REPORT TITLE:
False Claims Act


DESCRIPTION:
Provides for qui tam actions or the recovery of fraudulent claims
to the State.  (SB2115 CD1)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        2115
THE SENATE                              S.B. NO.           S.D. 1
TWENTIETH LEGISLATURE, 2000                                H.D. 2
STATE OF HAWAII                                            C.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
 

 
Page 2                                                     2115
                                     S.B. NO.           S.D. 1
                                                        H.D. 2
                                                        C.D. 1

 
 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;
 
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; or
 
16      (8)  Is a beneficiary of an inadvertant submission of a
 
17           false claim to the State, who subsequently discovers
 
18           the falsity of the claim, and fails to disclose the
 
19           false claim to the State within a reasonable time after
 
20           discovery of the false claim;
 
21 shall be liable to the State for a civil penalty of not less than
 
22 $5,000 and not more than $10,000, plus three times the amount of
 
23 damages that the State sustains due to the act of that person.
 

 
Page 3                                                     2115
                                     S.B. NO.           S.D. 1
                                                        H.D. 2
                                                        C.D. 1

 
 1      (b)  If the court finds that a person who has violated
 
 2 subsection (a):
 
 3      (1)  Furnished officials of the State responsible for
 
 4           investigating false claims violations with all
 
 5           information known to the person about the violation
 
 6           within thirty days after the date on which the
 
 7           defendant first obtained the information;
 
 8      (2)  Fully cooperated with any State investigation of such
 
 9           violation; and
 
10      (3)  At the time the person furnished the State with the
 
11           information about the violation, no criminal
 
12           prosecution, civil action, or administrative action had
 
13           commenced under this title with respect to such
 
14           violation, and the person did not have actual knowledge
 
15           of the existence of an investigation into such
 
16           violation;
 
17 the court may assess not less than two times the amount of
 
18 damages that the State sustains because of the act of the person.
 
19 A person violating subsection (a), shall also be liable to the
 
20 State for the costs and attorneys' fees of a civil action brought
 
21 to recover the penalty or damages.
 
22      (c) Liability under this section shall be joint and several
 
23 for any act committed by two or more persons.
 

 
Page 4                                                     2115
                                     S.B. NO.           S.D. 1
                                                        H.D. 2
                                                        C.D. 1

 
 1      (d) This section shall not apply to any controversy
 
 2 involving an amount of less than $500 in value.  For purposes of
 
 3 this subsection, "controversy" means the aggregate of any one or
 
 4 more false claims submitted by the same person in violation of
 
 5 this chapter.  Proof of specific intent to defraud is not
 
 6 required.
 
 7      (e) For purposes of this section:
 
 8      "Claim" includes any request or demand, whether under a
 
 9 contract or otherwise, for money or property that is made to a
 
10 contractor, grantee, or other recipient if the State provides any
 
11 portion of the money or property that is requested or demanded,
 
12 or if the government will reimburse the contractor, grantee, or
 
13 other recipient for any portion of the money or property that is
 
14 requested or demanded.
 
15      "Knowing" and "knowingly" means that a person, with respect
 
16 to information:
 
17      (1)  Has actual knowledge of the information;
 
18      (2)  Acts in deliberate ignorance of the truth or falsity of
 
19           the information; or
 
20      (3)  Acts in reckless disregard of the truth or falsity of
 
21           the information;
 
22  and no proof of specific intent to defraud is required.
 
23      (f) This section shall not apply to claims, records, or
 

 
Page 5                                                     2115
                                     S.B. NO.           S.D. 1
                                                        H.D. 2
                                                        C.D. 1

 
 1 statements for which procedures and remedies are otherwise
 
 2 specifically provided for under chapter 231.
 
 3      661-      Civil actions for false claims.   The attorney
 
 4 general shall investigate any violation under section 661-    .
 
 5 If the attorney general finds that a person has violated or is
 
 6 violating section 661-     , the attorney general may bring a
 
 7 civil action under this section.
 
 8      661-      Evidentiary determination; burden of proof.  A
 
 9 determination that a person has violated the provisions of this
 
10 chapter shall be based on a preponderance of the evidence.
 
11      661-      Statute of limitations.  An action for false
 
12 claims to the State pursuant to this chapter shall be brought
 
13 within six years after the false claim is discovered or by
 
14 exercise of reasonable diligence should have been discovered and,
 
15 in any event, no more than ten years after the date on which the
 
16 violation of section 661-   is committed.
 
