THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

INTRODUCED BY GERBER, EACHUS, PAYTON, BELFANTI, BEYER, BOYLE, BRENNAN, BRIGGS, DALEY, FRANKEL, FREEMAN, GEIST, GIBBONS, GOODMAN, GRELL, GROVE, HARPER, HARRIS, HENNESSEY, HORNAMAN, JOSEPHS, KILLION, KIRKLAND, KORTZ, KULA, LENTZ, LONGIETTI, MAHONEY, MANDERINO, MANN, McGEEHAN, MELIO, MILNE, MOUL, MUNDY, MURT, MUSTIO, M. O'BRIEN, PALLONE, PASHINSKI, QUINN, SANTARSIERO, SIPTROTH, K. SMITH, M. SMITH, SOLOBAY, J. TAYLOR, VULAKOVICH, WALKO, WATSON AND WHITE, JUNE 12, 2009

REFERRED TO COMMITTEE ON HEALTH AND HUMAN SERVICES, JUNE 12, 2009  

AN ACT

Providing for liability for false claims, for adoption of

Congressional intent of the Federal False Claims Act, for

treble damages, costs and civil penalties, for powers of the

Attorney General and for qui tam actions.

TABLE OF CONTENTS

Chapter 1.  Preliminary Provisions

Section 101.  Short title.

Section 102.  Declaration of policy.

Section 103.  Definitions.

Chapter 3.  False Claims

Section 301.  Acts subjecting persons to liability for treble

damages, costs and civil penalties; exceptions.

Section 302.  Attorney General investigations and prosecutions;

powers of prosecuting authority; civil actions by

individuals as qui tam plaintiff and as private

citizen; jurisdiction of courts.

Section 303.  Limitation of actions; prior activities; burden of

proof.

Section 304.  Remedies under other laws; severability of

provisions; liberality of legislative construction.

Section 305.  Regulations.

Chapter 21.  Miscellaneous Provisions

Section 2101.  Effective date.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

CHAPTER 1

PRELIMINARY PROVISIONS

Section 101.  Short title.

This act shall be known and may be cited as the False Claims

Act.

Section 102.  Declaration of policy.

The General Assembly declares that this act adopts the intent

of Congress in enacting the Federal False Claims Act (Public Law

97-258, 31 U.S.C. §§ 3729-3733) on September 13, 1982, including

the amendments (Public Law 99-562, 100 Stat. 3153) enacted

October 27, 1986.

Section 103.  Definitions.

The following words and phrases when used in this act shall

have the meanings given to them in this section unless the

context clearly indicates otherwise:

"Claim."  A request or demand for money, property or services

made to any employee, officer or agent of the Commonwealth, or

to any contractor, grantee or other recipient, whether under

contract or not, if any portion of the money, property or

services requested or demanded, issued from or was provided

using Commonwealth funds, or if the Commonwealth will reimburse

the contractor, grantee or other recipient for any portion of

the money or property requested or demanded.

"Employer."  A natural person, corporation, firm,

association, organization, partnership, business, trust or

Commonwealth-affiliated entity involved in a nongovernmental

function, including State universities and State hospitals.

"Knowingly."  Whenever a person, with respect to information,

does any of the following:

(1)  Has actual knowledge of the information.

(2)  Acts in deliberate ignorance of the truth or falsity

of the information.

(3)  Acts in reckless disregard of the truth or falsity

of the information. Proof of specific intent to defraud is

not required.

"Person."  A natural person, corporation, firm, association,

organization, partnership, business or trust.

"Qui tam plaintiff."  A person bringing a civil action under

section 301.

CHAPTER 3

FALSE CLAIMS

Section 301.  Acts subjecting persons to liability for treble

damages, costs and civil penalties; exceptions.

(a)  Liability.--A person who commits acts prohibited in

subsection (b) shall be liable to the Commonwealth for three

times the amount of damages which the Commonwealth sustains

because of the act of that person.

