Existing law, the California Control of Profits of Organized Crime Act, provides the procedure for the forfeiture of property and proceeds acquired through a pattern of criminal profiteering activity, as specified, and requires the prosecution to file a petition for forfeiture in conjunction with certain criminal charges. Under existing law, criminal profiteering activity is defined to include specified crimes, including forgery and offenses relating to counterfeit of a registered mark. Existing law also defines organized crime for the purposes of these provisions as including, among other things, specified crimes that are of a conspiratorial nature and are either of an organized nature and seek to supply illegal goods and services or crimes that, through planning and coordination of individual efforts, seek to conduct specified illegal activities.

This bill would include within the definition of criminal profiteering activity offenses relating to piracy, and insurance fraud, as specified. The bill would also broaden the definition of organized crime to include pimping and pandering, counterfeiting of a registered mark, piracy of a recording or audiovisual work, embezzlement, securities fraud, grand theft, money laundering, and forgery. By increasing the burdens on local prosecuting agencies, this bill would impose a state-mandated local program.

Existing law, the Sales and Use Tax Law, imposes a tax on retailers measured by the gross receipts from the sale of tangible personal property sold at retail in this state, or on the storage, use, or other consumption in this state of tangible personal property purchased from any retailer for storage, use, or other consumption in this state. Existing law provides that a retail sale or sale at retail includes any sale by a convicted seller, as defined, of tangible personal property with a counterfeit mark on, or in connection with, that sale, regardless of whether the sale is for resale in the regular course of business. Existing law provides that storage or use includes a purchase by a convicted purchaser, as defined, of tangible personal property with a counterfeit mark on, or in connection with, that purchase, regardless of whether the purchase is for resale in the regular course of business.

Under this bill, a retail sale or sale at retail additionally would include any sale by a convicted seller of tangible personal property with a counterfeit label or an illicit label, as specified. The bill similarly would provide that storage and use additionally would include a purchase by a convicted purchaser of tangible personal property with a counterfeit label or an illicit label, as specified.

The Bradley-Burns Uniform Local Sales and Use Tax Law authorizes counties and cities to impose local sales and use taxes in conformity with the Sales and Use Tax Law, and existing law authorizes districts, as specified, to impose transactions and use taxes in accordance with the Transactions and Use Tax Law, which generally conforms to the Sales and Use Tax Law. Amendments to state sales and use taxes are incorporated into these laws.

The amendments made by this bill would be incorporated into these laws.

This bill would include a change in state statute that would result in a taxpayer paying a higher tax within the meaning of Section 3 of Article XIIIA of the California Constitution, and thus would require for passage the approval of ²/₃ of the membership of each house of the Legislature.

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, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to these statutory provisions.

Existing law, the California Control of Profits of Organized Crime Act, provides the procedure for the forfeiture of property and proceeds acquired through a pattern of criminal profiteering activity, as specified, and requires the prosecution to file a petition for forfeiture in conjunction with certain criminal charges. Under existing law, criminal profiteering activity is defined to include specified crimes, including forgery and offenses relating to counterfeit of a registered mark. Existing law also defines organized crime for the purposes of these provisions as including, among other things, specified crimes that are of a conspiratorial nature and are either of an organized nature and seek to supply illegal goods and services or crimes that, through planning and coordination of individual efforts, seek to conduct specified illegal activities.

This bill would include within the definition of criminal profiteering activity offenses relating to piracy, and insurance fraud, as specified. The bill would also broaden the definition of organized crime to include pimping and pandering, counterfeiting of a registered mark, piracy of a recording or audiovisual work, embezzlement, securities fraud, grand theft, money laundering, and forgery. By increasing the burdens on local prosecuting agencies, this bill would impose a state-mandated local program.

Existing law, the Sales and Use Tax Law, imposes a tax on retailers measured by the gross receipts from the sale of tangible personal property sold at retail in this state, or on the storage, use, or other consumption in this state of tangible personal property purchased from any retailer for storage, use, or other consumption in this state. Existing law provides that a retail sale or sale at retail includes any sale by a convicted seller, as defined, of tangible personal property with a counterfeit mark on, or in connection with, that sale, regardless of whether the sale is for resale in the regular course of business. Existing law provides that storage or use includes a purchase by a convicted purchaser, as defined, of tangible personal property with a counterfeit mark on, or in connection with, that purchase, regardless of whether the purchase is for resale in the regular course of business.

Under this bill, a retail sale or sale at retail additionally would include any sale by a convicted seller of tangible personal property with a counterfeit label or an illicit label, as specified. The bill similarly would provide that storage and use additionally would include a purchase by a convicted purchaser of tangible personal property with a counterfeit label or an illicit label, as specified.

The Bradley-Burns Uniform Local Sales and Use Tax Law authorizes counties and cities to impose local sales and use taxes in conformity with the Sales and Use Tax Law, and existing law authorizes districts, as specified, to impose transactions and use taxes in accordance with the Transactions and Use Tax Law, which generally conforms to the Sales and Use Tax Law. Amendments to state sales and use taxes are incorporated into these laws.

The amendments made by this bill would be incorporated into these laws.

This bill would include a change in state statute that would result in a taxpayer paying a higher tax within the meaning of Section 3 of Article XIIIA of the California Constitution, and thus would require for passage the approval of ²/₃ of the membership of each house of the Legislature.

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, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to these statutory provisions.

Existing law, the California Control of Profits of Organized Crime Act, provides the procedure for the forfeiture of property and proceeds acquired through a pattern of criminal profiteering activity, as specified, and requires the prosecution to file a petition for forfeiture in conjunction with certain criminal charges. Under existing law, criminal profiteering activity is defined to include specified crimes, including forgery and offenses relating to counterfeit of a registered mark. Existing law also defines organized crime for the purposes of these provisions as including, among other things, specified crimes that are of a conspiratorial nature and are either of an organized nature and seek to supply illegal goods and services or crimes that, through planning and coordination of individual efforts, seek to conduct specified illegal activities.

This bill would include within the definition of criminal profiteering activity offenses relating to piracy, and insurance fraud, as specified. The bill would also broaden the definition of organized crime to include pimping and pandering, counterfeiting of a registered mark, piracy of a recording or audiovisual work, embezzlement, securities fraud, grand theft, money laundering, and forgery. By increasing the burdens on local prosecuting agencies, this bill would impose a state-mandated local program.

Existing law, the Sales and Use Tax Law, imposes a tax on retailers measured by the gross receipts from the sale of tangible personal property sold at retail in this state, or on the storage, use, or other consumption in this state of tangible personal property purchased from any retailer for storage, use, or other consumption in this state. Existing law provides that a retail sale or sale at retail includes any sale by a convicted seller, as defined, of tangible personal property with a counterfeit mark on, or in connection with, that sale, regardless of whether the sale is for resale in the regular course of business. Existing law provides that storage or use includes a purchase by a convicted purchaser, as defined, of tangible personal property with a counterfeit mark on, or in connection with, that purchase, regardless of whether the purchase is for resale in the regular course of business.

Under this bill, a retail sale or sale at retail additionally would include any sale by a convicted seller of tangible personal property with a counterfeit label or an illicit label, as specified. The bill similarly would provide that storage and use additionally would include a purchase by a convicted purchaser of tangible personal property with a counterfeit label or an illicit label, as specified.

The Bradley-Burns Uniform Local Sales and Use Tax Law authorizes counties and cities to impose local sales and use taxes in conformity with the Sales and Use Tax Law, and existing law authorizes districts, as specified, to impose transactions and use taxes in accordance with the Transactions and Use Tax Law, which generally conforms to the Sales and Use Tax Law. Amendments to state sales and use taxes are incorporated into these laws.

The amendments made by this bill would be incorporated into these laws.

This bill would include a change in state statute that would result in a taxpayer paying a higher tax within the meaning of Section 3 of Article XIIIA of the California Constitution, and thus would require for passage the approval of ²/₃ of the membership of each house of the Legislature.

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, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to these statutory provisions.

Existing law, the California Control of Profits of Organized Crime Act, provides the procedure for the forfeiture of property and proceeds acquired through a pattern of criminal profiteering activity, as specified, and requires the prosecution to file a petition for forfeiture in conjunction with certain criminal charges. Under existing law, criminal profiteering activity is defined to include specified crimes, including forgery and offenses relating to counterfeit of a registered mark. Existing law also defines organized crime for the purposes of these provisions as including, among other things, specified crimes that are of a conspiratorial nature and are organized, either of an organized nature and that seek to supply illegal goods and services or to conduct illegal activities. crimes that, through planning and coordination of individual efforts, seek to conduct specified illegal activities.

This bill would include within the definition of criminal profiteering activity offenses relating to piracy, and insurance fraud, and tax fraud, as specified. The bill would also broaden the definition of organized crime to include pimping and pandering, counterfeiting of a registered mark, piracy of a recording or audiovisual work, embezzlement, securities fraud, tax fraud, grand theft, money laundering, and forgery. By increasing the burdens on local prosecuting agencies, this bill would impose a state-mandated local program.

Existing law, the Sales and Use Tax Law, imposes a tax on retailers measured by the gross receipts from the sale of tangible personal property sold at retail in this state, or on the storage, use, or other consumption in this state of tangible personal property purchased from any retailer for storage, use, or other consumption in this state. Existing law provides that a retail sale or sale at retail includes any sale by a convicted seller, as defined, of tangible personal property with a counterfeit mark on, or in connection with, that sale, regardless of whether the sale is for resale in the regular course of business. Existing law provides that storage or use includes a purchase by a convicted purchaser, as defined, of tangible personal property with a counterfeit mark on, or in connection with, that purchase, regardless of whether the purchase is for resale in the regular course of business.

Under this bill, a retail sale or sale at retail additionally would include any sale by a convicted seller of tangible personal property with a counterfeit label or an illicit label, as specified. The bill similarly would provide that storage and use additionally would include a purchase by a convicted purchaser of tangible personal property with a counterfeit label or an illicit label, as specified.

The Bradley-Burns Uniform Local Sales and Use Tax Law authorizes counties and cities to impose local sales and use taxes in conformity with the Sales and Use Tax Law, and existing law authorizes districts, as specified, to impose transactions and use taxes in accordance with the Transactions and Use Tax Law, which generally conforms to the Sales and Use Tax Law. Amendments to state sales and use taxes are incorporated into these laws.

The amendments made by this bill would be incorporated into these laws.

This bill would include a change in state statute that would result in a taxpayer paying a higher tax within the meaning of Section 3 of Article XIIIA of the California Constitution, and thus would require for passage the approval of ²/₃ of the membership of each house of the Legislature.

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, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to these statutory provisions.

Existing law, the California Control of Profits of Organized Crime Act, provides the procedure for the forfeiture of property and proceeds acquired through a pattern of criminal profiteering activity, as specified, and requires the prosecution to file a petition for forfeiture in conjunction with certain criminal charges. Under existing law, criminal profiteering activity is defined to include specified crimes, including forgery and offenses relating to counterfeit of a registered mark. Existing law also defines organized crime for the purposes of these provisions. provisions as including, among other things, specified crimes that are of a conspiratorial nature and are organized, and that seek to supply illegal goods and services or to conduct illegal activities.

This bill would include within the definition of criminal profiteering activity offenses relating to piracy, insurance fraud, and tax fraud, as specified. By expanding the list of offenses that may subject a person to prosecution for criminal profiteering activity, this bill would impose a state-mandated local program. The bill would also broaden the definition of organized crime to include any crime that is of a conspiratorial or organized nature, or that involves the planning and coordination of individual efforts, and seeks to supply illegal goods and services, or conduct illegal activities that involve fraud or deceit for monetary gain in any way. pimping and pandering, counterfeiting of a registered mark, piracy of a recording or audiovisual work, embezzlement, securities fraud, tax fraud, grand theft, money laundering, and forgery. By increasing the burdens on local prosecuting agencies, this bill would impose a state-mandated local program.

Existing law, the Sales and Use Tax Law, imposes a tax on retailers measured by the gross receipts from the sale of tangible personal property sold at retail in this state, or on the storage, use, or other consumption in this state of tangible personal property purchased from any retailer for storage, use, or other consumption in this state. Existing law provides that a retail sale or sale at retail includes any sale by a convicted seller, as defined, of tangible personal property with a counterfeit mark on, or in connection with, that sale, regardless of whether the sale is for resale in the regular course of business. Existing law provides that storage or use includes a purchase by a convicted purchaser, as defined, of tangible personal property with a counterfeit mark on, or in connection with, that purchase, regardless of whether the purchase is for resale in the regular course of business.

