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AB-1270 False Claims Act.(2019-2020)



Current Version: 08/13/19 - Amended Senate

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AB1270:v96#DOCUMENT

Amended  IN  Senate  August 13, 2019
Amended  IN  Senate  June 24, 2019
Amended  IN  Assembly  April 10, 2019

CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Assembly Bill
No. 1270

Introduced by Assembly Member Mark Stone

February 21, 2019

An act to amend Sections 12650, 12651, and 12653 of the Government Code, relating to the False Claims Act.


LEGISLATIVE COUNSEL'S DIGEST


AB 1270, as amended, Mark Stone. False Claims Act.
Existing law, the False Claims Act, provides that any person who commits specified acts, including, but not limited to, knowingly presenting a false or fraudulent claim for payment or approval or knowingly making or using a false record or statement material to a false or fraudulent claim, is liable to the state or to the political subdivision for 3 times the amount of damages that the state or political subdivision sustained because of the act and for the costs of a civil action brought to recover any penalties or damages, and is subject to a civil penalty. That act requires the Attorney General or the prosecuting authority of a political subdivision to diligently investigate violations of those specific acts involving state funds or political subdivision funds, respectively, and authorizes the Attorney General, the prosecuting attorney, or a qui tam plaintiff to bring a civil action against a person who commits those acts.
This bill, with respect to whether a false record or statement is material, would require that the materiality test focus on the potential effect of the false record or statement when it is made, not on the actual effect of the false statement when it is discovered. This bill would specify that the amount of damages include consequential damages. This bill would state that these changes are declaratory of existing law.
The False Claims Act does not apply to claims, records, or statements made under the Revenue and Taxation Code.
This bill would apply the False Claims Act to apply to claims, records, or statements made under the Revenue and Taxation Code if specified conditions are met, including if damages pleaded in an action under the act exceed $200,000. $200,000 and that the claim, record, or statement was made on or after January 1, 2020. This bill would require the Attorney General or prosecuting authority, as described, to consult with the taxing authorities to whom the claim was submitted prior to filing or intervening in any action under the act that is based on the filing of false claims, records, or statements made under the Revenue and Taxation Code. The bill would authorize the Attorney General or the prosecuting authority, but not the qui tam plaintiff, to obtain otherwise confidential records relating to taxes, fees, or other obligations under the Revenue and Taxation Code. The bill would prohibit the disclosure of federal tax information to the Attorney General or the prosecuting authority without authorization from the Internal Revenue Service. The bill would require that any such information obtained be kept confidential, except as necessary to investigate and prosecute violations of these provisions.
Under the False Claims Act, an employee, contractor, or agent who is discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of their employment for engaging in lawful acts, as specified, or other efforts to stop violations of the act, is entitled to all relief necessary to make them whole.
This bill would specify that the relief described above applies to any current or former employee, contractor, or agent. The bill would extend this relief if these parties are otherwise harmed or penalized by an employer. This bill would define lawful acts to include specified acts that may violate a contract, employment term, or duty owed to an employer or contractor.
Existing constitutional provisions require that a statute that limits the right of access to the meetings of public bodies or the writings of public officials and agencies be adopted with findings demonstrating the interest protected by the limitation and the need for protecting that interest.
This bill would make legislative findings to that effect.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

The people of the State of California do enact as follows:


SECTION 1.

 Section 12650 of the Government Code is amended to read:

