REPORT TITLE: 
Fraudulent claims


DESCRIPTION:
Provides private right of action for recovery of fraudulent
claims to the State.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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HOUSE OF REPRESENTATIVES                H.B. NO.           
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                     A BILL FOR AN ACT

RELATING TO CAUSES OF ACTION.



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  .  RECOVERY OF FALSE CLAIMS TO THE STATE
 
 5      §661-      Actions for false claims to the State.(a)
 
 6 Notwithstanding section 661-7, any person who:
 
 7      (1)  Knowingly presents, or causes to be presented, to an
 
 8           officer or employee of the State a false or fraudulent
 
 9           claim for payment or approval;
 
10      (2)  Knowingly makes, uses, or causes to be made or used, a
 
11           false record or statement to get a false or fraudulent
 
12           claim paid or approved by the State;
 
13      (3)  Conspires to defraud the State by getting a false or
 
14           fraudulent claim allowed or paid;
 
15      (4)  Has possession, custody, or control of property or
 
16           money used, or to be used, by the State and, intending
 
17           to defraud the State or willfully to conceal the
 
18           property, delivers, or causes to be delivered, less
 
19           property that the amount for which the person receives
 
20           a certificate or receipt;
 

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

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

 
 
 
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 1      "Knowing" an "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, and no proof of specific intent to
 
 8           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 shall bring a
 
13 civil action under this section.
 
14      §661-      Action by private persons.(a)  A person may
 
15 bring a civil action for a violation of section 661-     for the
 
16 person and for the State.  The action shall be brought in the
 
17 name of the State.  The action may be dismissed only if the court
 
18 and the attorney general give written consent to the dismissal
 
19 and their reasons for consenting.
 
20      (b)  A copy of the complaint and written disclosure of
 
21 substantially all material evidence and information the person
 
22 possesses shall be served on the State in accordance with the
 
23 Hawaii Rules of Civil Procedure.  The complaint shall be filed in
 

 
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 1 camera, shall remain under seal for at least sixty days, and
 
 2 shall not be served on the defendant until the court so orders.
 
 3 The State may elect to intervene and proceed with the action
 
 4 within sixty days after it receives both the complaint and the
 
 5 material evidence and information.
 
 6      (c)  The State may, for good cause shown, move the court for
 
 7 extensions of the time during which the complaint remains under
 
 8 seal under subsection (b).  Any such motions may be supported by
 
 9 affidavits or other submissions in camera. The defendant shall
 
10 not be required to respond to any complaint filed under this
 
11 section until twenty days after the complaint is unsealed and
 
12 served upon the defendant in accordance with the Hawaii Rules of
 
13 Civil Procedure.
 
14      (d)  Before the expiration of the sixty-day period or any
 
15 extensions obtained, the State shall:
 
16      (1)  Proceed with the action, in which case the action shall
 
17           be conducted by the State; or
 
18      (2)  Notify the court that it declines to take over the
 
19           action, in which case the person bringing the action
 
20           shall have the right to conduct the action.
 
21      (e)  When a person brings an action under this section, no
 
22 person other than the State may intervene or bring a related
 
23 action based on the facts underlying the pending action.
 

 
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 1      §661-      Rights of parties to qui tam actions.(a)  If
 
 2 the State proceeds with an action under section 661-    , the
 
 3 State shall have the primary responsibility for prosecuting the
 
 4 action and shall not be bound by an act of the person bringing
 
 5 the action.  The person shall have the right to continue as a
 
 6 party to the action, subject to the following limitations:
 
 7      (1)  The State may dismiss the action notwithstanding the
 
 8           objections of the person initiating the action if the
 
 9           person has been notified by the State of the filing of
 
10           the motion and the court has provided the person with
 
11           an opportunity for a hearing on the motion;
 
12      (2)  The State may settle the action with the defendant
 
13           notwithstanding the objections of the person initiating
 
14           the action if the court determines, after a hearing,
 
15           that the proposed settlement is fair, adequate, and
 
16           reasonable under all the circumstances.  Upon a showing
 
17           of a good cause, the hearing may be held in camera;
 
