Bill Text: TX SB1115 | 2011-2012 | 82nd Legislature | Introduced

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Bill Title: Relating to fraud against the state and actions by the state and private persons to prosecute those frauds; providing a civil penalty.

Spectrum: Partisan Bill (Republican 1-0)

Status: (Introduced - Dead) 2011-03-16 - Referred to State Affairs [SB1115 Detail]

Download: Texas-2011-SB1115-Introduced.html

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82R8913 DAK-F
By: Wentworth S.B. No. 1115

A BILL TO BE ENTITLED
AN ACT
relating to fraud against the state and actions by the state and
private persons to prosecute those frauds; providing a civil
penalty.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subtitle C, Title 10, Government Code, is
amended by adding Chapter 2116 to read as follows:
CHAPTER 2116. FRAUD AGAINST THE STATE
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 2116.001. DEFINITIONS. In this chapter:
(1) "Claim" includes any written or electronically
submitted request or demand, under a contract or otherwise, for
state funds or property.
(2) "Qui tam action" means an action brought by a
private person against a person for the commission of an unlawful
act.
(3) "Qui tam plaintiff" means a person bringing a qui
tam action.
(4) "State" means state government as defined by
Section 101.001, Civil Practice and Remedies Code.
(5) "Unlawful act" means an unlawful act under Section
2116.101.
Sec. 2116.002. WHEN A PERSON ACTS KNOWINGLY. In this
chapter, a person acts "knowingly" with respect to information if
the person:
(1) has knowledge of the information;
(2) acts in deliberate ignorance of the truth or
falsity of the information; or
(3) acts in reckless disregard of the truth or falsity
of the information.
Sec. 2116.003. CERTAIN ACTIONS BARRED. (a) A person may
not bring a qui tam action based on allegations or transactions that
are the subject of a civil suit or an administrative penalty
proceeding in which the state is already a party.
(b) A person may not bring a qui tam action against a member
of the legislature, a member of the judiciary, or a senior official
of the executive branch if the action is based on evidence or
information known to the state when the action was brought.
Sec. 2116.004. CHAPTER NOT APPLICABLE TO MEDICAID FRAUD.
This chapter does not apply to an unlawful act described by Section
36.002, Human Resources Code, relating to Medicaid fraud.
[Sections 2116.005-2116.050 reserved for expansion]
SUBCHAPTER B. INVESTIGATION BY ATTORNEY GENERAL
Sec. 2116.051. RESPONSIBILITY OF ATTORNEY GENERAL. The
attorney general shall diligently investigate the commission of an
unlawful act and may bring a civil action against the person
committing the unlawful act.
Sec. 2116.052. INVESTIGATION. (a) The attorney general
may take action under Subsection (b) if the attorney general has
reason to believe that:
(1) a person has information or custody or control of
documentary material relevant to the subject matter of an
investigation of an alleged unlawful act;
(2) a person is committing, has committed, or is about
to commit an unlawful act; or
(3) it is in the public interest to conduct an
investigation to ascertain whether a person is committing, has
committed, or is about to commit an unlawful act.
(b) In investigating an unlawful act, the attorney general
may:
(1) require the person to file on a prescribed form a
statement in writing, under oath or affirmation, as to all the facts
and circumstances concerning the alleged unlawful act and other
information considered necessary by the attorney general;
(2) examine under oath a person in connection with the
alleged unlawful act; and
(3) execute in writing and serve on the person a civil
investigative demand requiring the person to produce the
documentary material and permit inspection and copying of the
material under Section 2116.053.
(c) The office of the attorney general may not release or
disclose information that is obtained under Subsection (b)(1) or
(2) or any documentary material or other record derived from the
information except:
(1) by court order for good cause shown;
(2) with the consent of the person who provided the
information;
(3) to an employee of the attorney general;
(4) to an agency of this state, the United States, or
another state;
(5) to any attorney representing the state under
Section 2116.055 or in a civil action brought under Subchapter D;
(6) to a political subdivision of this state; or
(7) to a person authorized by the attorney general to
receive the information.
(d) The attorney general may use documentary material
derived from information obtained under Subsection (b)(1) or (2),
or copies of that material, as the attorney general determines
necessary in the enforcement of this chapter, including
presentation before a court.
