SF 82

3rd Engrossment - 86th Legislature (2009 - 2010) Posted on 02/09/2010 02:10am

A bill for an act
relating to state government; establishing the Minnesota False Claims Act;
assessing penalties; establishing a false claims account; proposing coding for
new law as Minnesota Statutes, chapter 15C.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

new text begin [15C.01] DEFINITIONS.
new text end

new text begin Subdivision 1. new text end

new text begin Scope. new text end

new text begin For purposes of this chapter, the terms in this section have
the meanings given them.
new text end

new text begin Subd. 2. new text end

new text begin Claim. new text end

new text begin "Claim" includes a request or demand, whether under a contract or
otherwise, for money or property that is made by a contractor, grantee, or other recipient
to the state or a political subdivision if the state or the political subdivision has provided or
will provide a portion of the money or property that is requested or demanded, or if the
state or the political subdivision has reimbursed or will reimburse the contractor, grantee,
or other recipient for a portion of the money or property that is requested or demanded.
new text end

new text begin Subd. 3. new text end

new text begin Knowing and knowingly. new text end

new text begin "Knowing" and "knowingly" mean that a
person, with respect to information:
new text end

new text begin (1) has actual knowledge of the information;
new text end

new text begin (2) acts in deliberate ignorance of the truth or falsity of the information; or
new text end

new text begin (3) acts in reckless disregard of the truth or falsity of the information.
new text end

new text begin No proof of specific intent to defraud is required, but in no case is a person who acts
merely negligently, inadvertently, or mistakenly with respect to information deemed
to have acted knowingly.
new text end

new text begin Subd. 4. new text end

new text begin Original source. new text end

new text begin "Original source" means a person who has direct and
independent knowledge of information that is probative of an essential element of the
allegations in an action brought under this chapter that was not obtained from a public
source and who either voluntarily provided the information to the state or the political
subdivision before bringing an action based on the information or whose information
provided the basis for or caused an investigation, hearing, audit, or report that led to the
public disclosure of the allegations or transactions upon which an action brought under
this chapter is based.
new text end

new text begin Subd. 5. new text end

new text begin Person. new text end

new text begin "Person" means a natural person, partnership, corporation,
association or other legal entity but does not include the state or a political subdivision.
new text end

new text begin Subd. 6. new text end

new text begin Political subdivision. new text end

new text begin "Political subdivision" means a political subdivision
of the state and includes a department or agency of a political subdivision.
new text end

new text begin Subd. 7. new text end

new text begin Prosecuting attorney. new text end

new text begin "Prosecuting attorney" means:
new text end

new text begin (1) the attorney general, if the false or fraudulent claim involves money, property, or
services provided by the state; or
new text end

new text begin (2) the county attorney, city attorney, or other attorney representing a political
subdivision, if the false or fraudulent claim involves money, property, or services provided
by the political subdivision.
new text end

new text begin Subd. 8. new text end

new text begin State. new text end

new text begin "State" means the state of Minnesota and includes a department or
agency of the state.
new text end

Sec. 2.

new text begin [15C.02] LIABILITY FOR CERTAIN ACTS.
new text end

new text begin (a) A person who commits any act described in clauses (1) to (7) is liable to the
state or the political subdivision for a civil penalty of not less than $5,500 and not more
than $11,000 per false or fraudulent claim, plus three times the amount of damages that
the state or the political subdivision sustains because of the act of that person, except
as otherwise provided in paragraph (b):
new text end

new text begin (1) knowingly presents, or causes to be presented, to an officer or employee of the
state or a political subdivision a false or fraudulent claim for payment or approval;
new text end

new text begin (2) knowingly makes or uses, or causes to be made or used, a false record or
statement to get a false or fraudulent claim paid or approved by the state or a political
subdivision;
new text end

new text begin (3) knowingly conspires to either present a false or fraudulent claim to the state or a
political subdivision for payment or approval or makes, uses, or causes to be made or used
a false record or statement to obtain payment or approval of a false or fraudulent claim;
new text end

