Legislature(2001 - 2002)
03/20/2001 08:07 AM CRA
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HB 145-FALSE CLAIMS AGAINST STATE OR MUNICIPALIT CO-CHAIR MORGAN announced that the next order of business would be HOUSE BILL NO. 145, "An Act making a civil remedy available to the state or a municipality against persons who make false claims for, or certain misrepresentations regarding, state or municipal money or other property; and providing for an effective date." JIM BALDWIN, Assistant Attorney General, Civil Division (Juneau), Department of Law, informed the committee that this bill was before the committee in the Twenty-First Legislature as HB 425. House Bill 425 didn't pass simply because it was in the process too late. He explained that HB 145 is the result of [the department's] efforts to prosecute a claim against a major financial institution jointly with several municipalities in the state. Mr. Baldwin said, "While this bill may not aid that litigation, it came to light that we need something like this to update our laws, to give us better tools in enforcing the civil rights and remedies of municipal and state government when there has been a misrepresentation or a false or fraudulent claim presented against the state." MR. BALDWIN informed the committee that the current law, AS 37.10.090, is skeletal and dates back to territorial days. Basically, this statute provides a right of action by the state or a municipality if money has been falsely paid or illegally diverted. The statute also includes provisions regarding the state taking over the prosecution on behalf of municipalities. This has been utilized infrequently, if at all. Therefore, the department believes there is the need to update the statutes with a more detailed false claim statute. California [statute] was used as the model. Mr. Baldwin related his belief that HB 145 was referred to this committee because of the provisions relating to the cooperation between state and municipal governments when there may claims that have both state and municipal involvement. He informed the committee that cooperation between the state and the municipalities in the Bank of America case has been extremely good, although a rather involved process was followed in regard to how "we were going to conduct ourselves and finance our activities." This bill, HB 145, would resolve some of those issues, such as who goes first. Number 0723 MR. BALDWIN emphasized that, from the Department of Law's perspective, the bill provides a fairly potent remedy from a civil context in that it would potentially impose treble damages against a wrongdoer. Furthermore, the bill would establish easy methods of proof [by] following a criminal prosecution for fraud or misrepresentation. Our statute lacks those modern improvements. As far as Mr. Baldwin knew, there have been no questions raised by the municipalities about provisions that touch upon their powers or activities. Mr. Baldwin requested that the committee favorably forward HB 145 to its next committee of referral. Number 0807 REPRESENTATIVE MURKOWSKI referred to page 5, subsection (c) that addresses the sharing of the costs. She inquired as to how readily such could be determined. If there is some compensation being returned to the municipality or city, could there be a fight regarding who receives what. MR. BALDWIN replied that such a situation could potentially be the [case]. He explained that the Bank of America case involved bonds that were issued by various governments. A formula based on the amount of debt service that each entity was responsible for paying on the bonds involved was established. Therefore, costs are shared on a percentage of the debt service as compared to the whole. He said, "That's ... what we're getting at here with this kind of provision. If there's some logical way to arrive at that share, then this would be the avenue to getting there." Mr. Baldwin agreed with Representative Murkowski that in the beginning it is difficult to determine the total amount involved. However, there could be adjustments at the conclusion [of the process]. REPRESENTATIVE MURKOWSKI related her understanding that unless there is an agreement otherwise, the share would be based on the proportion. However, determining that proportion can be problematic. MR. BALDWIN agreed. He said, "What that does is it forces you to try to agree otherwise so that ... going in you remove the dispute." He agreed with Representative Murkowski's understanding that an agreement regarding the cost would be entered into at the time it is determined who would go first. He noted that if there is enough at stake, there is usually a way to find an agreement. Number 1039 REPRESENTATIVE MURKOWSKI recalled hearing this legislation twice last year, once in the House Community and Regional Affairs Standing Committee and once in the House Judiciary Standing Committee. She said she believes that HB 145 is probably the same as HB 425 from last year, although she couldn't remember what [the committees] did with it last year. She expressed the need for the House Judiciary Standing Committee to review what constitutes a "reasonable time" after the discovery of a false claim as well as some other specific technical issues. CO-CHAIR MEYER asked if Representative Murkowski recalled any concerns that arose with HB 425. REPRESENTATIVE MURKOWSKI referred to page 2, paragraph (8), and recalled that there was a question surrounding what would constitute a reasonable amount of time. She recalled that on page 3, subsection (3)(c), there was a question regarding what would happen to an individual that did all the things listed but knew that there was probably going to be an investigation. She felt that the House Judiciary Standing Committee could find the points of discussion. Number 1276 REPRESENTATIVE SCALZI asked if this would apply to any type of contract with a municipality. MR. BALDWIN answered that certain things are exempt from the act. If there is a single claim, worth under $500, that can't be aggregated with other claims, it would not be subject to this act. Therefore, this addresses the larger claims. There is also an exemption for provisions that have a statutory means for prosecuting false claims. Those provisions that are exempt would include the permanent fund dividend, employment claims, and under Title 43, the revenue and taxation code. CO-CHAIR MEYER said that he too had thought HB 145 would apply to people who falsified their permanent fund application or their taxes, or even the senior citizen property exemption. However, he understood Mr. Baldwin to mean that those would be exempt from this law. MR. BALDWIN reiterated that the permanent fund dividend is specifically exempted. He clarified, "If it's not specifically exempted, it could be prosecuted under this law." He specified that any civil penalty prosecuted under AS 43, the revenue and taxation code, would be exempt. Also exempt are public assistance, AS 47.25; the Alaska Temporary Assistance Program (ATAP), AS 47.27; worker's compensation, AS 23.30, and the Employment Security Act, AS 23.20. Those all have statutes that punish people who make false claims and thus there was no desire to change the statutory scheme. Number 1470 REPRESENTATIVE MURKOWSKI moved to report HB 145 out of committee with individual recommendations and the accompanying zero fiscal note. There being no objection, HB 145 was reported from the House Community and Regional Affairs Standing Committee. The committee took a brief at-ease from 8:28 a.m. to 8:30 a.m.