Under this bill, a retail sale or sale at retail additionally would include any sale by a convicted seller of tangible personal property with a counterfeit label or an illicit label, as specified. The bill similarly would provide that storage and use additionally would include a purchase by a convicted purchaser of tangible personal property with a counterfeit label or an illicit label, as specified.

The Bradley-Burns Uniform Local Sales and Use Tax Law authorizes counties and cities to impose local sales and use taxes in conformity with the Sales and Use Tax Law, and existing law authorizes districts, as specified, to impose transactions and use taxes in accordance with the Transactions and Use Tax Law, which generally conforms to the Sales and Use Tax Law. Amendments to state sales and use taxes are incorporated into these laws.

The amendments made by this bill would be incorporated into these laws.

This bill would include a change in state statute that would result in a taxpayer paying a higher tax within the meaning of Section 3 of Article XIIIA of the California Constitution, and thus would require for passage the approval of ²/₃ of the membership of each house of the Legislature.

Existing law, the California Control of Profits of Organized Crime Act, provides the procedure for the forfeiture of property and proceeds acquired through a pattern of criminal profiteering activity, as specified, and requires the prosecution to file a petition for forfeiture in conjunction with certain criminal charges. Under existing law, criminal profiteering activity is defined to include specified crimes, including forgery and offenses relating to counterfeit of a registered mark. Existing law also defines organized crime for the purposes of these provisions.

This bill would include within the definition of criminal profiteering activity offenses relating to piracy, insurance fraud, and tax fraud, as specified. By expanding the list of offenses that may subject a person to prosecution for criminal profiteering activity, this bill would impose a state-mandated local program. The bill would also broaden the definition of organized crime to include any crime that is of a conspiratorial nature and that is achieved through or organized nature, or that involves the planning and coordination of individual efforts. efforts, and seeks to supply illegal goods and services, or conduct illegal activities that involve fraud or deceit for monetary gain in any way.

Existing law, the Sales and Use Tax Law, imposes a tax on retailers measured by the gross receipts from the sale of tangible personal property sold at retail in this state, or on the storage, use, or other consumption in this state of tangible personal property purchased from any retailer for storage, use, or other consumption in this state. Existing law provides that a retail sale or sale at retail includes any sale by a convicted seller, as defined, of tangible personal property with a counterfeit mark on, or in connection with, that sale, regardless of whether the sale is for resale in the regular course of business. Existing law provides that storage or use includes a purchase by a convicted purchaser, as defined, of tangible personal property with a counterfeit mark on, or in connection with, that purchase, regardless of whether the purchase is for resale in the regular course of business.

Under this bill, a retail sale or sale at retail additionally would include any sale by a convicted seller of tangible personal property with a counterfeit label or an illicit label, as specified. The bill similarly would provide that storage and use additionally would include a purchase by a convicted purchaser of tangible personal property with a counterfeit label or an illicit label, as specified.

The Bradley-Burns Uniform Local Sales and Use Tax Law authorizes counties and cities to impose local sales and use taxes in conformity with the Sales and Use Tax Law, and existing law authorizes districts, as specified, to impose transactions and use taxes in accordance with the Transactions and Use Tax Law, which generally conforms to the Sales and Use Tax Law. Amendments to state sales and use taxes are incorporated into these laws.

The amendments made by this bill would be incorporated into these laws.

This bill would include a change in state statute that would result in a taxpayer paying a higher tax within the meaning of Section 3 of Article XIIIA of the California Constitution, and thus would require for passage the approval of ²/₃ of the membership of each house of the Legislature.

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.

Existing law, the California Control of Profits of Organized Crime Act, provides the procedure for the forfeiture of property and proceeds acquired through a pattern of criminal profiteering activity, as specified, and requires the prosecution to file a petition for forfeiture in conjunction with certain criminal charges. Under existing law, criminal profiteering activity is defined to include specified crimes, including forgery and offenses relating to counterfeit of a registered mark. Existing law also defines organized crime for the purposes of these provisions.

This bill would include within the definition of criminal profiteering activity offenses relating to piracy, insurance fraud, and tax fraud, as specified. By expanding the list of offenses that may subject a person to prosecution for criminal profiteering activity, this bill would impose a state-mandated local program. The bill would also broaden the definition of organized crime to include any crime that is of a conspiratorial nature and that is achieved through planning and coordination of individual efforts.

Existing law provides for the distribution of the money forfeited and the proceeds from the sale of property forfeited for conviction in connection with a pattern of criminal profiteering activity.

This bill would, in any case involving a felony violation of a specified offense relating to piracy, insurance fraud, or tax fraud, require the proceeds to be distributed, at the discretion of the court, in a specified priority.

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.

Existing law, the California Control of Profits of Organized Crime Act, provides the procedure for the forfeiture of property and proceeds acquired through a pattern of criminal profiteering activity, as specified, and requires the prosecution to file a petition for forfeiture in conjunction with certain criminal charges. Under existing law, criminal profiteering activity is defined to include specified crimes, including forgery and offenses relating to counterfeit of a registered mark. Existing law also defines organized crime for the purposes of these provisions.

This bill would include within the definition of criminal profiteering activity offenses relating to piracy, insurance fraud, and tax fraud, as specified. By expanding the list of offenses that may subject a person to prosecution for criminal profiteering activity, this bill would impose a state-mandated local program. The bill would also broaden the definition of organized crime to include any crime that is of a conspiratorial nature and that is achieved through planning and coordination of individual efforts.

Existing law provides for the distribution of the money forfeited and the proceeds from the sale of property forfeited for conviction in connection with a pattern of criminal profiteering activity.

This bill would, in any case involving a felony violation of a specified offense relating to piracy, insurance fraud, or tax fraud, require the proceeds to be distributed, at the discretion of the court, in a specified priority.

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.

CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 160

Author:(Dababneh)

As Amended Ver:June 16, 2015

2/3 vote

Original Committee Reference: PUB. S.

SUMMARY: Expands the list of crimes that allow for forfeiture of assets and prosecution of criminal profiteering and broadens the definition of criminal profiteering by broadening the organized crime element to include other specified offenses.

The Senate amendments make technical, non-substantive changes to this bill.

EXISTING LAW:

1. Establishes the "California Control Profits of Organized Crime Act."

2. Declares that the Legislature finds and declares that an effective means of punishing and deterring criminal activities of organized crime is through the forfeiture of profits acquired and accumulated as a result of such criminal activities. It is the intent of the Legislature that the "California Control of Profits of Organized Crime Act" be used by prosecutors to punish and deter only such activities.

3. Defines "criminal profiteering activity" as any act committed or attempted or any threat made for financial gain or advantage, which act or threat may be charged as a crime under any of the following offenses: arson, bribery, child pornography or exploitation, felonious assault, embezzlement, extortion, forgery, gambling, kidnapping, mayhem, murder, pimping and pandering, receiving stolen property, robbery, solicitation of crimes, grand theft, trafficking in controlled substances, violation of the laws governing corporate securities, specified crimes involving obscenity, presentation of a false or fraudulent claim, false or fraudulent activities, schemes, or artifices, money laundering, offenses relating to the counterfeit of a registered mark, offenses relating to the unauthorized access to computers, computer systems, and computer data, conspiracy to commit any of the crimes listed above, offenses committed on behalf of a criminal street gang, offenses related to fraud or theft against the state's beverage container recycling program, human trafficking, any crime in which the perpetrator induces, encourages, or persuades a person under 18 years of age to engage in a commercial sex act, any crime in which the perpetrator, through force, fear, coercion, deceit, violence, duress, menace, or threat of unlawful injury to the victim or to another person, causes a person under 18 years of age to engage in a commercial sex act, theft of personal identifying information, offenses involving the theft of a motor vehicle, abduction or procurement by fraudulent inducement for prostitution.

4. Defines "pattern of criminal profiteering activity" means engaging in at least two incidents of criminal profiteering, as defined by this chapter, that meet the following requirements:

   1. Have the same or a similar purpose, result, principals, victims, or methods of commission, or are otherwise interrelated by distinguishing characteristics;

   2. Are not isolated events; and/or

   3. Were committed as a criminal activity of organized crime.

5. Defines "organized crime" as a crime that is of a conspiratorial nature and that is either of an organized nature and seeks to supply illegal goods and services such as narcotics, prostitution, loan-sharking, gambling, and pornography, or that, through planning and coordination of individual efforts, seeks to conduct the illegal activities of arson for profit, hijacking, insurance fraud, smuggling, operating vehicle theft rings, fraud against the beverage container recycling program, or systematically encumbering the assets of a business for the purpose of defrauding creditors. "Organized crime" also means crime committed by a criminal street gang, as defined. "Organized crime" also means false or fraudulent activities, schemes, or artifices, as defined, and the theft of personal identifying information, as defined.

AS PASSED BY THE ASSEMBLY, this bill:

1. Expanded the list of offenses which can serve as a basis for a criminal profiteering action to include piracy and insurance fraud.

2. Expanded provisions from the "organized crime" element as it pertains to criminal profiteering by the provisions that require that the nature of the conspiratorial action be of an organized nature to include such examples as:

   1. Pimping and pandering;

   2. Counterfeiting of any registered trademark;

   3. Illegal piracy of recordings or audiovisual works;

   4. Embezzlement;

   5. Securities fraud;

   6. State tax fraud;

   7. Insurance fraud;

   8. Grand theft;

   9. Money laundering; and

   10. Forgery.

FISCAL EFFECT: According to the Senate Appropriations Committee, pursuant to Senate Rule 28.8, negligible state costs.

COMMENTS: According to the author, "Criminals should not profit from their crimes. Unfortunately, California's asset forfeiture laws for non-drug related crimes, like financial crimes and other white collar offenses, are so poorly drafted that they are almost unusable by District Attorneys and the Attorney General's office. As a result, white collar victims who sometimes have lost everything due to a defendant's fraud, often cannot collect restitution to make them whole. Adding more examples of crimes to the definition of "organized crime" will ensure that prosecutors are able to seize unlawfully obtained assets.

"Equally problematic, underground economy crimes like tax evasion that drain public resources from our schools, health services and law enforcement, are not even included among the list of crimes in which asset forfeiture is available. As found by the Little Hoover Commission, after an investigation of over a year, in the current climate, 'Crime Actually Does Pay – people participate in the underground economy because the rewards outweigh the risk.' (Little Hoover Commission Report # 226, p. 30.) This bill fixes the internal inconsistencies in the language of the state's asset forfeiture laws, and adds certain underground economy crimes to the list of offenses that can trigger asset forfeiture of criminal profits. This bill is to make it so that crime no longer pays in California."

Analysis Prepared by: Gabriel Caswell / PUB. S. / (916) 319-3744 FN: 0001417

 THIRD READING  

Bill No: AB 160

Author: Dababneh (D), et al.

Amended: 6/16/15 in Senate

Vote: 27

SENATE PUBLIC SAFETY COMMITTEE: 7-0, 6/30/15

AYES: Hancock, Anderson, Glazer, Leno, Liu, Monning, Stone

SENATE GOVERNANCE & FIN. COMMITTEE: 6-0, 7/15/15

AYES: Hertzberg, Beall, Hernandez, Lara, Moorlach, Pavley

NO VOTE RECORDED: Nguyen

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

ASSEMBLY FLOOR: 77-0, 5/28/15 - See last page for vote

SUBJECT: Criminal profiteering: counterfeit labels: sales and use taxes

SOURCE: Author

DIGEST: This bill 1) adds piracy of musical or audiovisual works, and unemployment insurance fraud to the list of crimes for which criminal asset forfeiture is authorized; 2) expands the definition of "organized crime" for purposes of criminal asset forfeiture to include pimping and pandering, loan-sharking, trademark counterfeiting, the piracy of a recording or audiovisual work, embezzlement, securities fraud, unemployment insurance fraud, grand theft, money laundering, and forgery; 3) defines a “retail sale” or “sale at retail” to include any sale by a convicted seller of tangible personal property with a counterfeit label or an illicit label; 4) provides that “storage” and “use” include a purchase by a convicted purchaser of tangible personal property with a counterfeit label or an illicit label; and 5) defines “counterfeit label” and “illicit label” as those terms are defined in federal law - a label that appears to be genuine but is not, and a genuine label that a person uses without authorization respectively.

