Hawaii False Claims Act for False Claims to the State

By: Joel M. Androphy1Rachel Grier and Nisha Ghosh

Hawaii’s state version of the federal False Claims Act (FCA)2 is the Hawaii False Claims Act for False Claims to the State (HFCAS).3

1. LIABILITY AND DAMAGES PROVISIONS

Generally, an individual will be liable under the HFCAS for the same violations as the federal FCA. For example, an individual will be liable for knowingly presenting or causing the presentation of a false or fraudulent claim, knowingly making, using, or causing to be made or used a false record or statement, or conspiring to defraud the state.4 The HFCAS also provides liability for a beneficiary of an inadvertent submission of a false claim who fails to disclose the false claim within a reasonable time of discovering it.5 In other words, if a person receives money from the state that he should not have received, he will be liable for a violation of the HFCAS if he does not return the money to the state.

Similar to the federal FCA, the HFCAS explicitly excludes false tax claims.6 The HFCAS also exempts claims involving less than $500.7 The damages provision in the HFCAS is identical to the statutory language of the federal FCA and allows for treble damages and civil penalties ranging from $5,000 to $10,000 per claim.8 In addition, the HFCAS follows the federal act and provides for a reduction of liability to double damages if the defendant voluntarily discloses the violations, if the defendant cooperates with investigations, and if no legal action has yet been taken on the violation.9

2. PROCEDURAL ISSUES

a. General Procedural Provisions 

The HFCAS permits a private individual to bring a civil action on behalf of the state.10 However, the statute prohibits a former or present employee of the state from bring a suit under this statute if the employee learned the information during the course of employment and did not first, in good faith, exhaust existing internal procedures for recovery of the money or property.11

Several of the other qui tam provisions are the same as in the federal statute, including the sealing provisions and the provision for an extension of the sealing period;12 the required disclosure to the state of all material evidence that the relator possesses;13 the state’s primary responsibility for litigating the action if it chooses to intervene and the right to limit the relator’s participation;14 and the state’s right to dismiss the case over the objection of the relator, as long as the state notifies the relator and provides an opportunity for a hearing.15 The state may also settle the case despite the relator’s objections as long as the court determines that the settlement is “fair, adequate, and reasonable under all circumstances.”16 If the government decides not to intervene, the relator may then proceed with the litigation.17 However, the state may intervene at a later date without limiting the status and right of the relator upon a showing of good cause.18

The Hawaii statute provides that the standard of proof for a violation of the statute is a preponderance of the evidence.19 The state may also explicitly request a stay of proceedings if discovery would interfere with the investigation of a criminal matter arising from the facts and can request an extension of the stay period upon a showing that the state has pursued the matter with reasonable diligence.20

a. Statute of Limitations

The HFCAS provides a different statute of limitations period than its federal counterpart.21 Pursuant to the federal FCA, an action may not be brought more than six years after a violation of the statute occurred or more than three years after officials knew or reasonably should have known of material facts of the violation.22 The HFCAS, on the other hand, only provides that an action may not be brought more than six years after the violation is discovered or by “exercise of reasonable diligence should have been discovered.”23 Both statutes state that the action may not be brought later than ten years after the violation was committed.24

3. JURISDICTIONAL BARS TO ACTIONS

a. First to File Bar and Bar Against Members of Legislative, Executive or Judicial Branches

Like its federal counterpart, the HFCAS provides jurisdictional bars to certain qui tam actions. The HFCAS contains a first to file bar and a bar prohibiting actions against members of the judicial, executive and legislative branches.25 It also contains a bar against actions based on transactions or allegations that are the subject of another civil or administrative action to which the government is already a party.26

b. Public Disclosure Bar

The HFCAS also contains a public disclosure bar that is similar to the federal FCA. The HFCAS prohibits a relator from bringing an action based upon

“the public disclosure of allegations or transactions in a criminal, civil, or administrative hearing, in a legislative or administrative report, hearing, audit, or investigation, or from the news media, unless the action is brought by the attorney general or the person bringing the action is an original source of the information.”27

In order to be an “original source,” the state statute requires that the relator have “direct and independent knowledge” of the information that the allegations are based on and have voluntarily provided the information to the attorney general before bringing an action under the statute.28 The state statute also has an additional requirement that the relator’s information be the basis or catalyst for the investigation, hearing, audit or report that led to the public disclosure.29 With the exception of the “basis or catalyst” requirement, this language used to be very similar to the federal FCA language, but the Patient Protection and Affordable Care Act (“the Affordable Care Act”)30 amended that section of the federal statute in 2010.31 Hawaii has not yet enacted these changes.

