HB0074 98TH GENERAL ASSEMBLY

LRB098 04218 HEP 34243 b

98TH GENERAL ASSEMBLY
State of Illinois
2013 and 2014
HB0074

Introduced 1/9/2013, by Rep. Michael J. Zalewski

SYNOPSIS AS INTRODUCED:

705 ILCS 505/8	from Ch. 37, par. 439.8
740 ILCS 175/4	from Ch. 127, par. 4104
740 ILCS 175/4.5 new

Amends the Illinois False Claims Act. Provides that no court has jurisdiction over a civil action relating to or involving a false claim regarding certain tax acts administered by the Department of Revenue, unless the action is brought by the Attorney General. Provides that the Department of Revenue shall have the sole authority to bring an administrative action and that the Attorney General shall have the sole authority to bring a judicial action under the Act for a false claim, statement, or record pertaining to certain taxes administered by the Department of Revenue. Contains provisions concerning reporting, investigative, and enforcement procedures for allegations of false claims pertaining to certain taxes. Contains provisions governing the payment of rewards to persons who provide information that leads to recovery of funds under the new provisions. Provides that the appeal of a determination regarding an award may be appealed exclusively to the Court of Claims and must be filed within 30 days of the determination of the award. Makes a corresponding change in the Court of Claims Act.

A BILL FOR

AN ACT concerning civil law.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 5. The Court of Claims Act is amended by changing Section 8 as follows:

(705 ILCS 505/8) (from Ch. 37, par. 439.8)

Sec. 8. Court of Claims jurisdiction; deliberation periods. The court shall have exclusive jurisdiction to hear and determine the following matters:

(a) All claims against the State founded upon any law of the State of Illinois or upon any regulation adopted thereunder by an executive or administrative officer or agency; provided, however, the court shall not have jurisdiction (i) to hear or determine claims arising under the Workers' Compensation Act or the Workers' Occupational Diseases Act, or claims for expenses in civil litigation, or (ii) to review administrative decisions for which a statute provides that review shall be in the circuit or appellate court.

(b) All claims against the State founded upon any contract entered into with the State of Illinois.

(c) All claims against the State for time unjustly served in prisons of this State when the person imprisoned received a pardon from the governor stating that such pardon is issued on the ground of innocence of the crime for which he or she was imprisoned or he or she received a certificate of innocence from the Circuit Court as provided in Section 2-702 of the Code of Civil Procedure; provided, the amount of the award is at the discretion of the court; and provided, the court shall make no award in excess of the following amounts: for imprisonment of 5 years or less, not more than $85,350; for imprisonment of 14 years or less but over 5 years, not more than $170,000; for imprisonment of over 14 years, not more than $199,150; and provided further, the court shall fix attorney's fees not to exceed 25% of the award granted. On or after the effective date of this amendatory Act of the 95th General Assembly, the court shall annually adjust the maximum awards authorized by this subsection (c) to reflect the increase, if any, in the Consumer Price Index For All Urban Consumers for the previous calendar year, as determined by the United States Department of Labor, except that no annual increment may exceed 5%. For the annual adjustments, if the Consumer Price Index decreases during a calendar year, there shall be no adjustment for that calendar year. The transmission by the Prisoner Review Board or the clerk of the circuit court of the information described in Section 11(b) to the clerk of the Court of Claims is conclusive evidence of the validity of the claim. The changes made by this amendatory Act of the 95th General Assembly apply to all claims pending on or filed on or after the effective date.

