By Alvarado H.B. No. 494 75R3049 DLF-F A BILL TO BE ENTITLED 1-1 AN ACT 1-2 relating to false claims made with certain governmental entities. 1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-4 SECTION 1. Subtitle F, Title 10, Government Code, is amended 1-5 by adding Chapter 2259 to read as follows: 1-6 CHAPTER 2259. FALSE CLAIMS 1-7 SUBCHAPTER A. GENERAL PROVISIONS 1-8 Sec. 2259.001. DEFINITIONS. In this chapter: 1-9 (1) "Claim" means a claim for money, property, or 1-10 services made to: 1-11 (A) an employee, officer, or agent of a 1-12 governmental entity; or 1-13 (B) a government contractor, if a portion of the 1-14 money, property, or services claimed was or is to be provided by a 1-15 governmental entity. 1-16 (2) "Government contractor" means a person who 1-17 receives money from a governmental entity to provide goods or a 1-18 service, acting within the course and scope of the person's 1-19 obligation to the governmental entity. The term includes a 1-20 contractor, grantee, or other recipient of money without regard to 1-21 whether the contractor, grantee, or recipient is under contract to 1-22 the governmental entity. 1-23 (3) "Governmental entity" means: 1-24 (A) the state; 2-1 (B) a local governmental entity; 2-2 (C) a board, commission, department, office, or 2-3 other agency in the executive branch of state government, including 2-4 an institution of higher education as defined by Section 61.003, 2-5 Education Code; 2-6 (D) the legislature or a legislative agency; or 2-7 (E) the supreme court, the court of criminal 2-8 appeals, a court of appeals, or the State Bar of Texas or another 2-9 judicial agency having statewide jurisdiction. 2-10 (4) "Local governmental entity" means: 2-11 (A) a municipality, county, public school 2-12 district, or special-purpose district or authority; or 2-13 (B) a court that receives any part of its 2-14 funding from a municipality or county. 2-15 (5) "Managing official" means an appointed or elected 2-16 official responsible for the management or oversight of a 2-17 governmental entity. In the case of the legislature, the term 2-18 means the speaker of the house of representatives or the lieutenant 2-19 governor. In the case of a court, the term means any judge or 2-20 justice of the court. 2-21 (6) "Prosecuting authority" means the attorney for a 2-22 local governmental entity or another local government official 2-23 charged with investigating, filing, and conducting civil legal 2-24 proceedings on behalf of a local governmental entity. 2-25 Sec. 2259.002. PROHIBITED ACTS. A person may not: 2-26 (1) present to an officer, employee, or agent of a 2-27 governmental entity or government contractor a false claim for 3-1 payment or approval; 3-2 (2) make or use a false record or statement to obtain 3-3 payment or approval of a false claim by a governmental entity or 3-4 government contractor; 3-5 (3) conspire to defraud a governmental entity or 3-6 government contractor by obtaining the payment or approval of a 3-7 false claim; 3-8 (4) deliver to a governmental entity or government 3-9 contractor less property than the amount of property for which the 3-10 person receives a receipt; 3-11 (5) make or deliver a receipt that falsely represents 3-12 the amount of property delivered that is to be used by a 3-13 governmental entity or government contractor; 3-14 (6) buy or accept as a pledge of an obligation or debt 3-15 public property from a person who may not sell or pledge the 3-16 property; 3-17 (7) make or use a false record or statement to 3-18 conceal, avoid, or decrease an obligation to pay or transmit money 3-19 or property to a governmental entity or government contractor; 3-20 (8) accept the benefits from a false claim made by any 3-21 person; or 3-22 (9) cause an act described by Subdivisions (1) through 3-23 (8) to be committed by another person. 3-24 (Sections 2259.003-2259.010 reserved for expansion 3-25 SUBCHAPTER B. LIABILITY FOR VIOLATIONS 3-26 Sec. 2259.011. LIABILITY FOR KNOWING VIOLATION. (a) A 3-27 court that finds that a person knowingly violated Section 2259.002 4-1 shall award the affected governmental entity: 4-2 (1) the actual damages sustained by the governmental 4-3 entity because of the violation; 4-4 (2) exemplary damages equal to two times the amount of 4-5 actual damages; and 4-6 (3) attorney's fees and costs incurred by the 4-7 governmental entity to recover the damages and penalty. 