1-1 By: Moncrief S.B. No. 1528 1-2 (In the Senate - Filed March 13, 1997; March 20, 1997, read 1-3 first time and referred to Committee on Jurisprudence; 1-4 April 9, 1997, reported favorably, as amended, by the following 1-5 vote: Yeas 7, Nays 0; April 9, 1997, sent to printer.) 1-6 COMMITTEE AMENDMENT NO. 1 By: Harris 1-7 Amend S.B. No. 1528, SECTION 1, page 5, line 48, by adding a new 1-8 Subsection (d) to Section 2259.052 to read as follows: 1-9 (d) This section does not apply to an employer who is 1-10 covered by Chapter 554. 1-11 A BILL TO BE ENTITLED 1-12 AN ACT 1-13 relating to false claims made with certain governmental entities; 1-14 providing a civil penalty. 1-15 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-16 SECTION 1. Subtitle F, Title 10, Government Code, is amended 1-17 by adding Chapter 2259 to read as follows: 1-18 CHAPTER 2259. FALSE CLAIMS 1-19 SUBCHAPTER A. GENERAL PROVISIONS 1-20 Sec. 2259.001. DEFINITIONS. In this chapter: 1-21 (1) "Claim" means a claim for money, property, or 1-22 services made to: 1-23 (A) an employee, officer, or agent of a 1-24 governmental entity; or 1-25 (B) a government contractor, if a portion of the 1-26 money, property, or services claimed was or is to be provided by a 1-27 governmental entity. 1-28 (2) "Government contractor" means a person who 1-29 receives money from a governmental entity to provide goods or a 1-30 service, acting within the course and scope of the person's 1-31 obligation to the governmental entity. The term includes a 1-32 contractor, grantee, or other recipient of money without regard to 1-33 whether the contractor, grantee, or recipient is under contract to 1-34 the governmental entity. 1-35 (3) "Governmental entity" means: 1-36 (A) the state; 1-37 (B) a local governmental entity; 1-38 (C) a board, commission, department, office, or 1-39 other agency in the executive branch of state government, including 1-40 an institution of higher education as defined by Section 61.003, 1-41 Education Code; 1-42 (D) the legislature or a legislative agency; or 1-43 (E) the supreme court, the court of criminal 1-44 appeals, a court of appeals, or the State Bar of Texas or another 1-45 judicial agency having statewide jurisdiction. 1-46 (4) "Local governmental entity" means: 1-47 (A) a municipality, county, public school 1-48 district, or special-purpose district or authority; or 1-49 (B) a court that receives any part of its 1-50 funding from a municipality or county. 1-51 (5) "Managing official" means an appointed or elected 1-52 official responsible for the management or oversight of a 1-53 governmental entity. In the case of the legislature, the term 1-54 means the speaker of the house of representatives or the lieutenant 1-55 governor. In the case of a court, the term means any judge or 1-56 justice of the court. 1-57 (6) "Prosecuting authority" means the attorney for a 1-58 local governmental entity or another local government official 1-59 charged with investigating, filing, and conducting civil legal 1-60 proceedings on behalf of a local governmental entity. 1-61 Sec. 2259.002. PROHIBITED ACTS. A person may not: 1-62 (1) present to an officer, employee, or agent of a 1-63 governmental entity or government contractor a false claim for 1-64 payment or approval; 2-1 (2) make or use a false record or statement to obtain 2-2 payment or approval of a false claim by a governmental entity or 2-3 government contractor; 2-4 (3) conspire to defraud a governmental entity or 2-5 government contractor by obtaining the payment or approval of a 2-6 false claim; 2-7 (4) deliver to a governmental entity or government 2-8 contractor less property than the amount of property for which the 2-9 person receives a receipt; 2-10 (5) make or deliver a receipt that falsely represents 2-11 the amount of property delivered that is to be used by a 2-12 governmental entity or government contractor; 2-13 (6) buy or accept as a pledge of an obligation or debt 2-14 public property from a person who may not sell or pledge the 2-15 property; 2-16 (7) make or use a false record or statement to 2-17 conceal, avoid, or decrease an obligation to pay or transmit money 2-18 or property to a governmental entity or government contractor; 2-19 (8) accept the benefits from a false claim made by any 2-20 person; or 2-21 (9) cause an act described by Subdivisions (1) through 2-22 (8) to be committed by another person. 