REPORT TITLE:
Fraudulent State Claims


DESCRIPTION:
Provides new penalties for fraudulent state claims. Allows
private actions to prosecute fraudulent state claims.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        
THE SENATE                              S.B. NO.           2098
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            
                                                             
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________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO FRAUDULENT CLAIMS AGAINST THE STATE.



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

 1      SECTION 1.  Chapter 661, Hawaii Revised Statutes, is amended
 
 2 by adding five new sections to be appropriately designated and to
 
 3 read as follows:
 
 4      "§661-     Civil action for false claims; when brought;
 
 5 rights of parties.  (a)  A person may bring a civil action for a
 
 6 violation of section 661-7 in the name of the State.  The action
 
 7 shall be dismissed only if the court and the attorney general
 
 8 give written consent to the dismissal and their reasons for
 
 9 consenting.
 
10      (b)  A copy of the complaint and written disclosure of
 
11 substantially all material evidence and information shall be
 
12 served on the attorney general.  The complaint shall be filed in
 
13 camera with the circuit court, shall remain under seal for at
 
14 least sixty days, and shall not be served on the defendant until
 
15 the court so orders.  Within the sixty day period after receiving
 
16 both the complaint and the material evidence and information, the
 
17 attorney general shall:
 
18      (1)  Proceed with the action, in which case the action will
 
19           be prosecuted by the attorney general; or
 

 
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 1      (2)  Notify the court and the person who brought the
 
 2           complaint that it declines to take over the action, in
 
 3           which case the court shall unseal the record and order
 
 4           service on the defendant, and person who brought the
 
 5           complaint shall have the right to prosecute the action.
 
 6 When a person prosecutes an action under this subsection, no
 
 7 person other than the attorney general may intervene or bring a
 
 8 related action based on the facts underlying the pending action.
 
 9      (c)  If the attorney general proceeds with the action, the
 
10 attorney general shall have the primary responsibility for
 
11 prosecuting the action and shall not be bound by any act of the
 
12 person who brought the action.  The person may continue as a
 
13 party to the action, subject to the limitations of subsection
 
14 (d).
 
15      (d)  The attorney general may dismiss the action
 
16 notwithstanding the objections of the person who brought the
 
17 action if the person has been notified by the attorney general of
 
18 the filing of the motion to dismiss and the court has provided
 
19 the person with an opportunity for a hearing on the motion.  The
 
20 attorney general may settle the action notwithstanding the
 
21 person's objections if the court determines, after a hearing,
 
22 that the proposed settlement is fair, adequate, and reasonable
 
23 under all the circumstances.  Upon a showing of good cause, the
 

 
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 1 hearing may be held in camera.  Upon a showing by the attorney
 
 2 general or the defendant that the unrestricted participation of
 
 3 the person who brought the action would interfere with or unduly
 
 4 delay the prosecution of the case, or would be repetitious,
 
 5 irrelevant, or for the purposes of harassment, the court, in its
 
 6 discretion, may impose limitations on the person's participation.
 
 7      (e)  If the State has the option to bring an administrative
 
 8 action against the defendant and chooses to exercise that option,
 
 9 the person who brought the action shall have the same rights to
 
10 participate in that administrative proceeding as the person would
 
11 have had had the action continued in court.  Any finding of fact
 
12 or conclusion of law in the administrative hearings shall become
 
13 conclusive on all parties under an action under this section.
 
14      §661-     Civil action for false claims; conduct of
 
15 proceedings.  (a)  If the attorney general elects not to proceed
 
16 with the action, the person who brought the action shall have the
 
17 right to conduct the action.  If the attorney general so
 
18 requests, the attorney general shall be served with copies of all
 
19 the pleadings and copies of all deposition transcripts at the
 
20 State's expense.  The court, without limiting the status and
 
21 rights of the person who brought the action, may nevertheless
 
22 permit the attorney general to intervene at a later date upon a
 
23 showing of good cause.
 

 
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 1      (b)  Whether or not the attorney general proceeds with the
 
 2 action, on a showing by the State in camera that certain actions
 
 3 related to discovery by the person would interfere with the
 
 4 State's investigation or prosecution of a criminal or civil
 
 5 matter arising from the same facts, the court may stay discovery
 
 6 in the civil action for a period of not more than sixty days.
 
 7 The court may extend the sixty day period upon a further showing
 
 8 in camera that the State has pursued the criminal or civil action
 
 9 with reasonable diligence and any proposed discovery in the
 
10 person's civil action will interfere with the other proceedings.
 
11      §661-     Civil action for false claims; award.  (a)  In a
 
12 false claims case prosecuted by the government, for any
 
13 settlement of judgment against the defendant in a false claim
 
14 action, the person who brought the action shall receive the
 
15 following:
 
16      (1)  If the success of the action or settlement depends
 
17           primarily on information or material received from
 
18           others, the court shall award the person up to ten per
 
19           cent of the recovery;
 
20      (2)  If the success of the action or settlement depends
 
21           primarily on information or material received from the
 
22           person who brought the action, the court shall award
 
23           the person between fifteen and twenty-five per cent of
 

 
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 1           the recovery.
 
 2 Any payment to a person under this section shall be made from the
 
 3 proceeds of the action.  The person shall also be entitled to
 
 4 receive an amount for the person's reasonable expenses
 
 5 necessarily incurred in participating in the action.  All fees,
 
 6 expenses, and costs shall be paid by the defendant.
 