(b)  Prohibited acts.--A person who commits any of the

following acts shall also be liable to the Commonwealth for the

costs of a civil action brought to recover any of those

penalties or damages and shall be liable to the Commonwealth for

a civil penalty of not less than $5,000 and not more than

$10,000 for each violation:

(1)  Knowingly presents or causes to be presented to an

employee, officer or agent of the Commonwealth or to a

contractor, grantee or other recipient of Commonwealth funds,

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 to get a false or fraudulent

claim paid or approved.

(3)  Conspires to defraud the Commonwealth by pursuing a

false claim that is allowed or paid or conspires to defraud

the Commonwealth by knowingly making, using or causing 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 Commonwealth.

(4)  Has possession, custody or control of public

property or money used or to be used by the Commonwealth and

knowingly delivers or causes to be delivered less property

than the amount for which the person receives a certificate

or receipt.

(5)  Is authorized to make or deliver a document

certifying receipt of property used or to be used by the

Commonwealth 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 to conceal, avoid or decrease an

obligation to pay or transmit money or property to the

Commonwealth.

(8)  Is a beneficiary of an inadvertent submission of a

false claim to any employee, officer or agent of the

Commonwealth or to any contractor, grantee or other recipient

of Commonwealth funds, subsequently discovers the falsity of

the claim and fails to disclose the false claim to the

Commonwealth within a reasonable time after discovery of the

false claim.

(c)  Damages limitation.--Notwithstanding subsection (a), the

court may assess not less than two times the amount of damages

which the Commonwealth sustains because of the act of the person

described in that subsection and no civil penalty if the court

finds all of the following:

(1)  The person committing the violation furnished the

Commonwealth officials who are 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 Commonwealth.

(3)  At the time the person furnished the Commonwealth

with information about the violation, no criminal

prosecution, civil action or administrative action has

commenced with respect to the violation, and the person did

not have actual knowledge of the existence of an

investigation into the violation.

(d)  Exclusion.--This section does not apply to claims,

records or statements made under the act of March 4, 1971

(P.L.6, No.2), known as the Tax Reform Code of 1971.

Section 302.  Attorney General investigations and prosecutions;

powers of prosecuting authority; civil actions by

individuals as qui tam plaintiff and as private

citizen; jurisdiction of courts.

(a)  Responsibilities of the Attorney General.--The Attorney

General shall diligently investigate a violation of section 301.

If the Attorney General finds that a person has violated or is

violating section 301, the Attorney General may bring a civil

action under this section against that person.

(b)  Actions by private persons.--

(1)  A person may bring a civil action for a violation of

this act for the person and for the Commonwealth in the name

of the Commonwealth. The person bringing the action shall be

referred to as the qui tam plaintiff. Once filed, the action

shall be dismissed only with the written consent of the

court, taking into account the best interest of the parties

involved and the policy of this act.

(2)  A copy of the complaint and written disclosure of

substantially all material evidence and information the qui

tam plaintiff possesses shall be served on the Attorney

General. The complaint shall be filed in camera and shall

remain under seal for at least 60 days and shall not be

served on the defendant until the court orders the service.

The Commonwealth may elect to intervene and proceed with the

action within 60 days after it receives the complaint and the

material evidence and information.

(3)  The Commonwealth may, for good cause shown, move the

court for extensions of the time during which the complaint

remains under seal under paragraph (2). The motions may be

supported by affidavits or other submissions in camera. The

defendant shall not be required to respond to any complaint

filed under this section until the complaint is unsealed and

served upon the defendant under the Pennsylvania Rules of

Civil Procedure.

(4)  Before the expiration of the 60-day period or any

extensions obtained under paragraph (3), the Commonwealth

shall:

(i)  proceed with the action, in which case the

action shall be conducted by the Commonwealth; or

(ii)  notify the court it declines to take over the

action, in which case the person bringing the action

shall have the right to conduct the action.

