BILL NUMBER: SB 1008 CHAPTERED 09/30/03 CHAPTER 632 FILED WITH SECRETARY OF STATE SEPTEMBER 30, 2003 APPROVED BY GOVERNOR SEPTEMBER 30, 2003 PASSED THE SENATE SEPTEMBER 10, 2003 PASSED THE ASSEMBLY SEPTEMBER 8, 2003 AMENDED IN ASSEMBLY SEPTEMBER 5, 2003 AMENDED IN ASSEMBLY SEPTEMBER 3, 2003 AMENDED IN ASSEMBLY AUGUST 26, 2003 AMENDED IN ASSEMBLY AUGUST 18, 2003 AMENDED IN ASSEMBLY JUNE 18, 2003 AMENDED IN SENATE MAY 20, 2003 AMENDED IN SENATE APRIL 21, 2003 INTRODUCED BY Senator Machado FEBRUARY 21, 2003 An act to amend Sections 999.2, 999.5, 999.7, and 999.9 of the Military and Veterans Code, and to add Section 10115.9 to the Public Contract Code, relating to veterans. LEGISLATIVE COUNSEL'S DIGEST SB 1008, Machado. Veterans: contracts: disabled veteran business enterprises. Under existing law, any state governmental entity that awards contracts for professional bond services and for construction and certain related purposes has annual statewide participation goals of not less than 3% for disabled veteran business enterprises, as defined. For purposes of these provisions, existing law defines a "disabled veteran" as a veteran, as specified, with a service-connected disability who is a resident of the state. This bill would specify that a limited liability company may be certified as a disabled veteran business enterprise for these purposes if that company is wholly owned by one or more disabled veterans. This bill would deem any disabled veteran business enterprise that rents equipment to an awarding department to be an equipment broker, as defined, unless one or more certified disabled veterans have 51% ownership of the equipment and evidence is submitted in support of that fact. The bill would also prohibit state funds expended for equipment rented from equipment brokers, as specified, from being credited toward the 3% goal. This bill would require a disabled veteran business enterprise that is a broker, as defined, and that obtains a contract under these provisions to make certain disclosures to the awarding department. The bill would also require a disabled veteran business enterprise and its owners to submit copies of the enterprise's federal income tax returns, as specified, or be subject to certain penalties for noncompliance. Existing law requires the administering agency and the awarding department to establish methods of monitoring adherence to the participation goals. This bill would additionally prohibit an awarding department from relying on the administering agency's certification of a disabled veteran business enterprise if that department knows that the disabled veteran business enterprise does not maintain the certification requirements. The bill would also prohibit state funds expended on a contract with a disabled veteran business enterprise that does not meet and maintain the certification requirements from being credited toward the 3% goal. Existing law imposes a civil penalty with respect to, among other things, fraudulently obtaining certification as a disabled veteran business enterprise. This bill would provide, among other things, that it is unlawful to knowingly and with intent to defraud, fraudulently represent participation of a disabled veteran business enterprise in order to obtain or retain a bid preference or a state contract. It would make it unlawful to establish, or knowingly aid in the establishment of, or exercise control over, a firm found to have violated the foregoing prohibitions. It would also make it unlawful to willfully and knowingly make or prepare any statement or document that is fraudulent or false as to any material matter. The bill would, in addition to civil penalties, make it a misdemeanor to violate all of the foregoing prohibitions, thereby imposing a state-mandated local program. The bill would also require a defendant to pay all of the plaintiff's costs and attorneys' fees in a civil action brought for violations of these provisions. The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement. This bill would provide that no reimbursement is required by this act for a specified reason. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 999.2 of the Military and Veterans Code is amended to read: 999.2. (a) Notwithstanding any other provision of law, contracts awarded by any state agency, department, officer, or other state governmental entity, including school districts when they are expending state funds for construction, professional services (except those subject to Chapter 6 (commencing with Section 16850) of Part 3 of Division 4 of Title 2 of the Government Code), materials, supplies, equipment, alteration, repair, or improvement shall have statewide participation goals of not less than 3 percent for disabled veteran business enterprises. These goals apply to the overall dollar amount expended each year by the awarding department. (b) For purposes of this section: (1) "Broker" or "agent" means any individual or entity, or any combination thereof, that does not have title, possession, control, and risk of loss of materials, supplies, services, or equipment provided to an awarding department, unless one or more certified disabled veterans has 51 percent ownership of the quantity and value of the materials, supplies, services, and of each piece of equipment provided under the contract. (2) "Equipment" means any piece of equipment that is used or provided for rental to any state agency, department, officer, or other state governmental entity, including equipment for which operators are provided. (3) "Equipment broker" means any broker or agent who rents equipment to an awarding department. (c) A disabled veteran business enterprise that rents equipment to an awarding department shall be deemed to be an equipment broker unless one or more disabled veterans has 51-percent ownership of