STAND. COM. REP. NO. 1028-00

                                 Honolulu, Hawaii
                                                   , 2000

                                 RE: S.B. No. 2115
                                     S.D. 1
                                     H.D. 1




Honorable Calvin K.Y. Say
Speaker, House of Representatives
Twentieth State Legislature
Regular Session of 2000
State of Hawaii

Sir:

     Your Committee on Judiciary and Hawaiian Affairs, to which
was referred S.B. No. 2115, S.D. 1, entitled: 

     "A BILL FOR AN ACT RELATING TO FALSE CLAIMS,"

begs leave to report as follows:

     The purpose of this bill as received is to establish a False
Claims Act that allows the State or a private plaintiff to bring
a civil action to recover damages from a person who presents a
false claim to the State.

     Testimony in support of this measure was received from the
State Department of the Attorney General and the Consumer Lawyers
of Hawaii.

     Your Committee finds that a State False Claims Act will
provide restitution of money taken from the State by fraud.  The
genesis of the False Claims Act stems from the Civil War period,
when President Abraham Lincoln urged Congress to enact a scheme
to address and prevent widespread fraud by private military
contractors.  In 1863, Congress passed legislation that allowed
private informers or "relators" to bring fraud actions against
contractors on behalf of the United States.  These lawsuits are
referred to as "qui tam" actions, which means "Who sues on behalf
of the King as well as for himself."

     Your Committee finds that a State False Claims Act will
benefit the citizens of Hawaii in several ways.  A State False

 
 
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Claims Act will provide for the restitution of money taken from
the State by fraud.  It will promote lawsuits which the State is
not equipped to bring on its own.  This bill will allow for qui
tam actions against contractors and suppliers who, due to their
close relationship with the Executive Branch, would not otherwise
be investigated or prosecuted and it will encourage and provide
an incentive for those with knowledge of fraud to come forward.
Finally, a State False Claims Act will have a preventative effect
and discourage fraud from occurring in the first place.

     Your Committee further notes that in recent years, potential
abuses have been exposed which may result in qui tam actions.
For example, in 1998, the Legislative Auditor found discrepancies
in the cost of some contracts that had been awarded to private
providers of special education services.  In one instance, the
Auditor noted that payment rates for certain special education
contracts were markedly higher than the rates paid by other state
agencies for the same or more extensive services.  For example, a
private provider charges $100 a day for a child placed by the
Office of Youth Services for group home services while it charges
$260 a day for a child placed by the Child and Adolescent Mental
Health Division.  The reason for the discrepancy is that the
Division bases payment on costs identified by the provider
whereas other agencies tell providers what they are willing to
pay.

     Your Committee has amended this measure by deleting the
provisions of the bill and inserting the provisions of H.B. 1804,
H.D. 2, and the following provisions:

     (1)  Allowing for the recovery of attorney fees incurred in
          a civil action for false claims presented to the State;

     (2)  Allowing the attorney general to bring a civil action,
          as opposed to mandating that the attorney general bring
          a civil action;

     (3)  Allowing an employee who has been discharged, demoted,
          suspended, threatened, harassed, or otherwise
          discriminated against because of the furtherance of an
          action under this part, to recover all relief necessary
          to make that employee whole, including two times the
          amount of backpay with interest, that the employee
          lost;

     (4)  Applying the Act to false claims submitted up to six
          years prior to its effective date; and  


 
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     (5)  Clarifying that the provisions of the Act are not
          exclusive, but are in addition to other applicable law
          or remedy, and are to be liberally construed and
          applied to promote the public interest.

     As affirmed by the record of votes of the members of your
Committee on Judiciary and Hawaiian Affairs that is attached to
this report, your Committee is in accord with the intent and
purpose of S.B. No. 2115, S.D. 1, as amended herein, and
recommends that it pass Second Reading in the form attached
hereto as S.B. No. 2115, S.D. 1, H.D. 1, and be referred to the
Committee on Finance.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Judiciary &
                                   Hawaiian Affairs,



                                   ______________________________
                                   ERIC G. HAMAKAWA, Chair