(d) All claims against the State for damages in cases sounding in tort, if a like cause of action would lie against a private person or corporation in a civil suit, and all like claims sounding in tort against the Medical Center Commission, the Board of Trustees of the University of Illinois, the Board of Trustees of Southern Illinois University, the Board of Trustees of Chicago State University, the Board of Trustees of Eastern Illinois University, the Board of Trustees of Governors State University, the Board of Trustees of Illinois State University, the Board of Trustees of Northeastern Illinois University, the Board of Trustees of Northern Illinois University, the Board of Trustees of Western Illinois University, or the Board of Trustees of the Illinois Mathematics and Science Academy; provided, that an award for damages in a case sounding in tort, other than certain cases involving the operation of a State vehicle described in this paragraph, shall not exceed the sum of $100,000 to or for the benefit of any claimant. The $100,000 limit prescribed by this Section does not apply to an award of damages in any case sounding in tort arising out of the operation by a State employee of a vehicle owned, leased or controlled by the State. The defense that the State or the Medical Center Commission or the Board of Trustees of the University of Illinois, the Board of Trustees of Southern Illinois University, the Board of Trustees of Chicago State University, the Board of Trustees of Eastern Illinois University, the Board of Trustees of Governors State University, the Board of Trustees of Illinois State University, the Board of Trustees of Northeastern Illinois University, the Board of Trustees of Northern Illinois University, the Board of Trustees of Western Illinois University, or the Board of Trustees of the Illinois Mathematics and Science Academy is not liable for the negligence of its officers, agents, and employees in the course of their employment is not applicable to the hearing and determination of such claims.

(e) All claims for recoupment made by the State of Illinois against any claimant.

(f) All claims pursuant to the Line of Duty Compensation Act. A claim under that Act must be heard and determined within one year after the application for that claim is filed with the Court as provided in that Act.

(g) All claims filed pursuant to the Crime Victims Compensation Act.

(h) All claims pursuant to the Illinois National Guardsman's Compensation Act. A claim under that Act must be heard and determined within one year after the application for that claim is filed with the Court as provided in that Act.

(i) All claims authorized by subsection (a) of Section 10-55 of the Illinois Administrative Procedure Act for the expenses incurred by a party in a contested case on the administrative level.

(j) All appeals of determinations by the Department of Revenue regarding awards under Section 4.5 of the Illinois False Claims Act.

(Source: P.A. 95-970, eff. 9-22-08; 96-80, eff. 7-27-09.)

Section 10. The Illinois False Claims Act is amended by changing Section 4 and by adding Section 4.5 as follows:

(740 ILCS 175/4) (from Ch. 127, par. 4104)

Sec. 4. Civil actions for false claims.

(a) Responsibilities of the Attorney General and the Department of State Police. The Attorney General or the Department of State Police shall diligently investigate a civil violation under Section 3. If the Attorney General finds that a person violated or is violating Section 3, the Attorney General may bring a civil action under this Section against the person.

The State shall receive an amount for reasonable expenses that the court finds to have been necessarily incurred by the Attorney General, including reasonable attorneys' fees and costs. All such expenses, fees, and costs shall be awarded against the defendant. The court may award amounts from the proceeds of an action or settlement that it considers appropriate to any governmental entity or program that has been adversely affected by a defendant. The Attorney General, if necessary, shall direct the State Treasurer to make a disbursement of funds as provided in court orders or settlement agreements.

(b) Actions by private persons.

(1) A person may bring a civil action for a violation of Section 3 for the person and for the State. The action shall be brought in the name of the State. The action may be dismissed only if the court and the Attorney General give written consent to the dismissal and their reasons for consenting.

(2) A copy of the complaint and written disclosure of substantially all material evidence and information the person possesses shall be served on the State. The complaint shall be filed in camera, shall remain under seal for at least 60 days, and shall not be served on the defendant until the court so orders. The State may elect to intervene and proceed with the action within 60 days after it receives both the complaint and the material evidence and information.

(3) The State may, for good cause shown, move the court for extensions of the time during which the complaint remains under seal under paragraph (2). Any such 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 20 days after the complaint is unsealed and served upon the defendant.

(4) Before the expiration of the 60-day period or any extensions obtained under paragraph (3), the State shall:

(A) proceed with the action, in which case the action shall be conducted by the State; or

(B) notify the court that it declines to take over the action, in which case the person bringing the action shall have the right to conduct the action.

(5) When a person brings an action under this subsection (b), no person other than the State may intervene or bring a related action based on the facts underlying the pending action.

