The safest thing to do is not count it against FMLA leave time and ensure that the absences from work were not counted against the employee in any way in terms of your attendance policy. The only liability in this scenario is if you fail to ensure that the person's absences were not treated as job protected and that later plays a role in the person's separation from your company.
If you want to try to count it against the person's FMLA bank, then you need to understand how your circuit feels about the Ragsdale decision. How Ragsdale and the details of your situation mesh should be discussed at length. Unless this is settled in your circuit, and it probably is not (I don't think this has been pursued to the bitter end post-Ragsdale), then the liability here is that you can end up being a test case for determining the scope and limit of the effects of Ragsdale. Essentially, Ragsdale established at the Supreme court level that 825.700 was not enforceable as written in the context that it was challenged in that case. Your situation is not exactly like the Ragsdale situation, so it's already a question mark as to whether or not this is a good idea for you to get aggressive about this. If you decide to go the aggressive route and get sued, let me know because I'd really like to follow the case. 
Everyone I know uses scenario 1 and we're in the employer-friendly state of Texas in the employer-friendly 5th circuit.
By the way: you can still request the employee obtain a return to work authorization from their physician. I would also counsel or discipline the supervisor for failing to report the leave and for failing to obtain a return to work authorization if those are established practices or in your handbook.