(c)  Intervention.--When a person brings a valid action under

this subsection, no person other than the Commonwealth may

intervene or bring a related action based on the facts

underlying the pending action.

(d)  Rights of the parties to qui tam actions.--

(1)  If the Commonwealth proceeds with the action, it

shall have the primary responsibility for prosecuting the

action and shall not be bound by an act of the person

bringing the action. The qui tam plaintiff shall have the

right to continue as a party to the action, subject to the

limitations set forth in paragraph (2).

(2)  (i)  The Commonwealth may move to dismiss the action

for good cause despite the objections of the qui tam

plaintiff if the qui tam plaintiff has been notified by

the Commonwealth of the filing of the motion and the

court has provided the qui tam plaintiff with an

opportunity to oppose the motion and present evidence at

a hearing.

(ii)  The Commonwealth may settle the action with the

defendant despite the objections of the qui tam plaintiff

if the court determines, after a hearing providing the

qui tam plaintiff an opportunity to present evidence, the

proposed settlement is fair, adequate and reasonable

under the circumstances.

(iii)  Upon a showing by the Commonwealth that

unrestricted participation during the course of the

litigation by the qui tam plaintiff would interfere with

or unduly delay the Commonwealth's prosecution of the

case or would be repetitious, irrelevant or harassment,

the court may, in its discretion, impose limitations on

the qui tam plaintiff's participation by:

(A)  limiting the number of witnesses the person

may call;

(B)  limiting the length of the testimony of the

witnesses;

(C)  limiting the qui tam plaintiff's cross-

examination of witnesses; or

(D)  otherwise limiting the participation by the

person in the litigation.

(iv)  Upon a showing by the defendant that

unrestricted participation during the litigation by the

qui tam plaintiff initiating the action 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.

(3)  If the Commonwealth elects not to proceed with the

action, the qui tam plaintiff shall have the right to conduct

the action. If the Commonwealth requests, it shall be served

with copies of all pleadings filed in the action and shall be

supplied with copies of all deposition transcripts at the

Commonwealth's expense. When a person proceeds with the

action, the court, without limiting the status and rights of

the qui tam plaintiff, may permit the Commonwealth to

intervene at a later date upon a showing of good cause.

(4)  Whether or not the Commonwealth proceeds with the

action, upon a showing by the Commonwealth that certain

actions of discovery by the qui tam plaintiff would interfere

with the Commonwealth'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 of not more than 60

days. The showing shall be conducted in camera. The court may

extend the 60-day period upon a further showing in camera

that the Commonwealth has pursued the criminal or civil

investigation or proceedings with reasonable diligence and

the discovery proposed in the civil action will interfere

with the ongoing criminal or civil investigations or

proceedings.

(5)  Notwithstanding subsection (b), the Commonwealth may

elect to pursue its claim through an alternate remedy

available to the Commonwealth, including an administrative

proceeding to determine a civil money penalty. If the

alternate remedy is pursued in another proceeding, the qui

tam plaintiff shall have the same rights in the proceeding as

if the action continued under this section. A finding of fact

or conclusion of law made in the other proceeding that has

become final shall be conclusive on all parties to an action

under this section. A finding or conclusion is final if it

has been finally determined on appeal to the appropriate

court of the Commonwealth, if the time for filing the appeal

regarding the finding or conclusion has expired or if the

finding or conclusion is not subject to judicial review.