the quantity and the value of each piece of equipment. If the equipment is owned by one or more disabled veterans, each disabled veteran owner shall, prior to performance under any contract, submit to the awarding department a declaration signed by the disabled veteran owner stating that the owner is a disabled veteran and providing the name, address, telephone number, and tax identification number of the disabled veteran owner. Each disabled veteran owner shall submit his or her federal income tax returns to the administering agency pursuant to subdivision (g) as if he or she were a disabled veteran business enterprise. The disabled veteran business enterprise of a disabled veteran owner who fails to submit his or her tax returns will be deemed to be an equipment broker. (d) A disabled veteran business enterprise that rents equipment to an awarding department shall, prior to performing the contract, submit to the awarding department a declaration signed by each disabled veteran owner and manager of the enterprise stating that the enterprise obtained the contract by representing that the enterprise was a disabled veteran business enterprise meeting and maintaining all of the requirements of a disabled veteran business enterprise. The declaration shall include the name, address, telephone number, and tax identification number of the owner of each piece of equipment identified in the contract. (e) State funds expended for equipment rented from equipment brokers pursuant to contracts awarded under this section shall not be credited toward the 3-percent goal. (f) A disabled veteran business enterprise that is a broker or agent and that obtains a contract pursuant to subdivision (a) shall, prior to performing the contract, disclose to the awarding department that the business is a broker or agent. The disclosure shall be made in a declaration signed and executed by each disabled veteran owner and manager of the enterprise, declaring that the enterprise is a broker or agent, and identifying the name, address, and telephone number of the principal for whom the enterprise is acting as a broker or agent. (g) (1) A disabled veteran business enterprise, and each owner thereof, shall, at the time of certification, submit to the administering agency complete copies of the enterprise's federal income tax returns for the three previous tax years. (2) A disabled veteran business enterprise, and each owner thereof, shall submit to the administering agency complete copies of the enterprise's federal income tax returns that have a postcertification due date, on or before the due date, including extensions. (3) A disabled veteran business enterprise that, and each owner thereof who, has not submitted to the administering agency complete copies of the enterprise's federal income tax returns for the three tax years preceding certification nor for each postcertification tax year for which a return was required to be filed, shall have 90 days to submit those returns. (4) A disabled veteran business enterprise that fails to comply with any provision of this subdivision shall be prohibited from participating in any state contract until the disabled veteran business enterprise complies with the provisions of this subdivision. Funds expended involving a disabled veteran business enterprise during any period in which that enterprise is not in compliance with the provisions of this subdivision shall not be credited toward the awarding department's 3-percent goal. (h) A disabled veteran business enterprise that fails to maintain the certification requirements set forth in this article shall immediately notify the awarding department and the administering agency of that failure by filing a notice of failure that states with particularity each requirement the disabled veteran business enterprise has failed to maintain. SEC. 2. Section 999.5 of the Military and Veterans Code is amended to read: 999.5. (a) The administering agency shall establish a method of monitoring adherence to the goal specified in Section 999.1, including requiring a followup report from all contractors upon the completion of any sale of bonds. (b) The awarding department shall establish a method of monitoring adherence to the goals specified in Section 999.2. (c) An awarding department shall not credit toward the department' s 3 percent goal state funds expended on a contract with a disabled veteran business enterprise that does not meet and maintain the certification requirements. (d) The administering agency shall adopt rules and regulations, including standards for good faith efforts, for the purpose of implementing this section. Emergency regulations consistent with this section may be adopted. SEC. 3. Section 999.7 of the Military and Veterans Code is amended to read: 999.7. (a) (1) On January 1 of each year, each awarding department shall report to the Governor, the Legislature, the Department of General Services, and the Department of Veterans Affairs on the level of participation by disabled veteran business enterprises in contracts identified in this article for the previous fiscal year. (2) If the awarding department has not met the established goals for that year, the awarding department shall report to the Legislature, the Department of General Services, and the Department of Veterans Affairs the reasons for the awarding department's inability to achieve the goals and shall identify steps it shall take in an effort to achieve the goals. (b) On April 1 of each year, the Department of General Services shall prepare for the Governor, the Legislature, and the Department of Veterans Affairs a statewide statistical summary detailing each awarding department's goal achievement and a statewide total of those goals. SEC. 4. Section 999.9 of the Military and Veterans Code is amended to read: 999.9. (a) It