Legislature(1999 - 2000)
04/17/2000 01:26 PM House JUD
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 425 - FALSE CLAIMS AGAINST STATE OR MUNI. Number 0677 CHAIRMAN KOTT turned to the next item of business, 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." [James Baldwin had provided brief remarks at a previous hearing. Before the committee was CSHB 425(CRA), but there was a new work draft, Version G.] Number 0683 JAMES BALDWIN, Assistant Attorney General, Governmental Affairs Section, Civil Division (Juneau), Department of Law, came forward to testify. He said he had reviewed this new draft committee substitute (CS), and he believes the amendments that he and the committee had discussed are reflected in it. He stated for the record that he is satisfied with the draft CS [Version G]. Number 0780 REPRESENTATIVE ROKEBERG moved to adopt proposed CSHB 425, Version G [1-GH2029\G, Bannister, 4/15/00] as the working document before the committee. There being no objection, it was so ordered. Number 0805 REPRESENTATIVE GREEN asked Mr. Baldwin whether the draft still includes treble damages and [a $10,000 fine]. MR. BALDWIN said yes. He explained that none of the changes made in the draft are substantive in nature from what the Office of the Attorney General originally had asked the committee to adopt, although the title has been made more descriptive of the contents. There had been some language that would have led one to believe that the Department of Law intended to change court rules, which it did not, and that language was corrected. Also, because the previous draft followed very closely the false claims statute of another state, there was a way of describing things that is not typical in Alaska statutes; that has also been fixed. "But yes, it does contain treble damages and the $10,000 fine, and that is one of the important aspects of the bill that we would like to have as an enforcement tool," he concluded. Number 0890 REPRESENTATIVE GREEN related his understanding: You are asking [to] prosecute criminally on preponderance of the evidence as you would a civil crime, and also have a rather severe penalty for these cases against the state. Is this preferential? You're not allowing this to happen to someone else, a person who was wronged; it's just the state. There's probably a rationale behind that. Number 0928 MR. BALDWIN explained that the motive behind a bill like this is to make it clear that when one is seeking a benefit or some kind of a financial or proprietary right from the government, one must do so honestly and in a straightforward manner. Therefore, the mere act of being dishonest about it should carry with it a heavy burden. The reason that the Department of Law would like to have this kind of a statute is that these claims of misrepresentation or defrauding the government can be difficult to prove in some instances. Mr. Baldwin continued: It is often easier to prove that someone was dishonest than it is to prove how dishonest they were. The threat of being able to assess a heavy damage for that dishonesty is, in our view, particularly [useful] when cases that we're focusing on are cases against large financial institutions that either can bury you with documents - to the extent that it is very difficult and very expensive to prove how they may have defrauded you or misrepresented things to you - or they have "cooked their books" to such an extent that it's again very expensive and very time-consuming to prove the extent of their misrepresentation. The fear of being brought in under a statute where you can assess treble damages [may make] a settlement of the claim more than likely than having to litigate it clear to the end point, which is extremely expensive and poses a lot of risks for both sides. Number 1032 REPRESENTATIVE GREEN said he certainly could understand that; it makes a lot of sense. He questioned whether this makes it easier for a state that has a battery of attorneys as opposed to an individual or a small company that may not. He asked whether that same fear would also reduce the chances that this same entity would try to defraud a small company or individual. "I'm just wondering why we are preferentially singling out the state to allow this concept," he added. Number 1070 MR. BALDWIN replied: We [in the Office of the Attorney General] exist and do our jobs as trustees of the public fisc, and it's in that role that we are seeking these kinds of powers. When we are acting in a fiduciary capacity, as a protector of the public's property and assets, this kind of a tool seems to me to be justified, as we are protecting collectively the interests of all of the people in not having to pay false claims or not having to see the public's property suffered to loss through fraud or misrepresentation. ... That would be one distinguishing characteristic. Number 1130 REPRESENTATIVE CROFT observed that there would be two options when somebody presents a false claim. He gave an example: So I say, "Here's the bill for shipping my car," [when] I didn't really ship my car and I want to pocket that $800 or $1,000. You could either, under the criminal standards, hold me criminally guilty of fraud ... or this gives you another tool that you can say, "All right, it's hard to get into his mental state and the burden of proof is high; we're just going to go after the civil and get treble damages from you." This, in effect, gives you another tool. And maybe you could tell me some about what some of the difficulties would be in just going the criminal route. Number 1190 MR. BALDWIN replied, "If we go the criminal route and you plead out to that, I can still go back and go after you civilly and whatever you have admitted to. If there's been a conviction entered against you, that becomes very strong evidence of your civil liability as well." He indicated the legal options operate not only independently but can operate concurrently. REPRESENTATIVE CROFT asked whether this could be used as a follow-up to criminal prosecution. MR. BALDWIN said it would be possible to do that. "If you have been convicted, it becomes evidence," he explained. REPRESENTATIVE KERTTULA pointed out that provision is in Section 3. Number 1286 MR. BALDWIN read from page 4, line 21: A guilty verdict rendered in a criminal proceeding charging false statements or fraud, whether upon a verdict after trial or upon a plea of guilty or nolo contendere, estop the defendant from denying the essential elements of the offense in a civil action .... He said that once a person has been convicted, the state's burden of proof on the civil side is much lessened. REPRESENTATIVE CROFT responded that it still would seem to him that a treble damage provision would be most useful, in that it might be an easier way to go than the criminal route. Number 1340 MR. BALDWIN explained that regarding unclaimed property, it is a misdemeanor when a financial institution fails to report its unclaimed property to the state. "I don't know of a circumstance where we have ever gone after anyone for a misdemeanor charge," he said. "But we would have that option. We could also go civilly, as a separate action, to obtain treble damages." Mr. Baldwin noted that in California, the prosecution of unclaimed property has gone more toward false-claim-type enforcement than it has toward the regular statutes that apply for collection of unclaimed property, simply because the ability to claim treble damages is such a strong enforcement tool that the companies are brought to a settlement much sooner than if the state had to proceed down the long administrative trail toward claiming unclaimed property. Number 1411 REPRESENTATIVE MURKOWSKI referred to Section 2(a)(8), concerning the beneficiary of an inadvertent submission of a false claim who finds out about the false claim, and then has to disclose it within a reasonable time. She wondered what was considered a reasonable time. She then called attention to subsection (c) [also under Section 2], where it would appear that a person is going to be held for treble damages unless that person can reduce the amount somehow. She asked whether [paragraph (8) is saying] that if she discovers that there has been a false claim and she has been the beneficiary, then she has to report to somebody within 30 days. Number 1876 MR. BALDWIN said he thinks that is a reasonable interpretation. He stated: We are looking upon that paragraph (8) as being our best chance of making this law applicable to a party like [a bank] whose activity occurred before the effective date of this Act. I think that it would be hard to make an argument that all the other provisions [except paragraph (8)] go back retroactively .... He said the bank has some hard choices; they still can argue that this law does not apply because of the retroactivity arguments, but he believes that paragraph (8) then brings them in. He added, "And then I think your interpretation is reasonable that the 30 days which allows you to step down to double damages rather than treble damages would be the test of reasonableness." CHAIRMAN KOTT asked whether anyone else wished to testify. There being no response, he closed public testimony on HB 425. Number 1560 REPRESENTATIVE ROKEBERG moved to report CSHB 425 [Version G] out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, it was so ordered and CSHB 425(JUD) was reported from the House Judiciary Standing Committee.
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