(e)  Award to qui tam plaintiff.--

(1)  If the Commonwealth proceeds with an action brought

by a qui tam plaintiff, the qui tam plaintiff shall, subject

to the provisions of this paragraph, receive at least 15% but

not more than 25% of the proceeds of the action or settlement

of the claim, including damages, civil penalties, payments

for costs of compliance and any other economic benefit

realized by the Commonwealth as a result of the action,

depending upon the extent to which either or both the person

and his counsel substantially contributed to the prosecution

of the action. Where the court finds the action is based

primarily on disclosures of specific information, other than

information provided by the qui tam plaintiff, relating to

allegations or transactions specifically in a criminal, civil

or administrative hearing or in a legislative or

administrative report, hearing, audit or investigation or

from the news media, the court may award the sums as it

considers appropriate, but in no case more than 10% of the

proceeds, taking into account the significance of the

information and the role of the person bringing the action in

advancing the case to litigation. A payment to a person under

the first or second sentence of this paragraph shall be made

from the proceeds. The person shall also receive an amount

for reasonable expenses which the appropriate judge finds was

necessarily incurred, plus reasonable attorney fees and

costs. The expenses, fees and costs shall be awarded against

the defendant.

(2)  If the Commonwealth does not proceed with an action

under this section, the qui tam plaintiff shall receive an

amount which the court decides is reasonable for collecting

the civil penalty and damages. The amount shall not be less

than 25% and not more than 30% of the proceeds of the action

or settlement and shall be paid out of the proceeds, which

includes damages, civil penalties, payments for costs of

compliance and any other economic benefit realized by the

government as a result of the action. The person shall also

receive an amount for reasonable expenses which the

appropriate Commonwealth court judge finds to have been

necessarily incurred, plus reasonable attorney fees and

costs. All the expenses, fees and costs shall be awarded

against the defendant.

(3)  Whether or not the Commonwealth proceeds with the

action, if the court finds the action was filed by a person

who planned and initiated the violation of section 301(a)

upon which the action was filed, then the court may, to the

extent the court considers appropriate, reduce the share of

the proceeds of the action which the person would otherwise

receive under paragraph (1) or (2), taking into account the

role of that person in advancing the case to litigation and

any relevant circumstances pertaining to the violation. If

the person bringing the action is convicted of criminal

conduct arising from his or her role in the violation of

section 301(a), that person shall be dismissed from the civil

action and shall not receive a share of the proceeds of the

action. The dismissal shall not prejudice the right of the

Commonwealth to continue the action.

(4)  If the Commonwealth does not proceed with the action

and the person bringing the action conducts the action, the

court may award to the defendant its reasonable attorney fees

and expenses if the defendant prevails in the action and the

court finds the claim of the person bringing the action was

clearly frivolous, clearly vexatious or brought primarily for

purposes of harassment.

(f)  Certain actions barred.--

(1)  No court shall have jurisdiction over an action

brought under subsection (b) against a member of the

legislative branch, a member of the judiciary or a senior

executive branch official if the action is based on evidence

or information known to the Commonwealth when the action was

brought.

(2)  In no event may a person bring an action under

subsection (b) which is based upon allegations or

transactions which are the subject of a civil suit or an

administrative civil penalty proceeding for money in which

the Commonwealth is already a party.

(3)  Upon the motion of the Attorney General, the court

may, in consideration of all the equities, dismiss a relator

of the elements of the actionable false claims alleged in the

qui tam complaint which have been publicly disclosed,

specifically in the news media or in a publicly disseminated

governmental report, at the time the complaint is filed.

(g)  Commonwealth not liable for certain expenses.--The

Commonwealth is not liable for expenses which a person incurs in

bringing an action under this section.

(h)  Private action for retaliation action.--An employee who

is discharged, demoted, suspended, threatened, harassed or in

any other manner discriminated against in the terms and

conditions of employment by the employer because of lawful acts

by the employee on behalf of the employee or others in

furtherance of an action under this section, including

investigation for, initiation of, testimony for or assistance in

an action filed or to be filed under this section, shall be

entitled to all relief necessary to make the employee whole. The

relief shall include reinstatement with the same seniority

status the employee 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, including litigation costs and reasonable

attorney fees. An employee may bring an action in an appropriate

court of this Commonwealth for the relief provided in this

subsection.

(i)  Civil investigative demand.--

(1)  (i)  The Attorney General shall have the authority

to issue civil investigative demands under paragraph (2).