shall be unlawful for a person to: (1) Knowingly and with intent to defraud, fraudulently obtain, retain, attempt to obtain or retain, or aid another in fraudulently obtaining or retaining or attempting to obtain or retain, certification as a disabled veteran business enterprise for the purpose of this article. (2) Willfully and knowingly make a false statement with the intent to defraud, whether by affidavit, report, or other representation, to a state official or employee for the purpose of influencing the certification or denial of certification of any entity as a disabled veteran business enterprise. (3) Willfully and knowingly obstruct, impede, or attempt to obstruct or impede, any state official or employee who is investigating the qualifications of a business entity that has requested certification as a disabled veteran business enterprise. (4) Knowingly and with intent to defraud, fraudulently obtain, attempt to obtain, or aid another person in fraudulently obtaining or attempting to obtain, public moneys, contracts, or funds expended under a contract, that are awarded by any state agency, department, officer, or other state governmental agency, to which the person is not entitled under this article. (5) Knowingly and with intent to defraud, fraudulently represent participation of a disabled veteran business enterprise in order to obtain or retain a bid preference or a state contract. (6) Willfully and knowingly make or subscribe to any statement, declaration, or other document that is fraudulent or false as to any material matter, whether or not that falsity or fraud is committed with the knowledge or consent of the person authorized or required to present the declaration, statement, or document. (7) Willfully and knowingly aid or assist in, or procure, counsel, or advise, the preparation or presentation of a declaration, statement, or other document that is fraudulent or false as to any material matter, regardless of whether that falsity or fraud is committed with the knowledge or consent of the person authorized or required to present the declaration, statement, or document. (8) Willfully and knowingly fail to file any declaration or notice with the awarding agency that is required by Section 999.2. (9) Establish, or knowingly aid in the establishment of, or exercise control over, a firm found to have violated any of paragraphs (1) to (8), inclusive. (b) Any person who violates any of the provisions of subdivision (a) shall be guilty of a misdemeanor punishable by imprisonment in the county jail not exceeding six months or by a fine not exceeding one thousand dollars ($1,000), or by both. In addition, the person shall be liable for a civil penalty of not less than ten thousand dollars ($10,000) nor more than thirty thousand dollars ($30,000) for the first violation, and a civil penalty of not less than thirty thousand dollars ($30,000) nor more than fifty thousand dollars ($50,000) for each additional or subsequent violation. A defendant who violates any of the provisions of subdivision (a) shall pay all costs and attorney's fees incurred by the plaintiff in a civil action brought pursuant to this section. (c) (1) The Department of General Services shall suspend any person who violates subdivision (a) from bidding on, or participating as either a contractor, subcontractor, or supplier in, any state contract or project for a period of not less than three years, and if certified as a disabled veteran business enterprise, the department shall revoke the business' certification for a period of not less than three years. An additional or subsequent violation shall extend the periods of suspension and revocation for a period of not less than five years. The suspension and revocation shall apply to the principals of the business and any subsequent business formed or financed by, or affiliated with, those principals. (2) The Department of General Services shall prohibit any business or person who fails to satisfy the penalties, costs, and attorney's fees imposed pursuant to subdivision (b) from further contracting with the state until the penalties are satisfied. (d) The awarding department shall report all alleged violations of this section to the Department of General Services. The Department of General Services shall subsequently report all alleged violations to the Attorney General who shall determine whether to bring a civil action against any person or firm for violation of this section. (e) The Department of General Services shall monitor the status of all reported violations and shall maintain and make available to all state departments a central listing of all firms and persons who have been determined to have committed violations resulting in suspension. (f) No awarding department shall enter into any contract with any person suspended for violating this section during the period of the person's suspension. No awarding department shall award a contract to any contractor utilizing the services of any person as a subcontractor suspended for violating this section during the period of the person's suspension. (g) The awarding department shall check the central listing provided by the Department of General Services to verify that the person or contractor to whom the contract is being awarded, or any person being utilized as a subcontractor or supplier by that person or contractor, is not under suspension for violating this section. SEC. 5. Section 10115.9 is added to the Public Contract Code, to read: 10115.9. A limited liability company may be certified as a disabled veteran business enterprise pursuant to this article if the limited liability company is wholly owned by one or more disabled veterans. SEC. 6. No reimbursement is required by this act pursuant to Section 6 XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution.