REPORT TITLE:
False Claims Act

DESCRIPTION:
Provides for qui tam actions or the recovery of fraudulent claims
to the State.  (HD1)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        
THE SENATE                              S.B. NO.           2115
TWENTIETH LEGISLATURE, 2000                                S.D. 1
STATE OF HAWAII                                            H.D. 1
                                                             
________________________________________________________________
________________________________________________________________


                     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
 
21           property than the amount for which the person receives
 
22           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 may not lawfully 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 due to the act of that person.
 
17      (b)  If the court finds that a person who has violated
 
18 subsection (a):
 
19      (1)  Furnished officials of the State responsible for
 
20           investigating false claims violations with all
 
21           information known to the person about the violation
 
22           within thirty days after the date on which the
 
23           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; the court may assess not less than two times
 
10           the amount of damages that the State sustains because
 
11           of the act of the person.  A person violating
 
12           subsection (a), shall also be liable to the State for
 
13           the costs and attorneys' fees of a civil action brought
 
14           to recover the 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.
 
23      "Knowing" and "knowingly" means that a person, with respect
 
24 to information:
 

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

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

 
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 1      (e)  When a person brings an action under this section, no
 
 2 person other than the State may intervene or bring a related
 
 3 action based on the facts underlying the pending action.
 
 4      §661-      Rights of parties to qui tam actions.(a)  If
 
 5 the State proceeds with an action under section 661-    , the
 
 6 State shall have the primary responsibility for prosecuting the
 
 7 action and shall not be bound by an act of the person bringing
 
 8 the action.  The person shall have the right to continue as a
 
 9 party to the action, subject to the following limitations:
 
10      (1)  The State may dismiss the action notwithstanding the
 
11           objections of the person initiating the action if the
 
12           person has been notified by the State of the filing of
 
13           the motion and the court has provided the person with
 
14           an opportunity for a hearing on the motion;
 
15      (2)  The State may settle the action with the defendant
 
16           notwithstanding the objections of the person initiating
 
17           the action if the court determines, after a hearing,
 
18           that the proposed settlement is fair, adequate, and
 
19           reasonable.  Upon a showing of good cause, the hearing
 
20           may be held in camera;
 
21      (3)  The court, upon a showing by the State that
 
22           unrestricted participation during the course of the
 
23           litigation by the person initiating the action would
 
24           interfere with or unduly delay the State's prosecution
 

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

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

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

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

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

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

 
 
 
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 1      SECTION 2.  This Act shall take effect upon its approval and
 
 2 shall apply to false claims submitted up to six years prior to
 
 3 its effective date.
 
 4      SECTION 3.  The provisions of this Act are not exclusive and
 
 5 are in addition to any other applicable law or remedy.  This
 
 6 Chapter shall be liberally construed and applied to promote the
 
 7 public interest.