(c) Rights of the parties to Qui Tam actions.

(1) If the State 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. Such person shall have the right to continue as a party to the action, subject to the limitations set forth in paragraph (2).

(2)(A) The State may dismiss the action notwithstanding the objections of the person initiating the action if the person has been notified by the State of the filing of the motion and the court has provided the person with an opportunity for a hearing on the motion.

(B) The State 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, such hearing may be held in camera.

(C) Upon a showing by the State that unrestricted participation during the course of the litigation by the person initiating the action would interfere with or unduly delay the State's prosecution of the case, or would be repetitious, irrelevant, or for purposes of harassment, the court may, in its discretion, impose limitations on the person's participation, such as:

(i) limiting the number of witnesses the person may call:

(ii) limiting the length of the testimony of such witnesses;

(iii) limiting the person's cross-examination of witnesses; or

(iv) otherwise limiting the participation by the person in the litigation.

(D) Upon a showing by the defendant that unrestricted participation during the course of the litigation by the person 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 person in the litigation.

(3) If the State elects not to proceed with the action, the person who initiated the action shall have the right to conduct the action. If the State so 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 State's expense). When a person proceeds with the action, the court, without limiting the status and rights of the person initiating the action, may nevertheless permit the State to intervene at a later date upon a showing of good cause.

(4) Whether or not the State proceeds with the action, upon a showing by the State that certain actions of discovery by the person initiating the action would interfere with the State's investigation or prosecution of a criminal or civil matter arising out of the same facts, the court may stay such discovery for a period of not more than 60 days. Such a showing shall be conducted in camera. The court may extend the 60-day period upon a further showing in camera that the State has pursued the criminal or civil investigation or proceedings with reasonable diligence and any proposed discovery in the civil action will interfere with the ongoing criminal or civil investigation or proceedings.

(5) Notwithstanding subsection (b), the State may elect to pursue its claim through any alternate remedy available to the State, including any administrative proceeding to determine a civil money penalty. If any such alternate remedy is pursued in another proceeding, the person initiating the action shall have the same rights in such proceeding as such person would have had if the action had continued under this Section. Any finding of fact or conclusion of law made in such other proceeding that has become final shall be conclusive on all parties to an action under this Section. For purposes of the preceding sentence, a finding or conclusion is final if it has been finally determined on appeal to the appropriate court, if all time for filing such an appeal with respect to the finding or conclusion has expired, or if the finding or conclusion is not subject to judicial review.

(d) Award to Qui Tam plaintiff.

(1) If the State proceeds with an action brought by a person under subsection (b), such person shall, subject to the second sentence of this paragraph, receive at least 15% but not more than 25% of the proceeds of the action or settlement of the claim, depending upon the extent to which the person substantially contributed to the prosecution of the action. Where the action is one which the court finds to be based primarily on disclosures of specific information (other than information provided by the person bringing the action) relating to allegations or transactions in a criminal, civil, or administrative hearing, in a legislative, administrative, or Auditor General's report, hearing, audit, or investigation, or from the news media, the court may award such sums as it considers appropriate, but in no case more than 10%, if any, 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. Any payment to a person under the first or second sentence of this paragraph (1) shall be made from the proceeds. Any such person shall also receive an amount for reasonable expenses which the court finds to have been necessarily incurred, plus reasonable attorneys' fees and costs. The State shall also receive an amount for reasonable expenses which the court finds to have been necessarily incurred by the Attorney General, including reasonable attorneys' fees and costs. All such expenses, fees, and costs shall be awarded against the defendant. The court may award amounts from the proceeds of an action or settlement that it considers appropriate to any governmental entity or program that has been adversely affected by a defendant. The Attorney General, if necessary, shall direct the State Treasurer to make a disbursement of funds as provided in court orders or settlement agreements.