18      (3)  The court, upon a showing by the State that
 
19           unrestricted participation during the course of the
 
20           litigation by the person initiating the action would
 
21           interfere with or unduly delay the State's prosecution
 
22           of the case, or would be repetitious, irrelevant, or
 
23           for purposes of harassment, may, in its discretion
 
24           impose limitations on the person's participation by:
 

 
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 1           (A)  Limiting the number of witnesses the person may
 
 2                call;
 
 3           (B)  Limiting the length of the testimony of the
 
 4                witnesses;
 
 5           (C)  Limiting the person's cross-examination of
 
 6                witnesses; or
 
 7           (D)  Otherwise limiting the participation by the person
 
 8                in the litigation.
 
 9      (b)  The defendant, by motion upon the court, may show that
 
10 unrestricted participation during the course of the litigation by
 
11 the person initiating the action would be for purposes of
 
12 harassment or would cause the defendant undue burden or
 
13 unnecessary expense.  At the court's discretion, the court may
 
14 limit the participation by the person in the litigation.
 
15      (c)  If the State elects not to proceed with the action, the
 
16 person who initiated that action shall have the right to conduct
 
17 the action.  If the State so requests, it shall be served with
 
18 copies of all pleadings filed in the action and shall be supplied
 
19 with copies of all deposition transcripts at the State's expense.
 
20 When a person proceeds with the action, the court without
 
21 limiting the status and rights of the person initiating the
 
22 action, may nevertheless permit the State to intervene at a later
 
23 date upon showing of good cause.
 

 
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 1      (d)  Whether or not the State proceeds with the action, upon
 
 2 a showing by the State that certain actions of discovery by the
 
 3 person initiating the action would interfere with the State's
 
 4 investigation or prosecution of a criminal or civil matter
 
 5 arising out of the same facts, the court may stay the discovery
 
 6 for a sufficient period to ensure noninterference with the
 
 7 investigation or prosecution of the criminal or civil case. 
 
 8      (e)  Notwithstanding section 661-    , the State may elect
 
 9 to pursue its claim through any alternate remedy available to the
 
10 State, including any administrative proceedings to determine
 
11 civil monetary penalties.  If any alternate remedy is pursued in
 
12 another proceeding, the person initiating the action shall have
 
13 the same rights in the proceedings as the person would have had
 
14 if the action had continued under this section.  Any finding of
 
15 fact or conclusion of law made in the other proceeding that
 
16 becomes final shall be conclusive on all parties to an action
 
17 under this section.  
 
18      (f)  For purposes of this section, a finding or conclusion
 
19 shall be final if it has been finally determined on appeal to the
 
20 appropriate court of the State or other court of competent
 
21 jurisdiction, if all time for filing the appeal with respect to
 
22 the finding or conclusion has expired, or if the finding or
 
23 conclusion is not subject to judicial review.
 

 
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 1      §661-     Awards to qui tam plaintiffs.(a)  If the State
 
 2 proceeds with an action brought by a person under section
 
 3 661-    , the person shall receive at least fifteen per cent but
 
 4 not more than twenty-five per cent of the proceeds of the action
 
 5 or settlement of the claim, depending upon the extent of which
 
 6 the person substantially contributed to the prosecution of the
 
 7 action.  Where the action is one that the court finds to be based
 
 8 primarily on disclosures of specific information, other than
 
 9 information provided by the person bringing the action, relating
 
10 to allegations or transactions in a criminal, civil, or
 
11 administrative hearing, in a congressional or administrative
 
12 report, hearing, audit, or investigation or from the news media,
 
13 the court may award sums as it considers appropriate, but in no
 
14 case more than ten per cent of the proceeds, taking into account
 
15 the significance of the information and the role of the person
 
16 bringing the action in advancing the case to litigation.  Any
 
17 payment to a person under this subsection shall be made from the
 
18 proceeds.  Any person shall also receive an amount for reasonable
 
19 expenses that the court finds to have been necessarily incurred,
 
20 plus reasonable attorneys' fees and costs.  All expenses, fees,
 
21 and costs shall be awarded against the defendant.
 