 7      (b)  In any false claims case prosecuted by the person who
 
 8 brought the action alone, for any settlement or judgment against
 
 9 the defendant, the person who brought the action shall be awarded
 
10 between twenty-five and thirty per cent of the recovery.  The
 
11 award shall be paid out of the proceeds.  The person shall also
 
12 be entitled to receive an amount for the person's reasonable
 
13 expenses necessarily incurred in prosecuting the action.  All
 
14 fees, expenses, and costs shall be paid by the defendant.
 
15      (c)  In any false claims case originally brought and
 
16 prosecuted by the person but in which the State later intervenes,
 
17 the person shall be awarded an amount between fifteen and thirty
 
18 per cent, at the court's discretion, based on the impact of the
 
19 person's actions on the case.  The person shall also be entitled
 
20 to fees, expenses, and costs as provided in subsections (a) and
 
21 (b).
 
22      (d)  If the court finds that the person who brought the
 
23 action also planned and initiated the underlying false claim, the
 

 
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 1 court, to the extent it finds appropriate, may reduce the
 
 2 person's award, taking into account:
 
 3      (1)  The person's role in advancing the case to litigation;
 
 4           and
 
 5      (2)  Any relevant circumstances pertaining to the violation.
 
 6 If the person who brought the action is convicted of criminal
 
 7 conduct arising from the person's role in the facts underlying
 
 8 the civil false claims action, that person shall be dismissed
 
 9 from the civil action and shall not be entitled to proceeds or
 
10 expenses from the civil action.  The dismissal of the person
 
11 shall not prejudice the right of the State to continue the
 
12 action, represented by the attorney general.
 
13      (e)  If the false claims case is prosecuted by the person
 
14 alone and defendant prevails, the court may award the defendant
 
15 reasonable attorney fees and expenses if the court finds that the
 
16 claim of the person who brought the action was clearly frivolous,
 
17 clearly vexatious, or brought primarily for purposes of
 
18 harassment.
 
19      (f)  The State shall not be liable for expenses, costs, or
 
20 fees incurred by any person in a civil action for false claims
 
21 case.
 
22      §661-     Civil actions for false claims; when barred.  No
 
23 person may bring a civil action for false claims that is:
 

 
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 1      (1)  Based on allegations or transactions which are the
 
 2           subject of a civil suit or an administrative civil
 
 3           penalty proceeding in which the State is already a
 
 4           party; or
 
 5      (2)  Based on public disclosure of allegations or
 
 6           transactions in a criminal, civil, or administrative
 
 7           hearing, based on a state report or record, or the
 
 8           media, unless the person is the original source of the
 
 9           information disclosed.
 
10      §661-     Civil action for false claims; protection of
 
11 employees.  Any employee who is discharged, demoted, suspended,
 
12 threatened, harassed, or in any other manner discriminated
 
13 against in the terms of conditions of employment by the
 
14 employee's employer because of the lawful acts done by the
 
15 employee in furtherance of a false claims action shall be
 
16 entitled to all relief necessary to make the employee whole.
 
17 Relief shall include reinstatement with the same seniority
 
18 status, double the amount of back pay, interest on the back pay,
 
19 and compensation for special damages, including litigation costs
 
20 and attorney fees.  An employee may bring an action in circuit
 
21 court for relief under this section."
 
22      SECTION 2.  Section 661-7, Hawaii Revised Statutes, is
 
23 amended to read as follows:
 

 
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 1      "§661-7 Claim forfeited by fraud.(a)  Any person who
 
 2 intentionally submits a false claim or attempts to commit any
 
 3 fraud against the State in the proof, statement, establishment,
 
 4 or allowance of any claim, or of any part of any claim against
 
 5 the State, shall forfeit the same to the State; and when an
 
 6 action is brought to recover on such a claim, the court shall
 
 7 find specifically that fraud was committed or attempted to be
 
 8 committed, and thereupon give judgment that such claim is
 
 9 forfeited to the State, and that the claimant is forever barred
 
10 from prosecuting the same.
 
11      (b)  Any person who [intentionally submits a false claim or
 
12 attempts to commit a fraud against the State in the proof,
 
13 statement, establishment, or allowance of any claim under $5,000
 
14 or any part of any claim under $5,000 against the State shall,]
 
15 violates subsection (a), in addition to any other penalty
 
16 provided by law, shall be liable for civil penalties of:
 
17      (1)  Payment of interest on the amount of excess benefits or
 
18           payments at the maximum legal rate in effect on the
 
19           date the payment was made to said person, for the
 
20           period from the date upon which payment was made to the
 
21           date upon which repayment is made to the State;
 
22      (2)  Payment of an amount [not to exceed double] three times
 
23           the amount of such excess benefits or payments; and
 

 
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 1      (3)  Payment [in the sum of $1,000] of not less than $5,000
 
 2           and not more than $10,000 for each fraudulent claim or
 
 3           part of a fraudulent claim made against the State.
 
 4      All interest and penalties provided for in this section may
 
 5 be sought and recovered in an administrative proceeding held
 
 6 pursuant to chapter 91 conducted by the department to which the
 
 7 claim was submitted."
 
 8      SECTION 3.  Statutory material to be repealed is bracketed.
 
 9 New statutory material is underscored.
 
10      SECTION 4.  This Act shall take effect upon its approval.
 
11 
 
12                           INTRODUCED BY:  _______________________