4. RETALIATION

Unlike the federal FCA, HFCAS does not provide Protections to whistleblowers.32 However, Hawaii’s Whistleblowers’ Protection Act (HWPA) does protect whistleblowers from retaliation.33 The HWPA prohibits an employer from discharging, threatening or otherwise discriminating against an employee who reports or is about to report a false claim.34 Relief under the HWPA can include reinstatement, payment of back wages, full fringe benefits and seniority rights, actual damages, and all or a portion of the costs of litigation.35

5. RELATOR’S SHARE

The relator’s share provision of the HFCAS is almost identical to the federal FCA. Like the federal FCA, if the state proceeds with an action, the relator is entitled to fifteen to twenty-five percent of the recovery.36 However, if the state declines to intervene, the relator is entitled to twenty-five to thirty percent of the proceeds.37 Both statutes allow for a recovery of necessary costs, plus reasonable attorney’s fees and costs.38 Like the federal FCA, the HFCAS provides for the reduction of a relator’s award to not more than ten percent of the proceeds if the suit was based on public disclosure and the relator was not an original source of the information.39 Both statutes also allow for a reduction of the proceeds if the relator “planned and initiated” the fraudulent activity.40 If the relator is convicted of criminal conduct due to his role in the fraud, the relator shall be dismissed from the civil action and will not share in the proceeds.41 The HFCAS allows a successful defendant to recover attorney’s fees and costs if the suit was filed for purposes of harassment or if the suit was frivolous or vexatious.42

 

  1. Author of treatise,Federal False Claims Act and Qui Tam Litigation, Law Journal Press (2010), research source of the issues discussed in this article.
  2. 31 U.S.C. §§ 3729-3733.
  3. Haw. Rev. Stat. §§ 661-21 to 661-29.
  4. Haw. Rev. Stat. § 661-21(a).
  5. Haw. Rev. Stat. § 661-21(a)(8).
  6. Haw. Rev. Stat. § 661-21(f).  Compare 31 U.S.C. § 3729(e).
  7. Haw. Rev. Stat. § 661-21(d)
  8. Haw. Rev. Stat. § 661-21(a).  Compare 31 U.S.C. § 3729(a). The civil penalties under the federal FCA have now been raised to $5,500 and $11,000 to account for inflation.  See Chapter 4, supra, for further discussion of this issue.
  9. Haw. Rev. Stat. § 661-21(b).
  10. Haw. Rev. Stat. § 661-25(a).
  11. Haw. Rev. Stat. § 661-27(e)(2).
  12. Haw. Rev. Stat. § 661-25(b)-(c).
  13. Haw. Rev. Stat. § 661-25(b).
  14. Haw. Rev. Stat. § 661-26(a).
  15. Haw. Rev. Stat. § 661-26(a)(1).
  16. Haw. Rev. Stat. § 661-26(a)(2).
  17. Haw. Rev. Stat. § 661-26(c).
  18. Id.
  19. Haw. Rev. Stat. § 661-23.
  20. Haw. Rev. Stat. § 661-26(d).
  21. Haw. Rev. Stat. § 661-24.  Compare 31 U.S.C. § 3731(b).
  22. 31 U.S.C. § 3731(b).
  23. Haw. Rev. Stat. § 661-24.
  24. Haw. Rev. Stat. § 661-24.  See also, 31 U.S.C. § 3731(b).
  25. Haw. Rev. Stat. §§ 661-25(e) & 661-27(e)(1).  See also, 31 U.S.C. §§ 3730(b)(5) and (e)(2).
  26. Haw. Rev. Stat. § 661-27(e)(3).  See also, 31 U.S.C. 3730(e)(3).
  27. Haw. Rev. Stat. § 661-28.
  28. Id.  Compare 31 U.S.C. § 3730(e)(4)(A)-(B).
  29. Id.
  30. Patient Protection and Affordable Care Act (“the Affordable Care Act”), Pub. L. No. 111-148, 124 Stat. 119 (March 23, 2010).
  31. 31 U.S.C. §3730(e)(4)(B).  In the amended version of the federal FCA, the definition of “original source” was changed and the amended law now allows a person to qualify as an “original source” if that person discloses the information to the government before the public disclosure is made or if they have “knowledge that is independent of and materially adds to the publicly disclosed allegations or transactions.”  In addition, in the amended version of the federal FCA, the court can only dismiss an action based upon a public disclosure if the government does not oppose the dismissal.  Also, actions based on public disclosures are only barred if they are made in a criminal, civil, or administrative hearing in which the government is a party
  32. Compare 31 U.S.C. § 3730(h).
  33. Haw. Rev. Stat. Ann. §§ 378-61 to 378-70.  Hawaii Whistleblowers’ Protection Act.
  34. Haw. Rev. Stat. Ann. § 378-62.
  35. Haw. Rev. Stat. Ann. § 378-64.  Compare 31 U.S.C. § 3730(h).
  36. Haw. Rev. Stat. Ann. § 661-27(a).
  37. Haw. Rev. Stat. Ann. § 661-27(b).
  38. Haw. Rev. Stat. Ann. § 661-27(a)-(b).
  39. Haw. Rev. Stat. Ann. § 661-27(a).
  40. Haw. Rev. Stat. Ann. § 661-27(c).
  41. Id.
  42. Haw. Rev. Stat. Ann. § 661-27(d).

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