REPORT TITLE:
False Claims Act


DESCRIPTION:
Provides for qui tam actions or the recovery of fraudulent claims
to the State.  (SB2115 HD2)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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THE SENATE                              S.B. NO.           S.D. 1
TWENTIETH LEGISLATURE, 2000                                H.D. 2
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                     A BILL FOR AN ACT
RELATING TO FALSE CLAIMS.



BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 1      SECTION 1.  Chapter 661, Hawaii Revised Statutes, is amended
 
 2 by adding a new part to be appropriately designated and to read
 
 3 as follows:
 
 4             "PART  .  QUI TAM ACTIONS OR RECOVERY OF
 
 5                     FALSE CLAIMS TO THE STATE
 
 6      661-      Actions for false claims to the State; qui tam
 
 7 actions.(a)  Notwithstanding section 661-7 to the contrary, any
 
 8 person who:
 
 9      (1)  Knowingly presents, or causes to be presented, to an
 
10           officer or employee of the State a false or fraudulent
 
11           claim for payment or approval;
 
12      (2)  Knowingly makes, uses, or causes to be made or used, a
 
13           false record or statement to get a false or fraudulent
 
14           claim paid or approved by the State;
 
15      (3)  Conspires to defraud the State by getting a false or
 
16           fraudulent claim allowed or paid;
 
17      (4)  Has possession, custody, or control of property or
 
18           money used, or to be used, by the State and, intending
 
19           to defraud the State or wilfully to conceal the
 
20           property, delivers, or causes to be delivered, less
 

 
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 1           property than the amount for which the person receives
 
 2           a certificate or receipt;
 
 3      (5)  Is authorized to make or deliver a document certifying
 
 4           receipt of property used, or to be used by the State
 
 5           and, intending to defraud the State, makes or delivers
 
 6           the receipt without completely knowing that the
 
 7           information on the receipt is true;
 
 8      (6)  Knowingly buys, or receives as a pledge of an
 
 9           obligation or debt, public property from any officer or
 
10           employee of the State who may not lawfully sell or 
 
11           pledge the property; or
 
12      (7)  Knowingly makes, uses, or causes to be made or used, a
 
13           false record or statement to conceal, avoid, or
 
14           decrease an obligation to pay or transmit money or
 
15           property to the State;
 
16 shall be liable to the State for a civil penalty of not less than
 
17 $5,000 and not more than $10,000, plus three times the amount of
 
18 damages that the State sustains due to the act of that person.
 
19      (b)  If the court finds that a person who has violated
 
20 subsection (a):
 
21      (1)  Furnished officials of the State responsible for
 
22           investigating false claims violations with all
 
23           information known to the person about the violation
 

 
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 1           within thirty days after the date on which the
 
 2           defendant first obtained the information;
 
 3      (2)  Fully cooperated with any State investigation of such
 
 4           violation; and
 
 5      (3)  At the time the person furnished the State with the
 
 6           information about the violation, no criminal
 
 7           prosecution, civil action, or administrative action had
 
 8           commenced under this title with respect to such
 
 9           violation, and the person did not have actual knowledge
 
10           of the existence of an investigation into such
 
11           violation; the court may assess not less than two times
 
12           the amount of damages that the State sustains because
 
13           of the act of the person.  A person violating
 
14           subsection (a), shall also be liable to the State for
 
15           the costs and attorneys' fees of a civil action brought
 
16           to recover the penalty or damages.
 
17      (c) For purposes of this section:
 
18      "Claim" includes any request or demand, whether under a
 
19 contract or otherwise, for money or property that is made to a
 
20 contractor, grantee, or other recipient if the State provides any
 
21 portion of the money or property that is requested or demanded,
 
22 or if the government will reimburse the contractor, grantee, or
 
23 other recipient for any portion of the money or property that is
 
24 requested or demanded.
 