(ii)  Nothing in this subsection shall be construed

to limit the regulatory or investigative authority of any

department or agency of the Commonwealth whose functions

may relate to persons, enterprises or matters falling

within the scope of this chapter.

(2)  (i)  Whenever the Attorney General has reason to

believe that any person or enterprise may be in

possession, custody or control of documentary material

relevant to an investigation under this chapter, the

Attorney General may issue in writing, and cause to be

served upon the person or enterprise, a civil

investigative demand requiring the production of the

material for examination.

(ii)  Each demand shall:

(A)  state the nature of the conduct constituting

the alleged violation which is under investigation,

the applicable provision of law and the connection

between the documentary material demanded and the

conduct under investigation;

(B)  describe the class or classes of documentary

material to be produced with sufficient definiteness

and certainty to permit the material to be fairly

identified;

(C)  state the demand is returnable or prescribe

a return date which will provide a reasonable time

period within which the material demanded may be

assembled and made available for inspection and

copying or reproduction;

(D)  identify an investigator to whom the

material shall be made available; and

(E)  contain the following statement printed

conspicuously at the top of the demand: "You have the

right to seek the assistance of an attorney and he

may represent you in all phases of the investigation

of which this civil investigative demand is a part."

(iii)  The demand shall not:

(A)  contain a requirement which would be held to

be unreasonable if contained in a subpoena duces

tecum issued by any court in connection with a grand

jury investigation of such alleged violation; or

(B)  require the production of documentary

evidence which would be privileged from disclosure if

demanded by a subpoena duces tecum issued by a court

in connection with a grand jury investigation of the

alleged violation.

(iv)  Service of any such demand or any petition

filed under this paragraph shall be made in the manner

prescribed by the Pennsylvania Rules of Civil Procedure

for service of writs and complaints.

(v)  A verified return by the individual serving a

demand or petition setting forth the manner of the

service shall be prima facie proof of the service. In the

case of service by registered or certified mail, the

return shall be accompanied by the return post office

receipt of delivery of the demand.

(vi)  (A)  Any party upon whom any demand issued

under this subsection has been duly served shall make

the material available for inspection and copying or

reproduction to the investigator designated at the

principal place of business of the party, or at the

other place as the investigator and party may agree

or as the court may direct under this paragraph, on

the return date specified in the demand. The party

may upon agreement of the investigator substitute

copies of all or any part of the material for the

originals.

(B)  The investigator to whom documentary

material is delivered shall take physical possession

of it and shall be responsible for the use for which

it is made and for its return under this paragraph.

The investigator may cause the preparation of copies

of the documentary material as may be required for

official use. While in the possession of the

investigator, no material produced shall be available

for examination without the consent of the party who

produced the material by an individual other than the

Attorney General or investigator. Under reasonable

terms and conditions as the Attorney General shall

prescribe, documentary material while in the

possession of the investigator shall be available for

examination by the party who produced the material or

a duly authorized representative of the party.

(C)  Upon completion of the investigation for

which documentary material was produced under this

paragraph and any case or proceeding arising from the

investigation, the investigator shall return to the

party who produced the material all the material

other than copies made under this paragraph which

have not passed into the control of any court or

grand jury through introduction into the record of

the case or proceeding.

(D)  When documentary material has been produced

by a party under this paragraph for use in an

investigation and no case or proceeding arising

therefrom has been instituted within a reasonable

time after completion of the examination and analysis

of all evidence assembled in the course of the

investigation, the party shall be entitled, upon

written demand made upon the Attorney General, to the

return of all documentary material, other than copies

made under this paragraph, produced by the party.

