BILL ANALYSIS �
SENATE COMMITTEE ON PUBLIC SAFETY
Senator Loni Hancock, Chair S
2013-2014 Regular Session B
7
6
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SB 762 (Hill)
As Amended April 15, 2013
Hearing date: April 23, 2013
Code
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PAWNBROKERS AND SECONDHAND GOODS DEALERS
HISTORY
Source: California Pawnbrokers' Association
Prior Legislation: SB 1520 (Schiff) - Ch. 994, Stats. 2000
SB 1893 (Burton) - failed in Assembly Business and
Professions, 2004
SCR 63 (Yee) - Ch. 16., Stats. 2010
AB 1796 (Galgiani) 2012, failed in Assembly Public
Safety
Support: California Coin and Bullion Merchants Association;
California Sheriffs'
Association; California Police Chief's Association,
Inc.
Opposition:California District Attorneys Association; One
Individual
KEY ISSUES
SHOULD OPERATING AS AN UNLICENSED SECONDHAND DEALER AND NOT
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REPORTING ACQUISITIONS OF SECONDHAND PROPERTY BE CONSIDERED
CRIMINAL PROFITEERING BY ORGANIZED CRIME AND THE PROFITS FROM
SUCH ACTIVITIES SUBJECT TO CRIMINAL FORFEITURE?
(CONTINUED)
SHOULD THE RIGHTS AND INTERESTS OF A PAWNBROKER IN LOST OR STOLEN
PROPERTY THAT HAS BEEN SOLD TO THE PAWNBROKER OR HELD AS COLLATERAL
BE CLARIFIED AND PROTECTED IN RELATED STATUTES?
PURPOSE
The purposes of this bill are to 1) provide that operating as an
unlicensed secondhand dealer and failing to report acquisitions
of secondhand goods may be considered criminal profiteering by
organized crime and the profits of such an enterprise subject to
criminal forfeiture; 2) specifically authorize a law enforcement
officer to seize property that was reported stolen if the
pawnbroker or secondhand dealer in possession of the property
refuses to place a hold on the property; and 3) protect and
clarify the rights and interests of pawnbrokers in property
seized from a pawnbroker where a criminal investigation or case
involving the property has been resolved or terminated.
Criminal Profiteering
Existing law includes criminal profiteering asset forfeiture
that 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 property is 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. This includes all things of value that may have
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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 the use of a minor for prostitution
or related commercial sex acts, 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.
This bill defines operating a business as secondhand goods
dealer without a license as criminal profiteering, subject to
the forfeiture laws covering such activities.
This bill provides that operating as secondhand goods dealer
without a license and not reporting to the police acquisitions
of secondhand goods shall be defined as organized crime, within
the meaning of the criminal profiteering asset forfeiture laws.
This bill provides that the proceeds of forfeiture, after
storage fees, court costs and money owed secured creditors are
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paid, shall be distributed as follows:
10% to the Restitution Fund.
45% to the general fund of the city, county or city and
county that instituted the forfeiture.
45% to the city, county or city and county in which the
forfeiture occurred.
Secondhand Dealers and Pawn Generally
Existing law includes a statement of legislative intent to
curtail the dissemination of stolen property, to facilitate the
recovery of stolen property and to detect possible sales tax
evasion by means of a uniform, statewide, state-administered
program of regulation of persons whose principal business is
dealing in tangible personal property, as specified. (Bus. &
Prof. Code � 21625; Fin. Code � 21051.)
Existing law includes legislative intent that reports of
transactions in pawned and secondhand property should be
correlated with law enforcement reports so as to trace and
recover stolen property. (Bus. & Prof. Code � 21625.)
Existing law , for purposes of the system for curtailing
dissemination of stolen property, defines a "secondhand dealer"
as any person or entity whose business includes buying, selling,
trading, taking in pawn, accepting for sale on consignment or
auctioning any "tangible personal property." (Bus. & Prof.
Code � 21625.)