new text begin (4) has possession, custody, or control of public property or money used, or to
be used, by the state or a political subdivision and knowingly delivers or causes to be
delivered to the state or a political subdivision less money or property than the amount
for which the person receives a receipt;
new text end

new text begin (5) is authorized to prepare or deliver a receipt for money or property used, or to be
used, by the state or a political subdivision and knowingly prepares or delivers a receipt
that falsely represents the money or property;
new text end

new text begin (6) knowingly buys, or receives as a pledge of an obligation or debt, public property
from an officer or employee of the state or a political subdivision who lawfully may
not sell or pledge the property; or
new text end

new text begin (7) knowingly makes or uses, or causes to be made or used, a false record or
statement to conceal, avoid, or decrease an obligation to pay or transmit money or property
to the state or a political subdivision.
new text end

new text begin (b) The court may assess not less than two times the amount of damages that the
state or the political subdivision sustains because of the act of the person if:
new text end

new text begin (1) the person committing a violation under paragraph (a) furnished an officer or
employee of the state or the political subdivision responsible for investigating the false or
fraudulent claim violation with all information known to the person about the violation
within 30 days after the date on which the person first obtained the information;
new text end

new text begin (2) the person fully cooperated with any investigation by the state or the political
subdivision of the violation; and
new text end

new text begin (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 been commenced under this chapter with respect to the violation and the person
did not have actual knowledge of the existence of an investigation into the violation.
new text end

new text begin (c) A person violating this section is also liable to the state or the political
subdivision for the costs of a civil action brought to recover any penalty or damages.
new text end

new text begin (d) A person is not liable under this section for mere negligence, inadvertence, or
mistake with respect to activities involving a false or fraudulent claim.
new text end

new text begin (e) An employer is not liable for an act committed by a nonmanagerial employee
that violates this section, unless the employer had knowledge of the act, ratified the act, or
was reckless in the hiring or supervision of the employee.
new text end

new text begin (f) Except in cases where proof of specific intent to defraud the state or a political
subdivision is found, a person is not liable under this section unless:
new text end

new text begin (1) the person has been informed by the original source that single or multiple false
or fraudulent claims have been made against the state or a political subdivision; and
new text end

new text begin (2) the person fails to take reasonable steps to repay the amount of actual damages
to the state or the political subdivision within 45 days after being so informed. If the
person has a compliance office, an original source is not considered to have informed the
person of a false or fraudulent claim unless the original source reported it to the person's
compliance office.
new text end

Sec. 3.

new text begin [15C.03] EXCLUSION.
new text end

new text begin This chapter does not apply to claims, records, or statements made under portions
of Minnesota Statutes relating to taxation.
new text end

Sec. 4.

new text begin [15C.04] RESPONSIBILITIES OF PROSECUTING ATTORNEY.
new text end

new text begin Subdivision 1. new text end

new text begin General. new text end

new text begin A prosecuting attorney may investigate violations of
section 15C.02. If a prosecuting attorney finds that a person has violated or is violating
section 15C.02, the prosecuting attorney may bring a civil action under this chapter
against the person to enjoin an act in violation of section 15C.02 and to recover damages
and penalties.
new text end

new text begin Subd. 2. new text end

new text begin Attorney general investigatory powers. new text end

new text begin In connection with an
investigation under this section, the attorney general has the powers listed in section
8.31, subdivisions 2 and 3.
new text end

Sec. 5.