(e) If a person fails to file a statement as required by
Subsection (b)(1) or fails to submit to an examination as required
by Subsection (b)(2), the attorney general may file in a district
court of Travis County a petition for an order to compel the person
to file the statement or submit to the examination within a period
stated by court order. Failure to comply with an order entered
under this subsection is punishable as contempt.
(f) An order issued by a district court under this section
is subject to appeal to the supreme court.
Sec. 2116.053. CIVIL INVESTIGATIVE DEMAND. (a) An
investigative demand must:
(1) state the rule or statute under which the alleged
unlawful act is being investigated and the general subject matter
of the investigation;
(2) describe the class or classes of documentary
material to be produced with reasonable specificity to fairly
indicate the documentary material demanded;
(3) prescribe a return date within which the
documentary material is to be produced; and
(4) identify an authorized employee of the attorney
general to whom the documentary material is to be made available for
inspection and copying.
(b) A civil investigative demand may require disclosure of
any documentary material that is discoverable under the Texas Rules
of Civil Procedure.
(c) Service of an investigative demand may be made by:
(1) delivering an executed copy of the demand to the
person to be served or to a partner, an officer, or an agent
authorized by appointment or by law to receive service of process on
behalf of that person;
(2) delivering an executed copy of the demand to the
principal place of business in this state of the person to be
served; or
(3) mailing by registered or certified mail an
executed copy of the demand addressed to the person to be served at
the person's principal place of business in this state or, if the
person has no place of business in this state, to a person's
principal office or place of business.
(d) Documentary material demanded under this section shall
be produced for inspection and copying during normal business hours
at the office of the attorney general or as agreed by the person
served and the attorney general.
(e) The office of the attorney general may not produce for
inspection or copying or otherwise disclose the contents of
documentary material obtained under this section except:
(1) by court order for good cause shown;
(2) with the consent of the person who produced the
information;
(3) to an employee of the attorney general;
(4) to an agency of this state, the United States, or
another state;
(5) to any attorney representing the state under
Section 2116.055 or in a civil action brought under Subchapter D;
(6) to a political subdivision of this state; or
(7) to a person authorized by the attorney general to
receive the information.
(f) The attorney general shall prescribe reasonable terms
and conditions allowing the documentary material to be available
for inspection and copying by the person who produced the material
or by an authorized representative of that person. The attorney
general may use the documentary material or copies of it as the
attorney general determines necessary in the enforcement of this
chapter, including presentation before a court.
(g) A person may file a petition, stating good cause, to
extend the return date for the demand or to modify or set aside the
demand. A petition under this section shall be filed in a district
court of Travis County and must be filed before the earlier of:
(1) the return date specified in the demand; or
(2) the 20th day after the date the demand is served.
(h) Except as provided by court order, a person on whom a
demand has been served under this section shall comply with the
terms of an investigative demand.
(i) A person who has committed an unlawful act has submitted
to the jurisdiction of this state, and personal service of an
investigative demand under this section may be made on the person
outside of this state.
(j) This section does not limit the authority of the
attorney general to conduct investigations or to access a person's
documentary materials or other information under another state or
federal law, the Texas Rules of Civil Procedure, or the Federal
Rules of Civil Procedure.
(k) If a person fails to comply with an investigative
demand, or if copying and reproduction of the documentary material
demanded cannot be satisfactorily accomplished and the person
refuses to surrender the documentary material, the attorney general
may file in a district court of Travis County a petition for an
order to enforce the investigative demand.
(l) If a petition is filed under Subsection (k), the court
may determine the matter presented and may enter an order to
implement this section.
(m) Failure to comply with a final order entered under
Subsection (l) is punishable by contempt.
(n) A final order issued by a district court under
Subsection (l) is subject to appeal to the supreme court.
Sec. 2116.054. INJUNCTIVE RELIEF. (a) If the attorney
general has reason to believe that a person is committing, has
committed, or is about to commit an unlawful act, the attorney
general may institute an action for an appropriate order to
restrain the person from committing or continuing the unlawful act.
(b) An action under this section shall be brought in a
district court of Travis County, or in a county in which any part of
the unlawful act occurred, is occurring, or is about to occur.
Sec. 2116.055. ATTORNEY GENERAL AS RELATOR IN FEDERAL
ACTION. To the extent permitted by 31 U.S.C. Sections 3729-3733,
the attorney general may bring an action as relator under 31 U.S.C.