4-8 (b) The court may reduce the amount of exemplary damages 4-9 awarded under Subsection (a)(2) to an amount not less than the 4-10 amount of actual damages if the person who knowingly violated 4-11 Section 2259.002: 4-12 (1) furnished an official of the governmental entity 4-13 responsible for investigating false claims violations with all 4-14 information known to the person about the violation not later than 4-15 the 30th day after the official requested the information; and 4-16 (2) otherwise fully cooperated with any investigation 4-17 by the governmental entity. 4-18 (c) A person knowingly violates Section 2259.002 if the 4-19 person: 4-20 (1) acts with actual knowledge of the facts that 4-21 constitute the violation; 4-22 (2) acts in deliberate ignorance or reckless disregard 4-23 of those facts or the truth or falsity of those facts; or 4-24 (3) acts without actual knowledge of the facts that 4-25 constitute the violation and, after the violation, learns the facts 4-26 that constitute the violation and fails to take action to mitigate 4-27 or rectify the violation. 5-1 Sec. 2259.012. CIVIL PENALTY. In addition to amounts 5-2 awarded under Section 2259.011, the court may award to the affected 5-3 governmental entity a civil penalty of not more than $10,000 for 5-4 each false claim unless the person who knowingly violated Section 5-5 2259.002 cooperated in the investigation as described by Sections 5-6 2259.011(b)(1) and (2). 5-7 Sec. 2259.013. LIABILITY JOINT AND SEVERAL; PROPORTIONATE 5-8 RESPONSIBILITY INAPPLICABLE. Liability under this subchapter is 5-9 joint and several for a violation committed by more than one 5-10 person. Chapter 33, Civil Practice and Remedies Code, does not 5-11 apply to an action brought under this chapter. 5-12 Sec. 2259.014. EXCEPTIONS. (a) A court may not award 5-13 exemplary damages and attorney's fees and costs under Section 5-14 2259.011 or a civil penalty under Section 2259.012 against a person 5-15 if the total actual damages resulting from all violations for which 5-16 damages are being assessed against the person in the case is less 5-17 than $500. 5-18 (b) This chapter does not apply to a claim made under a 5-19 workers' compensation law of this state. 5-20 Sec. 2259.015. DEPOSIT OF MONEY. (a) Money collected on 5-21 behalf of a governmental entity shall be deposited to the credit of 5-22 the general revenue fund of the state or of the local governmental 5-23 entity, as appropriate. 5-24 (b) If the action is brought in the names of both the state 5-25 and one or more local governmental entities, the court shall 5-26 apportion the award of damages, exemplary damages, and any civil 5-27 penalty among the state and those local entities on the basis of 6-1 the loss incurred. Attorney's fees and costs shall be awarded to 6-2 the entity that incurred the fees and costs. 6-3 Sec. 2259.016. LIMITATIONS. (a) Subject to Subsection (b), 6-4 an action under this subchapter must be brought not later than the 6-5 third anniversary of the date on which the violation was discovered 6-6 by: 6-7 (1) the attorney general or prosecuting authority; or 6-8 (2) a managing official of the affected governmental 6-9 entity, other than a managing official who participated in the 6-10 violation. 6-11 (b) An action under this subchapter may not be brought after 6-12 the 10th anniversary of the date on which the violation was 6-13 committed. 6-14 Sec. 2259.017. APPLICATION OF LAW GOVERNING EXEMPLARY 6-15 DAMAGES. Chapter 41, Civil Practice and Remedies Code, does not 6-16 apply to exemplary damages awarded under Section 2259.011 or to the 6-17 civil penalty awarded under Section 2259.012. 6-18 (Sections 2259.018-2259.020 reserved for expansion 6-19 SUBCHAPTER C. ATTORNEY GENERAL ACTION 6-20 Sec. 2259.021. ATTORNEY GENERAL INVESTIGATION. (a) The 6-21 attorney general shall investigate alleged violations of Section 6-22 2259.002 involving state funds. 6-23 (b) If the attorney general finds that a person has violated 6-24 Section 2259.002, the attorney general may bring an action under 6-25 Subchapter B against the person. 6-26 Sec. 2259.022. AFFECTED LOCAL GOVERNMENTAL ENTITY. (a) If 6-27 the attorney general brings an action under Subchapter B on a claim 7-1 that involves local government funds as well as state funds, the 7-2 attorney general shall provide a copy of the complaint to the 7-3 appropriate prosecuting authority. 7-4 (b) The attorney general shall mail the complaint to the 7-5 prosecuting authority by certified mail, return receipt requested, 7-6 not later than the date on which the complaint is filed. 