12650.
 (a) This article shall be known and may be cited as the False Claims Act.
(b) For purposes of this article:
(1) “Claim” means any request or demand, whether under a contract or otherwise, for money, property, or services, and whether or not the state or a political subdivision has title to the money, property, or services that meets either of the following conditions:
(A) Is presented to an officer, employee, or agent of the state or of a political subdivision.
(B) Is made to a contractor, grantee, or other recipient, if the money, property, or service is to be spent or used on a state or any political subdivision’s behalf or to advance a state or political subdivision’s program or interest, and if the state or political subdivision meets either of the following conditions:
(i) Provides or has provided any portion of the money, property, or service requested or demanded.
(ii) Reimburses the contractor, grantee, or other recipient for any portion of the money, property, or service that is requested or demanded.
(2) “Claim” does not include requests or demands for money, property, or services that the state or a political subdivision has paid to an individual as compensation for employment with the state or political subdivision or as an income subsidy with no restrictions on that individual’s use of the money, property, or services.
(3) “Knowing” and “knowingly” mean that a person, with respect to information, does any of the following:
(A) Has actual knowledge of the information.
(B) Acts in deliberate ignorance of the truth or falsity of the information.
(C) Acts in reckless disregard of the truth or falsity of the information.
Proof of specific intent to defraud is not required.
(4) “Material” means having a natural tendency to influence, or be capable of influencing, the payment or receipt of money, property, or services. The materiality test shall focus on the potential effect of the false record or statement when it is made, not on the actual effect of the false record or statement when it is discovered.
(5) “Obligation” means an established duty, whether or not fixed, arising from an express or implied contractual, grantor-grantee, or licensor-licensee relationship, from a fee-based or similar relationship, from statute or regulation, or from the retention of any overpayment.
(6) “Political subdivision” includes any city, city and county, county, tax or assessment district, or other legally authorized local governmental entity with jurisdictional boundaries.
(7) “Political subdivision funds” means funds that are the subject of a claim.
(8) “Prosecuting authority” refers to the county counsel, city attorney, or other local government official charged with investigating, filing, and conducting civil legal proceedings on behalf of, or in the name of, a particular political subdivision and includes counsel retained by a political subdivision to act on its behalf for these purposes.
(9) “Person” includes any natural person, corporation, firm, association, organization, partnership, limited liability company, business, or trust.
(10) “State funds” mean funds that are the subject of a claim.

SEC. 2.

 Section 12651 of the Government Code is amended to read:

12651.
 (a) Any person who commits any of the following enumerated acts in this subdivision shall have violated this article and shall be liable to the state or to the political subdivision for three times the amount of all damages, including consequential damages, that the state or political subdivision sustains because of the act of that person. A person who commits any of the following enumerated acts shall also be liable to the state or to the political subdivision for the costs of a civil action brought to recover any of those penalties or damages, and shall be liable to the state or political subdivision for a civil penalty of not less than five thousand five hundred dollars ($5,500) and not more than eleven thousand dollars ($11,000) for each violation, as adjusted by the Federal Civil Penalties Inflation Adjustment Act of 1990, Public Law 101-410 Section 5, 104 Stat. 891, note following 28 U.S.C. Section 2461.
(1) Knowingly presents or causes to be presented a false or fraudulent claim for payment or approval.
(2) Knowingly makes, uses, or causes to be made or used a false record or statement material to a false or fraudulent claim.
(3) Conspires to commit a violation of this subdivision.
(4) Has possession, custody, or control of public property or money used or to be used by the state or by any political subdivision and knowingly delivers or causes to be delivered less than all of that property.
(5) Is authorized to make or deliver a document certifying receipt of property used or to be used by the state or by any political subdivision and knowingly makes or delivers a receipt that falsely represents the property used or to be used.
(6) Knowingly buys, or receives as a pledge of an obligation or debt, public property from any person who lawfully may not sell or pledge the property.
(7) Knowingly makes, uses, or causes to be made or used a false record or statement material to an obligation to pay or transmit money or property to the state or to any political subdivision, or knowingly conceals or knowingly and improperly avoids, or decreases an obligation to pay or transmit money or property to the state or to any political subdivision.
(8) Is a beneficiary of an inadvertent submission of a false claim, subsequently discovers the falsity of the claim, and fails to disclose the false claim to the state or the political subdivision within a reasonable time after discovery of the false claim.
(b) Notwithstanding subdivision (a), the court may assess not less than two times and not more than three times the amount of damages which the state or the political subdivision sustains because of the act of the person described in that subdivision, and no civil penalty, if the court finds all of the following:
(1) The person committing the violation furnished officials of the state or of the political subdivision responsible for investigating false claims violations with all information known to that person about the violation within 30 days after the date on which the person first obtained the information.
(2) The person fully cooperated with any investigation by the state or a political subdivision of the violation.
(3) At the time the person furnished the state or the political subdivision with information about the violation, no criminal prosecution, civil action, or administrative action had commenced with respect to the violation, and the person did not have actual knowledge of the existence of an investigation into the violation.
(c)  Liability under this section shall be joint and several for any act committed by two or more persons.
(d) This section does not apply to any controversy involving an amount of less than five hundred dollars ($500) in value. For purposes of this subdivision, “controversy” means any one or more false claims submitted by the same person in violation of this article.
(e) This section does not apply to claims, records, or statements made pursuant to Division 3.6 (commencing with Section 810) of Title 1 or to workers’ compensation claims filed pursuant to Division 4 (commencing with Section 3200) of the Labor Code.
(f) (1) This section shall apply to claims, records, or statements made under the Revenue and Taxation Code only if the damages pleaded in such action exceed two hundred thousand dollars ($200,000) and any of the following equals or exceeds five hundred thousand dollars ($500,000) for any taxable year subject to any action brought pursuant to this article:
(A) The taxable income of any person other than a corporation against whom the action is brought, under Part 10 (commencing with Section 17001) of Division 2 of the Revenue and Taxation Code.
(B) The net income gross receipts, as defined in Section 25120 of the Revenue and Taxation Code, less returns and allowances of any corporation or other person other than an individual against whom the action is brought, under Part 11 (commencing with Section 23001) of Division 2 of the Revenue and Taxation Code.
(C) The sales of any person against whom the action is brought, under Part 1 (commencing with Section 6001) of Division 2 of the Revenue and Taxation Code.
(2) For purposes of this subdivision only, “person” shall have the meaning ascribed to it in Section 17007 of the Revenue and Taxation Code.
(3) The Attorney General or prosecuting authority shall consult with the taxing authorities to whom the claim, record, or statement was submitted prior to filing or intervening in any action under this article that is based on the filing of false claims, records, or statements made under the Revenue and Taxation Code.
(4) Notwithstanding any other law, the Attorney General or prosecuting authority, but not the qui tam plaintiff, is hereby authorized to obtain otherwise confidential records relating to taxes, fees, surcharges, or other obligations under the Revenue and Taxation Code needed to investigate or prosecute suspected violations of this subdivision from state and local taxing and other governmental authorities in possession of such information and records, and such authorities are hereby authorized to make those disclosures. The taxing and other governmental authorities shall not provide federal tax information without authorization from the Internal Revenue Service.
(5) Any information received pursuant to paragraphs (3) and (4) shall be kept confidential except as necessary to investigate and prosecute suspected violations of this subdivision.
(6) This subdivision does not and shall not be construed to have retroactive application to any claims, records, or statements made under the Revenue and Taxation Code before January 1, 2020.
(g) This section does not apply to claims, records, or statements for the assets of a person that have been transferred to the Commissioner of Insurance, pursuant to Section 1011 of the Insurance Code.

