04/13/2000 01:15 PM House JUD

HB 425 - FALSE CLAIMS AGAINST STATE OR MUNI.                                                                                  
                                                                                                                                
CHAIRMAN KOTT announced  that the next order of  business would be                                                              
HOUSE  BILL NO.  425, "An  Act relating  to misrepresentation  and                                                              
false  claims  made  against  the state  or  a  municipality;  and                                                              
providing for an effective date."   [The bill was sponsored by the                                                              
House Rules  Committee  by request  of the Governor.   Before  the                                                              
committee was CSHB 425(CRA).]                                                                                                   
                                                                                                                                
Number 1541                                                                                                                     
                                                                                                                                
JAMES BALDWIN,  Assistant Attorney  General, Governmental  Affairs                                                              
Section, Civil Division (Juneau),  Department of Law, explained to                                                              
members  that the  bill would  enact  a false  claims statute  for                                                              
Alaska.   Although there  is the skeletal  form of a  false claims                                                              
statute now, it doesn't have some  of the provisions that would be                                                              
particularly helpful  in at least  one current case  involving the                                                              
Bank of America.   The allegations in that case are  that the bank                                                              
retained a substantial  amount of bond funds which  were placed in                                                              
their hands by state and municipal  governments.  Alaska's lack of                                                              
a  false  claims   statute  was  brought  to   [the  department's]                                                              
attention  by the  State of  California, which  recently used  its                                                              
false  claims statute  to  bring to  a successful  conclusion  the                                                              
claims  that  it  had  against  the   bank,  thereby  receiving  a                                                              
settlement of $188 million.                                                                                                     
                                                                                                                                
MR.  BALDWIN specified  that Alaska's  skeletal statute  is in  AS                                                              
37.10.090,  which basically  makes  it unlawful  for  a person  to                                                              
illegally pay or divert state or  municipal funds.  The version of                                                              
the bill before  the committee [CSHB 425(CRA)]  was copied closely                                                              
from the California false claims  statute.  It provides for treble                                                              
damages  if someone  files  a false  administrative  claim with  a                                                              
public  officer.  There  are various  forms of  that, Mr.  Baldwin                                                              
explained.   The claim has  to be in  excess of $500,  and certain                                                              
types  of claims  are excluded,  such as  claims for  welfare-type                                                              
benefits or unemployment.   Also, the tax code  and permanent fund                                                              
dividends  are excluded  because those  have established  statutes                                                              
that provide  for penalties  for filing  false claims under  those                                                              
particular statutory schemes.                                                                                                   
                                                                                                                                
MR. BALDWIN illustrated the magnitude  of the Bank of America case                                                              
by noting that  in Alaska, state and municipal  issuers had placed                                                              
in the hands of  the bank about $22 billion in  bond proceeds.  It                                                              
was determined, by using a sampling  technique in California, that                                                              
of the bearer bond  proceeds - which anyone can show  up and claim                                                              
who is  holding the  bearer paper, because  they aren't  issued in                                                              
anyone's name and  the bank doesn't really has this  paper - 0.392                                                              
percent  of that  money remained  unclaimed  in the  hands of  the                                                              
bank; that figure  times the $7 billion of unclaimed  bearer paper                                                              
is a large number.  [The State of  Alaska] would like to have this                                                              
kind of  enforcement tool,  Mr. Baldwin explained,  to be  able to                                                              
successfully  prosecute  the  Bank   of  America  case  and  other                                                              
potential  cases  against other  custodians  of  large amounts  of                                                              
state and municipal money.                                                                                                      
                                                                                                                                
Number 1715                                                                                                                     
                                                                                                                                
MR. BALDWIN  noted that  when he had  spoken with Chairman  Kott's                                                              
staff about this,  he was shown a memorandum from  the Legislative                                                              
Affairs  Agency  [from  Theresa  Bannister,  Legislative  Counsel,                                                              
dated March  8, 2000]  about the  bill.   Mr. Baldwin pointed  out                                                              
that the memorandum contained comments  about the bill's title and                                                              
some other  provisions that  might involve court  rules.   Thus he                                                              
was offering  a written amendment  for a title that  would tighten                                                              
it up and  be more descriptive  about the contents;  the amendment                                                              
also  would  alter  provisions  relating  to  service  of  and  by                                                              
municipal and state  attorneys, which would avoid a  change in the                                                              
civil  rules.   That draft  amendment  read [original  punctuation                                                              
provided]:                                                                                                                      
                                                                                                                                
     Page 1, lines 1 and 2:  delete all material (the title)                                                                    
     and insert the following new material to read:                                                                             
                                                                                                                                
          "An act  creating a right  for the state  or a                                                                        
          municipality to recover  civil damages against                                                                        
          a  person  who makes  a  false  administrative                                                                        
          claim for payment or approval  from a state or                                                                        
          municipal  officer  for  payment of  money  or                                                                        
          property   or  who   knowingly  receives   the                                                                        
          benefit  of   a  false  administrative   claim                                                                        
          presented  to a  state  or municipal  officer;                                                                        
          and providing for an effective date."                                                                                 
                                                                                                                                
      Page 4, line 25:  delete "serve" insert "provide" in                                                                      
     its place                                                                                                                  
          line 26:  delete "on" and insert "to" in its place                                                                    
                                                                                                                                
     Page 5, line 2:  delete "serve" insert "provide" in its                                                                    
     place                                                                                                                      
          line 3:  delete "on" and insert "to" in its place                                                                     
                                                                                                                                
MR.  BALDWIN provided  a copy  of  that amendment  and offered  to                                                              
answer questions.                                                                                                               
                                                                                                                                
Number 1765                                                                                                                     
                                                                                                                                
CHAIRMAN  KOTT  asked  whether there  were  questions;  none  were                                                              
offered.   He then asked  whether anyone  else wished  to testify;                                                              
there was  no response.   He announced that  HB 425 would  be held                                                              
over.   He indicated  there would  be a  new committee  substitute                                                              
(CS) drafted, which  would incorporate the concerns  that had been                                                              
identified.  [HB 425 was held over.]