Here is the quick overview of the false claims act in California.  Keep in
mind that the California AG has offered a $50,000,000 bounty or more for
information leading to successful false claims act cases that show that
wholesale prices were too high.

Thanks
Gary

> -----Original Message-----
> From: Smith, Amanda D.
> Sent: Tuesday, April 10, 2001 12:45 PM
> To: Fergus, Gary S.
> Subject: False Claims Act
>
> Gary,
>
> This is a brief description of the relevant provisions of the California
> False Claims Act.  As we discussed, a more in-depth analysis will follow
> in memo form.
>
> -Amanda
>
>
>
> The California False Claims Act (CFCA), available at California Government
> Code Section 12650 et seq., provides that any person (natural person,
> corporation, firm, etc.) who commits various acts shall be liable to the
> state or political subdivision (city, county, etc) for treble damages
> sustained because of those acts.  That person may also be liable for a
> civil penalty of up to $10,000 for each false claim and for the costs of
> any civil action brought to recover any penalties or damages.
>
> Initially the CFCA defines "claim" as including "any request or demand for
> money, property, or services made to any employee, officer, or agent of
> the state or of any political subdivision, 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 by, the state ... or by any political subdivision thereof ...."
>
> The CFCA then describes those acts which subject a person to treble
> damages.  The covered acts potentially relevant to Enron are:
>
> * Knowingly presenting or causing to be presented to an officer or
> employee of the state or of any political subdivision thereof, a false
> claim for payment or approval. (Sec. 12651(a)(1))
> * Knowingly making, using, or causing to be made or used a false
> record or statement to get a false claim paid or approved by the state or
> by any political subdivision. (Sec. 12651(a)(2))
> * Conspiring to defraud the state or any political subdivision by
> getting a false claim allowed or paid by the state or by any political
> subdivision. (Sec. 12651(a)(3))
> * Having possession, custody, or control of public property or money
> used or to be used by the state or by any political subdivision and
> knowingly delivering or causing to be delivered less property than the
> amount for which the person receives a certificate or receipt.  (Sec.
> 12651(a)(4))
> * 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 state or to any political subdivision.
> (Sec. 12651(a)(7))
> * Being a beneficiary of an inadvertent submission of a false claim to
> the state or a political subdivision who 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.  (Sec. 12651(a)(8))
>
> Section 12652 of the CFCA provides, inter alia, that a person ("a qui tam
> plaintiff") may "bring a civil action for a violation of this article for
> the person and either for the State of California in the name of the
> state, if any state funds are involved, or for a political subdivision in
> the name of the political subdivision, if political subdivision funds are
> exclusively involved.... Once filed, the action may be dismissed only with
> the written consent of the court, taking into account the best interests
> of the parties involved and the public purposes behind this act."
> Section 12652 goes on to describe the procedures whereby the State or a
> Political Subdivision may intervene in a suit filed by a qui tam plaintiff
> and how the damages recovered in such a suit shall be divided.
>
> Several other provisions of Section 12652 could be extremely important:
>
> * When a qui tam plaintiff brings an action under this subdivision, no
> other person (qui tam plaintiff) may bring a related action based on the
> facts underlying the pending action. (Sec. 12652(c)(10))
> * A qui tam plaintiff may not bring an action that is based upon
> allegations or transactions that are the subject of a civil suit or an
> administrative civil money penalty proceeding in which the state or
> political subdivision is already a party.  (Sec. 12652 (d)(2))
> * A qui tam plaintiff may only be "an original source" with direct and
> independent knowledge of the information on which the allegations are
> based.  A qui tam plaintiff may not obtain information from the news media
> or from public disclosure of the information in governmental or regulatory
> hearings, investigations, reports, etc. and use it to bring suit under the
> CFCA. (Sec. 12652 (d)(3))
> * If the qui tam plaintiff is a state employee, that person must
> exhaust various internal procedures before filing suit under the CFCA
> (Sec. 12652 (d)(4))
> * If the state, a political subdivision, or the qui tam plaintiff
> proceeds with the action, the court may award to the defendant its
> reasonable attorney's fees and expenses against the party that proceeded
> with the action if the defendant prevails in the action and the court
> finds that the claim was clearly frivolous, clearly vexatious, or brought
> solely for purposes of harassment.   (Sec. 12652 (g)(9)
>
>
> Other relevant provisions of the CFCA include:
>
> * The CFCA defines "knowing" and "knowingly" to mean that a person,
> with respect to information  "(A) Has actual knowledge of the information.
> (B) Acts in deliberate ignorance of the truth or falsity of the
> information. [or] (C) Acts in reckless disregard of the truth or falsity
> of the information."  Importantly, proof of specific intent to defraud is
> not required.  (Sec. 12650(b)(2))
> * The CFCA has various damages limitations provisions for defendants
> who cooperate with the State's investigation
> * The CFCA has various "whistleblower" provisions protecting employees
> who disclose information about false claims.
> * In any action brought under Section 12652, the state, the political
> subdivision, 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.  (Sec. 12654(c))
>
>

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