new text begin [15C.05] PRIVATE REMEDIES; COMPLAINT UNDER SEAL; COPY
OF COMPLAINT AND WRITTEN DISCLOSURE OF EVIDENCE TO BE SENT
TO PROSECUTING ATTORNEY.
new text end

new text begin (a) Except as otherwise provided in this section, a person may maintain an action
under this chapter on the person's own account and that of the state if money, property,
or services provided by the state are involved; the person's own account and that of a
political subdivision if money, property, or services provided by the political subdivision
are involved; or on the person's own account and that of both the state and a political
subdivision if both are involved. After an action is commenced, it may be voluntarily
dismissed only if the court and the prosecuting attorney give written consent to the
dismissal and their reasons for consenting.
new text end

new text begin (b) If an action is brought under this section, no other person may bring another
action under this section based on the same facts that are the subject of the pending action.
new text end

new text begin (c) An action may not be maintained under this section:
new text end

new text begin (1) against the state, the legislature, the judiciary, the executive branch, or a political
subdivision, or their respective officers, members, or employees;
new text end

new text begin (2) if the action is based upon allegations or transactions that are the subject of a
civil action or an administrative proceeding for a monetary penalty to which the state or a
political subdivision is already a party; or
new text end

new text begin (3) unless the action is brought by an original source of the information or the
prosecuting attorney initiates or intervenes in the action, if the action is based upon the
public disclosure of allegations or transactions: (i) in a criminal, civil, or administrative
hearing; (ii) in an investigation, report, hearing, or audit conducted by or at the request of
the house of representatives or the senate; (iii) by an auditor or the governing body of a
political subdivision; or (iv) by the news media.
new text end

new text begin (d) A complaint in an action under this section must be commenced by filing the
complaint with the court in chambers and the court must place it under seal for at least 60
days. No service may be made upon the defendant until the complaint is unsealed.
new text end

new text begin (e) If a complaint is filed under this section, the plaintiff shall serve a copy of the
complaint on the prosecuting attorney in accordance with the Minnesota Rules of Civil
Procedure and at the same time shall serve a written disclosure of all material evidence
and information the plaintiff possesses.
new text end

Sec. 6.

new text begin [15C.06] PROSECUTING ATTORNEY INTERVENTION; MOTION TO
EXTEND TIME; UNSEALING OF COMPLAINT.
new text end

new text begin (a) Within 60 days after receiving a complaint and disclosure under section 15C.05,
the prosecuting attorney shall intervene or decline intervention or, for good cause shown,
move the court to extend the time for doing so. The motion may be supported by affidavits
or other submissions in chambers.
new text end

new text begin (b) The complaint must be unsealed after the prosecuting attorney decides whether
or not to intervene.
new text end

new text begin (c) Notwithstanding the prosecuting attorney's decision regarding intervention in an
action brought by a plaintiff under section 15C.05, the prosecuting attorney may pursue
the claim through any alternate remedy available to the state, including an administrative
proceeding to determine a civil monetary penalty. If the prosecuting attorney pursues an
alternate remedy in another proceeding, the person initiating the action has the same rights
in that proceeding as if the action had continued under section 15C.05. A finding of fact or
conclusion of law made in the other proceeding that has become final is conclusive on
all parties to an action under section 15C.05. For purposes of this paragraph, a finding
or conclusion is final if it has been finally determined on appeal to the appropriate state
court, if the time for filing an appeal has expired, or if the finding or conclusion is not
subject to judicial review.
new text end

Sec. 7.

new text begin [15C.07] SERVICE OF UNSEALED COMPLAINT AND RESPONSE
BY DEFENDANT.
new text end

new text begin When unsealed, the complaint must be served on the defendant pursuant to Rule 3 of
the Minnesota Rules of Civil Procedure. The defendant must respond to the complaint
within 20 days after it is served on the defendant.
new text end

Sec. 8.