Existing law defines "tangible personal property" thus:
All secondhand personal property that has a serial
number or personalized markings,
All tangible property, new or used, taken by a
pawnbroker as security for a loan, and
All tangible personal property commonly sold by
secondhand dealers that constitutes a significant class of
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stolen property. (Bus. & Prof. Code � 21627, subds.
(a)-(b).)
Existing law provides that tangible personal property does not
include coins, monetized bullion or commercial grade ingots of
precious metals. (Bus. & Prof. Code � 21627, subd. (d).)
Existing law defines a pawnbroker<1> as a "person engaged in the
business of receiving goods in pledge for security for a loan."
(Fin. Code � 21000.)
Existing law defines a "coin dealer" as a person or entity
"whose principal business is the buying, selling, and trading of
coins, monetized bullion, or commercial grade ingots of gold, or
silver, or other precious metals." (Bus. & Prof. Code � 21626,
subd. (b).) A coin dealer is not a secondhand dealer, except as
concerns transactions in tangible personal property. (Bus. &
Prof. Code � 21626, subd. (a).)
Existing law provides that a violation of the statutes
regulating secondhand dealers and tangible personal property,
including the failure to obtain a license is a misdemeanor.
These offenses include an element<2> that the defendant person
knew or should have known that a violation was committed. The
offenses are punishable as follows:
For the first offense, a fine of up to $1,500 or
imprisonment in the county jail up to two months, or both;
For the second offense, a fine of up to $5,000 or
imprisonment in the county jail up to four months, or both;
and,
For the third offense, a fine of up to $25,000 or
imprisonment in the county jail up to six months, or both.
(Bus. and Prof. Code � 21645.)
--------------------------
<1> For purposes of this analysis, the terms pawnbroker and
secondhand dealer are used interchangeably. Secondhand dealers
also handle property for consignment sale and resale.
<2> An element is a fact or circumstance that is essential to
the proof of a crime.
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Existing law provides that a license to operate as a secondhand
dealer is subject to forfeiture and the licensee's activities
may be enjoined for a breach of any of the following conditions:
The business shall be carried on only at the location
designated on the license. The license shall designate all
locations where property belonging to the business is
stored. Property of the business may be stored at locations
not designated on the license only with the written consent
of the local licensing authority.
The license or a copy thereof, certified by the
licensing authority, shall be displayed on the premises in
plain view of the public.
The licensee shall not engage in any act which the
licensee knows to be in violation of this article; or
The licensee shall not be convicted of an attempt to
receive stolen property or any other offense involving
stolen property. (Bus. & Prof. Code � 21642, subd. (b).)
Reports to Law Enforcement of Transactions in Secondhand Goods
and Issues Concerning Return of Stolen Property to the Owner
Existing law includes a statement of legislative intent to
require the uniform statewide reporting of transactions in and
acquisitions of secondhand and pawned property by pawnbrokers
and secondhand dealers. (Bus. & Prof. Code � 21625; Fin. Code �
21051.)
Existing law provides that pawnbrokers and coin dealers shall
report daily on forms approved or provided by the Department of
Justice (DOJ), or electronically, as specified, all personal
property purchased, taken in trade, taken in pawn, etc., to
local law enforcement. The report shall include the following
information:
The name and current address and identification of the
intended seller or pledgor of the property;
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A complete and reasonably accurate description of
serialized or nonserialized property; and
A certification by the intended seller or pledgor that
he or she is the owner of the property, or has the
authority of the owner to sell or pledge the property and
that any information provide is true and complete, and a
legible fingerprint taken from the intended seller or
pledgor. (Bus. & Prof. Code � 21628.)
Existing law provides that on the date that DOJ implements the
statewide electronic reporting system for pawned or secondhand
tangible personal property, each secondhand dealer or pawnbroker
shall electronically report applicable transactions, as
specified. The following apply to the electronic reporting
system:
Coin dealers shall continue to report transactions on
paper forms.
For 30 days after implementation of the electronic
system, dealers shall continue to report on paper forms.