(2) If the State does not proceed with an action under this Section, the person bringing the action or settling the claim shall receive an amount which the court decides is reasonable for collecting the civil penalty and damages. The amount shall be not less than 25% and not more than 30% of the proceeds of the action or settlement and shall be paid out of such proceeds. Such person shall also receive an amount for reasonable expenses which the court finds to have been necessarily incurred, plus reasonable attorneys' fees and costs. All such expenses, fees, and costs shall be awarded against the defendant. The court may award amounts from the proceeds of an action or settlement that it considers appropriate to any governmental entity or program that has been adversely affected by a defendant. The Attorney General, if necessary, shall direct the State Treasurer to make a disbursement of funds as provided in court orders or settlement agreements.

(3) Whether or not the State proceeds with the action, if the court finds that the action was brought by a person who planned and initiated the violation of Section 3 upon which the action was brought, then the court may, to the extent the court considers appropriate and without limitation, reduce the share of the proceeds of the action which the person would otherwise receive under paragraph (1) or (2) of this subsection (d), 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 3, that person shall be dismissed from the civil action and shall not receive any share of the proceeds of the action. Such dismissal shall not prejudice the right of the State to continue the action, represented by the Attorney General.

(4) If the State does not proceed with the action and the person bringing the action conducts the action, the court may award to the defendant its reasonable attorneys' fees and expenses if the defendant prevails in the action and the court finds that the claim of the person bringing the action was clearly frivolous, clearly vexatious, or brought primarily for purposes of harassment.

(e) Certain actions barred.

(1) No court shall have jurisdiction over an action brought by a former or present member of the Guard under subsection (b) of this Section against a member of the Guard arising out of such person's service in the Guard.

(2)(A) No court shall have jurisdiction over an action brought under subsection (b) against a member of the General Assembly, a member of the judiciary, or an exempt official if the action is based on evidence or information known to the State when the action was brought.

(B) For purposes of this paragraph (2), "exempt official" means any of the following officials in State service: directors of departments established under the Civil Administrative Code of Illinois, the Adjutant General, the Assistant Adjutant General, the Director of the State Emergency Services and Disaster Agency, members of the boards and commissions, and all other positions appointed by the Governor by and with the consent of the Senate.

(3) 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 money penalty proceeding in which the State is already a party.

(4)(A) The court shall dismiss an action or claim under this Section, unless opposed by the State, if substantially the same allegations or transactions as alleged in the action or claim were publicly disclosed:

(i) in a criminal, civil, or administrative hearing in which the State or its agent is a party;

(ii) in a State legislative, State Auditor General, or other State report, hearing, audit, or investigation; or

(iii) 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.

(B) For purposes of this paragraph (4), "original source" means an individual who either (i) prior to a public disclosure under subparagraph (A) of this paragraph (4), has voluntarily disclosed to the State the information on which allegations or transactions in a claim are based, or (ii) has knowledge that is independent of and materially adds to the publicly disclosed allegations or transactions, and who has voluntarily provided the information to the State before filing an action under this Section.