 
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 1      "Knowing" and "knowingly" means that a person, with respect
 
 2 to information:
 
 3      (1)  Has actual knowledge of the information;
 
 4      (2)  Acts in deliberate ignorance of the truth or falsity of
 
 5           the information; or
 
 6      (3)  Acts in reckless disregard of the truth or falsity of
 
 7           the information;
 
 8  and no proof of specific intent to defraud is required.
 
 9      661-      Civil actions for false claims.   The attorney
 
10 general shall investigate any violation under section 661-    .
 
11 If the attorney general finds that a person has violated or is
 
12 violating section 661-     , the attorney general may bring a
 
13 civil action under this section.
 
14      661-      Evidentiary determination; burden of proof.  A
 
15 determination that a person has violated the provisions of this
 
16 chapter shall be based on a preponderance of the evidence.
 
17      661-      Statute of limitations.  An action for false
 
18 claims to the State pursuant to this chapter shall be brought
 
19 within six years after the false claim is discovered or by
 
20 exercise of reasonable diligence should have been discovered.
 
21      661-      Action by private persons.(a)  A person may
 
22 bring a civil action for a violation of section 661-     for the
 
23 person and for the State.  The action shall be brought in the
 

 
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 1 name of the State.  The action may be dismissed only if the court
 
 2 and the attorney general give written consent to the dismissal
 
 3 and their reasons for consenting.
 
 4      (b)  A copy of the complaint and written disclosure of
 
 5 substantially all material evidence and information the person
 
 6 possesses shall be served on the State in accordance with the
 
 7 Hawaii Rules of Civil Procedure.  The complaint shall be filed in
 
 8 camera, shall remain under seal for at least sixty days, and
 
 9 shall not be served on the defendant until the court so orders.
 
10 The State may elect to intervene and proceed with the action
 
11 within sixty days after it receives both the complaint and the
 
12 material evidence and information.
 
13      (c)  The State may, for good cause shown, move the court for
 
14 extensions of the time during which the complaint remains under
 
15 seal under subsection (b).  Any such motions may be supported by
 
16 affidavits or other submissions in camera.  The defendant shall
 
17 not be required to respond to any complaint filed under this
 
18 section until twenty days after the complaint is unsealed and
 
19 served upon the defendant in accordance with the Hawaii Rules of
 
20 Civil Procedure.
 
21      (d)  Before the expiration of the sixty-day period or any
 
22 extension obtained, the State shall:
 

 
 
 
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 1      (1)  Proceed with the action, in which case the action shall
 
 2           be conducted by the State; or
 
 3      (2)  Notify the court that it declines to take over the
 
 4           action, in which case the person bringing the action
 
 5           shall have the right to conduct the action.
 
 6      (e)  When a person brings an action under this section, no
 
 7 person other than the State may intervene or bring a related
 
 8 action based on the facts underlying the pending action.
 
 9      661-      Rights of parties to qui tam actions.(a)  If
 
10 the State proceeds with an action under section 661-    , the
 
11 State shall have the primary responsibility for prosecuting the
 
12 action and shall not be bound by an act of the person bringing
 
13 the action.  The person shall have the right to continue as a
 
14 party to the action, subject to the following limitations:
 
15      (1)  The State may dismiss the action notwithstanding the
 
16           objections of the person initiating the action if the
 
17           person has been notified by the State of the filing of
 
18           the motion and the court has provided the person with
 
19           an opportunity for a hearing on the motion;
 
20      (2)  The State may settle the action with the defendant
 
21           notwithstanding the objections of the person initiating
 
22           the action if the court determines, after a hearing,
 
23           that the proposed settlement is fair, adequate, and
 

 
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 1           reasonable.  Upon a showing of good cause, the hearing
 
 2           may be held in camera;
 
 3      (3)  The court, upon a showing by the State that
 
 4           unrestricted participation during the course of the
 
 5           litigation by the person initiating the action would
 
 6           interfere with or unduly delay the State's prosecution
 
 7           of the case, or would be repetitious, irrelevant, or
 
 8           for purposes of harassment, may, in its discretion
 
 9           impose limitations on the person's participation by:
 
10           (A)  Limiting the number of witnesses the person may
 
11                call;
 
12           (B)  Limiting the length of the testimony of the
 
13                witnesses;
 
14           (C)  Limiting the person's cross-examination of
 
15                witnesses; or
 
16           (D)  Otherwise limiting the participation by the person
 
17                in the litigation.
 