DOJ shall charge all secondhand dealers and pawnbrokers
a fee for the operation of the electronic reporting system.
The secondhand dealer licensing authority - the sheriff,
police chief or police commission as applicable - shall
collect the electronic system reporting fee and transmit
the fee to DOJ.
The secondhand dealer licensing authority may charge a
fee to the applicant not to exceed the actual costs
incurred to process the application and collect and
transmit the fee charged by DOJ.
Pawnbrokers shall comply with property transaction
reporting requirements imposed on secondhand dealers. (Bus.
& Prof. Code � 21628, subd. (j).)
Existing law provides the following as to the calculation of the
electronic reporting system fee:
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The fee shall be paid at the time the original license
is granted and when the license is renewed every two years.
The fee shall be no more than $300 in any event.
The fee shall be no more than necessary to reflect the
costs of the following:
o Processing of the initial application.
o Processing renewal applications.
o Implementing, operating and maintain the
statewide reporting system. (Bus. & Prof. Code �
21642.5, subds. (a)-(b).)
Exiting law establishes the Secondhand Dealer and Pawnbroker
Fund. The fund shall, upon appropriation of the Legislature, be
used by DOJ to implement, operate, and maintain the pawned and
secondhand property electronic reporting system. (Bus. & Prof.
Code � 21642.5, subd. (d).)
Existing law provides that a district attorney or the Attorney
General may seek an injunction to stop or prevent a violation of
the laws governing transactions in pawned and secondhand goods.
(Bus. & Prof. Code � 21646.)
Existing law provides that when a peace officer has probable
cause to believe that property, other than coins and precious
metal ingots, in the possession of a pawnbroker, secondhand
dealer or coin dealer is stolen, the officer may place a hold on
the property for up to 90 days.
The pawnbroker or dealer may not release or dispose of
the property without a court order or written receipt from
an officer of the agency that placed the hold.
The pawnbroker or dealer shall produce and deliver the
property to a peace officer for purposes of a criminal
investigation. (Bus. & Prof. Code � 21647, subds.
(b)-(c).)
Existing law provides that where property reported as stolen is
found in the possession of a pawnbroker, secondhand dealer or
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coin dealer, the agency shall notify the person who reported the
property lost or stolen of the following:
The contact information for the pawnbroker, secondhand
dealer or coin dealer holding the property.
The law does not prohibit payment of a fee or any
condition for surrender of the property.
If the reporting person declines to participate in the
prosecution of the alleged thief, the reporting person
shall pay the broker or dealers expenses for the
acquisition of the property.
If the reporting person takes no action to recover the
property within 60 days of the mailing of notice, the
broker or dealer may treat the property as acquired in the
regular course of business.
A copy of the notice will be mailed to the broker or
dealer in possession of the property. (Bus. & Prof. Code �
21647, subd. (c).)
Existing law provides that when property subject to a law
enforcement agency hold is no longer needed for a criminal
investigation, the agency shall release the hold. The agency
shall give notice to the person who reported the property as
lost or stolen, as specified. (Bus. & Prof. Code � 21647, subd.
(d).)
Existing law provides that where the pledgor of property (person
using the property as collateral for a loan) attempts to
retrieve the property during the holding period, the pawnbroker
shall inform the pledgor about the officer and agency that
placed the hold. If the property is no longer needed for an
investigation, the hold shall be released. (Bus. & Prof. Code �
21647, subd. (e).)
Existing law provides that where stolen or lost property (as
listed in the DOJ system) is found in the possession of a
pawnbroker, secondhand dealer or coin dealer, and a peace
officer places a hold on the property, the following shall
apply:
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If 60 days elapses following delivery of the required
notice to the reporting person, or the hold otherwise
elapses, the pawnbroker, secondhand dealer or coin dealer
may send, by certified mail, a request to delete the
property from the DOJ stolen or lost property or firearm
system.
Within 30 days of the mailing of the request, the law
enforcement agency shall have the listing deleted or place
a hold on the property.