Section 3730 with respect to an act for which a person may be held
liable under 31 U.S.C. Section 3729. The attorney general may
contract with a private attorney to represent the state under this
section.
Sec. 2116.056. STANDARD OF PROOF. The standard of proof for
all elements of a cause of action under this chapter is
preponderance of the evidence.
Sec. 2116.057. CHAPTER 41, CIVIL PRACTICE AND REMEDIES
CODE, INAPPLICABLE TO ACTION UNDER THIS CHAPTER. Chapter 41, Civil
Practice and Remedies Code, is not applicable to a cause of action
under this chapter.
[Sections 2116.058-2116.100 reserved for expansion]
SUBCHAPTER C. UNLAWFUL ACTS
Sec. 2116.101. UNLAWFUL ACTS. (a) A person commits an
unlawful act if the person:
(1) knowingly presents, or causes to be presented, a
false or fraudulent claim for state funds or property for payment or
approval;
(2) knowingly makes, uses, or causes to be made or used
a false record or statement material to payment or approval of a
false or fraudulent claim for state funds or property;
(3) has possession, custody, or control of state
property or funds used or to be used by this state and knowingly
delivers or causes to be delivered less property or funds than the
amount for which the person receives a certificate or receipt;
(4) is authorized to make or deliver a document
certifying receipt of property or funds used or to be used by this
state and knowingly makes or delivers a receipt that falsely
represents the property or funds used or to be used;
(5) knowingly buys, or receives as a pledge of an
obligation or debt, state property from any person who lawfully may
not sell or pledge the property;
(6) knowingly makes, uses, or causes to be made or used
a false record or statement to conceal, avoid, or decrease an
obligation to pay or transmit funds or property to this state; or
(7) conspires to commit a violation of this section.
(b) Proof of a person's specific intent to commit an
unlawful act under Subsection (a) is not required in a civil or
administrative proceeding to show that a person acted "knowingly"
with respect to information under this chapter.
Sec. 2116.102. CIVIL REMEDIES. (a) A person who commits
an unlawful act is liable to this state for:
(1) a civil penalty in an amount not less than $5,000
and not more than $10,000 for each unlawful act committed by the
person;
(2) except as provided by Subsection (b), three times
the amount of damages that this state sustains directly or
indirectly as a result of the act of the person; and
(3) fees, expenses, and costs reasonably incurred in
obtaining relief or civil remedies or conducting investigations
under this chapter, including court costs, reasonable attorney's
fees, witness fees, and deposition fees.
(b) A court may assess not less than two times the amount of
damages under Subsection (a)(2) if the court finds:
(1) that the person committing an unlawful act
furnished the attorney general with all information known to the
person about the unlawful act on or before the 30th day after the
date the person first obtained the information;
(2) that the person committing an unlawful act fully
cooperated with any investigation of the unlawful act; and
(3) at the time the person furnished information about
the unlawful act, a criminal prosecution, civil action, or
administrative action had not commenced in relation to the unlawful
act and the person did not have actual knowledge of the existence of
an investigation into the unlawful act.
Sec. 2116.103. EXCLUSION. This subchapter does not apply
to a claim, record, or statement made under the Tax Code.
[Sections 2116.104-2116.150 reserved for expansion]
SUBCHAPTER D. ACTIONS BY PRIVATE PERSONS
Sec. 2116.151. ACTIONS BY PRIVATE PERSON AUTHORIZED;
ALTERNATIVE REMEDY SOUGHT BY STATE. (a) Subject to Section
2116.201, a private person may bring a civil action against a person
committing an unlawful act.
(b) The action is a qui tam action on behalf of both the
person and the state and must be brought in the name of the state.
(c) No person other than the attorney general may intervene
or bring a related action based on the facts underlying a pending
action under this subchapter.
Sec. 2116.152. INITIATION OF ACTION. (a) A qui tam
plaintiff shall serve a copy of the petition and a written
disclosure of substantially all material evidence and information
the person possesses on the attorney general in compliance with the
Texas Rules of Civil Procedure.
(b) The petition shall be filed in camera, shall remain
under seal for at least 180 days, and may not be served on the
defendant until the court orders service.