7-7 (c) The prosecuting authority may intervene in an action 7-8 brought by the attorney general under this subchapter not later 7-9 than the 60th day after the date the prosecuting authority receives 7-10 the copy of the complaint. The court may permit the prosecuting 7-11 authority to intervene after that date for good cause. 7-12 (Sections 2259.023-2259.030 reserved for expansion 7-13 SUBCHAPTER D. ACTION BROUGHT BY PROSECUTING AUTHORITY 7-14 Sec. 2259.031. PROSECUTING AUTHORITY INVESTIGATION. (a) A 7-15 prosecuting authority shall investigate alleged violations of 7-16 Section 2259.002 involving funds belonging to a local governmental 7-17 entity. 7-18 (b) If the prosecuting authority finds that a person has 7-19 violated Section 2259.002, the prosecuting authority may bring an 7-20 action under Subchapter B against the person. 7-21 Sec. 2259.032. ATTORNEY GENERAL. (a) If the prosecuting 7-22 authority brings an action under Subchapter B on a claim that 7-23 involves state funds as well as local government funds, the 7-24 prosecuting authority shall provide a copy of the complaint to the 7-25 attorney general. 7-26 (b) The prosecuting authority shall mail the complaint to 7-27 the attorney general by certified mail, return receipt requested, 8-1 not later than the date on which the complaint is filed. 8-2 (c) Not later than the 60th day after the date the attorney 8-3 general receives the copy of the complaint, the attorney general 8-4 shall: 8-5 (1) notify the court that the attorney general intends 8-6 to proceed with the action and assume primary responsibility for 8-7 conducting the action; or 8-8 (2) notify the court that the attorney general 8-9 declines to assume primary responsibility for conducting the 8-10 action. 8-11 (d) If the attorney general assumes primary responsibility 8-12 for conducting the action, the prosecuting authority may continue 8-13 as a party in the action. If the attorney general declines to 8-14 assume primary responsibility for conducting the action, the 8-15 prosecuting authority may continue to conduct the action. 8-16 (Sections 2259.033-2259.040 reserved for expansion 8-17 SUBCHAPTER E. PRIVATE CAUSE OF ACTION 8-18 Sec. 2259.041. PRIVATE ACTION. A person may bring a civil 8-19 action in a district court in this state for a violation of Section 8-20 2259.002 in the name of the person and the name of the state, the 8-21 name of a local government, or both the state and the local 8-22 government, as appropriate. 8-23 Sec. 2259.042. SERVICE OF PETITION. (a) A person who 8-24 brings an action under this subchapter shall serve a copy of the 8-25 petition in the action on: 8-26 (1) the attorney general, if the claim involves state 8-27 funds; and 9-1 (2) the prosecuting authority of the local government, 9-2 if the claim involves local government funds. 9-3 (b) Service under this section shall be made in the manner 9-4 provided by Rule 21a, Texas Rules of Civil Procedure. 9-5 Sec. 2259.043. INTERVENTION. (a) In an action involving 9-6 only state funds, the attorney general may assume responsibility 9-7 for prosecution of the action by entering an appearance not later 9-8 than the 60th day after the date the attorney general receives 9-9 service of the petition under Section 2259.042. 9-10 (b) In an action involving only local government funds, the 9-11 prosecuting authority may assume responsibility for prosecution of 9-12 the action by entering an appearance not later than the 60th day 9-13 after the date the prosecuting authority receives service of the 9-14 petition under Section 2259.042. 9-15 (c) In an action involving state and local government funds, 9-16 the attorney general may assume primary responsibility for 9-17 prosecution of the action by entering an appearance not later than 9-18 the 60th day after the date the attorney general receives service 9-19 of the petition under Section 2259.042. 9-20 (d) If the attorney general assumes primary responsibility 9-21 for prosecution of the action under Subsection (c), the prosecuting 9-22 authority may, not later than the 60th day after the date the 9-23 prosecuting authority receives service of the petition under 9-24 Section 2259.042, enter an appearance and proceed as a party in the 9-25 action. 9-26 (e) If the attorney general does not assume primary 9-27 responsibility for prosecution of the action under Subsection (c), 10-1 the prosecuting authority may assume responsibility for prosecution 10-2 of the action not later than the 30th day after the last date the 10-3 attorney general may enter an appearance under this section. 