SEC. 3.

 Section 12653 of the Government Code is amended to read:

12653.
 (a) (1) Any current or former employee, contractor, or agent shall be entitled to all relief necessary to make that employee, contractor, or agent whole, if that employee, contractor, or agent is discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of their employment or otherwise harmed or penalized by an employer or contractor because of lawful acts done by the employee, contractor, agent, or associated others in furtherance of an action under this section or other efforts to stop one or more violations of this article.
(2) For purposes of this section, a “lawful act” shall include, but not be limited to, obtaining or transmitting to the state, a political subdivision, a qui tam plaintiff, or private counsel employed to investigate, potentially file, or file a cause of action under this article, documents, data, correspondence, electronic mail, or any other information, even though that act may violate a contract, employment term, or duty owed to the employer or contractor.
(3) Nothing in this subdivision shall be interpreted to prevent any law enforcement authority from bringing a civil or criminal action against any person for violating any provision of law.
(b) Relief under this section shall include reinstatement with the same seniority status that the employee, contractor, or agent would have had but for the discrimination, 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, and, where appropriate, punitive damages. The defendant shall also be required to pay litigation costs and reasonable attorney’s fees. An action under this section may be brought in the appropriate superior court of the state.
(c) A civil action under this section shall not be brought more than three years after the date when the retaliation occurred.

SEC. 4.

 (a) The amendment of paragraph (4) of subdivision (b) of Section 12650 of the Government Code made by this act does not constitute a change in, but is declaratory of, existing law.
(b) The amendment of subdivision (a) of Section 12651 of the Government Code made by this act does not constitute a change in, but is declaratory of, existing law.

SEC. 5.

 The Legislature finds and declares that Section 2 of this act, which amends Section 12651 of the Government Code, imposes a limitation on the public’s right of access to the meetings of public bodies or the writings of public officials and agencies within the meaning of Section 3 of Article I of the California Constitution. Pursuant to that constitutional provision, the Legislature makes the following findings to demonstrate the interest protected by this limitation and the need for protecting that interest:
In order to protect the existing confidentiality of tax records, it is necessary to limit the public’s access to these documents.