new text begin [15C.08] PROSECUTING ATTORNEY AND PRIVATE PARTY ROLES.
new text end

new text begin (a) Except as otherwise provided by this section, if the prosecuting attorney does not
intervene at the outset in an action brought by a person under section 15C.05, the person
has the same rights in conducting the action as the prosecuting attorney would have. A
copy of each pleading or other paper filed in the action and a copy of the transcript of each
deposition taken must be mailed to the prosecuting attorney if the prosecuting attorney
so requests and pays the cost of doing so.
new text end

new text begin (b) If the prosecuting attorney elects not to intervene at the outset of the action, the
prosecuting attorney may intervene subsequently, upon timely application and good cause
shown. If the prosecuting attorney so intervenes, the prosecuting attorney subsequently
has primary responsibility for conducting the action.
new text end

new text begin (c) If the prosecuting attorney elects at the outset of the action to intervene, the
prosecuting attorney has the primary responsibility for prosecuting the action. The person
who initially brought the action remains a party but the person's acts do not bind the
prosecuting attorney.
new text end

new text begin (d) Whether or not the prosecuting attorney intervenes in the action, the prosecuting
attorney may move to dismiss the action for good cause. The person who brought the
action must be notified of the filing of the motion and may oppose it and present evidence
at the hearing. The prosecuting attorney may also settle the action. If the prosecuting
attorney intends to settle the action, the prosecuting attorney shall notify the person who
brought the action. The state or the political subdivision may settle the action with the
defendant notwithstanding the objections of the person initiating the action if the court
determines, after a hearing, that the proposed settlement is fair, adequate, and reasonable
under all the circumstances. Upon a showing of good cause, the hearing may be held in
chambers.
new text end

Sec. 9.

new text begin [15C.09] STAY OF DISCOVERY; EXTENSION.
new text end

new text begin (a) The court may stay discovery by a person who brought an action under section
15C.05 for not more than 60 days if the prosecuting attorney shows that the proposed
discovery would interfere with the investigation or prosecution of a civil or criminal
matter arising out of the same facts, whether or not the prosecuting attorney participates
in the action.
new text end

new text begin (b) The court may extend the stay upon a further showing that the prosecuting
attorney has pursued the civil or criminal investigation or proceeding with reasonable
diligence and that the proposed discovery would interfere with its continuation. Discovery
may not be stayed for a total of more than six months over the objection of the person who
brought the action, except for good cause shown by the prosecuting attorney.
new text end

new text begin (c) A showing made pursuant to this section must be made in chambers.
new text end

Sec. 10.

new text begin [15C.10] COURT-IMPOSED LIMITATION UPON PARTICIPATION
OF PRIVATE PLAINTIFF IN ACTION.
new text end

new text begin Upon a showing by the prosecuting attorney in an action in which the prosecuting
attorney has intervened that unrestricted participation by a person under this chapter would
interfere with or unduly delay the conduct of the action, or would be repetitious, irrelevant,
or solely for harassment, the court may limit the person's participation by limiting the
number of witnesses, the length of the testimony of the witnesses, the cross-examination
of witnesses by the person, or by other measures.
new text end

Sec. 11.

new text begin [15C.11] LIMITATION OF ACTIONS; REMEDIES.
new text end

new text begin (a) An action under this chapter may not be commenced more than three years after
the date of discovery of the fraudulent activity by the prosecuting attorney or more than
six years after the fraudulent activity occurred, whichever occurs later, but in no event
more than ten years after the date on which the violation is committed.
new text end

new text begin (b) A finding of guilt in a criminal proceeding charging a false statement or fraud,
whether upon a verdict of guilty or a plea of guilty or nolo contendere, stops the person
found guilty from denying an essential element of that offense in an action under this
chapter based upon the same transaction as the criminal proceeding.
new text end

new text begin (c) In an action under this chapter, the state or the political subdivision and any
plaintiff under section 15C.05 must prove the essential elements of the cause of action,
including damages, by a preponderance of the evidence.
new text end

Sec. 12.

new text begin [15C.12] AWARD OF EXPENSES AND ATTORNEY FEES.
new text end

new text begin If the prosecuting attorney or a person who brought an action under section 15C.05
prevails in or settles an action under this chapter, the court may authorize the prosecuting
attorney or person to recover reasonable costs, reasonable attorney fees, and the reasonable
fees of expert consultants and expert witnesses. These expenses must be awarded against
the defendant and are not allowed against the state or a political subdivision. If the
prosecuting attorney does not intervene in the action and the person bringing the action
conducts the action and the defendant prevails in the action, the court shall award to the
defendant reasonable expenses and attorney fees against the person bringing the action if
it finds that the action was clearly frivolous or vexatious or brought in substantial part for
harassment. The state or a political subdivision is not liable for expenses, attorney fees, or
other costs incurred by a person in bringing or defending an action under this chapter.
new text end