ANALYSIS:

Existing law:

1) Includes the criminal profiteering asset forfeiture law, which applies where the defendant is convicted of a specified offense and the defendant has engaged in a pattern of criminal profiteering activity, as specified. (Pen. Code § 186.3.) The following assets or property are subject to forfeiture:

a) Any property interest whether tangible or intangible, acquired through a pattern of criminal profiteering activity.

b) All proceeds of a pattern of criminal profiteering activity, which property shall include all things of value that may have been received in exchange for the proceeds immediately derived from the pattern of criminal profiteering activity.

2) States that forfeited cash and proceeds of the sale of forfeited property shall be distributed as follows:

a) To the bona fide or innocent purchaser, conditional sales vendor, or holder of a valid lien, mortgage, or security interest, up to the amount of his or her interest in the property or proceeds, as specified.

b) To the Department of General Services or local governmental entity for all expenditures incurred in connection with the sale of the forfeited property.

c) To the State General Fund or the general fund of the local governmental entity, whichever prosecutes. (Pen. Code § 186.8), except in the child pornography or recycling fraud cases.

d) In a case of fraud involving the state recycling program, to a special fund designated in the Public Resources Code.

e) In the case of child pornography crimes, to the county children’s trust fund or State Children’s Trust Fund.

f) In a case involving human trafficking of minors for purposes of prostitution or lewd conduct, or a case of procurement of a minor, to the Victim-Witness Assistance Fund for child sexual exploitation and abuse counseling and prevention programs. Fifty percent of the funds shall be granted to community-based organizations that serve minor victims of human trafficking.

3) States that any person who willfully manufactures, intentionally sells, or knowingly possesses for sale any counterfeit of a mark registered with the California Secretary of State or registered on the United States Patent and Trademark Office shall be punishable as follows:

a) If the offense involves less than 1,000 of the articles with a total retail value less than the standard for grand theft (over $400 - $487), the defendant is guilty of a misdemeanor, punishable by a fine of not more than $5,000, imprisonment in a county jail for up to one year, or by both. If the defendant is a corporation, by a fine of not more than $100,000.

b) When the crime involves 1,000 or more articles, or has a total retail value that meets the standard for grand theft (over $400 - $487), the crime is an alternate felony-misdemeanor, punishable by imprisonment in a county jail for up to one year, or in the state prison for 16 months, two years or three years, by a fine not to exceed $250,000, or both.  If the defendant is a corporation, the maximum fine is $500,000. (Pen. Code § 350, subd. (a).)

4) Provides that a repeated violation of the counterfeit trademark statute is an alternate felony-misdemeanor, punishable by a fine of not more than $50,000, imprisonment in a county jail for not more than one year, or in the state prison for 16 months, or two or three years, or both. If the defendant is a corporation, the maximum fine is $200,000.  (Pen. Code § 350, subd. (b).)

5) Provides that where a defendant is convicted of a trademark counterfeiting, the court shall order the forfeiture and destruction of all of counterfeit marks and all counterfeit items. The court, with specified exceptions for community property vehicles, shall also order forfeiture and destruction or other disposition of all means of making the marks, and all other devices for making or transporting the marks used in connection with the violation.  

6) Describes "fair use" of a trademark, which is not subject to prosecution or a civil action, as any of the following:

a) Advertising or promotion that permits consumers to compare goods or services;

b) Identifying and parodying, criticizing, or commenting upon the famous mark owner or the goods or services of the famous mark owner; noncommercial use of the mark; and

c) All forms of news reporting and news commentary. (Bus. & Prof. Code § 14247.)

7) Provides, in federal statutes, that it is a crime to "traffic" or "attempt to traffic" in counterfeit goods. The crime is punishable by a fine of up to $2,000,000, imprisonment for up to 10 years, or both. The maximum fine for a corporation or an entity other than an individual is $5,000,000. Repeated convictions are punishable by imprisonment for up to 20 years, a fine of up to $5,000,000, or both. Where the convicted defendant of repeated violations is other than an individual the maximum fine is $15,000,000. (18 U.S.C. § 2320.)

8) Provides the following property is subject to forfeiture under federal law following a defendant's conviction for trafficking in counterfeit goods: the proceeds of the crime; any of the defendant's property used or intended to be used in the crime; any article bearing a counterfeit mark. (18 U.S.C. § 2320 (b).)

This bill:

1) Expands the list of offenses that can serve as a basis for criminal profiteering asset forfeiture - employed against organized crime - to include piracy of audio or audiovisual works and unemployment insurance fraud.

2) Expands provisions from the "organized crime" element as it pertains to criminal profiteering by the provisions that require that the nature of the conspiratorial action be of an organized nature to include such examples as:

a) pimping and pandering;

b) counterfeiting of any registered trademark;

c) illegal piracy of recordings or audiovisual works;

d) embezzlement;

e) securities fraud;

f) state tax fraud;

g) unemployment insurance fraud;

h) grand theft;

i) money laundering; and

j) forgery.

3. Adds, to the definition of a "retail sale" or "sale at retail," the sale of tangible personal property (TPP) with a counterfeit or illicit label regardless of whether the sale is for resale in the regular course of business.

3. Adds, to the definition of "storage" or "use," a purchase by a convicted purchaser of TPP in connection with a counterfeit label or illicit label, regardless of whether the purchase is for resale in the regular course of business.

3. Defines "counterfeit label" as having the same meaning as U.S.C., Title 18, Section 2318 - a label that appears to be genuine, but is not.

3. Defines "illicit label" as having the same meaning as U.S.C., Title 18, Section 2318 - a genuine label that is used without authorization.

Background

In 1982, the California Legislature passed the California Control of Profits of Organized Crime Act, authorizing forfeiture of profits acquired through criminal profiteering by organized crime. (Pen. Code §§ 186 and 186.1.) Criminal profiteering asset forfeiture is a criminal proceeding held in conjunction with the trial of the underlying criminal offense.

Criminal asset forfeiture is allowed upon conviction of more than 30 crimes, including extortion, pimping and pandering, robbery, grand theft, trafficking in controlled substances, money laundering, and offenses related to counterfeiting. Proceeds can be forfeited if the assets or profits of organized criminal entities were obtained through a “pattern of criminal profiteering activity.” This bill adds offenses related to music and video piracy and unemployment insurance fraud to the list of "criminal profiteering activity." This bill also matches the definition of "organized crime" - to the list of specific crimes for which criminal asset forfeiture is authorized. That is, this bill essentially what members of criminal organizations do match what how criminal organizations are defined.

The underground economy is thriving in California. The Board of Equalization has estimated that $8 billion in corporate, personal, and sales and use tax revenues go uncollected in each year, placing a burden on state and local governments and legitimate businesses. In 1993, the Joint Enforcement Strike Force was created to combat the underground economy by the sharing of information, coordinating enforcement efforts, and developing methods for using enforcement resources. Additionally, the Labor Task Force has also been launched to help ensure that employees receive proper payments and that California receives all employment taxes and fees owed

AB 2681 (Dababneh), Chapter 477, Statutes of 2014, expanded the definition of "retail sale" or "sale at retail" to include any sale by a convicted seller of TPP with a counterfeit mark regardless of whether the sale is for resale in the regular course of business. This bill again expands the definition to further include "counterfeit label" and "illicit label."

However, it is not clear that imposing a tax on counterfeit items would discourage criminals from selling counterfeit items. A seller of counterfeit goods makes a profit if sales revenues exceed costs. However, unlike legitimate businesses, sellers of counterfeit goods must additionally take into account the potential costs of government prosecution and civil lawsuits from genuine producers. These considerations may largely control a seller's decision to carry counterfeit items, especially if the government has improved enforcement or increased sentences. The more active the government becomes in enforcing laws, the more likely sellers will choose not to carry counterfeit products. Requiring payment of sales tax would appear to be a relatively minor consideration for sellers of counterfeit goods. Imposition of sales tax would essentially be an additional penalty upon conviction.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: Yes

SUPPORT: (Verified 8/18/15)

American Federation of State, County and Municipal Employees

California Chamber of Commerce

California College and University Police Chiefs

California District Attorneys Association

California Police Chiefs Association

California Retailers Association

California State Sheriffs’ Association

California Statewide Law Enforcement Coalition

California State Lodge, Fraternal Order of Police

Independent Insurance Agents and Brokers of California

Liberty Mutual Insurance

Long Beach Police Officers Association

Los Angeles Area Chamber of Commerce

Los Angeles County Professional Peace Officers Association

Motion Picture Association of America, Inc

Sacramento County Deputy Sheriffs’ Association

Valley Industry and Commerce Association

OPPOSITION: (Verified 8/18/15)

None received

ASSEMBLY FLOOR: 77-0, 5/28/15

AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gray, Hadley, Harper, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Atkins

NO VOTE RECORDED: Bloom, Gordon, Grove

Prepared by: Jerome McGuire / PUB. S. /

8/19/15 20:23:20

**** END ****

SENATE COMMITTEE ON GOVERNANCE AND FINANCE

Senator Robert M. Hertzberg, Chair

2015 - 2016 Regular

Criminal profiteering: counterfeit labels: sales and use taxes

Applies the sales and use tax to goods with counterfeit or illicit labels held for resale; extends authority for asset forfeiture to specified crimes.

Background and Existing Law

I. Sales and Use Tax. State law imposes the sales tax on every retailer engaged in business in this state that sells tangible personal property, and requires them to collect the appropriate tax from the purchase and remit the amount to the Board of Equalization (BOE). Sales tax applies whenever a retail sale is made, which is basically any sale other than one for resale in the regular course of business. Unless the person pays the sales tax to the retailer, he or she is liable for the use tax, which is imposed on any person consuming tangible personal property in the state. The use tax rate is the same rate as the sales tax rate, and must be remitted on or before the last day of the month following the quarterly period in which the person made the purchase. The Legislature added the use tax in 1935 in response to complaints from in-state retailers that California residents would evade the sales tax it enacted in 1933 by purchasing property out-of-state, but use it here.

Federal and state law make it a criminal act to willfully manufacture, intentionally sell, or knowingly possess for sale any counterfeit of a mark registered with the Secretary of State or the Principal Register of the United States Patent and Trademark Office. Federal law also makes it a criminal act to traffic in:

• Goods and services knowingly using a counterfeit mark in connection with the goods and services,

• Specified products knowing that a counterfeit mark has been applied to it, the use of which is likely to cause confusion, a mistake, or deceive someone,

• Counterfeit military goods or service, knowing that the use, malfunction, or failure of which is likely to cause serious bodily injury or death, disclosure of classified information, impairment of or significant harm to combat operations, or to national security or a member of the armed forces, or

• Counterfeit drugs.

Last year, the Legislature provided that for purposes of the sales and use tax. a sale includes any sale of tangible personal property with a counterfeit mark by an individual convicted of selling counterfeit merchandise under state or federal law, regardless of whether it’s for resale (AB 2681, Dababneh, 2014). The measure essentially applied the sales tax on all the goods sold by individuals on or before the date they were convicted of selling counterfeit goods.

II. Asset Forfeiture. In 1982, the California Legislature passed the California Control of Profits of Organized Crime Act to punish the activities of organized crime through the forfeiture of profits acquired and accumulated as a result of engaging in a pattern of criminal profiteering activity. To have a pattern of criminal profiteering activity, a person must engage in at least two incidents with (1) the same or similar purposes, victims, principals, results, or methods, or (2) were committed as a criminal activity of organized crime. State law defines organized crime as conspiratorial and which is either organized and seeks to provide illegal goods or a specified list of services, or seeks to conduct other services for profit.

Existing law provides that where a defendant is convicted of a trademark counterfeiting, the court shall order the forfeiture and destruction of all of counterfeit marks and all counterfeit items. The court, with specified exceptions for community property vehicles, shall also order forfeiture and destruction or other disposition of all means of making the marks, and all other devices for making or transporting the marks used in connection with the violation.

BOE Chairman Jerome Horton wants to expand AB 2781’s extension of the sales and use tax for goods held for resale that have counterfeit or illicit marks to account for a recent case where an individual was selling items labelled as gold bars.

Proposed law.

I. Sales and Use Tax. Assembly Bill 160 expands AB 2781’s extension of the sales tax to sales of goods with counterfeit marks to also include sales of goods with counterfeit or illicit labels, as defined in the United State Code. The measure also makes a conforming change to the definition of “counterfeit seller.”

II. Criminal Law. Assembly Bill 160 adds offenses related to piracy and insurance fraud onto the list of criminal offenses for which prosecutors can seek asset forfeiture. The measure also expands the definition of “organized crime” to include supplying pimping and pandering, loan-sharking, counterfeiting a registered mark, the piracy of recording or audiovisual work, or conducting embezzlement, securities fraud, insurance fraud, grand theft, money laundering, or forgery for profit.