2-23 (Sections 2259.003-2259.010 reserved for expansion 2-24 SUBCHAPTER B. LIABILITY FOR VIOLATIONS 2-25 Sec. 2259.011. LIABILITY FOR KNOWING VIOLATION. (a) A 2-26 court that finds that a person knowingly violated Section 2259.002 2-27 shall award the affected governmental entity: 2-28 (1) the actual damages sustained by the governmental 2-29 entity because of the violation; 2-30 (2) exemplary damages equal to two times the amount of 2-31 actual damages; and 2-32 (3) attorney's fees and costs incurred by the 2-33 governmental entity to recover the damages and penalty. 2-34 (b) The court may reduce the amount of exemplary damages 2-35 awarded under Subsection (a)(2) to an amount not less than the 2-36 amount of actual damages if the person who knowingly violated 2-37 Section 2259.002: 2-38 (1) furnished an official of the governmental entity 2-39 responsible for investigating false claims violations with all 2-40 information known to the person about the violation not later than 2-41 the 30th day after the official requested the information; and 2-42 (2) otherwise fully cooperated with any investigation 2-43 by the governmental entity. 2-44 (c) A person knowingly violates Section 2259.002 if the 2-45 person: 2-46 (1) acts with actual knowledge of the facts that 2-47 constitute the violation; 2-48 (2) acts in deliberate ignorance or reckless disregard 2-49 of those facts or the truth or falsity of those facts; or 2-50 (3) acts without actual knowledge of the facts that 2-51 constitute the violation and, after the violation, learns the facts 2-52 that constitute the violation and fails to take action to mitigate 2-53 or rectify the violation. 2-54 Sec. 2259.012. CIVIL PENALTY. In addition to amounts 2-55 awarded under Section 2259.011, the court may award to the affected 2-56 governmental entity a civil penalty of not more than $10,000 for 2-57 each false claim unless the person who knowingly violated Section 2-58 2259.002 cooperated in the investigation as described by Sections 2-59 2259.011(b)(1) and (2). 2-60 Sec. 2259.013. LIABILITY JOINT AND SEVERAL; PROPORTIONATE 2-61 RESPONSIBILITY INAPPLICABLE. Liability under this subchapter is 2-62 joint and several for a violation committed by more than one 2-63 person. Chapter 33, Civil Practice and Remedies Code, does not 2-64 apply to an action brought under this chapter. 2-65 Sec. 2259.014. EXCEPTIONS. A court may not award exemplary 2-66 damages and attorney's fees and costs under Section 2259.011 or a 2-67 civil penalty under Section 2259.012 against a person if the total 2-68 actual damages resulting from all violations for which damages are 2-69 being assessed against the person in the case is less than $500. 3-1 Sec. 2259.015. DEPOSIT OF MONEY. (a) Money collected on 3-2 behalf of a governmental entity shall be deposited to the credit of 3-3 the general revenue fund of the state or of the local governmental 3-4 entity, as appropriate. 3-5 (b) If the action is brought in the names of both the state 3-6 and one or more local governmental entities, the court shall 3-7 apportion the award of damages, exemplary damages, and any civil 3-8 penalty among the state and those local entities on the basis of 3-9 the loss incurred. Attorney's fees and costs shall be awarded to 3-10 the entity that incurred the fees and costs. 3-11 Sec. 2259.016. LIMITATIONS. (a) Subject to Subsection (b), 3-12 an action under this subchapter must be brought not later than the 3-13 third anniversary of the date on which the violation was discovered 3-14 by: 3-15 (1) the attorney general or prosecuting authority; or 3-16 (2) a managing official of the affected governmental 3-17 entity, other than a managing official who participated in the 3-18 violation. 3-19 (b) An action under this subchapter may not be brought after 3-20 the 10th anniversary of the date on which the violation was 3-21 committed. 3-22 Sec. 2259.017. APPLICATION OF LAW GOVERNING EXEMPLARY 3-23 DAMAGES. Chapter 41, Civil Practice and Remedies Code, does not 3-24 apply to exemplary damages awarded under Section 2259.011 or to the 3-25 civil penalty awarded under Section 2259.012. 3-26 (Sections 2259.018-2259.020 reserved for expansion 3-27 SUBCHAPTER C. ATTORNEY GENERAL ACTION 3-28 Sec. 2259.021. ATTORNEY GENERAL INVESTIGATION. (a) The 3-29 attorney general shall investigate alleged violations of Section 3-30 2259.002 involving state funds. 3-31 (b) If the attorney general finds that a person has violated 3-32 Section 2259.002, the attorney general may bring an action under 3-33 Subchapter B against the person. 3-34 Sec. 2259.022. AFFECTED LOCAL GOVERNMENTAL ENTITY. (a) If 3-35 the attorney general brings an action under Subchapter B on a claim 3-36 that involves local government funds as well as state funds, the 3-37 attorney general shall provide a copy of the complaint to the 3-38 appropriate prosecuting authority. 