SENATE BILL REPORT

                   SB 6455

              As Reported By Senate Committee On:

            Government Operations, February 1, 1996

Title:  An act relating to the citizen whistleblower act.

Brief Description:  Adopting the citizen whistleblower act.

Sponsors:  Senators Heavey, Winsley, Rasmussen, Oke, Franklin, Haugen and Kohl; by request of Governor Lowry and State Auditor.

Brief History:

Committee Activity:  Government Operations:  1/25/96, 2/1/96 [DPS-WM].

SENATE COMMITTEE ON GOVERNMENT OPERATIONS

Majority Report:  That Substitute Senate Bill No. 6455 be substituted therefor, and the substitute bill do pass and be referred to Committee on Ways & Means.

  Signed by Senators Haugen, Chair; Sheldon, Vice Chair; Goings, Hale, Heavey, McCaslin and Winsley.

Staff:  Rod McAulay (786-7754)

Background:  There are no specific civil remedies addressing wrongdoings involving claims against the state and protecting private employees who blow the whistle on such wrongdoing other than the existing general criminal laws against fraud and theft; common law civil claims such as those for conversion of property, breach of contract, and wrongful discharge; and state employee disciplinary procedures.  It is believed that establishing a special civil remedy and providing protection for private employees who disclose fraud will serve as a deterrent against such activity and provide a more effective means of prosecution.

Summary of Substitute Bill:  A civil penalty of not less than $5,000 or more than $10,000 plus treble damages is established for persons who knowingly:

!present, or conspire to present, a false claim for payment by a state agency;

!make or use a false record or statement to get a false claim paid or approved or to reduce an amount owed to an agency;

!retain property or money of an agency with intent to deceive or conceal;

!make or deliver a receipt for property on behalf of an agency, with the intent to deceive knowing that the information on the receipt is false;

!buy or receive as a pledge of an obligation or debt, public property from an officer or employee who may not lawfully sell or pledge the property;

An award of treble damages may be reduced only upon written findings by the court of one or more of three specified extenuating circumstances.

The State Auditor is authorized to conduct investigations of violations of this act and make referrals to the Attorney General.  The Attorney General is authorized to bring a civil action.

A private person may bring a civil action for violations of this act.  Any complaint filed by a private citizen is sealed.  A copy of the complaint must be served on the Attorney General.  Within 90 days of receipt of the complaint, the Attorney General is required to intervene and proceed with the action or notify the court that the Attorney General declines to take action, in which case the person bringing the action may conduct the action.  The Attorney General and the private plaintiff may agree to dismiss the action prior to unsealing the complaint. The Attorney General may request the court for an extension of the 90 day review period during which the complaint remains under seal. Actions under this act must be filed in Thurston County superior court.

If the Attorney General proceeds with an action under this act, the Attorney General has the primary responsibility for prosecuting the action, and is not bound by any act of a private person bringing the action.  However, the private person, may, subject to limitations, continue as a party to the action.  Either the private plaintiff or the Attorney General may compromise a claim after a hearing and with court approval.

In an action conducted solely by a private plaintiff, the State Auditor or Attorney General may request that they be provided with all pleadings and, to avoid interference with an ongoing investigation, may request a stay of discovery by the private plaintiff or defendant for limited periods of time.

If the Attorney General proceeds with and prevails in an action initiated by a private plaintiff, the court may order distribution to the private plaintiff up to 25 percent of the proceeds recovered under any judgment or settlement.

If the private plaintiff prosecutes an action without the Attorney General, the court may award the private plaintiff an amount not less than 25 percent or more than 30 percent of any judgment or settlement recovered.

The court must award the injured agency its compensatory damages and any remaining proceeds of a judgment or settlement must be deposited in the citizens' whistleblower account.  Any payments to private plaintiffs under this act must come solely from moneys recovered from the defendant.  If a private plaintiff is convicted of criminal conduct arising from his or her role in the violation of this act, he or she is dismissed from the action and may not receive an award.

The Attorney General who prevails in an action and a private plaintiff who receives an award under this act may also be awarded reasonable attorneys' fees.  If a private plaintiff pursues an action without the Attorney General which the court finds is clearly frivolous, vexatious or brought for the purpose of harassment, the court may award the defendant reasonable attorneys' fees and costs against the private plaintiff.

Courts do not have jurisdiction over an action under this chapter against a member of the Legislature, a member of the judiciary, or a senior executive branch official if the action is based on evidence known to the state government when the action was brought.  "Senior executive branch official" is defined.

A private cause of action for damages is created for any person who is retaliated against because of lawful acts done by or one behalf of the person in furtherance of an action under this act.  The Attorney General may bring an action on behalf of a person acting lawfully under this provision.

A limitation on the time for filing an action under this act is fixed at five years or two years from the time when facts material to the right of action are known or reasonably should have been known, but, in no event, more than seven years.

A citizen whistleblower account is created in the state treasury.  All money received under this act must be placed in the account and moneys may be spent from the account only after appropriation.  Expenditures from the account may be made only for administrative costs of the auditor's office and the office of the Attorney General.  Surplus funds in the account are transferred to the general fund annually.

Information and working documents obtained or prepared as part of a complaint or investigation under this act are exempt from public disclosure.

Substitute Bill Compared to Original Bill:  The substitute clarifies ambiguous terminology, removes the floor on damages and provides the court wider discretion in making awards to private plaintiffs.

Appropriation:  None.

Fiscal Note:  Available.

Effective Date:  The bill takes effect on January 1, 1997.

Testimony For:  This bill will provide a needed incentive and protection for citizens revealing fraud against the state.  It is modeled on federal law and laws of other states.  It will ultimately pay for itself.

Testimony Against:  This could be misused by disgruntled employees and could unfairly raise the cost of doing business in the state.

Testified:  Mary McKnew, Governor's office; Jeff Sarong, Ken Raske, State Auditor's office; Clif Finch, AWB.