17      661-      Action by private persons.(a)  A person may
 
18 bring a civil action for a violation of section 661-     for the
 
19 person and for the State.  The action shall be brought in the
 
20 name of the State.  The action may be dismissed only with the
 
21 written consent of the court, taking into account the best
 
22 interests of the parties involved and the public purposes behind
 
23 this chapter.
 

 
Page 6                                                     2115
                                     S.B. NO.           S.D. 1
                                                        H.D. 2
                                                        C.D. 1

 
 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 and the seal shall be lifted;
 
22           or
 
23      (2)  Notify the court that it declines to take over the
 

 
Page 7                                                     2115
                                     S.B. NO.           S.D. 1
                                                        H.D. 2
                                                        C.D. 1

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

 
Page 8                                                     2115
                                     S.B. NO.           S.D. 1
                                                        H.D. 2
                                                        C.D. 1

 
 1           unrestricted participation during the course of the
 
 2           litigation by the person initiating the action would
 
 3           interfere with or unduly delay the State's prosecution
 
 4           of the case, or would be repetitious, irrelevant, or
 
 5           for purposes of harassment, may, in its discretion
 
 6           impose limitations on the person's participation by:
 
 7           (A)  Limiting the number of witnesses the person may
 
 8                call;
 
 9           (B)  Limiting the length of the testimony of the
 
10                witnesses;
 
11           (C)  Limiting the person's cross-examination of
 
12                witnesses; or
 
13           (D)  Otherwise limiting the participation by the person
 
14                in the litigation.
 
15      (b)  The defendant, by motion upon the court, may show that
 
16 unrestricted participation during the course of the litigation by
 
17 the person initiating the action would be for purposes of
 
18 harassment or would cause the defendant undue burden or
 
19 unnecessary expense.  At the court's discretion, the court may
 
20 limit the participation by the person in the litigation.
 
21      (c)  If the State elects not to proceed with the action, the
 
22 person who initiated that action shall have the right to conduct
 
23 the action.  If the State so requests, it shall be served with
 

 
Page 9                                                     2115
                                     S.B. NO.           S.D. 1
                                                        H.D. 2
                                                        C.D. 1

 
 1 copies of all pleadings filed in the action and shall be supplied
 
 2 with copies of all deposition transcripts at the State's expense.
 
 3 When a person proceeds with the action, the court without
 
 4 limiting the status and rights of the person initiating the
 
 5 action, may nevertheless permit the State to intervene at a later
 
 6 date upon showing of good cause.
 
 7      (d)  Whether or not the State proceeds with the action, upon
 
 8 motion and a showing by the State that certain actions of
 
 9 discovery by the person initiating the action would interfere
 
10 with the State's investigation or prosecution of a criminal or
 
11 civil matter arising out of the same facts, the court may stay
 
12 the discovery for a period of not more than sixty days.  The
 
13 court may extend the sixty day period upon a motion and showing
 
14 by the State that the State has pursued the investigation or
 
15 prosecution of the criminal or civil matter with reasonable
 
16 diligence and the proposed discovery would interfere with the
 
17 ongoing investigation or prosecution of the criminal or civil
 
18 matter.
 
19      (e)  Notwithstanding section 661-    , the State may elect
 
20 to pursue its claim through any alternate remedy available to the
 
21 State, including any administrative proceedings to determine
 
22 civil monetary penalties.  If any alternate remedy is pursued in
 
23 another proceeding, the person initiating the action shall have
 

 
Page 10                                                    2115
                                     S.B. NO.           S.D. 1
                                                        H.D. 2
                                                        C.D. 1

 
 1 the same rights in the proceedings as the person would have had
 
 2 if the action had continued under this section.  Any finding of
 
 3 fact or conclusion of law made in the other proceeding that
 
 4 becomes final shall be conclusive on all parties to an action
 
 5 under this section.  
 
 6      (f)  Whether or not the State elects to proceed with the
 
 7 action, the parties to the action shall receive court approval of
 
 8 any settlements reached.
 