(5) No court shall have jurisdiction over a civil action brought under subsection (b) that relates to or involves a false claim regarding a tax administered by the Department of Revenue under the Use Tax Act; the Service Use Tax Act; the Service Occupation Tax Act; the Retailers' Occupation Tax Act; the Cigarette Machine Operators' Occupation Tax Act; the Cigarette Tax Act; the Cigarette Use Tax Act; the Home Rule Cigarette Tax Restriction Act; the Tobacco Products Tax Act of 1995; the Hotel Operators' Occupation Tax Act; the Use and Occupation Tax Refund Act; the Automobile Renting Occupation and Use Tax Act; the Aircraft Use Tax Law; the Watercraft Use Tax Law; the Direct Pay Permit Implementation Act; the Governmental Tax Reform Validation Act; the Simplified Sales and Use Tax Administration Act, the Gas Use Tax Law, the Live Adult Entertainment Facility Surcharge Act; the Illinois Estate and Generation-Skipping Transfer Tax Act; the Motor Fuel Tax Law; the Coin-Operated Amusement Device and Redemption Machine Tax Act; the Mobile Home Local Services Tax Act; the Mobile Home Local Services Tax Enforcement Act; the Manufactured Home Installation Act; the Cannabis and Controlled Substances Tax Act; the Illinois Central Railroad Tax Act; the Messages Tax Act; the Gas Revenue Tax Act; the Public Utilities Revenue Act; the Water Company Invested Capital Tax Act; the Telecommunications Excise Tax Act; the Telecommunications Infrastructure Maintenance Fee Act; the Simplified Municipal Telecommunications Tax Act; the Mobile Telecommunications Sourcing Conformity Act; the Electricity Excise Tax Law; the Electricity Infrastructure Maintenance Fee Law; Section 31 of the Innovation Development and Economy Act; Sections 5-1006, 5-1006.5, 5-1006.7, 5-1007, 5-1008, 5-1008.5, and 5-1035.1 of the Counties Code; Sections 8-11-1, 8-11-2, 8-11-3, 8-11-4, 8-11-5, 8-11-6, 8-11-6b, 8-11-7, 8-11-8, 8-11-9, 8-11-11, 8-11-15, 8-11-16, 8-11-20, 8-11-21, and 11-74.3-3 of the Illinois Municipal Code; Section 13 of the Metropolitan Pier and Exposition Authority Act; Section 30 of the Metro-East Park and Recreation District Act; Section 5.01 of the Local Mass Transit District Act; Section 4.03 of the Regional Transportation Authority Act; and Section 4 of the Water Commission Act of 1985, unless the action is brought by the Attorney General. Nothing in this Section affects the Income Tax Act exclusion in subsection (c) of Section 3 of this Act.

(f) State not liable for certain expenses. The State is not liable for expenses which a person incurs in bringing an action under this Section.

(g) Relief from retaliatory actions.

(1) In general, any employee, contractor, or agent shall be entitled to all relief necessary to make that employee, contractor, or agent whole, if that employee, contractor, or agent is discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employment because of lawful acts done by the employee, contractor, agent, or associated others in furtherance of an action under this Section or other efforts to stop one or more violations of this Act.

(2) Relief under paragraph (1) shall include reinstatement with the same seniority status that the employee, contractor, or agent would have had but for the discrimination, 2 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 attorneys' fees. An action under this subsection (g) may be brought in the appropriate circuit court for the relief provided in this subsection (g).

(3) A civil action under this subsection may not be brought more than 3 years after the date when the retaliation occurred.

(Source: P.A. 96-1304, eff. 7-27-10; 97-978, eff. 8-17-12.)".

(740 ILCS 175/4.5 new)

Sec. 4.5. Actions for false claims relating to certain tax Acts administered by the Department of Revenue.

(a) The Department of Revenue shall have the sole authority to bring an administrative action resulting from information provided by any person alleging a false claim, statement, or record, as defined in Section 3 of this Act, pertaining to any tax administered by the Department of Revenue under a provision identified in subdivision (e)(5) of Section 4 of this Act. The Attorney General shall have the sole authority to bring a judicial action under this Act for a false claim, statement, or record, as defined in Section 3 of this Act, pertaining to any tax administered by the Department of Revenue under a provision identified in subdivision (e)(5) of Section 4 of this Act.

(b) A person may provide to the Department of Revenue any information alleging a false claim, statement, or record, as defined in Section 3 of this Act, pertaining to any tax administered by the Department of Revenue under a provision identified in subdivision (e)(5) of Section 4 of this Act. The Department of Revenue shall establish, by rule, a procedure for the reporting of any allegation of a false claim, statement, or record to the Department. The Department of Revenue shall notify the Attorney General within 60 days of receipt of a report under this subsection (b). The Department of Revenue shall investigate all allegations of a false claim, statement, or record and make a recommendation to the Attorney General as to whether or not the Attorney General should bring an action under this Act for all applicable tax and interest the Department of Revenue determines is due under the appropriate tax act. The Attorney General has the ultimate authority to accept or reject the Department of Revenue's recommendation. Nothing in this Section limits the authority of the Attorney General to bring an action under this Act at any time, even in the absence of a recommendation from the Department of Revenue. A person found liable in an action under this Act is subject to the assessment of penalties and damages as specified in Section 3 of this Act.