3-39 (b) The attorney general shall mail the complaint to the 3-40 prosecuting authority by certified mail, return receipt requested, 3-41 not later than the date on which the complaint is filed. 3-42 (c) The prosecuting authority may intervene in an action 3-43 brought by the attorney general under this subchapter not later 3-44 than the 60th day after the date the prosecuting authority receives 3-45 the copy of the complaint. The court may permit the prosecuting 3-46 authority to intervene after that date for good cause. 3-47 (Sections 2259.023-2259.030 reserved for expansion 3-48 SUBCHAPTER D. ACTION BROUGHT BY PROSECUTING AUTHORITY 3-49 Sec. 2259.031. PROSECUTING AUTHORITY INVESTIGATION. (a) A 3-50 prosecuting authority shall investigate alleged violations of 3-51 Section 2259.002 involving funds belonging to a local governmental 3-52 entity. 3-53 (b) If the prosecuting authority finds that a person has 3-54 violated Section 2259.002, the prosecuting authority may bring an 3-55 action under Subchapter B against the person. 3-56 Sec. 2259.032. ATTORNEY GENERAL. (a) If the prosecuting 3-57 authority brings an action under Subchapter B on a claim that 3-58 involves state funds as well as local government funds, the 3-59 prosecuting authority shall provide a copy of the complaint to the 3-60 attorney general. 3-61 (b) The prosecuting authority shall mail the complaint to 3-62 the attorney general by certified mail, return receipt requested, 3-63 not later than the date on which the complaint is filed. 3-64 (c) Not later than the 60th day after the date the attorney 3-65 general receives the copy of the complaint, the attorney general 3-66 shall: 3-67 (1) notify the court that the attorney general intends 3-68 to proceed with the action and assume primary responsibility for 3-69 conducting the action; or 4-1 (2) notify the court that the attorney general 4-2 declines to assume primary responsibility for conducting the 4-3 action. 4-4 (d) If the attorney general assumes primary responsibility 4-5 for conducting the action, the prosecuting authority may continue 4-6 as a party in the action. If the attorney general declines to 4-7 assume primary responsibility for conducting the action, the 4-8 prosecuting authority may continue to conduct the action. 4-9 (Sections 2259.033-2259.040 reserved for expansion 4-10 SUBCHAPTER E. PRIVATE CAUSE OF ACTION 4-11 Sec. 2259.041. PRIVATE ACTION. A person may bring a civil 4-12 action in a district court in this state for a violation of Section 4-13 2259.002 in the name of the person and the name of the state, the 4-14 name of a local government, or both the state and the local 4-15 government, as appropriate. 4-16 Sec. 2259.042. SERVICE OF PETITION. (a) A person who 4-17 brings an action under this subchapter shall serve a copy of the 4-18 petition in the action on: 4-19 (1) the attorney general, if the claim involves state 4-20 funds; and 4-21 (2) the prosecuting authority of the local government, 4-22 if the claim involves local government funds. 4-23 (b) Service under this section shall be made in the manner 4-24 provided by Rule 21a, Texas Rules of Civil Procedure. 4-25 Sec. 2259.043. INTERVENTION. (a) In an action involving 4-26 only state funds, the attorney general may assume responsibility 4-27 for prosecution of the action by entering an appearance not later 4-28 than the 60th day after the date the attorney general receives 4-29 service of the petition under Section 2259.042. 4-30 (b) In an action involving only local government funds, the 4-31 prosecuting authority may assume responsibility for prosecution of 4-32 the action by entering an appearance not later than the 60th day 4-33 after the date the prosecuting authority receives service of the 4-34 petition under Section 2259.042. 4-35 (c) In an action involving state and local government funds, 4-36 the attorney general may assume primary responsibility for 4-37 prosecution of the action by entering an appearance not later than 4-38 the 60th day after the date the attorney general receives service 4-39 of the petition under Section 2259.042. 4-40 (d) If the attorney general assumes primary responsibility 4-41 for prosecution of the action under Subsection (c), the prosecuting 4-42 authority may, not later than the 60th day after the date the 4-43 prosecuting authority receives service of the petition under 4-44 Section 2259.042, enter an appearance and proceed as a party in the 4-45 action. 