If law enforcement takes no action within 45 days, the
pawnbroker, secondhand dealer or coin dealer, may presume
the listing has been deleted and "deal with the property
accordingly." (Bus. & Prof. Code � 21647, subd. (f).)
Existing law provides that where allegedly stolen property has
been taken from a pawnbroker, the officer, magistrate, court
clerk or other holder of the property shall not deliver the
property to a person claiming ownership unless the following
requirements have been met:
If anyone makes a claim of ownership, the person with
custody of the property shall notify the pawnbroker.
If the pawnbroker makes no claim on the property within
10 days of notice, the property may be disposed of in
compliance with the law. (Fin. Code � 21206.8, subds.
(a)-(b).)
Existing law provides that where the ownership of stolen or
embezzled property can be ascertained, and where the address of
the owner and security holder can be ascertained, the officer in
custody of the property shall notify by mail the owner and
security holder, as specified:
The owner shall be notified of the location of the
property and the method through which the owner may
retrieve the property.
If the property is not timely claimed, as specified, the
property shall be sold and the proceeds deposited in the
county treasury. The property may be retained for the
county if needed.
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If the property was taken from a pawnbroker or
secondhand dealer and reasonable efforts to return the
property to the owner have been unsuccessful, the property
shall be returned to the pawnbroker or dealer when it is
not needed in a criminal case. (Pen. Code � 1141.)
Notice shall be given to the pawnbroker and the property
may not be disposed of for three months. (Fin. Code �
21206.8, subd. (c).)
Existing law provides that where law enforcement identifies
serialized property that has been reported stolen or lost and
the property has been listed in the DOJ system, the agency shall
notify the owner or person entitled to possession of the
property within 15 days. If a pawnbroker or secondhand dealer
reported his or her acquisition of the the property to law
enforcement, the owner shall be given the contact information of
the pawnbroker or dealer and be informed of the law concerning
retrieval of property from such a business. If the property is
no longer needed as evidence, it shall be returned to the owner,
as specified. (Pen. Code � 11108.5.)
This bill provides that the rules set out in Penal Code Section
1411 concerning retrieval from a law enforcement agency of
stolen or embezzled property by the owner of the property shall
not apply to property taken from a pawnbroker or secondhand
dealer unless the pawnbroker or secondhand dealer willfully
refused to consent to a statutory hold on the property or the
property was seized from the pawnbroker or secondhand dealer by
warrant.
This bill provides that where property held by a pawnbroker or
secondhand dealer is needed for a criminal investigation, and a
law-enforcement hold has been placed on the property, the
property lien of the pawnbroker or secondhand dealer shall
continue when the property is surrendered to law enforcement.
Upon termination of criminal proceedings, the property shall be
returned to the pawnbroker for disposition, as specified.
This bill specifically provides that a peace officer, when
placing a hold on property found at a pawnshop that has been
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reported stolen, may take the property or leave it at the
pawnshop.
This bill provides that when property entered into the DOJ
automated property or firearm system is found in the possession
of a pawnbroker or secondhand dealer, the property shall be
placed on law enforcement hold.
This bill provides that a pawnbroker or secondhand dealer shall
not refuse a request to place a hold on property that law
enforcement has probable cause to believe is stolen. If the
hold request is refused, an officer may seize the property
without a warrant.
This bill provides that a warrant shall not be issued for the
search of a pawn or secondhand business unless the application
for the warrant sets out the officer's unsuccessful attempts to
use the procedures for placing a hold on the property and the
magistrate determines the following:
The pawnbroker or secondhand dealer has refused to
voluntarily surrender the property, or there is probable
cause that the business owner willfully concealed the
property; and
Any notice requirements as to the property would
frustrate the criminal investigation of the pawnbroker or
secondhand dealer.
This bill provides that in adjudicating competing claims of
interest in property seized from a pawnbroker, the magistrate or
person with custody of the property shall consider Section 2403
of the Commercial Code, which concerns the rights acquired by a
purchaser of property under various circumstances.
