GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1997

H	4 

HOUSE BILL 431
Committee Substitute Favorable 3/25/97
Committee Substitute #2 Favorable 4/28/97
Fourth Edition Engrossed 4/30/97

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

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Sponsors:

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Referred to:  

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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 COUNTY 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 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 county department of social services or the 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.
(5)	Public assistance program. – Any means-tested benefit program administered or supervised by a county department of social services or the Department of Human Resources which is funded in whole or in part by federal, State, or county 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 to recoup a fraudulent or erroneous payment.  Not more than twenty percent (20%) of the recipient's or former recipient's monthly disposable income may be garnished to recoup payment in cases of fraudulent payment and not more than ten (10%) of the recipient's or former recipient's monthly disposable income may be garnished to recoup payment in cases of erroneous 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 county 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.  In cases of erroneous payment, garnishment shall be a remedy to recoup payment only after all administrative remedies are exhausted unsuccessfully. 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's 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 may 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 court 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 county department of social services or the Secretary of Human Resources may issue a subpoena to a third party in the State for the production of books, papers, correspondence, memoranda, agreements, or other information, documents, or records relevant to establishing a fraudulent or erroneous claim of public assistance. 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.  A county department of social services and the Department of Human Resources are authorized to administer oaths for the purpose of the examinations.  Information obtained as a result of a subpoena issued pursuant to this section is confidential and may be used only by county department of social services or Department program integrity personnel for the purposes of investigating fraudulent or erroneous public assistance payments.
(b)	A person subpoenaed pursuant to subsection (a) of this section may contest the subpoena.  Within 10 days after service of the subpoena, a person shall notify the county department of social services or the Department of the intent to contest the subpoena.  The notice shall be given by registered or certified mail and include a statement which sets forth the objections to complying with the subpoena.  Upon receipt of the notice and a determination that the objections are without merit, the county department of social services or the Department may initiate proceedings to enforce the subpoena by petition to the district court in the district where a person contesting the subpoena was served.
(c)	The refusal of a third party to cooperate shall not affect the eligibility of an initial application to receive public assistance.
(d)	For the purpose of this section, the following definitions shall apply:  ‘Director' means the Director of the county department of social services and ‘Secretary' means the Secretary of the Department of Human Resources.
(e)	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.