10-4 Sec. 2259.044. AWARD TO PRIVATE PARTY IF GOVERNMENT 10-5 PROSECUTES ACTION. (a) If the attorney general or the prosecuting 10-6 authority assumes responsibility for prosecution of the action 10-7 under Section 2259.043 and the action is settled or the court 10-8 enters a judgment for the state or the local government, the court 10-9 shall award a reasonable portion of the settlement or judgment to 10-10 the person who commenced the action under this subchapter. 10-11 (b) In determining the amount to award a person under this 10-12 section, the court shall consider the value of any information or 10-13 evidence disclosed by the person. An award of 10 percent of the 10-14 settlement or judgment is presumed to be reasonable. 10-15 Sec. 2259.045. AWARD TO PRIVATE PARTY IF GOVERNMENT DOES 10-16 NOT PROSECUTE ACTION. (a) If the attorney general or the 10-17 prosecuting authority does not assume responsibility for 10-18 prosecution of the action under Section 2259.043 and the action is 10-19 settled or the court enters a judgment for the state or the local 10-20 government, the court shall award a reasonable portion of the 10-21 settlement or judgment to the person who prosecuted the action 10-22 under this subchapter. 10-23 (b) In determining the amount to award a person under 10-24 Subsection (a), the court shall consider the value of the person's 10-25 prosecution of the action. An award of 25 percent of the 10-26 settlement or judgment is presumed to be reasonable. 10-27 (c) The court may also award to the person who prosecuted 11-1 the action reasonable expenses incurred by the person in 11-2 prosecuting the action. 11-3 (Sections 2259.046-2259.050 reserved for expansion 11-4 SUBCHAPTER F. INTERFERENCE WITH DISCLOSURE BY EMPLOYEES 11-5 Sec. 2259.051. RIGHT TO DISCLOSE INFORMATION AND PARTICIPATE 11-6 IN ACTION. A person is entitled to: 11-7 (1) disclose information relevant to an alleged 11-8 violation of Section 2259.002 to a governmental entity, a 11-9 prosecuting authority, the attorney general, or a law enforcement 11-10 agency; 11-11 (2) assist, at the request of the attorney general or 11-12 a prosecuting authority, in the investigation of an alleged 11-13 violation of Section 2259.002; or 11-14 (3) testify or otherwise participate, at the request 11-15 of the attorney general or a prosecuting authority, in the 11-16 furtherance of an action filed or to be filed under this chapter. 11-17 Sec. 2259.052. PROHIBITED CONDUCT BY EMPLOYER. (a) An 11-18 employer may not: 11-19 (1) adopt or enforce a rule or policy that prevents an 11-20 employee from exercising the employee's rights under Section 11-21 2259.051; or 11-22 (2) discriminate against an employee, including 11-23 discharging, demoting, suspending, threatening, harassing, or 11-24 denying promotion to the employee, because the employee has 11-25 exercised the employee's rights under Section 2259.051. 11-26 (b) An employer who violates Subsection (a) is liable to the 11-27 employee for: 12-1 (1) actual damages, including damages for lost wages; 12-2 (2) reinstatement to employment with the seniority 12-3 status, if applicable, that the employee would have had in the 12-4 absence of the discrimination; 12-5 (3) exemplary damages equal to not less than two times 12-6 the amount of lost wages; and 12-7 (4) attorney's fees and costs. 12-8 (c) An employee may not recover under Subsection (b) unless: 12-9 (1) the employee exercised the employee's rights under 12-10 Section 2259.051; and 12-11 (2) to the extent the employee participated in the 12-12 violation of Section 2259.002, the employee participated in 12-13 response to harassment, threats of termination or demotion, or 12-14 other coercion by the employer. 12-15 SECTION 2. This Act takes effect September 1, 1997, and 12-16 applies only to conduct that occurs on or after that date. Conduct 12-17 that occurred before the effective date of this Act is governed by 12-18 the law applicable to the conduct immediately before the effective 12-19 date of this Act, and that law is continued in effect for that 12-20 purpose. 12-21 SECTION 3. The importance of this legislation and the 12-22 crowded condition of the calendars in both houses create an 12-23 emergency and an imperative public necessity that the 12-24 constitutional rule requiring bills to be read on three several 12-25 days in each house be suspended, and this rule is hereby suspended.