BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                      



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          |SENATE RULES COMMITTEE            |                   SB 861|
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                                 THIRD READING


          Bill No:  SB 861
          Author:   Corbett (D)
          Amended:  5/31/11
          Vote:     21

           
           SENATE GOVERNMENTAL ORG. COMMITTEE  :  9-1, 4/12/11
          AYES:  Wright, Anderson, Corbett, De León, Evans, 
            Hernandez, Strickland, Wyland, Yee
          NOES:  Berryhill
          NO VOTE RECORDED:  Calderon, Cannella, Padilla

           SENATE APPROPRIATIONS COMMITTEE  :  6-3, 5/26/11
          AYES:  Kehoe, Alquist, Lieu, Pavley, Price, Steinberg
          NOES:  Walters, Emmerson, Runner


           SUBJECT  :    Public contracts:  ineligibility of scrutinized 
          companies

           SOURCE  :     Author


           DIGEST  :    This bill prohibits a scrutinized company, as 
          defined, from entering into a contract with a state agency 
          for goods or services.  A scrutinized company is a person 
          that has been found to be in violation of Section 13(p) of 
          the Securities Exchange Act of 1934 by final judgment or 
          settlement entered in a civil or administrative action 
          brought by the securities and Exchange Commission and the 
          person has not remedied or cured the violation in a manner 
          accepted by the commission on or before final judgment or 
          settlements.  A person shall cease to be regarded as a 
                                                           CONTINUED





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          scrutinized company when the person is no longer deemed to 
          be in violation of Section 13(p) of the Securities Exchange 
          Act of 1934, or after three years from the date of final 
          judgment or settlement, whichever is earlier.

           ANALYSIS  :    Existing law authorizes contracting between 
          state agencies and private contractors and sets forth 
          requirements for the procurement of goods and services by 
          state agencies and the various responsibilities of state 
          agencies and the Department of General Services in 
          implementing state contracting procedures and policies.

          This bill prohibits a scrutinized company, as defined, from 
          entering into a contract with a state agency for goods or 
          services.  A "scrutinized company" is a person that has 
          been found to be in violation of Section 13(p) of the 
          Securities Exchange Act of 1934 by final judgment or 
          settlement entered in a civil or administrative action 
          brought by the securities and Exchange Commission and the 
          person has not remedied or cured the violation in a manner 
          accepted by the commission on or before final judgment or 
          settlements.  A person shall cease to be regarded as a 
          scrutinized company when the person is no longer deemed to 
          be in violation of Section 13(p) of the Securities Exchange 
          Act of 1934, or after three years from the date of final 
          judgment or settlement, whichever is earlier.

           Background
           
          On July 21, 2010, the President signed into law the 
          Dodd-Frank Wall Street Reform and Consumer Protection Act 
          (Act).  Section 1502 of the Act directs the SEC to 
          promulgate new disclosure rules for SEC reporting companies 
          for whom "conflict minerals are necessary to the 
          functionality or production of a product manufactured by 
          such persons."  The new disclosure rules are to include 
          submission of annual disclosure to the SEC and a more 
          detailed report that will be subject to audit.  The SEC is 
          required to promulgate rules to implement these disclosure 
          requirements by April 17, 2011, although the SEC has 
          announced that it won't meet that deadline.

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







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          According to the Senate Appropriations Committee:

                          Fiscal Impact (in thousands)

           Major Provisions                     2011-12     2012-13    
           2013-14          Fund  

          State contract prohibitionUnknown, potentially increased    
             General/ 
                                   costs for specific state goods and 
               Special
                                   services.  To the extent 
          restrictions   
                                   Prohibit companies from bidding, 
          costs
                                   May increase due to reduced 
          competition

          State contract oversightUnknown costs ongoing to            
             General/
                                   administer a potentially more      
                Special
                                   complex contracting process, 
                              including
                                   costs to determine if a bidder is 
                              a
                                   scrutinized company; increased
                                   protests and rebidding

          SUPPORT  :   (Verified  5/31/11)

          Action Evangelique En Prison, Democratic Republic of the 
          Congo
          Africa Faith and Justice Network
          Amnesty International
          California Coalition Against Sexual Assault
          California Commission on the Status of Women
          California National Organization for Women
          Coalition for Free and Democratic Elections in Congo
          Coalition to Abolish Slavery and Trafficking
          Consumer Federation of California
          Earth Rights International
          Enough!







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          Falling Whistles
          Feminist Majority
          Free the Slaves
          Global Witness
          Human Rights Watch
          Program for Torture Victims
          Responsible Sourcing Network
          St. Mark Presbyterian Church, Newport Beach
          Stop Genocide Now
          Union for Democracy and Social Progress

           ARGUMENTS IN SUPPORT  :    The author's office notes that 
          embedded in the financial reform measure that President 
          Obama signed was a truly historic regulatory provision 
          pertaining to the DRC.  In an effort to choke off funding 
          for the armed thugs and rebel militias who have killed more 
          than five million people and turned the Congo into the rape 
          capital of the world, federal law now requires publicly 
          traded companies to disclose whether their products contain 
          minerals from rebel-controlled mines in the Congo.  Greed 
          for the Congo's mineral wealth has been a prime cause of 
          the atrocities and conflict, and multiple armed groups use 
          mass rape as a strategy to intimidate and control 
          communities as they profit from the illicit trade of 
          conflict minerals.  Many of these same conflict minerals 
          end up in our electronic devices such as cell phones, 
          laptops, and digital cameras.


          PQ:do  5/31/11   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

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