4-46 (e) If the attorney general does not assume primary 4-47 responsibility for prosecution of the action under Subsection (c), 4-48 the prosecuting authority may assume responsibility for prosecution 4-49 of the action not later than the 30th day after the last date the 4-50 attorney general may enter an appearance under this section. 4-51 Sec. 2259.044. AWARD TO PRIVATE PARTY IF GOVERNMENT 4-52 PROSECUTES ACTION. (a) If the attorney general or the prosecuting 4-53 authority assumes responsibility for prosecution of the action 4-54 under Section 2259.043 and the action is settled or the court 4-55 enters a judgment for the state or the local government, the court 4-56 shall award a reasonable portion of the settlement or judgment to 4-57 the person who commenced the action under this subchapter. 4-58 (b) In determining the amount to award a person under this 4-59 section, the court shall consider the value of any information or 4-60 evidence disclosed by the person. An award of 10 percent of the 4-61 settlement or judgment is presumed to be reasonable. 4-62 Sec. 2259.045. AWARD TO PRIVATE PARTY IF GOVERNMENT DOES 4-63 NOT PROSECUTE ACTION. (a) If the attorney general or the 4-64 prosecuting authority does not assume responsibility for 4-65 prosecution of the action under Section 2259.043 and the action is 4-66 settled or the court enters a judgment for the state or the local 4-67 government, the court shall award to the person who prosecuted the 4-68 action under this subchapter: 4-69 (1) a reasonable portion of the settlement or 5-1 judgment; and 5-2 (2) reasonable expenses incurred by the person in 5-3 prosecuting the action. 5-4 (b) In determining the amount to award a person under 5-5 Subsection (a), the court shall consider the value of the person's 5-6 prosecution of the action. An award of 25 percent of the 5-7 settlement or judgment is presumed to be reasonable. 5-8 (Sections 2259.046-2259.050 reserved for expansion 5-9 SUBCHAPTER F. INTERFERENCE WITH DISCLOSURE BY EMPLOYEES 5-10 Sec. 2259.051. RIGHT TO DISCLOSE INFORMATION AND PARTICIPATE 5-11 IN ACTION. A person is entitled to: 5-12 (1) disclose information relevant to an alleged 5-13 violation of Section 2259.002 to a governmental entity, a 5-14 prosecuting authority, the attorney general, or a law enforcement 5-15 agency; 5-16 (2) assist, at the request of the attorney general or 5-17 a prosecuting authority, in the investigation of an alleged 5-18 violation of Section 2259.002; or 5-19 (3) testify or otherwise participate, at the request 5-20 of the attorney general or a prosecuting authority, in the 5-21 furtherance of an action filed or to be filed under this chapter. 5-22 Sec. 2259.052. PROHIBITED CONDUCT BY EMPLOYER. (a) An 5-23 employer may not: 5-24 (1) adopt or enforce a rule or policy that prevents an 5-25 employee from exercising the employee's rights under Section 5-26 2259.051; or 5-27 (2) discriminate against an employee, including 5-28 discharging, demoting, suspending, threatening, harassing, or 5-29 denying promotion to the employee, because the employee has 5-30 exercised the employee's rights under Section 2259.051. 5-31 (b) An employer who violates Subsection (a) is liable to the 5-32 employee for: 5-33 (1) actual damages, including damages for lost wages; 5-34 (2) reinstatement to employment with the seniority 5-35 status, if applicable, that the employee would have had in the 5-36 absence of the discrimination; 5-37 (3) exemplary damages equal to not less than two times 5-38 the amount of lost wages; and 5-39 (4) attorney's fees and costs. 5-40 (c) An employee may not recover under Subsection (b) unless: 5-41 (1) the employee exercised the employee's rights under 5-42 Section 2259.051; and 5-43 (2) to the extent the employee participated in the 5-44 violation of Section 2259.002, the employee participated in 5-45 response to harassment, threats of termination or demotion, or 5-46 other coercion by the employer. 5-47 SECTION 2. This Act takes effect September 1, 1997, and 5-48 applies only to an action commenced on or after that date without 5-49 regard to whether the act on which the action is based occurred 5-50 before, on, or after that date. An action commenced before the 5-51 effective date of this Act is governed by the law applicable to the 5-52 action immediately before the effective date of this Act, and that 5-53 law is continued in effect for that purpose. 5-54 SECTION 3. The importance of this legislation and the 5-55 crowded condition of the calendars in both houses create an 5-56 emergency and an imperative public necessity that the 5-57 constitutional rule requiring bills to be read on three several 5-58 days in each house be suspended, and this rule is hereby suspended. 5-59 * * * * *