Sec. 13.

new text begin [15C.13] DISTRIBUTION TO PRIVATE PLAINTIFF IN CERTAIN
ACTIONS.
new text end

new text begin If the prosecuting attorney intervenes at the outset in an action brought by a person
under section 15C.05, the person is entitled to receive not less than 15 percent or more
than 25 percent of any recovery in proportion to the person's contribution to the conduct
of the action. If the prosecuting attorney does not intervene in the action at any time,
the person is entitled to receive not less than 25 percent or more than 30 percent of
any recovery of the civil penalty and damages, or settlement, as the court determines
is reasonable. If the prosecuting attorney does not intervene in the action at the outset
but subsequently intervenes, the person is entitled to receive not less than 15 percent or
more than 30 percent of any recovery, as the court determines is reasonable based on the
person's participation in the action before the prosecuting attorney intervened.
new text end

Sec. 14.

new text begin [15C.14] EMPLOYER RESTRICTIONS; LIABILITY.
new text end

new text begin (a) An employer must not adopt or enforce any rule or policy forbidding an
employee to disclose information to the state, a political subdivision, or a law enforcement
agency, or to act in furtherance of an action under this chapter, including investigation
for, bringing, or testifying in the action.
new text end

new text begin (b) An employer must not discharge, demote, suspend, threaten, harass, deny
promotion to, or otherwise discriminate against an employee in the terms or conditions of
employment because of lawful acts done by the employee on the employee's behalf or
on behalf of others in disclosing information to the state, a political subdivision, or a law
enforcement agency in furtherance of an action under this chapter, including investigation
for bringing or testifying in the action.
new text end

new text begin (c) An employer who violates this section is liable to the affected employee in a civil
action for damages and other relief, including reinstatement, twice the amount of lost
compensation, interest on the lost compensation, any special damage sustained as a result
of the discrimination, and punitive damages if appropriate. The employer is also liable for
expenses recoverable under section 15C.12, including costs and attorney fees.
new text end

Sec. 15.

new text begin [15C.15] DEPOSIT OF STATE FUNDS; FALSE CLAIMS ACCOUNT.
new text end

new text begin Subdivision 1. new text end

new text begin Deposit of funds. new text end

new text begin The net proceeds received by the state in an action
under this chapter, after distributions made to private plaintiffs and as otherwise required
by federal law, must be deposited in the state treasury and credited as follows:
new text end

new text begin (1) the portion of net proceeds equal to the amount of the actual damages that the
state sustains because of an act specified in section 15C.02 must be credited to the fund
that sustained the damages;
new text end

new text begin (2) the portion of net proceeds equal to the additional recovery of federal money
authorized by United States Code, title 42, section 1396h, for a recovery under this
chapter, as determined by the commissioner of finance, must be credited to the false
claims account under subdivision 2, provided that the amount credited may not exceed
$1,000,000 in a fiscal year; and
new text end

new text begin (3) the remainder of the net proceeds must be credited to the general fund.
new text end

new text begin Subd. 2. new text end

new text begin False claims account. new text end

new text begin A false claims account is established in the special
revenue fund in the state treasury. The commissioner of finance may enter into interagency
agreements to deposit up to $2,055,000 for litigation and related expenses under this act.
Money in the account deposited through interagency agreement or under subdivision 1 is
annually appropriated to the attorney general for purposes of this chapter.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin Subdivision 2 is effective the day following final enactment.
new text end

Sec. 16. new text begin EFFECTIVE DATE.
new text end

new text begin Except as otherwise provided, this act is effective July 1, 2010.
new text end