This bill provides that when property that has been reported
lost, stolen or embezzled is taken from a pawnshop, the
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following applies:
The person claiming ownership of the property must file
a written statement, under penalty of perjury, stating the
factual basis for his or her claim.
The person with custody of the property shall notify the
pawnbroker of the claim and provide the pawnbroker with a
copy of the claim.
This bill provides that at least 30 days prior to any hearing
adjudicating competing claims of a pawnbroker and a person
claiming interest in property, the person with custody of the
property shall deliver to the pawnbroker a copy of the police
report substantiating the basis for the seizure of the property
from the pawnbroker.
This bill refers to property that is "lost, stolen or embezzled"
in references to property that is acquired by pawnbrokers and
secondhand dealers and subject to reporting requirements and
procedures for return of such property. Existing law refers to
lost and stolen property.
RECEIVERSHIP/OVERCROWDING CRISIS AGGRAVATION
For the last several years, severe overcrowding in California's
prisons has been the focus of evolving and expensive litigation
relating to conditions of confinement. On May 23, 2011, the
United States Supreme Court ordered California to reduce its
prison population to 137.5 percent of design capacity within two
years from the date of its ruling, subject to the right of the
state to seek modifications in appropriate circumstances.
Beginning in early 2007, Senate leadership initiated a policy to
hold legislative proposals which could further aggravate the
prison overcrowding crisis through new or expanded felony
prosecutions. Under the resulting policy known as "ROCA" (which
stands for "Receivership/ Overcrowding Crisis Aggravation"), the
Committee held measures which created a new felony, expanded the
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scope or penalty of an existing felony, or otherwise increased
the application of a felony in a manner which could exacerbate
the prison overcrowding crisis. Under these principles, ROCA
was applied as a content-neutral, provisional measure necessary
to ensure that the Legislature did not erode progress towards
reducing prison overcrowding by passing legislation which would
increase the prison population. ROCA necessitated many hard and
difficult decisions for the Committee.
In January of 2013, just over a year after the enactment of the
historic Public Safety Realignment Act of 2011, the State of
California filed court documents seeking to vacate or modify the
federal court order issued by the Three-Judge Court three years
earlier to reduce the state's prison population to 137.5 percent
of design capacity. The State submitted in part that the, ". .
. population in the State's 33 prisons has been reduced by over
24,000 inmates since October 2011 when public safety realignment
went into effect, by more than 36,000 inmates compared to the
2008 population . . . , and by nearly 42,000 inmates since 2006
. . . ." Plaintiffs, who opposed the state's motion, argue in
part that, "California prisons, which currently average 150% of
capacity, and reach as high as 185% of capacity at one prison,
continue to deliver health care that is constitutionally
deficient." In an order dated January 29, 2013, the federal
court granted the state a six-month extension to achieve the
137.5 % prisoner population cap by December 31st of this year.
In an order dated April 11, 2013, the Three-Judge Court denied
the state's motions, and ordered the state of California to
"immediately take all steps necessary to comply with this
Court's . . . Order . . . requiring defendants to reduce overall
prison population to 137.5% design capacity by December 31,
2013."
The ongoing litigation indicates that prison capacity and
related issues concerning conditions of confinement remain
unresolved. However, in light of the real gains in reducing the
prison population that have been made, although even greater
reductions are required by the court, the Committee will review
each ROCA bill with more flexible consideration. The following
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questions will inform this consideration:
whether a measure erodes realignment;
whether a measure addresses a crime which is directly
dangerous to the physical safety of others for which there
is no other reasonably appropriate sanction;
whether a bill corrects a constitutional infirmity or
legislative drafting error;
whether a measure proposes penalties which are
proportionate, and cannot be achieved through any other
reasonably appropriate remedy; and
whether a bill addresses a major area of public safety
or criminal activity for which there is no other
reasonable, appropriate remedy.
COMMENTS
1.Need for This Bill
Under current law there are no consequences to
operators who are unlicensed and deal in secondhand
reportable property transactions. Consumers cannot
recover property that is not "held" as described in
current law, when an unscrupulous operator is not
licensed and therefore ignores that requirement.