 
 
 
 
 
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 1      (b)  If the State does not proceed with an action under this
 
 2 section, the person bringing the action or settling the claim
 
 3 shall receive an amount that the court decides is reasonable for
 
 4 collecting the civil penalty and damages.  The amount shall be
 
 5 not less than twenty-five per cent and not more than thirty per
 
 6 cent of the proceeds of the action or settlement and shall be
 
 7 paid out of the proceeds.  The person shall also receive an
 
 8 amount for reasonable expenses that the court finds to have been
 
 9 necessarily incurred, plus reasonable attorneys' fees and costs.
 
10 All expenses, fees, and costs shall be awarded against the
 
11 defendant.
 
12      (c)  Whether or not the State proceeds with the action, if
 
13 the court finds that the action was brought by a person who
 
14 planned and initiated the violation of section 661-     upon
 
15 which the action was brought, then the court may, to the extent
 
16 the court considers appropriate, reduce the share of the proceeds
 
17 of the action that the person would otherwise receive under
 
18 subsection (a), taking into account the role of that person in
 
19 advancing the case to litigation and any relevant circumstances
 
20 pertaining to the violation.  If the person bringing the action
 
21 is convicted of criminal conduct arising from the person's role
 
22 in the violation of section 661-    , that person shall be
 
23 dismissed from the civil action and shall not receive any share
 

 
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 1 of the proceeds of the action.  The dismissal shall not prejudice
 
 2 the right of the State to continue the action.
 
 3      (d)  If the State does not proceed with the action and the
 
 4 person bringing the action conducts the action, the court may
 
 5 award to the defendant its reasonable attorneys' fees and
 
 6 expenses if the defendant prevails in the action and the court
 
 7 finds that the claim of the person bringing the action was
 
 8 frivolous, vexatious, or brought primarily for purposes of
 
 9 harassment.
 
10      (e)  In no event may a person bring an action under section
 
11 661-     that is based upon allegations or transactions that are
 
12 the subject of a civil suit or an administrative civil money
 
13 penalty proceeding in which the State is already a party.
 
14      §661-      Jurisdiction.(a)  No court shall have
 
15 jurisdiction over an action under this part based upon the public
 
16 disclosure of allegations or transactions in a criminal, civil,
 
17 or administrative hearing, in a congressional or administrative
 
18 report, hearing, audit, or investigation, or from the news media,
 
19 unless the action is brought by the attorney general or the
 
20 person bringing the action is an original source of the
 
21 information.
 
22      (b)  For purposes of this section:
 

 
 
 
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 1      "Original source" means an individual who has direct and
 
 2 independent knowledge of the information on which the allegations
 
 3 are based and has voluntarily provided the information to the
 
 4 State before filing an action under this part that is based on
 
 5 the information.
 
 6      §661-    Fees and costs of litigation.  The State shall
 
 7 not be liable for expenses or fees, including attorney fees, that
 
 8 a person incurs in bringing an action under this part and shall
 
 9 not elect to pay those expenses or fees.
 
10      §661-      Whistleblower protection.  Any employee who is
 
11 discharged, demoted, suspended, threatened, harassed, or in any
 
12 other manner discriminated against in the terms and conditions of
 
13 employment by the employee's employer because of lawful acts done
 
14 by the employee on behalf of the employee or others in
 
15 furtherance of an action under this part, including investigation
 
16 for, initiation of, testimony for, or assistance in an action
 
17 filed or to be filed under this part, shall include reinstatement
 
18 with the same seniority status the employee would have and
 
19 compensation for any special damages sustained as a result of the
 
20 discrimination, including litigation costs and reasonable
 
21 attorney's fees.  An employee may bring an action in the
 
22 appropriate court of the State for relief provided in this part."
 

 
 
 
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 1      SECTION 2.  This Act shall take effect upon its approval.
 
 2 
 
 3                           INTRODUCED BY:  _______________________