 9      661-     Awards to qui tam plaintiffs.(a)  If the State
 
10 proceeds with an action brought by a person under section
 
11 661-    , the person shall receive at least fifteen per cent but
 
12 not more than twenty-five per cent of the proceeds of the action
 
13 or settlement of the claim, depending upon the extent to which
 
14 the person substantially contributed to the prosecution of the
 
15 action.  Where the action is one that the court finds to be based
 
16 primarily on disclosures of specific information, other than
 
17 information provided by the person bringing the action, relating
 
18 to allegations or transactions in a criminal, civil, or
 
19 administrative hearing, in a legislative or administrative
 
20 report, hearing, audit, or investigation, or from the news media,
 
21 the court may award sums as it considers appropriate, but in no
 
22 case more than ten per cent of the proceeds, taking into account
 
23 the significance of the information and the role of the person
 

 
Page 11                                                    2115
                                     S.B. NO.           S.D. 1
                                                        H.D. 2
                                                        C.D. 1

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

 
Page 12                                                    2115
                                     S.B. NO.           S.D. 1
                                                        H.D. 2
                                                        C.D. 1

 
 1 subsection (a), taking into account the role of that person in
 
 2 advancing the case to litigation and any relevant circumstances
 
 3 pertaining to the violation.  If the person bringing the action
 
 4 is convicted of criminal conduct arising from the person's role
 
 5 in the violation of section 661-    , that person shall be
 
 6 dismissed from the civil action and shall not receive any share
 
 7 of the proceeds of the action.  The dismissal shall not prejudice
 
 8 the right of the State to continue the action.
 
 9      (d)  If the State does not proceed with the action and the
 
10 person bringing the action conducts the action, the court may
 
11 award to the defendant its reasonable attorneys' fees and
 
12 expenses if the defendant prevails in the action and the court
 
13 finds that the claim of the person bringing the action was
 
14 frivolous, vexatious, or brought primarily for purposes of
 
15 harassment.
 
16      (e)  In no event may a person bring an action under section
 
17 661-     :
 
18      (1)  Against a member of the state senate or state house of
 
19           representatives, a member of the judiciary, or an
 
20           elected official in the executive branch of the State,
 
21           if the action is based on evidence or information known
 
22           to the State.  For purposes of this section, evidence
 
23           or information known only to the person or persons
 

 
Page 13                                                    2115
                                     S.B. NO.           S.D. 1
                                                        H.D. 2
                                                        C.D. 1

 
 1           against whom an action is brought shall not be
 
 2           considered to be known to the state;
 
 3      (2)  When the person is a present or former employee of the
 
 4           State and the action is based upon information
 
 5           discovered by the employee during the course of the
 
 6           employee's employment, unless the employee first, in
 
 7           good faith, exhausted any existing internal procedures
 
 8           for reporting and seeking recovery of the falsely
 
 9           claimed sums through official channels and the State
 
10           failed to act on the information provided within a
 
11           reasonable period of time; or
 
12      (3)  That is based upon allegations or transactions that are
 
13           the subject of a civil or criminal investigation by the
 
14           State, civil suit, or an administrative civil money
 
15           penalty proceeding in which the State is already a
 
16           party.
 
17      661-      Jurisdiction.  No court shall have jurisdiction
 
18 over an action under this part based upon the public disclosure
 
19 of allegations or transactions in a criminal, civil, or
 
20 administrative hearing, in a legislative or administrative
 
21 report, hearing, audit, or investigation, or from the news media,
 
22 unless the action is brought by the attorney general or the
 
23 person bringing the action is an original source of the
 

 
Page 14                                                    2115
                                     S.B. NO.           S.D. 1
                                                        H.D. 2
                                                        C.D. 1

 
 1 information.  For purposes of this section:
 
 2      "Original source" means an individual who has direct and
 
 3 independent knowledge of the information on which the allegations
 
 4 are based and has voluntarily provided the information to the
 
 5 State before filing an action under this part that is based on
 
 6 the information, and whose information provided the basis or
 
 7 catalyst for the investigation, hearing, audit, or report that
 
 8 led to the public disclosure.
 
 9      661-    Fees and costs of litigation.  The State shall
 
10 not be liable for expenses or fees, including attorney fees, that
 
11 a person incurs in bringing an action under this part and shall
 
12 not elect to pay those expenses or fees.
 
13      SECTION 2.  The provisions of this Act are not exclusive and
 
14 are in addition to any other applicable law or remedy.  This Act
 
15 shall be liberally construed and applied to promote the public
 
16 interest.
 
17      SECTION 3.  This Act shall take effect upon its approval.