18      (b)  The defendant, by motion upon the court, may show that
 
19 unrestricted participation during the course of the litigation by
 
20 the person initiating the action would be for purposes of
 
21 harassment or would cause the defendant undue burden or
 
22 unnecessary expense.  At the court's discretion, the court may
 
23 limit the participation by the person in the litigation.
 

 
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 1      (c)  If the State elects not to proceed with the action, the
 
 2 person who initiated that action shall have the right to conduct
 
 3 the action.  If the State so requests, it shall be served with
 
 4 copies of all pleadings filed in the action and shall be supplied
 
 5 with copies of all deposition transcripts at the State's expense.
 
 6 When a person proceeds with the action, the court without
 
 7 limiting the status and rights of the person initiating the
 
 8 action, may nevertheless permit the State to intervene at a later
 
 9 date upon showing of good cause.
 
10      (d)  Whether or not the State proceeds with the action, upon
 
11 a showing by the State that certain actions of discovery by the
 
12 person initiating the action would interfere with the State's
 
13 investigation or prosecution of a criminal or civil matter
 
14 arising out of the same facts, the court may stay the discovery
 
15 for a sufficient period to ensure noninterference with the
 
16 investigation or prosecution of the criminal or civil case. 
 
17      (e)  Notwithstanding section 661-    , the State may elect
 
18 to pursue its claim through any alternate remedy available to the
 
19 State, including any administrative proceedings to determine
 
20 civil monetary penalties.  If any alternate remedy is pursued in
 
21 another proceeding, the person initiating the action shall have
 
22 the same rights in the proceedings as the person would have had
 
23 if the action had continued under this section.  Any finding of
 

 
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 1 fact or conclusion of law made in the other proceeding that
 
 2 becomes final shall be conclusive on all parties to an action
 
 3 under this section.  
 
 4      (f)  Whether or not the State elects to proceed with the
 
 5 action, the parties to the action shall receive court approval of
 
 6 any settlements reached.
 
 7      (g)  For purposes of this section, a finding or conclusion
 
 8 shall be final if it has been finally determined on appeal to the
 
 9 appropriate court of the State or other court of competent
 
10 jurisdiction, if the period for filing the appeal with respect to
 
11 the finding or conclusion has expired, or if the finding or
 
12 conclusion is not subject to judicial review.
 
13      661-     Awards to qui tam plaintiffs.(a)  If the State
 
14 proceeds with an action brought by a person under section
 
15 661-    , the person shall receive at least fifteen per cent but
 
16 not more than twenty-five per cent of the proceeds of the action
 
17 or settlement of the claim, depending upon the extent to which
 
18 the person substantially contributed to the prosecution of the
 
19 action.  Where the action is one that the court finds to be based
 
20 primarily on disclosures of specific information, other than
 
21 information provided by the person bringing the action, relating
 
22 to allegations or transactions in a criminal, civil, or
 
23 administrative hearing, in a legislative or administrative
 

 
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 1 report, hearing, audit, or investigation, or from the news media,
 
 2 the court may award sums as it considers appropriate, but in no
 
 3 case more than ten per cent of the proceeds, taking into account
 
 4 the significance of the information and the role of the person
 
 5 bringing the action in advancing the case to litigation.  Any
 
 6 payment to a person under this subsection shall be made from the
 
 7 proceeds.  Any person shall also receive an amount for reasonable
 
 8 expenses that the court finds to have been necessarily incurred,
 
 9 plus reasonable attorneys' fees and costs.  All expenses, fees,
 
10 and costs shall be awarded against the defendant.
 
