GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1997

H	2 

HOUSE BILL 431
Committee Substitute Favorable 3/25/97

Short Title:  Public Assistance Fraud/AB.	(Public)

─────────────────────────────────────── 
Sponsors:

─────────────────────────────────────── 
Referred to:  

─────────────────────────────────────── 

March 10, 1997

A BILL TO BE ENTITLED
AN ACT TO PERMIT THE GARNISHMENT OF WAGES TO RECOUP FRAUDULENT OR ERRONEOUS PUBLIC ASSISTANCE PROGRAM PAYMENTS, TO PROVIDE INVESTIGATORY SUBPOENA POWER TO LOCAL DEPARTMENTS OF SOCIAL SERVICES AND THE DEPARTMENT OF HUMAN RESOURCES, AND TO CREATE AN OFFENSE FOR ILLEGAL POSSESSION OR USE OF FOOD STAMPS.
The General Assembly of North Carolina enacts:
Section 1.  Part 1 of Article 2 of Chapter 108A of the General Statutes is amended by adding new sections as follows:
"§ 108A-25.1.  Garnishment of wages to recoup fraudulent or erroneous public assistance program payment.
(a)	The following definitions apply in this section:
(1)	Disposable income. – The part of the compensation paid or payable for personal services, whether denominated as wages, salary, commission, bonus, or otherwise (including periodic payments pursuant to a pension, retirement, or other deferred compensation program) which remains after the deduction of any amounts required by law to be withheld.
(2)	Erroneous payment. – Any public assistance program payment made because of a recipient's, a recipient's representative's or recipient household member's  misunderstanding or unintentional error, or any action or inaction of the local department of social services or Department of Human Resources which results in an erroneous public assistance program payment.
(3)	Fraudulent payment. – Any public assistance program payment made because of a recipient's false statement or representation or failure to disclose a material fact which occurs willfully and knowingly and with intent to deceive.
(4)	Garnishee. – The person, firm, association, or corporation owing compensation for personal services, whether denominated as wages, salary, commission, bonus, or otherwise (including periodic payments pursuant to a pension, retirement, or other deferred compensation program).
(5)	Public assistance program. – Any means-tested benefit program administered or supervised by a local department of social services or the Department of Human Resources which is funded in whole or in part by federal, State, or local resources.
(b)	In any case in which a recipient or former recipient of a public assistance program, who while a recipient, obtained or benefited from a fraudulent or erroneous payment, a judge of the district court in the county where the recipient or former recipient resides or is found, or in the county where the payment was made, may enter an order of garnishment whereby no more than twenty percent (20%) of that person's monthly disposable income may be garnished to recoup the payment.  The order of garnishment shall be subject to all federal and State laws or regulations that may apply to recoupment of fraudulent or erroneous payments.
(c)	A local department of social services or the Department of Human Resources may petition the court for an order of garnishment to recoup a fraudulent or erroneous public assistance program payment.  The petition shall be verified and provide the court with facts and circumstances of the fraudulent or erroneous payment to or on behalf of the recipient or former recipient, the name and address of the garnishee, the recipient or former recipient's monthly disposable income (which may be based on information and belief), and the amount sought to be garnished from the recipient's or former recipient's disposable income.  The petition shall be served on both the recipient or former recipient and the garnishee in accordance with the provisions for service of process set forth in G.S. 1A-1, Rule 4.  The time period for answering or otherwise responding to process issued pursuant to this section shall be in accordance with the time periods set forth in G.S. 1A-1, Rule 12.
(d)	Upon a hearing held pursuant to this section, the court may enter an order of garnishment.  If an order of garnishment is entered, a copy of the same shall be served on both the recipient or the former recipient and the garnishee either personally or by certified or registered mail, return receipt requested.  The order shall set forth sufficient findings of facts to support the action by the court and the amount to be garnished for each pay period.  The amount garnished shall be increased by an additional one dollar ($1.00) processing fee to be assessed and retained by the garnishee for each payment under the order.  The order shall be subject to review for modification and dissolution upon the filing of a motion in the cause.
(e)	Upon receipt of the order of garnishment, the garnishee shall transmit without delay to the clerk of superior court the amount ordered by the court to be garnished.  These funds shall be disbursed to the local department of social services to recoup fraudulent or erroneous payments subject to the order of garnishment entered pursuant to this section.
(f)	A garnishee who violates the terms of an order of garnishment shall be subject to punishment for contempt.
(g)	The Social Services Commission shall adopt rules and regulations to implement this section. The rules shall ensure that a petition for an order of garnishment sought pursuant to this section is consistent with all federal and State laws and regulations.
"§ 108A-25.2.  Power to issue investigatory subpoenas.
(a)	When all other reasonable means of investigating facts and circumstances pertaining to fraudulent or erroneous applications for or receipt of public assistance benefits have been exhausted, the Director of the local department of social services or the Director's designee, or the Secretary of Human Resources or the Secretary's designee, may issue a subpoena to a third party in the State who has necessary and relevant information and require that pertinent records and other documents be produced for examination.  The subpoena shall specify the person to whom the records and documents sought shall be produced, including time and place, and shall be served in accordance with any manner as prescribed in G.S. 1A-1, Rule 4.  The local department of social services and the Department is authorized to administer oaths for the purpose of the examinations.
(b)	An action for contempt may be initiated when such third party fails to obey a subpoena issued as provided for in subsection (a) of this section.  The action shall be initiated by petition to the district court in the district where the person to whom the subpoena was directed was served.  The action for contempt may be punishable by the court in the same manner as if the subpoena had been issued by the court subject to G.S. 1A-1, Rule 45.
(c)	The refusal of a third party to cooperate shall not affect the eligibility of an initial application to receive public assistance.
(d)	The Social Services Commission shall adopt rules and regulations to implement this section."
Section 2.  Part 5 of Article 2 of Chapter 108A of the General Statutes is amended by adding a new section as follows:
"§ 108A-53.1.  Illegal possession or use of food stamps.
Any person who knowingly uses, transfers, acquires, alters, or possesses food stamp coupons, authorization cards, or access devices in any manner contrary to that authorized by the Food Stamp Program (7 U.S.C. § 2011, et seq.) and the regulations issued pursuant thereto shall be guilty of a Class 1 misdemeanor if the value of such food stamp coupons, authorization cards, or access devices is less than one hundred dollars ($100.00), or a Class I felony if the value of such food stamp coupons, authorization cards, or access devices is equal to one hundred dollars ($100.00) but less than one thousand dollars ($1,000), or a Class H felony if the value of such food stamp coupons, authorization cards, or access devices equals or exceeds one thousand dollars ($1,000)."
Section 3.  The Social Services Commission shall adopt rules and regulations to implement Section 1 of this act within 90 days of the date this act is signed into law.
Section 4.  This act becomes effective December 1, 1997.