(vii)  Whenever a person or enterprise fails to

comply with a civil investigative demand duly served upon

him under this paragraph or whenever satisfactory copying

or reproduction of the material cannot be done and the

party refuses to surrender the material, the Attorney

General may file, in the court of common pleas, for a

county in which the party resides or transacts business,

and serve upon the party a petition for an order of the

court for the enforcement of this paragraph, except that

if the person transacts business in more than one county

the petition shall be filed in the county in which the

party maintains its principal place of business.

(viii)  Within 20 days after the service of the

demand upon a person or enterprise, or at any time before

the return date specified in the demand, whichever period

is shorter, the party may file, in the court of common

pleas of the county within which the party resides or

transacts business, and serve upon the Attorney General a

petition for an order of the court modifying or setting

aside the demand. The time allowed for compliance with

the demand in whole or in part as deemed proper and

ordered by the court shall not run during the pendency of

the petition in the court. The petition shall specify

each ground upon which the petitioner relies in seeking

the relief, and may be based upon a failure of the demand

to comply with the provisions of this paragraph or upon a

constitutional or other legal right or privilege of the

party.

(ix)  When the Attorney General is in custody or

control of documentary material delivered by a party in

compliance with a demand, the party may file, in the

court of common pleas of the county within which the

documentary material was delivered, and serve upon the

Attorney General a petition for an order of the court

requiring the performance of a duty imposed by this

paragraph.

(x)  Whenever a petition is filed in a court of

common pleas under this paragraph, the court shall have

jurisdiction to hear and determine the matter so

presented, and, after a hearing at which all parties are

represented, to enter an order as may be required to

carry into effect the provisions of this paragraph.

(3)  Whenever an individual refuses, on the basis of his

Fifth Amendment privilege against self-incrimination, to

comply with a civil investigative demand issued under

paragraph (2), the Attorney General may invoke the provisions

of 42 Pa.C.S. § 5947 (relating to immunity of witnesses).

Section 303.  Limitation of actions; prior activities; burden of

proof.

(a)  Statute of limitations.--A civil action under section

302 may not be brought more than ten years after the date on

which the violation was committed.

(b)  Burden of proof.--In any action brought under section

302, the Commonwealth or the qui tam plaintiff shall be required

to prove all essential elements of the cause of action,

including damages, by a preponderance of the evidence.

(c)  Estoppel.--Notwithstanding any other provision of law, a

guilty verdict rendered in a criminal proceeding charging false

statements or fraud, whether upon a verdict after trial or upon

a plea of guilty or nolo contendere, shall estop the defendant

from denying the essential elements of the offense in any action

which involves the same transaction as in the criminal

proceeding and which is brought under section 302(a) or (b).

Section 304.  Remedies under other laws; severability of

provisions; liberality of legislative construction.

(a)  Remedies under other laws.--The provisions of this act

are not exclusive and the remedies provided for in this act

shall be in addition to any other remedies provided for in any

other law or available under common law.

(b)  Liberality of legislative construction.--This chapter

shall be liberally construed and applied to promote the public

interest. 

Section 305.  Regulations.

(a)  General rule.--The Attorney General shall have the power

and authority to promulgate rules and regulations which may be

necessary to carry out the purposes set forth in this chapter.

(b)  Guidelines.--In order to facilitate the speedy

implementation of this chapter, the Attorney General shall have

the power and authority to promulgate, adopt and use guidelines

which shall be published in the Pennsylvania Bulletin. The

guidelines shall not be subject to review under section 205 of

the act of July 31, 1968 (P.L.769, No.240), referred to as the

Commonwealth Documents Law; sections 204(b) and 301(10) of the

act of October 15, 1980 (P.L.950, No.164), known as the

Commonwealth Attorneys Act; or the act of June 25, 1982

(P.L.633, No.181), known as the Regulatory Review Act. The

guidelines shall be effective for not more than two years from

the effective date of this chapter. After the expiration of the

two-year period, the guidelines shall be promulgated as

regulations.

CHAPTER 21

MISCELLANEOUS PROVISIONS

Section 2101.  Effective date.

This act shall take effect in 60 days.