State Revenue Impact

BOE states that the measure’s asset forfeiture provisions increase revenue by several million dollars annually, while its counterfeiting offense change results in $1.1 million in annual revenue.

Comments

1. Purpose of the bill. According to the author, “Criminals should not profit from their crimes. Unfortunately, California's asset forfeiture laws for non-drug related crimes, like financial crimes and other white collar offenses are so poorly drafted that they are almost unusable by District Attorneys and the Attorney General's office. As a result, white collar victims who sometimes have lost everything due to a defendant's fraud often cannot collect restitution to make them whole. Adding more examples of crimes to the definition of “organized crime” will ensure that prosecutors are able to seize unlawfully obtained assets. Equally problematic, underground economy crimes like insurance fraud that drain public resources from our schools, health services and law enforcement, are not even included among the list of crimes in which asset forfeiture is available. As found by the Little Hoover Commission, after an investigation of over a year, in the current climate, "Crime Actually Does Pay-- people participate in the underground economy because the rewards outweigh the risk." (Little Hoover Committee Report # 226, p. 30.) This bill fixes the internal inconsistencies in the language of the state's asset forfeiture laws, and adds certain underground economy crimes to the list of offenses that can trigger asset forfeiture of criminal profits. This bill is to make it so that crime no longer pays in California.”

2. Effective? Criminal law applies sanctions to individuals who sell counterfeit merchandise, which deprives honest owners of the economic returns justly due to them for the goods and services they provide. AB 2681 added to existing criminal law deterrents against counterfeiting by applying the sales and use tax to sales of good with counterfeit marks, which AB 160 would expand to counterfeit and illicit labels. As such, the bill only affects people convicted of crimes, who are unlikely to have sufficient income or assets to satisfy the debt, especially after satisfying criminal restitution orders to those that hold the rights to the counterfeited trademarks. As such, AB 160 may only add to the state’s accounts receivables, and not to its revenues. The Committee may wish to consider the tangible effects of applying the sales and use tax to goods with counterfeit or illicit labels goods sold for resale.

3. 2/3. AB 160 increases a tax on any taxpayers for the purpose of Section III of Article XIIIA of the California Constitution. As such, Legislative Counsel has assigned the measure a 2/3 vote key.

4. Incoming! On June 30^th, the Committee on Public Safety approved AB 160 by a vote of 7-0. The Committee on Governance and Finance is hearing the measure as the Committee of second reference.

Assembly Actions

Senate Public Safety 7-0
Assembly Floor 77-0
Assembly Appropriations 15-0
Assembly Revenue and Taxation 9-0
Assembly Public Safety 7-0

Support and Opposition

(7/9/15)

Support: BOE Chair Jerome Horton; American Federation of State, County, and Municipal Employees; California Chamber of Commerce; California College and University Police Chiefs; California Police Chiefs Association; California District Attorneys Association; California State Sheriffs’ Association; California Statewide Law Enforcement Association; Independent Insurance Agents; Liberty Mutual Insurance; Los Angeles Area Chamber of Commerce; Valley Industry and Commerce Association.

Opposition: None received.

-- END --

SENATE COMMITTEE ON PUBLIC SAFETY

Senator Loni Hancock, Chair

2015 - 2016 Regular

Bill No: AB 160 Hearing Date: June 30, 2015

Subject: Criminal Profiteering: Counterfeit Labels: Sales and Use Taxes

HISTORY

Source: Jerome Horton, Chairman of the Board of Equalization

Prior Legislation: AB 2681 (Dababneh) - Ch. 477, Stats. 2014
AB 90 (Swanson) - Ch. 457 Stats. 2011
AB 924 (Emmerson) - Ch. 111, Stats. 2007

AB 988 (Bogh) - Ch. 53, Stats. 2005

SB 968 (Bowen) - Ch. 125, Stats. 2004

AB 1990 (Liu) - Ch. 991, Stats. 2002

AB 662 (Wesson) - 1999, vetoed

Support: Association of Federal State County and Municipal Employees; California Chamber of Commerce; California District Attorneys Association; California College and University Police Chiefs; California Police Chiefs Association; California Retailers Association California State Sheriffs’ Association; California Statewide Law Enforcement Coalition; California State Lodge; Fraternal Order of Police; Independent Insurance Agents and Brokers of California; Liberty Mutual Insurance; Long Beach Police Officers Association; Los Angeles Area Chamber of Commerce; Los Angeles County Professional Peace Officers Association; Motion Picture Association of America, Inc.; Sacramento County Deputy Sheriffs’ Association; Valley Industry and Commerce Association

Opposition: None known

Assembly Floor Vote: 77 - 0

PURPOSE

The purpose of this bill is to 1) add piracy of musical or audiovisual works, and unemployment insurance fraud to the list of crimes for which criminal asset forfeiture is authorized; 2) expand the definition of "organized crime" for purposes of criminal asset forfeiture to include pimping and pandering, loan-sharking, trademark counterfeiting, the piracy of a recording or audiovisual work, embezzlement, securities fraud, unemployment insurance fraud, grand theft, money laundering, and forgery; 3) define a “retail sale” or “sale at retail” to include any sale by a convicted seller of tangible personal property with a counterfeit label or an illicit label; 4) provide that “storage” and “use” include a purchase by a convicted purchaser of tangible personal property with a counterfeit label or an illicit label; and 5) define “counterfeit label” and “illicit label” as those terms are defined in federal law - a label that appears to be genuine but is not, and a genuine label that a person uses without authorization respectively.

Existing law:

Includes the criminal profiteering asset forfeiture law, which applies where the defendant is convicted of a specified offense and the defendant has engaged in a pattern of criminal profiteering activity, as specified. (Pen. Code § 186.3.) The following assets or property are subject to forfeiture:

• Any property interest whether tangible or intangible, acquired through a pattern of criminal profiteering activity.

• All proceeds of a pattern of criminal profiteering activity, which property shall include all things of value that may have been received in exchange for the proceeds immediately derived from the pattern of criminal profiteering activity.

Existing law states that forfeited cash and proceeds of the sale of forfeited property shall be distributed as follows:

• To the bona fide or innocent purchaser, conditional sales vendor, or holder of a valid lien, mortgage, or security interest, up to the amount of his or her interest in the property or proceeds, as specified.

• To the Department of General Services or local governmental entity for all expenditures incurred in connection with the sale of the forfeited property.

• To the State General Fund or the general fund of the local governmental entity, whichever prosecutes. (Pen. Code § 186.8), except in the child pornography or recycling fraud cases.

• In a case of fraud involving the state recycling program, to a special fund designated in the Public Resources Code.

• In the case of child pornography crimes, to the county children’s trust fund or State Children’s Trust Fund.

• In a case involving human trafficking of minors for purposes of prostitution or lewd conduct, or a case of procurement of a minor, to the Victim-Witness Assistance Fund for child sexual exploitation and abuse counseling and prevention programs. Fifty percent of the funds shall be granted to community-based organizations that serve minor victims of human trafficking.

Existing law states that any person who willfully manufactures, intentionally sells, or knowingly possesses for sale any counterfeit of a mark registered with the California Secretary of State or registered on the United States Patent and Trademark Office shall be punishable as follows:

• If the offense involves less than 1,000 of the articles with a total retail value less than the standard for grand theft (over $400 - $487), the defendant is guilty of a misdemeanor, punishable by a fine of not more than $5000, imprisonment in a county jail for up to one year, or by both. If the defendant is a corporation, by a fine of not more than $100,000.

• When the crime involves 1,000 or more articles, or has a total retail value that meets the standard for grand theft (over $400 - $487), the crime is an alternate felony-misdemeanor, punishable by imprisonment in a county jail for up to one year, or in the state prison for 16 months, 2 years or 3 years, by a fine not to exceed $250,000, or both.  If the defendant is a corporation, the maximum fine is $500,000. (Pen. Code § 350, subd. (a).)

Existing law provides that a repeated violation of the counterfeit trademark statute is an alternate felony-misdemeanor, punishable by a fine of not more than $50,000, imprisonment in a county jail for not more than one year, or in the state prison for 16 months, or 2 or 3 years, or both. If the defendant is a corporation, the maximum fine is $200,000.  (Pen. Code § 350, subd. (b).)

Existing law provides that where a defendant is convicted of a trademark counterfeiting, the court shall order the forfeiture and destruction of all of counterfeit marks and all counterfeit items. The court, with specified exceptions for community property vehicles, shall also order forfeiture and destruction or other disposition of all means of making the marks, and all other devices for making or transporting the marks used in connection with the violation.  

Existing law describes "fair use" of a trademark, which is not subject to prosecution or a civil action, as any of the following:

• advertising or promotion that permits consumers to compare goods or services;

• identifying and parodying, criticizing, or commenting upon the famous mark owner or the goods or services of the famous mark owner;

• noncommercial use of the mark; and

• all forms of news reporting and news commentary. (Bus. & Prof. Code § 14247.)

Existing federal law provides that it is a crime to "traffic" or "attempt to traffic" in counterfeit goods. The crime is punishable by a fine of up to $2,000,000, imprisonment for up to 10 years, or both. The maximum fine for a corporation or an entity other than an individual is $5,000,000. Repeated convictions are punishable by imprisonment for up to 20 years, a fine of up to $5,000,000, or both. Where the convicted defendant of repeated violations is other than an individual the maximum fine is $15,000,000. (18 U.S.C. § 2320.)

Existing federal law provides the following property is subject to forfeiture following a defendant's conviction for trafficking in counterfeit goods: the proceeds of the crime; any of the defendant's property used or intended to be used in the crime; any article bearing a counterfeit mark. (18 U.S.C. § 2320 (b).)

This bill:

Expands the list of offenses that can serve as a basis for criminal profiteering asset forfeiture - employed against organized crime - to include piracy of audio or audiovisual works and unemployment insurance fraud.

Expands provisions from the "organized crime" element as it pertains to criminal profiteering by the provisions that require that the nature of the conspiratorial action be of an organized nature to include such examples as:

• pimping and pandering;

• counterfeiting of any registered trademark;

• illegal piracy of recordings or audiovisual works;

• embezzlement;

• securities fraud;

• state tax fraud;

• unemployment insurance fraud;

• grand theft;

• money laundering; and

• forgery.

Adds, to the definition of a "retail sale" or "sale at retail," the sale of tangible personal property (TPP) with a counterfeit or illicit label regardless of whether the sale is for resale in the regular course of business.

Adds, to the definition of "storage" or "use," a purchase by a convicted purchaser of TPP in connection with a counterfeit label or illicit label, regardless of whether the purchase is for resale in the regular course of business.

Defines "counterfeit label" as having the same meaning as United States Code (USC), Title 18, Section 2318 - a label that appears to be genuine, but is not.

Defines "illicit label" as having the same meaning as USC, Title 18, Section 2318 - a genuine label that is used without authorization.

RECEIVERSHIP/OVERCROWDING CRISIS AGGRAVATION

For the past eight years, this Committee has scrutinized legislation referred to its jurisdiction for any potential impact on prison overcrowding. Mindful of the United States Supreme Court ruling and federal court orders relating to the state’s ability to provide a constitutional level of health care to its inmate population and the related issue of prison overcrowding, this Committee has applied its “ROCA” policy as a content-neutral, provisional measure necessary to ensure that the Legislature does not erode progress in reducing prison overcrowding.

On February 10, 2014, the federal court ordered California to reduce its in-state adult institution population to 137.5% of design capacity by February 28, 2016, as follows:

• 143% of design bed capacity by June 30, 2014;

• 141.5% of design bed capacity by February 28, 2015; and,

• 137.5% of design bed capacity by February 28, 2016.

In February of this year the administration reported that as “of February 11, 2015, 112,993 inmates were housed in the State’s 34 adult institutions, which amounts to 136.6% of design bed capacity, and 8,828 inmates were housed in out-of-state facilities. This current population is now below the court-ordered reduction to 137.5% of design bed capacity.”( Defendants’ February 2015 Status Report In Response To February 10, 2014 Order, 2:90-cv-00520 KJM DAD PC, 3-Judge Court, Coleman v. Brown, Plata v. Brown (fn. omitted).

