Legislature(2001 - 2002)

03/20/2001 08:07 AM CRA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= 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                                                               
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.                                                                  

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