(c) The state may elect to intervene and proceed with the
action not later than the 180th day after the date the attorney
general receives the petition and the material evidence and
information.
(d) The state may, for good cause shown, move the court for
an extension of the period during which the petition remains under
seal. A motion under this subsection may be supported by affidavits
or other submissions in camera.
(e) An action under this subchapter may be dismissed before
the end of the period during which the petition remains under seal
only if the court and the attorney general consent in writing to the
dismissal and state their reasons for consenting.
Sec. 2116.153. ANSWER BY DEFENDANT. A defendant is not
required to file in accordance with the Texas Rules of Civil
Procedure an answer to a petition filed under this subchapter until
the petition is unsealed and served on the defendant.
Sec. 2116.154. CHOICE OF STATE. (a) Not later than the
last day of the period described by Section 2116.152(c) or an
extension of that period as provided by Section 2116.152(d), the
state shall:
(1) proceed with the action; or
(2) notify the court that the state declines to take
over the action.
(b) If the state declines to take over the action, the court
shall dismiss the action.
Sec. 2116.155. ACTION CONDUCTED BY STATE. (a) This
section applies to a qui tam action the state takes over under
Section 2116.154(a)(1).
(b) The state has the primary responsibility for
prosecuting the action and is not bound by an act of the qui tam
plaintiff.
(c) Subject to this section, the qui tam plaintiff is
entitled to continue as a party to the action.
(d) Notwithstanding the objection of the qui tam plaintiff,
the state may dismiss the action for good cause if:
(1) the state notifies the qui tam plaintiff that a
motion to dismiss has been filed; and
(2) the court provides the qui tam plaintiff with an
opportunity for a hearing on the motion.
(e) Notwithstanding the objection of the qui tam plaintiff,
the state may settle the action if the court determines, after a
hearing, that the proposed settlement is fair, adequate, and
reasonable under all the circumstances.
(f) On a showing by the state that unrestricted
participation in the litigation of the action by the qui tam
plaintiff would interfere with or unduly delay the state's
prosecution of the case or would be repetitious, irrelevant, or for
purposes of harassment, the court may impose limitations on the qui
tam plaintiff's participation, including:
(1) limiting the number of witnesses the qui tam
plaintiff may call;
(2) limiting the length of the testimony of witnesses
called by the qui tam plaintiff;
(3) limiting the qui tam plaintiff's cross-examination
of witnesses; or
(4) otherwise limiting the participation by the qui
tam plaintiff in the litigation.
(g) On a showing by the defendant that unrestricted
participation in the litigation of the action by the qui tam
plaintiff would be for purposes of harassment or would cause the
defendant undue burden or unnecessary expense, the court may limit
the participation by the qui tam plaintiff in the litigation.
Sec. 2116.156. STAY OF CERTAIN DISCOVERY. (a) On a
showing by the state that certain actions of discovery by the qui
tam plaintiff would interfere with the state's investigation or
prosecution of a criminal or civil matter arising out of the same
facts, the court may stay the discovery for a period not to exceed
60 days.
(b) The court shall hear a motion to stay discovery under
this section in camera.
(c) The court may extend the period prescribed by Subsection
(a) on a further showing in camera that the state has pursued the
criminal or civil investigation or proceedings with reasonable
diligence and that any proposed discovery in the civil action will
interfere with the ongoing criminal or civil investigation or
proceedings.
Sec. 2116.157. AWARD TO QUI TAM PLAINTIFF WHEN STATE
PROCEEDS WITH ACTION. (a) If the state proceeds with an action
under this subchapter, the qui tam plaintiff is entitled, except as
provided by Subsection (b), to receive at least 15 percent, but not
more than 25 percent, of the proceeds of the action, depending on
the extent to which the qui tam plaintiff substantially contributed
to the prosecution of the action.
(b) If the court finds that the action is based primarily on
disclosures of specific information, other than information
provided by the qui tam plaintiff, relating to allegations or
transactions in a civil or criminal hearing, in a legislative or
administrative report, hearing, audit, or investigation, or from
the news media, the court may award the amount the court considers
appropriate but not more than seven percent of the proceeds of the
action. The court shall consider the significance of the
information and the role of the qui tam plaintiff in advancing the
case to litigation.