While significant gains have been made in reducing the prison population, the state now must stabilize these advances and demonstrate to the federal court that California has in place the “durable solution” to prison overcrowding “consistently demanded” by the court. (Opinion Re: Order Granting in Part and Denying in Part Defendants’ Request For Extension of December 31, 2013 Deadline, NO. 2:90-cv-0520 LKK DAD (PC), 3-Judge Court, Coleman v. Brown, Plata v. Brown (2-10-14). The Committee’s consideration of bills that may impact the prison population therefore will be informed by the following questions:

• Whether a proposal erodes a measure which has contributed to reducing the prison population;

• Whether a proposal addresses a major area of public safety or criminal activity for which there is no other reasonable, appropriate remedy;

• Whether a proposal addresses a crime which is directly dangerous to the physical safety of others for which there is no other reasonably appropriate sanction;

• Whether a proposal corrects a constitutional problem or legislative drafting error; and

• Whether a proposal proposes penalties which are proportionate, and cannot be achieved through any other reasonably appropriate remedy.

COMMENTS

1. Need for This Bill

According to the author:

The problem with current Penal Code section 186.2 is that it is internally inconsistent. The list of 33 crimes set forth in subd. (a) to which the statute is supposed to apply, does not mesh with the additional requirements found in subd. (d), i.e., that it also be "organized crime." "Organized crime" is defined in such a way in subdivision (d) (by listing 12 other types of illegal activity), that it is hard to match it up with one of the 33 enumerated crimes the statute was intended to address.

Additionally, the list of crimes addressed in Penal Code 186.2 is deficient; it does not take into account all of the crimes that make up the underground economy. Indeed, after over a year of investigation and testimony, the Little Hoover Commission released on March 9, 2015, a report about underground economy crimes (tax evasion, counterfeiting, worker's comp fraud, etc.) and listed as one of its recommendations that "The state should refine and expand its asset seizure laws to improve the collection of victim restitution." (Lit. Hov. Comm. Report, #226, p. x.) The report specifically mentions AB 160 in this regard.

2. The Basics of Criminal Asset Forfeiture

History: In 1982, the California Legislature passed the California Control of Profits of Organized Crime Act. The express purpose of the Act was to punish the activities of organized crime through the forfeiture of profits acquired and accumulated as a result of engaging in a pattern of criminal profiteering activity. All property gained through that activity is subject to forfeiture. (Penal Code §§ 186 and 186.1.)

Procedure: Criminal profiteering asset forfeiture is a criminal proceeding held in conjunction with the trial of the underlying criminal offense. Often, the same jury that heard the criminal charges determines whether the defendant's assets were the ill-gotten gains of criminal profiteering. As a practical matter, the prosecution must assemble its evidence for the forfeiture matter simultaneously with the evidence of the crime.

Proceeds: Under existing law the forfeited proceeds of criminal profiteering are placed in the county general fund with no directions for use. There are limited exceptions. For example, forfeiture in child pornography cases is deposited in the county or State Children's Trust Fund for child abuse and neglect prevention and intervention. (Pen. Code § 186.8; Welf. Inst. Code §§ 18966 and 18969.)

Contrast with Drug Asset Forfeiture: In contrast to criminal asset forfeiture, drug asset forfeiture is a separate civil action. With limited exceptions, a conviction for an underlying drug offense is required. However, the prosecution in drug asset forfeiture can conduct substantial civil discovery to find the defendant's assets. Law enforcement receives 65% of drug forfeiture proceeds. Federal forfeiture law authorizes a federal agency to “adopt” a state seizure and return as much as 80% of the proceeds to the state or local agency. The United States Attorney General has recently limited adoption of state forfeitures. SB 443 (Mitchell) would rewrite the California drug asset forfeiture law. Most notably, SB 443 would prohibit state or local law enforcement agencies from transferring seized property to a federal agency for adoption, require that property seized pursuant to federal law be distributed to state and local law enforcements according to state law formulas, and that convictions be obtained before the agencies could share in federal forfeiture proceeds.

3. Expansion of the Control of Profits of Organized Crime Act - Criminal Asset Forfeiture

It was the intent of the Legislature, when enacting the criminal asset forfeiture law, to punish and deter criminal activities of organized crime through the forfeiture of profits acquired and accumulated as a result of such criminal activities. Criminal asset forfeiture is allowed upon conviction of more than 30 crimes, including extortion, pimping and pandering, robbery, grand theft, trafficking in controlled substance, money laundering, and offenses related to counterfeiting. Proceeds can be forfeited if the proceeds were gained through a pattern of criminal activity and were gained through involvement in organized crime. This bill adds offenses related to music and video piracy and unemployment insurance fraud to the list of "criminal profiteering activity." The bill also matches the definition of "organized crime" - to the list of specific crimes for which criminal asset forfeiture is authorized. That is, the bill essentially what members of criminal organizations do match what how criminal organizations are defined.

4. The Underground Economy

The underground economy is a well-documented problem in the State of California. The Board of Equalization (BOE) has estimated that $8 billion in corporate, personal, and sales and use tax (SUT) revenues go uncollected in California each year, with unreported and underreported economic activity responsible for the vast majority of that total, placing a burden on state and local governments, and legitimate businesses; tackling the problem has not been easy. In 1993, the Joint Enforcement Strike Force was created to combat the underground economy by aiding in the sharing of information, coordinating enforcement efforts, and developing methods to target enforcement resources. Additionally, the Labor Task Force has also been launched in an effort to curb the underground economy. Through its information sharing program, the Labor Task Force attempts to ensure that employees receive proper payments and that California receives all employment taxes and fees owed

5. Sales and Use Tax on Counterfeit Items

AB 2681 (Dababneh), Chapter 477, Statutes of 2014, expanded the definition of "retail sale" or "sale at retail" to include any sale by a convicted seller of TPP with a counterfeit mark regardless of whether the sale is for resale in the regular course of business. This bill again expands the definition to further include "counterfeit label" and "illicit label."

It is unclear if imposing a tax on counterfeit items, regardless of whether the sale is for resale in the regular course of business, would discourage criminals from selling counterfeit items. Like most business models, a seller of counterfeit goods makes a profit if sales revenues exceed costs. However, unlike legitimate businesses, sellers of counterfeit goods must additionally take into account the potential costs of government prosecution and civil lawsuits from genuine producers. These considerations may have a huge impact on a seller's decision to carry counterfeit items, especially if the government has improved enforcement of trademark laws or increased sentences. The more active the government becomes in enforcing laws, the more likely sellers will choose not to carry counterfeit products. The threat of sales tax, on its face, may be seen as one additional tool to deter a person from selling counterfeit items because it increases the costs of doing business. However, the collection of sales tax is secondary to the threat of being caught. Thus, a person selling counterfeit goods would not likely be deterred by the possibility of having to remit sales tax, especially when the imposition of the tax is only imposed after a conviction.

However, there are well-known cases where organized criminals were prosecuted for tax fraud when prosecutors had difficulty proving the crimes from which the organizations derived income that was not reported. The most notable and well-known case is the conviction of Al Capone for tax fraud.¹ Tax fraud charges could also be used in plea bargaining.

-- END –

ASSEMBLY THIRD READING

ATR Bill Id:AB 160

Author:(Dababneh)

As Amended Ver:May 5, 2015

2/3 vote

SUMMARY:

Expands the list of crimes that allow for forfeiture of assets and prosecution of criminal profiteering and broadens the definition of criminal profiteering by broadening the organized crime element to include other specified offenses. Specifically, this bill:

1. Expands the list of offenses which can serve as a basis for a criminal profiteering action to include piracy and insurance fraud.

2. Expands provisions from the "organized crime" element as it pertains to criminal profiteering by the provisions that require that the nature of the conspiratorial action be of an organized nature to include such examples as:

   1. Pimping and pandering;

   2. Counterfeiting of any registered trademark;

   3. Illegal piracy of recordings or audiovisual works;

   4. Embezzlement;

   5. Securities fraud;

   6. State tax fraud;

   7. Insurance fraud;

   8. Grand theft;

   9. Money laundering; and

   10. Forgery.

EXISTING LAW:

1. Establishes the "California Control Profits of Organized Crime Act."

2. Declares that the Legislature finds and declares that an effective means of punishing and deterring criminal activities of organized crime is through the forfeiture of profits acquired and accumulated as a result of such criminal activities. It is the intent of the Legislature that the "California Control of Profits of Organized Crime Act" be used by prosecutors to punish and deter only such activities.

3. Defines "criminal profiteering activity" as any act committed or attempted or any threat made for financial gain or advantage, which act or threat may be charged as a crime under any of the following offenses: arson, bribery, child pornography or exploitation, felonious assault, embezzlement, extortion, forgery, gambling, kidnapping, mayhem, murder, pimping and pandering, receiving stolen property, robbery, solicitation of crimes, grand theft, trafficking in controlled substances, violation of the laws governing corporate securities, specified crimes involving obscenity, presentation of a false or fraudulent claim, false or fraudulent activities, schemes, or artifices, money laundering, offenses relating to the counterfeit of a registered mark, offenses relating to the unauthorized access to computers, computer systems, and computer data, conspiracy to commit any of the crimes listed above, offenses committed on behalf of a criminal street gang, offenses related to fraud or theft against the state's beverage container recycling program, human trafficking, any crime in which the perpetrator induces, encourages, or persuades a person under 18 years of age to engage in a commercial sex act, any crime in which the perpetrator, through force, fear, coercion, deceit, violence, duress, menace, or threat of unlawful injury to the victim or to another person, causes a person under 18 years of age to engage in a commercial sex act, theft of personal identifying information, offenses involving the theft of a motor vehicle, abduction or procurement by fraudulent inducement for prostitution.

4. Defines "pattern of criminal profiteering activity" means engaging in at least two incidents of criminal profiteering, as defined by this chapter, that meet the following requirements:

   1. Have the same or a similar purpose, result, principals, victims, or methods of commission, or are otherwise interrelated by distinguishing characteristics;

   2. Are not isolated events; and/or

   3. Were committed as a criminal activity of organized crime.

5. Defines "organized crime" as a crime that is of a conspiratorial nature and that is either of an organized nature and seeks to supply illegal goods and services such as narcotics, prostitution, loan-sharking, gambling, and pornography, or that, through planning and coordination of individual efforts, seeks to conduct the illegal activities of arson for profit, hijacking, insurance fraud, smuggling, operating vehicle theft rings, fraud against the beverage container recycling program, or systematically encumbering the assets of a business for the purpose of defrauding creditors. "Organized crime" also means crime committed by a criminal street gang, as defined. "Organized crime" also means false or fraudulent activities, schemes, or artifices, as defined, and the theft of personal identifying information, as defined.

FISCAL EFFECT:

According to the Assembly Appropriations Committee:

1. Minor and absorbable costs to state and local law enforcement; minor and absorbable costs to the Board of Equalization (BOE) to administer the tax.

2) Estimated General Fund revenue increase of approximately $1.1 million per year based on California's pro rata share of total seizures of counterfeit label and illicit label goods in the United States and the taxable value of those goods.

COMMENTS:

According to the author, "Criminals should not profit from their crimes. Unfortunately, California's asset forfeiture laws for non-drug related crimes, like financial crimes and other white collar offenses, are so poorly drafted that they are almost unusable by District Attorneys and the Attorney General's office. As a result, white collar victims who sometimes have lost everything due to a defendant's fraud, often cannot collect restitution to make them whole. Adding more examples of crimes to the definition of "organized crime" will ensure that prosecutors are able to seize unlawfully obtained assets.

"Equally problematic, underground economy crimes like tax evasion that drain public resources from our schools, health services and law enforcement, are not even included among the list of crimes in which asset forfeiture is available. As found by the Little Hoover Commission, after an investigation of over a year, in the current climate, 'Crime Actually Does Pay – people participate in the underground economy because the rewards outweigh the risk.' (Little Hoover Commission Report # 226, p. 30.) This bill fixes the internal inconsistencies in the language of the state's asset forfeiture laws, and adds certain underground economy crimes to the list of offenses that can trigger asset forfeiture of criminal profits. This bill is to make it so that crime no longer pays in California."

Analysis Prepared by: Gabriel Caswell / PUB. S. / (916) 319-3744 FN: 0000475

Date of Hearing: May 20, 2015

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Jimmy Gomez, Chair

ABPCA Bill Id:AB 160

Author:(Dababneh) – As Amended Ver:May 5, 2015

Urgency: No State Mandated Local Program: Yes Reimbursable: Yes

SUMMARY:

This bill expands the list of crimes for which forfeiture of assets and prosecution of criminal profiteering may be sought, and expands the tax applicable to certain counterfeit goods. In summary, this bill:

1) Adds piracy and insurance fraud to the list of offenses that may be considered criminal profiteering, and expands the definition of "organized crime" as it relates to criminal profiteering to include pimping and pandering, counterfeiting, piracy, embezzlement, securities fraud, insurance fraud, grand theft, money laundering, and forgery.