Theoretically, the bill can generate revenue through
seizure that may be directed to the General Funds of
cities and counties that may be dedicated to law
enforcement and prosecutors to curb this illegal
activity.
Further, to incentivize businesses to become licensed
and to report and hold their acquisitions pursuant to
existing law, SB 762 streamlines the process of
adjudicating the competing claims of licensed
secondhand dealers and alleged crime victims by
revising the existing statutory hold provision of
current law.
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2. Property Rights and Interests of Pawnbrokers - Law Enforcement
may Return Property to a Person Claiming to be the Owner of
the Property
The sponsor has stated that this bill would, in substantial
part, clarify existing law and codify a federal appellate case
holding that California law prohibits law enforcement from
simply taking reportedly stolen property and returning the
property to the person claiming to own the property.
The case at issue is G&G Jewelry v. Oakland (1993) (9th Cir.)
989 F.2d 1093.
Boiled down to the essence of the decision, the court in G&G
held that California law prohibited the Oakland Police (or any
law enforcement agency) from taking reportedly stolen property
from the possession of a pawnbroker and giving the property to
the claimed owner of the property. The police cannot return the
property to the owner following resolution of a criminal case
concerning the stolen property. The police must follow
statutory procedures requiring that property be returned to the
pawnshop owner and the owner must obtain the property from the
pawnshop. The pawnshop owner may charge a fee for returning the
property to the owner. If the owner did not participate in the
prosecution, the pawnshop owner may require the property owner
to pay the pawnbroker's "out of pocket" expenses. These
expenses apparently include the amount of a loaned secured by
the property or the money paid by the pawnshop owner to buy the
property.
G&G was decided on the basis of law that is largely the same
today as in 1993. The police in Oakland were not following
statutory procedures at that time. This raises the issue as to
whether the problems for pawnshop owners in vindicating their
rights arise because of misapplication of the governing, rather
than deficiencies in the way the statutes are written.
A summary of the facts of G&G follows: Michael Watson filed a
report that his camera had been stolen in a robbery. A few
months later, the camera was pawned (given as collateral for a
loan) by Frederick Brasley at G&G Jewelry - a pawnshop in
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Oakland. The Oakland Police placed a statutory (Bus. & Prof.
Code � 21647) 90-hold on the camera when the department matched
the serial numbers of the camera from the robbery report with
the required report by G&G of the pawn transaction with Brasley.
The hold prohibited G&G from transferring or disposing of the
camera. The police determined that Brasley had not stolen the
camera, so charges were not filed against him.
Six days before the 90-day hold expired, the police notified G&G
that unless it could establish that Watson - the reported
robbery victim - was not the owner of the camera, the camera
would be returned to Watson. G&G objected, but an officer took
the camera. (G&G Jewelry v. Oakland, supra, 989 F.2d 1093,
1094-1095.)
The interests and rights of pawnshop owners in property that has
been acquired by a pawnshop and that has been reported as lost
or stolen is a very important part of this bill. Existing
statutes on this issue are not entirely clear and consistent.
For example, Penal Code Section 1411 could be interpreted to
allow a law enforcement agency to return lost or stolen property
directly to a person who claimed ownership of the property,
regardless of whether the property had been sold as secondhand
property or pledged as collateral for a loan from a pawnshop.
This bill essentially requires that all property that has been
pledged as a loan or sold to a pawnshop and that 1) was entered
into the database of property acquired by pawnshops and
secondhand dealers, and 2) reported as lost or stolen, be
returned to the pawnshop owner when a criminal investigation or
prosecution concerning the property has concluded. Upon return
of the property to the pawnshop owner, the pawnshop owner may
return the property to the person claiming ownership as follows:
1) If the person claiming ownership cooperated with the
underlying criminal action, the pawnshop owner may charge a fee
to the person claiming ownership of the property as a condition
of return. 2) If the person claiming ownership did not
cooperate with the criminal action, the pawnshop owner is
entitled to his or her "out of pocket" expenses, presumably
including the amount of money loaned to the pledger of the
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property, or the price the pawnshop owner paid to purchase the
property and any related costs and expenses.