(c) A payment to a qui tam plaintiff under this section
shall be made from the proceeds of the action. A qui tam plaintiff
receiving a payment under this section is also entitled to receive
from the defendant an amount for reasonable expenses, reasonable
attorney's fees, and costs that the court finds to have been
necessarily incurred. The court's determination of expenses, fees,
and costs to be awarded under this subsection shall be made only
after the defendant has been found liable in the action.
(d) In this section, "proceeds of the action" includes
proceeds of a settlement of the action.
Sec. 2116.158. REDUCTION OF AWARD. (a) If the court finds
that the qui tam plaintiff planned and initiated the unlawful act
that is the basis of the qui tam action, the court may, to the extent
the court considers appropriate, reduce the share of the proceeds
of the action the qui tam plaintiff would otherwise receive under
Section 2116.157, taking into account the qui tam plaintiff's role
in advancing the case to litigation and any relevant circumstances
pertaining to the violation.
(b) If the qui tam plaintiff is convicted of criminal
conduct arising from that person's role in the unlawful act, the
court shall dismiss that person from the civil action and that
person may not receive any share of the proceeds of the action. A
dismissal under this subsection does not prejudice the right of the
state to continue the qui tam action.
Sec. 2116.159. STATE NOT LIABLE FOR CERTAIN EXPENSES. The
state is not liable for expenses that a qui tam plaintiff incurs in
bringing an action under this subchapter.
Sec. 2116.160. RETALIATION BY EMPLOYER AGAINST PERSON
BRINGING SUIT PROHIBITED. (a) A person who is discharged,
demoted, suspended, threatened, harassed, or in any other manner
discriminated against in the terms of employment by the person's
employer because of a lawful act taken by the person in furtherance
of a qui tam action, including investigation for, initiation of,
testimony for, or assistance in a qui tam action filed or to be
filed, is entitled to all relief necessary to make the person whole,
including:
(1) reinstatement with the same seniority status the
person would have had but for the discrimination; and
(2) two times the amount of back pay, interest on the
back pay, and compensation for any special damages sustained as a
result of the discrimination, including litigation costs and
reasonable attorney's fees.
(b) A person may bring an action in the appropriate district
court for the relief provided in this section.
[Sections 2116.161-2116.200 reserved for expansion]
SUBCHAPTER E. ACTION BY STATE
Sec. 2116.201. STATE MAY PURSUE ALTERNATIVE REMEDY.
(a) After a qui tam action is filed, the state may elect to
prosecute the unlawful act that is the subject of the action through
any alternative remedy available to the state, including any
administrative proceeding to determine an administrative penalty.
(b) The qui tam plaintiff has the same rights in the other
proceeding as that person would have had if the action had continued
in the original forum, including a monetary award as provided by
Subchapter D.
(c) A finding of fact or conclusion of law made in the other
proceeding that has become final is conclusive on all parties to the
qui tam action. For purposes of this subsection, a finding or
conclusion is final if:
(1) the finding or conclusion has been finally
determined on appeal to the appropriate court;
(2) no appeal has been filed with respect to the
finding or conclusion and all time for filing an appeal has expired;
or
(3) the finding or conclusion is not subject to
judicial review.
SECTION 2. Section 41.002(d), Civil Practice and Remedies
Code, is amended to read as follows:
(d) Notwithstanding any provision to the contrary, this
chapter does not apply to:
(1) Section 15.21, Business & Commerce Code (Texas
Free Enterprise and Antitrust Act of 1983);
(2) an action brought under the Deceptive Trade
Practices-Consumer Protection Act (Subchapter E, Chapter 17,
Business & Commerce Code) except as specifically provided in
Section 17.50 of that Act;
(3) an action brought under Chapter 36, Human
Resources Code; [or]
(4) an action brought under Chapter 541 [21],
Insurance Code; or
(5) an action brought under Chapter 2116, Government
Code.
SECTION 3. This Act applies only to an unlawful act as
described by Section 2116.101, Government Code, as added by this
Act, that takes place on or after the effective date of this Act. An
unlawful act takes place on or after the effective date of this Act
only if all elements of the unlawful act take place on or after the
effective date of this Act.
SECTION 4. This Act takes effect immediately if it receives
a vote of two-thirds of all the members elected to each house, as
provided by Section 39, Article III, Texas Constitution. If this
Act does not receive the vote necessary for immediate effect, this
Act takes effect September 1, 2011.