2) Adds the sale of counterfeit label or illicit label goods to the definition of "retail sale" or "sale at retail" under the tax code, thereby subjecting wholesale or other non-retail sales and purchases of those counterfeit goods to sales and use tax.

FISCAL EFFECT:

1) Minor and absorbable costs to state and local law enforcement; minor and absorbable costs to the Board of Equalization (BOE) to administer the tax.

2) Estimated GF revenue increase of approximately $1.1 million per year based on California's pro rata share of total seizures of counterfeit label and illicit label goods in the United States and the taxable value of those goods.

COMMENTS:

1) Purpose. According to the author, AB 2681 (Dababneh), Statutes of 2014, granted BOE increased authority to assess taxes on individuals convicted of trafficking in counterfeit goods, and this bill further increases this authority by allowing law enforcement to seize assets acquired directly and immediately from the proceeds of illegal activity including piracy, insurance fraud, and counterfeiting. AB 160 also authorizes BOE to assess taxes on the sale of property containing counterfeit labels and illicit labels.

Supporters, including the California District Attorneys Association, believe California's "little RICO" statute is limited by the comparatively few crimes that can trigger asset forfeiture. Whereas the federal RICO statute lists over 150 crimes that can trigger forfeiture, California's statute list only 33.

2) Criminal Profiteering Asset Forfeiture. Criminal profiteering asset forfeiture is a criminal proceeding held in conjunction with the trial of the underlying criminal offense, during which the court determines whether the defendant's assets were the ill-gotten gains of criminal profiteering. As a practical matter, the prosecution must assemble its evidence for the forfeiture matter simultaneously with the evidence of the crime.

3) Wholesale Sales Tax. Under current law, sales taxes are imposed on the "retail sale" or "sale at retail" of tangible personal property. As a result, retail sales of counterfeit goods and stolen intellectual property in the form of tangible personal property is subject to sales tax to the same extent as the retail sale of legitimate goods. Wholesale possession or transportation of goods for resale is typically not subject to sales tax, though wholesale possession or transportation of counterfeit goods became subject to sales tax under AB 2681 (Dababneh), Statutes of 2014. This bill would subject the wholesale possession or transportation for resale of goods containing counterfeit labels and illicit labels to sales tax.

3) Buyers of Counterfeit Goods. Several academic studies have shown that consumers often buy counterfeit goods because they cannot afford the legitimate products but want the brand or style affinity that comes with those products. In some cases, such brand affinity can serve to increase the underlying value of the brand even though another party profits from the sale of the good. This is particularly true in cases where a consumer buys a counterfeit product with the hope of later "upgrading" that product to the authentic item.

In recent years, the ability of manufacturers to counterfeit products has improved substantially. This may lead certain consumers to mistake the counterfeit for the authentic product. Under this scenario, sellers of counterfeit goods may limit legitimate sales, undercutting the investment and labor of legitimate manufacturers and retailers.

4) Tax on Criminality. Taxes are frequently used to encourage or discourage certain behavior, though it is unusual to subject illegal or criminal activity to taxation. For example, tobacco is subject to high excise taxation in order to discourage its use, but marijuana is not subject to any excise tax. One reason for abstaining from taxing criminal activity is that it may legitimize or destigmatize the activity. Another reason is that the incremental disincentive created by taxation may be overshadowed by the severe penalties that otherwise befall criminal activity, such as jail time, forfeiture of property, and fines.

Given the strong disincentives already in place, it is unclear what effect an additional sales tax would have on the sale of goods containing counterfeit labels and illicit labels. Furthermore, though BOE has attempted to estimate the taxable value of counterfeit goods seized in California, it is unclear whether much of this revenue will ever be recovered once criminal fines, court costs, and legal fees have first been satisfied.

Analysis Prepared by: Joel Tashjian / APPR. / (916) 319-2081

Date of Hearing: April 27, 2015

ASSEMBLY COMMITTEE ON REVENUE AND TAXATION

Philip Ting, Chair

ABPCA Bill Id:AB 160

Author:(Dababneh) – As Amended Ver:April 9, 2015

2/3 vote. Fiscal committee.

SUBJECT: Criminal profiteering: counterfeit labels: sales and use taxes

SUMMARY: Removes the sale for resale exclusion for tangible personal property (TPP) sold or purchased with counterfeit or illicit labeling, adds tax fraud to the list of crimes eligible for civil forfeiture as "criminal profiteering activity," and revises the definition of "organized crime" to include crimes that through planning and coordination of individual efforts, seek to conduct the illegal activities of tax fraud. Specifically, this bill:

1. Adds, to the definition of a "retail sale" or "sale at retail," the sale of TPP with a counterfeit label or illicit label on the property, regardless of whether the sale is for resale in the regular course of business.

2. Adds, to the definition of "storage" or "use," a purchase by a convicted purchaser of TPP with a counterfeit label or illicit label on the property, regardless of whether the purchase is for resale in the regular course of business.

3. Defines "counterfeit label" as having the same meaning as United States Code (USC), Title 18, Section 2318.

4. Defines "illicit label" as having the same meaning as USC, Title 18, Section 2318.

5. Expands the list of offenses which can serve as a basis for a criminal profiteering action to include piracy, insurance fraud, and tax fraud.

6. Revises the definition of "organized crime" to include crimes that through planning and coordination of individual efforts, seek to conduct the illegal activities of tax fraud.

7. Provides that if the Commission on State Mandates determines that this bill contains costs mandated by the state, reimbursement to local agencies and school districts for those costs shall be made.

8. Makes amendments to the Penal Code that are beyond the purview of this Committee.

EXISTING LAW:

1. Requires the Board of Equalization (BOE) to seize any person's property, real or personal, when the person is delinquent in paying amounts due, and sell the property, or a sufficient part of it, at public auction to pay the amount due together with any interest or penalties imposed for the delinquency and any costs incurred on account of the seizure and sale.

2. Provides that the BOE is allowed to issue to a person a notice of jeopardy determination that requires the person to pay the amount immediately if the BOE determines that a delay will jeopardize tax collection. The amount determined is immediately due and payable.

3. Provides that a person receiving a jeopardy determination notice may, within 10 days of the notice, file a petition and pursue remedies through the BOE’s appeal process. The person must make a security deposit with the BOE for the amount the notice requires.

4. Makes it a crime, punishable by fines and imprisonment, for any person to willfully manufacture, intentionally sell, or knowingly possess for sale any counterfeit of a mark registered with the Secretary of State or the Principal Register of the United States Patent and Trademark Office.

5. Imposes a sales tax on retailers for the privilege of selling TPP, absent a specific exemption. The tax is based upon the retailer's gross receipts from TPP sales in California.

6. Defines a "retail sale" as a sale for any purpose other than resale in the regular course of business. With respect to illegal sales of goods in California, the law imposes a Sales and Use Tax (SUT) on the retail sales and purchases of those goods in the same manner as legitimate sales. However, existing law also specifies that sales and purchases of tangible personal property with a counterfeit mark, when made by a "convicted seller" or "convicted purchaser," are subject the SUT, regardless of whether the sales are for resale in the regular course of business.

7. Provides that TPP sold to a person who resells the property prior to any use of that property is not subject to SUT.

8. Provides that TPP sold to a person who purchases the property to incorporate into a manufactured item to be sold is not subject to SUT.

9. Imposes a complementary use tax on the storage, use, or other consumption in California of TPP purchased from any retailer. The use tax is imposed on the purchaser, and unless the purchaser pays the use tax to a retailer registered to collect the California use tax, the purchaser remains liable for the tax, unless the use is exempted. The use tax is set at the same rate as the state's sales tax and must generally be remitted to the State Board of Equalization (BOE).

FISCAL EFFECT: The BOE projects revenue gain from asset forfeiture "of several million dollars annually beginning in fiscal year 2016-17" and a "potential gain of $1.1 million annually" from counterfeiting offenses.

COMMENTS:

1. Author's Statement: The author has provided the following statement in support of this bill:

I authored AB 2681 (signed by Governor Brown on September 19, 2014) to grant the BOE increased authority to assess taxes on individuals convicted of trafficking in counterfeit goods. Under this Legislation, any transaction involving the sale of counterfeit goods will be taxable as a retail transaction. The legislative intent was to stop counterfeiters from profiting from their crimes, holds them financially liable, and captures tax revenues lost as a direct result of their criminal activities.

This bill (AB 160) furthers this legislative intent by allowing enforcement to seize assets acquired directly and immediately from the proceeds of illegal activity including tax evasion, copyright infringement, counterfeiting and insurance fraud. Additionally, AB 160 would also allow the BOE to seek an order of restitution for sales and use tax liabilities owed to the State based [on] the retail sale or consumption of tangible personal property which violates a recorded copyright or contains an illicit label as defined under federal law.

2. Arguments in Support: According to the California District Attorneys Association, "California's 'little RICO' statute (patterned after the federal RICO forfeiture statute) is limited by its restrictions and lack of predures. Whereas the federal statute lists over 150 different crimes that can trigger forfeiture, that California statute lists only 33 crimes. Additionally, none of the 33 listed crimes in the California statute address tax fraud, despite California's rampant tax fraud problem and an underground economy that costs the states $9 billion in taxes every year."

3. Underground Economy: The underground economy is a well-documented problem in the State of California. The BOE has estimated that $8 billion in corporate, personal, and SUT revenues go uncollected in California each year, with unreported and underreported economic activity responsible for the vast majority of that total, placing a burden on state and local governments, and legitimate businesses; tackling the problem has not been easy. In 1993, the Joint Enforcement Strike Force was created to combat the underground economy by aiding in the sharing of information, coordinating enforcement efforts, and developing methods to target enforcement resources. Additionally, the Labor Task Force has also been launched in an effort to curb the underground economy. Through its information sharing program, the Labor Task Force attempts to ensure that employees receive proper payments and that California receives all employment taxes and fees owed.

4. Evolution of Tax Recovery and Crime Enforcement Team (TRaCE): In 2012, AB 1185 (Price), of the 2011-12 Legislative Session, would have established a multiagency partnership, known as the "Centralized Intelligence Partnership" (CIP), consisting of the Employment Development Department (EDD), the Franchise Tax Board (FTB), and the BOE, to collaborate in combating illegal underground operations. AB 1185 was held on Assembly Appropriations Committee's Suspense File. In January 2014, AB 576 (V. Manuel Perez), Chapter 614, Statutes of 2014, created the Revenue Recovery and Collaborative Enforcement Team Act (RRaCE) pilot program. The Legislature intended the act to enhance existing efforts to combat criminal tax evasion associated with underground economic activities by institutionalizing collaboration among state agencies. A key element of the effort is to authorize and facilitate data and intelligence sharing among participating state agencies. The intent of AB 576 is to focus on criminal and civil prosecution of those who operate in the underground economy and violate the tax laws. The Governor attached a signing letter to AB 576 designating the Department of Industrial Relations (DIR) as the lead agency; it is believed this was done to avoid duplication of efforts with other state agencies and task forces that address elements of the underground economy (i.e., the labor laws focused on by the Joint Enforcement Strike Force (JESF), and the Labor Enforcement Task Force (LETF).)

Despite the more formal efforts of establishing RRaCE and CIP, the BOE has been working since 2011 with several agencies to establish a working body of investigators to collaborate on underground economy cases involving felony tax evasion. According to the BOE, these independent efforts eventually lead to the establishment of TRaCE. TRaCE combats criminal tax evasion related to underground economic activity. Team members and other participating agencies are authorized to exchange information to investigate, prosecute, and recover revenue lost in connection with illegal underground tax evasion. The task force is comprised of public officials from the BOE, Department of Justice, FTB, Department of Alcoholic Beverage Control, EDD, Federal Bureau of Investigation, and U.S. Immigration and Customs Enforcement's Homeland Security Investigations. The BOE states that the development of TRaCE was not dependent on the enactment of AB 576 or SB 1185. However, when SB 1185 or AB 576 moved through the legislative process, it appeared that explicit legislative authorization was required to implement a program of this nature. Additionally, despite the Governor's appointment of DIR as the lead agency for RRaCE, DIR is not one of the participating members of the current TRaCE pilot program. DIR's lack of direct participation in TRaCE may be due to the fact that DIR was only given an advisory position within RRaCE. In order to fully implement the Governor's signing message and appointment of DIR as the lead agency, the Committee may wish to add DIR as a partner equal to FTB, BOE, and EDD within RRaCE and TRaCE.