11      (b)  If the State does not proceed with an action under this
 
12 section, the person bringing the action or settling the claim
 
13 shall receive an amount that the court decides is reasonable for
 
14 collecting the civil penalty and damages.  The amount shall be
 
15 not less than twenty-five per cent and not more than thirty per
 
16 cent of the proceeds of the action or settlement and shall be
 
17 paid out of the proceeds.  The person shall also receive an
 
18 amount for reasonable expenses that the court finds to have been
 
19 necessarily incurred, plus reasonable attorneys' fees and costs.
 
20 All expenses, fees, and costs shall be awarded against the
 
21 defendant.
 
22      (c)  Whether or not the State proceeds with the action, if
 
23 the court finds that the action was brought by a person who
 

 
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 1 planned and initiated the violation of section 661-     upon
 
 2 which the action was brought, then the court may, to the extent
 
 3 the court considers appropriate, reduce the share of the proceeds
 
 4 of the action that the person would otherwise receive under
 
 5 subsection (a), taking into account the role of that person in
 
 6 advancing the case to litigation and any relevant circumstances
 
 7 pertaining to the violation.  If the person bringing the action
 
 8 is convicted of criminal conduct arising from the person's role
 
 9 in the violation of section 661-    , that person shall be
 
10 dismissed from the civil action and shall not receive any share
 
11 of the proceeds of the action.  The dismissal shall not prejudice
 
12 the right of the State to continue the action.
 
13      (d)  If the State does not proceed with the action and the
 
14 person bringing the action conducts the action, the court may
 
15 award to the defendant its reasonable attorneys' fees and
 
16 expenses if the defendant prevails in the action and the court
 
17 finds that the claim of the person bringing the action was
 
18 frivolous, vexatious, or brought primarily for purposes of
 
19 harassment.
 
20      (e)  In no event may a person bring an action under section
 
21 661-     that is based upon allegations or transactions that are
 
22 the subject of a civil or criminal investigation by the State,
 
23 civil suit, or an administrative civil money penalty proceeding
 
24 in which the State is already a party.
 

 
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 1      661-      Jurisdiction.  No court shall have jurisdiction
 
 2 over an action under this part based upon the public disclosure
 
 3 of allegations or transactions in a criminal, civil, or
 
 4 administrative hearing, in a legislative or administrative
 
 5 report, hearing, audit, or investigation, or from the news media,
 
 6 unless the action is brought by the attorney general or the
 
 7 person bringing the action is an original source of the
 
 8 information.  For purposes of this section:
 
 9      "Original source" means an individual who has direct and
 
10 independent knowledge of the information on which the allegations
 
11 are based and has voluntarily provided the information to the
 
12 State before filing an action under this part that is based on
 
13 the information.
 
14      661-    Fees and costs of litigation.  The State shall
 
15 not be liable for expenses or fees, including attorney fees, that
 
16 a person incurs in bringing an action under this part and shall
 
17 not elect to pay those expenses or fees.
 
18      661-      Whistleblower protection.  Any employee who is
 
19 discharged, demoted, suspended, threatened, harassed, or in any
 
20 other manner discriminated against in the terms and conditions of
 
21 employment by the employee's employer because of lawful acts done
 
22 by the employee on behalf of the employee or others in
 
23 furtherance of an action under this part, including investigation
 

 
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 1 for, initiation of, testimony for, or assistance in an action
 
 2 filed or to be filed under this part, shall be entitled to all
 
 3 relief necessary to make the employee whole.  Such relief shall
 
 4 include reinstatement with the same seniority status the employee
 
 5 would have had but for the discrimination, two times the amount
 
 6 of back pay, interest on the back pay, and compensation for any
 
 7 special damages sustained as a result of the discrimination,
 
 8 including litigation costs and reasonable attorney's fees.  An
 
 9 employee may bring an action in the appropriate court of the
 
10 State for relief provided in this part."
 
11      SECTION 2.  The provisions of this Act are not exclusive and
 
12 are in addition to any other applicable law or remedy.  This Act
 
13 shall be liberally construed and applied to promote the public
 
14 interest.
 
15      SECTION 3.  This Act shall take effect upon its approval and
 
16 shall apply to false claims submitted up to six years prior to
 
17 its effective date.