(c) In exercising its discretion in administering and enforcing the tax laws, the Department of Revenue may determine that a person's allegations of a false claim, statement, or record are best handled within the course of an audit conducted within the Department of Revenue's normal course of business. If the Department of Revenue exercises its audit functions and the audit results in a contested tax assessment, the person audited shall retain all of his or her legal rights to resolve the matter in any forum where jurisdiction is proper, including an administrative hearing before the Department of Revenue, the Independent Tax Tribunal, circuit court under the State Officers and Employees Money Disposition Act, or any other judicial proceeding. Under no circumstances may a person, other than the person audited and his or her attorney, have any right to participate in those proceedings, participate in settlement negotiations, challenge the validity of any settlement between the Department and any person, or review any materials subject to the confidentiality provisions of the underlying tax act. If the Attorney General files an action under this Act that relates to or involves a false claim regarding a tax administered by the Department of Revenue under a provision identified in subdivision (e)(5) of Section 4 of this Act, any Department of Revenue administrative proceeding that seeks recovery for the same conduct alleged in the Attorney General's complaint shall be automatically stayed until resolution of the action brought by the Attorney General under this Act. However, a Department of Revenue audit or investigation may not be stayed under this subsection (c).

(d) If the Attorney General proceeds with a judicial action under this Act based on information brought to the Department of Revenue's attention by a person, the person shall, subject to subsection (e) of this Section, receive as an award an amount equal to at least 15% but not more than 30% of the collected proceeds (including penalties, interest, additions to tax, and additional amounts) resulting from the action and any related actions, or from any settlement in response to the action, taking into account the significance of the person's information and the role of the person and any legal representative of the person in contributing to the action. If the Department of Revenue proceeds with an administrative action based on information brought to its attention by a person, the person shall, subject to subsection (e) of this Section, receive as an award an amount equal to at least 10% but not more than 15% of the collected proceeds (including penalties, interest, additions to tax, and additional amounts) resulting from the action or from any settlement in response to the action, taking into account the significance of the person's information and the role of the person and any legal representative of the person in contributing to the action. A person who brings to the Department's attention information alleging a false claim, statement, or record, as defined in Section 3 of this Act, pertaining to any tax administered by the Department of Revenue under a provision identified in subdivision (e)(5) of Section 4 of this Act, may not receive any amounts for expenses, attorney's fees, or costs.

(e) In the event the judicial or administrative action described in subsection (d) is one which the Department of Revenue determines to be based principally on disclosures of specific allegations (other than information provided by the person described in subsection (d)) resulting from a judicial or administrative hearing, from a governmental report, hearing, audit, or investigation, or from the news media, the Department of Revenue may award to the person a sum as the Department of Revenue considers appropriate, but in no case more than 10%, if any, of the collected proceeds (including penalties, interest, additions to tax, and additional amounts) resulting from the action (including any related actions) or from any settlement in response to the action, taking into account the significance of the person's information and the role of the person and any legal representative of the person in contributing to the action. This subsection (e) does not apply if the information resulting in the initiation of the administrative or judicial action described in subsection (d) was originally provided by the person described in subsection (d).

(f) If the Department of Revenue determines that a claim for an award under subsection (d) or (e) is brought by a person who planned and initiated the actions that led to the false claim and any resulting underpayment of tax, the Department of Revenue may reduce the award to the extent it considers appropriate and without limitation. If the person is convicted of criminal conduct arising from conduct described in this subsection (f), the Department of Revenue may not pay any award to the person.

(g) A determination by the Department of Revenue regarding an award under this Section may be appealed exclusively to the Court of Claims. An appeal under this subsection (g) must be filed within 30 days of the Department of Revenue's determination of an award under this Section.