5. Expansion of the Control of Profits of Organized Crime Act (CPOC): It was the intent of the Legislature, when enacting the CPOC, to punish and deter criminal activities of organized crime through the forfeiture of profits acquired and accumulated as a result of such criminal activities. Under the CPOC, asset forfeiture is allowed upon conviction of more than 30 crimes, including extortion, pimping and pandering, robbery, grand theft, trafficking in controlled substance, money laundering, and offenses related to counterfeiting. Proceeds can be forfeited if the proceeds were gained through a pattern of criminal activity and were gained through involvement in organized crime. This bill adds offenses related to tax fraud to the list of "criminal profiteering activity," and tax fraud to the definition of "organized crime."

Generally, tax evasion and fraud is a consequence of the underlying criminal activity. For example, earnings generated from the prostitution are subject to income tax, and the failure to report income on those activities is tax fraud. Additionally, California imposes a sales and use tax (SUT) on the final sale of illegal goods in the same manner as legitimate sales. Therefore, a person selling counterfeit items on a street corner would be liable for the SUT owed. Under these examples, the act of selling counterfeit items and engaging in prostitution is already illegal. As noted in the following example, despite not having the authority to seize assets because of tax fraud, assets were still seized because of other unlawful acts.

The BOE provides an example of a case where a defendant had committed tax evasion on tobacco products. In the example, BOE was unable to seize the assets because it lacked authority to do so, and had to turn to the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF). The defendant was charged with wire fraud and money laundering, which gave ATF the authority to seize the assets. Because ATF seized the assets, ATF received 37% of the assets and California received the remaining 63%. According to the BOE, the lack of authority prevents the BOE, FTB, EDD, Department of Justice, and Department of Insurance, who have worked hard to obtain a warrant, from potentially collecting restitution for tax evasion. As mentioned before, assets are seized despite not having the authority to do so under tax fraud. The concern, therefore, does not appear to be focused on preventing criminals from fleeing with millions of dollars in assets. Rather, this bill appears to be addressing, as explained by the BOE, the state's inability to collect restitution amounts in full. The Committee may wish to consider weighing the benefits of an increased restitution amounts against the potential negative unintended consequences of criminalizing "tax fraud" under the CPOC.

6. Unintended Consequences: The prosecution of tax fraud within CPOC appears to include individuals not contemplated within this bill. The author's intent is to go after serious offenders with $500,000 in tax evasion or more, but this bill appears to primarily focus on increasing the BOE share of restitution proceeds and broadening its authority to seize assets. The language of this bill potentially covers a husband and wife filing a tax return who knowing overestimate the value of an item donated to a charitable organization in order to reduce tax liability. Husbands and wives filing a joint tax return, small owners of convenience stores, and other small business partners could potentially be swept within a web of organized crime under the language of this bill. As such, the Committee may wish to consider deleting the tax fraud provision from this bill.

7. SUT on Counterfeit Item. AB 2681 (Dababneh), Chapter 477, Statutes of 2014, expanded the definition of "retail sale" or "sale at retail" to include any sale by a convicted seller of TPP with a counterfeit mark regardless of whether the sale is for resale in the regular course of business. This bill again expands the definition to further include "counterfeit label" and "illicit label." As discussed in this Committee's analysis of AB 2681, it is unclear if imposing a tax on counterfeit items, regardless of whether the sale is for resale in the regular course of business, would discourage criminals from selling counterfeit items. Like most business models, a seller of counterfeit goods makes a profit if sales revenues exceed costs. However, unlike legitimate businesses, sellers of counterfeit goods must additionally take into account the potential costs of government prosecution and civil lawsuits from genuine producers. These considerations may have a huge impact on a seller's decision to carry counterfeit items, especially if the government has improved enforcement of copyright laws or increased jail time. The more active the government becomes in enforcing laws, the more likely sellers will choose not to carry counterfeit products. The threat of sales tax, on its face, may be seen as one additional tool to deter a person from selling counterfeit items because it increases the costs of doing business. However, the collection of sales tax is secondary to the threat of being caught. When one considers the jail time, the seizure of property, and the enormous criminal fines, it seems unlikely that a person selling counterfeit goods would be deterred by the possibility of having to remit sales tax, especially when the imposition of the tax is only imposed after a conviction.

8. Double Referral: This bill was double referred to the Assembly Committee on Public Safety, which passed this bill on April 7, 0215, with a vote of 7-0. For additional discussion of this bill, please refer to the analysis prepared by the Assembly Committee on Public Safety.

REGISTERED SUPPORT / OPPOSITION:

Support

California District Attorneys Association (Co-Sponsor)

California Chamber of Commerce

Opposition

None on file

Analysis Prepared by: Carlos Anguiano / REV. & TAX. / (916) 319-2098

Date of Hearing: April 7, 2015

Counsel: Gabriel Caswell

ASSEMBLY COMMITTEE ON PUBLIC SAFETY

Bill Quirk, Chair

ABPCA Bill Id:AB 160

Author:(Dababneh) – As Amended Ver:March 19, 2015

As Proposed to be Amended in Committee

SUMMARY:

Expands the list of crimes that allow for forfeiture of assets and prosecution of criminal profiteering and broadens the definition of criminal profiteering by broadening the organized crime element to include other specified offenses. Specifically, this bill:

1. Expands the list of offenses which can serve as a basis for a criminal profiteering action to include piracy, insurance fraud, and tax fraud.
   
   

2. Expands provisions from the "organized crime" element as it pertains to criminal profiteering by the provisions that require that the nature of the conspiratorial action be of an organized nature to include such examples as:

1. pimping and pandering;
   
   

2. counterfeiting of any registered trademark;
   
   

3. illegal piracy of recordings or audiovisual works;
   
   

4. embezzlement;
   
   

5. securities fraud;
   
   

6. state tax fraud;
   
   

7. insurance fraud;
   
   

8. grand theft;
   
   

9. money laundering; and
   
   

10. forgery.

EXISTING LAW:

1. Establishes the "California Control Profits of Organized Crime Act." (Pen. Code, § 186.)
   
   

2. Declares that the Legislature finds and declares that an effective means of punishing and deterring criminal activities of organized crime is through the forfeiture of profits acquired and accumulated as a result of such criminal activities. It is the intent of the Legislature that the "California Control of Profits of Organized Crime Act" be used by prosecutors to punish and deter only such activities. (Pen. Code, § 186.1).

3. Defines "criminal profiteering activity" as any act committed or attempted or any threat made for financial gain or advantage, which act or threat may be charged as a crime under any of the following offenses: arson, bribery, child pornography or exploitation, felonious assault, embezzlement, extortion, forgery, gambling, kidnapping, mayhem, murder, pimping and pandering, receiving stolen property, robbery, solicitation of crimes, grand theft, trafficking in controlled substances, violation of the laws governing corporate securities, specified crimes involving obscenity, presentation of a false or fraudulent claim, false or fraudulent activities, schemes, or artifices, money laundering, offenses relating to the counterfeit of a registered mark, offenses relating to the unauthorized access to computers, computer systems, and computer data, conspiracy to commit any of the crimes listed above, offenses committed on behalf of a criminal street gang, offenses related to fraud or theft against the state's beverage container recycling program, human trafficking, any crime in which the perpetrator induces, encourages, or persuades a person under 18 years of age to engage in a commercial sex act, any crime in which the perpetrator, through force, fear, coercion, deceit, violence, duress, menace, or threat of unlawful injury to the victim or to another person, causes a person under 18 years of age to engage in a commercial sex act, theft of personal identifying information, offenses involving the theft of a motor vehicle, abduction or procurement by fraudulent inducement for prostitution. (Pen. Code, § 186.2(a).)
   
   

4. Defines "pattern of criminal profiteering activity" means engaging in at least two incidents of criminal profiteering, as defined by this chapter, that meet the following requirements: (Pen. Code, § 186.2(b)(1).)
   
   

   1. Have the same or a similar purpose, result, principals, victims, or methods of commission, or are otherwise interrelated by distinguishing characteristics;
      
      

   2. Are not isolated events; and/or
      
      

   3. Were committed as a criminal activity of organized crime.
      
      

5. Defines "organized crime" as a crime that is of a conspiratorial nature and that is either of an organized nature and seeks to supply illegal goods and services such as narcotics, prostitution, loan-sharking, gambling, and pornography, or that, through planning and coordination of individual efforts, seeks to conduct the illegal activities of arson for profit, hijacking, insurance fraud, smuggling, operating vehicle theft rings, fraud against the beverage container recycling program, or systematically encumbering the assets of a business for the purpose of defrauding creditors. "Organized crime" also means crime committed by a criminal street gang, as defined. "Organized crime" also means false or fraudulent activities, schemes, or artifices, as defined, and the theft of personal identifying information, as defined. (Pen. Code, § 186.2(d).)

6. States that the following assets of any person who is convicted a specified underlying offense and of engaging in a pattern of criminal profiteering activity are subject to forfeiture (Pen. Code, § 186.3):
   
   

   1. Any property interest whether tangible or intangible, acquired through a pattern of criminal profiteering activity; and
      
      

   2. All proceeds of a pattern of criminal profiteering activity, which property shall include all things of value that may have been received in exchange for the proceeds immediately derived from the pattern of criminal profiteering activity.
      
      

7. States that, notwithstanding that no response or claim has been filed, in all cases where property is forfeited, as specified, and, if necessary, sold by the Department of General Services (DGS) or local governmental entity, the money forfeited or the proceeds of sale shall be distributed by the state or local governmental entity as follows (Pen. Code, § 186.8):
   
   

   1. To the bona fide or innocent purchaser, conditional sales vendor, or holder of a valid lien, mortgage, or security interest, if any, up to the amount of his or her interest in the property or proceeds, when the court declaring the forfeiture orders a distribution to that person. The court shall endeavor to discover all those lien holders and protect their interests and may, at its discretion, order the proceeds placed in escrow for up to an additional 60 days to ensure that all valid claims are received and processed;
      
      

   2. To DGS or local governmental entity for all expenditures made or incurred by it in connection with the sale of the property, including expenditures for any necessary repairs, storage, or transportation of any property seized, as specified; and
      
      

   3. To the State's General Fund or local governmental entity, whichever prosecutes.

FISCAL EFFECT:

Unknown

COMMENTS:

1. Author's Statement: According to the author, " Criminals should not profit from their crimes. Unfortunately, California's asset forfeiture laws for non-drug related crimes, like financial crimes and other white collar offenses, are so poorly drafted that they are almost unusable by District Attorneys and the Attorney General's office. As a result, white collar victims who sometimes have lost everything due to a defendant's fraud, often cannot collect restitution to make them whole. Adding more examples of crimes to the definition of “organized crime” will ensure that prosecutors are able to seize unlawfully obtained assets.
   
   "Equally problematic, underground economy crimes like tax evasion that drain public resources from our schools, health services and law enforcement, are not even included among the list of crimes in which asset forfeiture is available. As found by the Little Hoover Commission, after an investigation of over a year, in the current climate, "Crime Actually Does Pay--people participate in the underground economy because the rewards outweigh the risk." (Lit. Hoov. Comm. Report # 226, p. 30.) This bill fixes the internal inconsistencies in the language of the state's asset forfeiture laws, and adds certain underground economy crimes to the list of offenses that can trigger asset forfeiture of criminal profits. This bill is to make it so that crime no longer pays in California.
   "
   
   

2. Criminal Profiteering Asset Forfeiture Generally:  Criminal profiteering asset forfeiture is a criminal proceeding held in conjunction with the trial of the underlying criminal offense.  Often, the same jury who heard the criminal charges also determines whether the defendant's assets were the ill-gotten gains of criminal profiteering.  As a practical matter, the prosecution must assemble its evidence for the forfeiture matter simultaneously with the evidence of the crime. 
   
   Under Penal Code Section 186.2, asset forfeiture for is allowed upon conviction of more than thirty crimes under specified circumstances. 
   
