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.]