   "Criminal profiteering activity means any act committed or attempted or any threat made for financial gain or advantage, which act or threat may be charged as a crime [under various criminal statutes].  Those crimes include: arson; bribery, child pornography or exploitation, which may be prosecuted as a felony; felonious assault, embezzlement; extortion, forgery, gambling, kidnapping, mayhem, murder, pimping and pandering, receiving stolen property, robbery, solicitation of crimes, grand theft, trafficking in controlled substances, violation of the laws governing corporate securities, crimes related to possession and distribution of obscene or harmful matter, presentation of a false or fraudulent claim, false or fraudulent activities, schemes, or artifices, money laundering, offenses relating to the counterfeit of a registered mark, offenses relating to the unauthorized access to computers, computer systems, and computer data, conspiracy to commit any of the crimes listed above, felony gang activity, as specified, any offenses related to fraud or theft against the state's beverage container recycling program, including, but not limited to, those offenses specified in this subdivision and those criminal offenses specified in the California Beverage Container Recycling and Litter Reduction Act, human trafficking, any crime in which the perpetrator induces, encourages or persuades a person under 18 years of age to engage in a commercial sex act, any crime in which the perpetrator, through force, fear, or coercion, deceit violence, duress, menace, or threat of unlawful injury to the victim or to another person, causes a person under 18 years of age to engage in a commercial sex act, theft of personal identifying information, motor vehicle theft, and abduction or procurement by fraudulent inducement for prostitution".  (Pen. Code, § 186.2(a)(1) to (33).)
   
   

3. Criminal Profiteering Proceeds:  Under existing law, forfeited assets are distributed as follows:
   
   

   1. To the bona fide or innocent purchaser, conditional sales vendor, or holder of a valid lien, mortgage, or security interest, if any, up to the amount of his or her interest in the property or proceeds, when the court declaring the forfeiture orders a distribution to that person. The court shall endeavor to discover all those lien holders and protect their interests and may, at its discretion, order the proceeds placed in escrow for up to an additional 60 days to ensure that all valid claims are received and processed.
      
      

   2. To the Department of General Services (DGS) or local governmental entity for all expenditures made or incurred by it in connection with the sale of the property, including expenditures for any necessary repairs, storage, or transportation of any property seized, as specified.
      
      

   3. To the State's General Fund or local governmental entity, whichever prosecutes.
      
      Under existing law, the forfeited proceeds of criminal profiteering are placed in the county general fund with no directions for use.  There is an exception for forfeiture in child pornography cases.  In such cases, the money is deposited in the county or State Children's Trust Fund for child abuse and neglect prevention and intervention.  (Pen. Code, § 186.8 and Welf. and Inst. Code, § 18966 and 18969.) In California drug asset forfeiture, law enforcement receives 65% of forfeiture proceeds. (Health and Safety Code Sections 11469 et seq.)  Of this amount, 15% must be placed in a special county or city fund used "to combat drug abuse and divert gang activity."  Under federal forfeiture law allowing "adoption" of state seizures of drug proceeds, the agency seizing that property may receive as much as 80% of these proceeds.  This money must be used according to guidelines set by the United States Department of Justice and require that the money be used largely for law enforcement.
      
      

4. Elements of the Offense:  Proceeds can be forfeited if the proceeds were gained through a pattern of criminal activity and were gained through involvement in organized crime. 
   
   

   1. Pattern of Criminal Activity:  "Pattern of criminal profiteering activity" means engaging in at least two incidents of criminal profiteering (listed above), that meet the following requirements
      
      

      1. Have the same or a similar purpose, result, principals, victims, or methods of commission, or are otherwise interrelated by distinguishing characteristics;
         
         

      2. Are not isolated events; and/or
         
         

      3. Were committed as a criminal activity of organized crime.
         
         

   2. Organized Crime:  "Organized crime" means crime that is of a conspiratorial nature and that is either of an organized nature and seeks to supply illegal goods and services such as narcotics, prostitution, loan-sharking, gambling, and pornography, or that, through planning and coordination of individual efforts, seeks to conduct the illegal activities of arson for profit, hijacking, insurance fraud, smuggling, operating vehicle theft rings, fraud against the beverage container recycling program, or systematically encumbering the assets of a business for the purpose of defrauding creditors. "Organized crime" also means crime committed by a criminal street gang.  "Organized crime" also means false or fraudulent activities, schemes, or artifices, and the theft of personal identifying information.
      
      

5. The Proposed Amendments: The proposed amendments to the bill take a different approach to the modification of the organized crime element of criminal profiteering. The bill, as introduced, eliminated the specified examples of organized crime and instead categorized organized crime as conspiratorial crimes. The original purpose of criminal profiteering was to create an "effective means of punishing and deterring criminal activities of organized crime is through the forfeiture of profits acquired and accumulated as a result of such criminal activities."  (Pen. Code § 186.)  This bill, as introduced, would have revised that intent to include commission of any of the listed qualifying crimes that are committed in a simple conspiracy, not for the purpose of organized crime.  As proposed to be amended, the bill adds crimes to the list of examples of organized crime, thereby preserving the original intent of the organized crime element.
   
   Additionally, as introduced, this bill redirected forfeited proceeds for tax fraud, insurance fraud, and piracy in the following priority: (1) to the victims of the crime, (2) to cover the costs of investigation, and finally (3) to the General Fund of the state. The redistribution of funds in this manner would have been highly irregular in light of existing forfeiture procedures.  Specifically, as a policy matter, we do not allow law enforcement and government entities to recoup costs for the costs of investigations with forfeited proceeds.  To allow the recoupment of costs creates a conflict of interest that can call into question the integrity of an investigation.  By allowing a law enforcement entity to financially benefit from a conviction is per se a conflict of interest.  Additionally, by eliminating potential bona fide purchasers, the introduced version of the bill would have cut out ancillary victims of the crime.  For example, people who might legitimately purchase pirated goods would not be compensated for their financial loss.  The proposed amendments do not modify the distribution of any forfeited assets and follows the provision in existing law.
   
   The listed letters in support and opposition were written to address the introduced version of the bill, not the proposed amendments. The amendments are an attempt to address the majority of the opposition's concerns, while continuing to address the concerns of the proponents of the bill.
   
   

6. Argument in Support: According to Liberty Mutual Insurance, "While existing legal statutes provide an index of crimes that trigger the forfeiture of assets acquired from engagement in illicit activities, prosecutors are required to further demonstrate a 'pattern of criminal activity' to warrant the seizure of property in cases involving white-collar crime. However, a pattern of criminal activity must fall within the scope of 'organized crime,' which is defined with arbitrary examples of criminal acts that omit others. The result of inconsistent language contained in Penal Code section 186.2 places victims at risk of not receiving the compensation they are rightfully owed.
   
   "AB 160 would include offenses relating to piracy, insurance fraud, and tax fraud within the definition of criminal profiteering activity and broaden the scope of organized crime to include illegal activities involving conspiratorial nature that are achieved through planning and coordination of individual efforts. The bill also provides procedure for the redistribution of seized funds stemming from felony violations that relate to piracy, insurance fraud, and tax fraud by prioritizing that recovered proceeds must first be paid to the victims of the crime, followed by reimbursement for investigative costs, and the remainder to the General Fund.
   
   "Fraud has a consequential impact upon victims, business, and the state of California. For example, a recent report by the Little Hoover Commission found that the state loses as much as $10 billion in tax revenue annually as a result of the underground economy. Additionally, law enforcement has too often witnessed felony convictions that were unable to provide restitution to the victims who suffered significant loss. AB 160 is a necessary measure that will deliver justice, strengthen the judicial process, and foster a thriving economy."
   
   

7. Argument in Opposition: According to The American Civil Liberties Union of California, "We regret to inform you that we oppose AB 160 unless amended. Specifically, we oppose the broad expansion of the definition of 'organized crime' and the requirement that proceeds from seized property be distributed to investigating agencies.
   
   "California’s Criminal Profiteering statute allows a prosecuting agency to seize any property that has been 'acquired through a pattern of criminal profiteering activity,' as well as the proceeds of criminal activity. (Pen. Code sec. 186.3(b)(c).) Forfeiture statutes are intended to reach beyond merely specific property that has been stolen. The entire purpose of forfeiture statutes is to allow the government to seize property that may have later been acquired, even if it is only tangentially related to the original crime.
   
   "Because of the potential to use forfeiture statutes to reach far beyond just stolen property, these statutes should be narrowly drawn. Indeed, in enacting our statutory scheme, the California Legislature stated:
   
   "The Legislature hereby finds and declares that an effective means of punishing and deterring criminal activities of organized crime is through the forfeiture of profits acquired and accumulated as a result of such criminal activities. It is the intent of the Legislature that the "California Control of Profits of Organized Crime Act" be used by prosecutors to punish and deter only such activities. (Pen. Code sec. 186.2 [emphasis added].)
   
   "AB 160 would amend California’s Criminal Profiteering statute in three ways:
   
   

"1) The bill would add piracy, insurance fraud and tax fraud to the list of crimes for which a prosecuting agency may pursue forfeiture;

"2) The bill would greatly expand the definition of “organized crime,” thereby greatly expanding the reach of the statute; and

"3) The bill would direct that the proceeds from forfeitures related to piracy, insurance fraud and tax fraud be distributed to the victims of the crime, then investigating agencies, then the General Fund.

"While the ACLU has no objection to the first proposed change, we do object to the other proposed amendments for the reasons noted below.

"The proposed changes to the definition of “organized crime” would greatly expand the reach of the statute Currently, the definition of “organized crime” in Penal Code section 186.2 includes the requirement that:

• "the crime 'is either of an organized nature and seeks to supply illegal goods and services such as narcotics, prostitution, loan-sharking, gambling, and pornography,' or

• "the crime, 'through planning and coordination of individual efforts, seeks to conduct the illegal activities of arson for profit, hijacking, insurance fraud, smuggling, operating vehicle theft rings, fraud against the beverage container recycling program, or systematically encumbering the assets of a business for the purpose of defrauding creditors.' (Pen. Code sec. 186.2(d).)

"AB 160 would eliminate both of these elements, instead merely requiring that the crime is 'of a conspiratorial nature and that is achieved through planning and coordination of individual efforts.' This change applies to all crimes that trigger criminal forfeiture, not just the new crimes that AB 160 proposes to add to the statute.

"This is a dramatic change in the scope of the definition of 'organized crime,' one that would take California’s Criminal Profiteering statute far beyond its original intent. The newly proposed definition would effectively include any criminal offense committed by two or more people. While the statute still requires a 'pattern of criminal profiteering activity' to trigger seizure, this requires merely two incidents. (Pen. Code sec. 186.2(b)(1).) Under the new proposed definition of 'organized crime,' therefore, two people who committed two relatively minor theft offenses in the course of one evening would now be subject to forfeiture proceedings.

"The proposed change to the definition of 'organized crime' would take California’s Criminal Profiteering statute in a whole new direction, allowing prosecutors to seize a vast array of property from individuals who have committed only minor crimes, including property that was acquired long after the crime and with just a small portion of the proceeds of the crime. This sweeping change to the criminal forfeiture statutes is unwarranted and will lead to abuse.

"Distributing the proceeds from seized property to investigating agencies will lead to abuse. Finally, AB 160 would designate that the proceeds from property seized for the specific crimes of piracy, insurance fraud and tax fraud would be distributed as follows: to the crime victims, 'to cover the costs of investigation,' and then to the General Fund. Since the victims of these crimes are corporations insured for loss or the government, the inclusion of crime victims on this list will have little impact. Instead, the amendment effectively directs proceeds from seized property to the investigating agencies, creating an incentive for law enforcement agencies to pursue criminal forfeiture for their own financial reasons. This type of incentive structures in forfeiture statutes leads to abuse.

"We urge you to amend AB 160 to address these problems. Please do not hesitate to contact us should you have any questions or concerns."

1. Related Legislation: AB 443 (Alejo), would add trafficking in firearms or other deadly weapons and trafficking in endangered species to the list of acts which can constitute criminal profiteering activity. And  allows the prosecuting agency to file a petition of forfeiture prior to the commencement of the underlying criminal proceeding if the value of the assets seized exceeds $10,000, if there is a substantial probability that the prosecuting agency will file a criminal complaint, there is a substantial probability the prosecuting agency will prevail on the issue of forfeiture and failure to enter the order will result in the property being destroyed or otherwise removed from the jurisdiction of the court, and the need to preserve the property outweighs the hardship on any party against whom the order is entered. AB 443 is scheduled to be heard in this committee on April 14, 2014.
   
   

REGISTERED SUPPORT / OPPOSITION:

Support

AFSCME

Association of California Insurance Companies

California College and University Police Chiefs

California District Attorneys Association

California State Sheriffs' Association

Independent Insurance Agents and Brokers of California

Liberty Mutual Insurance

Opposition

American Civil Liberties Union

California Attorneys for Criminal Justice

Analysis Prepared by:

Gabriel Caswell/PUB. S./(916) 319-3744

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