In discussions about this bill, a representative of the sponsor
noted that property that has been reported as lost or stolen and
in the possession of a pawnshop is only discovered because the
pawnshop owner reported acquisition of the property. Had the
pawnshop owner not complied with the reporting law, the owner of
the property would not have gotten his or her property back.
Others noted that reporting the acquisition of the property is a
legal duty. The legal duty is imposed because pawnshops and
secondhand dealers provide a relatively obvious method for
thieves to attempt to dispose of stolen property. Return of the
property to the owner without compensation to the pawnshop owner
or secondhand goods dealer arguably should be considered an
expected risk or cost of doing business in secondhand goods.
WHERE PROPERTY PLEDGED FOR A LOAN OR SOLD AS A SECONDHAND GOOD
IS DETERMINED TO BE LOST OR STOLEN, AND THE PAWNSHOP OWNER OR
SECONDHAND GOODS BUSINESS COMPLIED WITH THE LAW, SHOULD THE
PROPERTY ALWAYS BE RETURNED TO THE PAWNSHOP OWNER UPON
CONCLUSION OF A CRIMINAL INVESTIGATION OR PROSECUTION?
UPON RETURN OF THE PROPERTY TO THE PAWNSHOP OWNER, SHOULD HE OR
SHE BE ENTITLED TO A FEE FROM THE PROPERTY OWNER OR PAYMENT BY
THE OWNER OF THE PAWNBOKER'S OUT OF POCKET COSTS?
3. Search Warrant Issues
This bill provides that a warrant shall not be issued for the
search of the place of business of a pawnbroker or secondhand
dealer unless one of the following is demonstrated to the court:
The evidence sought "to be secured by the search warrant
is sought for its evidentiary value other than property
that is lost, stolen or embezzled."
The peace officer's attempts to use the procedures for
placing a hold on property that is suspected of being lost,
stolen or embezzled demonstrate that the pawnbroker has
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refused to voluntarily surrender the property.
There is probable cause that the reportedly lost, stolen
or embezzled property is being willfully concealed by the
pawnbroker or secondhand dealer.
This portion of the bill was discussed at length in a conference
call that included the sponsor, the author's staff, Committee
staff and representatives of the California District Attorneys
Association (CDAA). Concerns were raised that this provision
could be read as limiting a court's ability to issue a warrant
for the search of a pawnbroker or secondhand goods business. In
general, questions were raised about the propriety of describing
in a statute the grounds for issuance of a search warrant, since
search warrants are issued when a law enforcement officer
establishes probable cause that evidence of a crime may be found
in found in the place to be searched. That is, the limits on
the issuance of search warrants are found in constitutional law,
not statutes.
In particular, questions were raised as to whether these
provisions would create uncertainty and issues for court
motions, writs and appeals. For example, one could argue that
the bill limits searches to cases where the police seek to
"secure" a specific item of evidence, rather than to discover
evidence.
CDAA has argued in its letter of opposition that a California
appellate case authorizes police to seize stolen property from a
pawnbroker or secondhand dealer without a warrant if the
property is in plain view. (Christian v. Chester (1990) 218
Cal.App.3d 273, 277.) CDAA argues that this bolsters its
argument that issues of search and seizure are governed by
constitutional law and should not be addressed in statute.<3>
The court in Christian ruled that when a police officer finds
stolen property in plain view at a pawnshop, the officer can
---------------------------
<3> The court in G&G v. Oakland , supra , 989 F.2d 1093,
1094-1095, appears to have concluded that Oakland police did not
have the right to seize stolen property from a pawnbroker
without a warrant under the plain view doctrine.
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seize the property without a warrant under the plain view
doctrine. The officer must give the pawnbroker a receipt for
the property, as required by Financial Code 21206.7. The
officer need not comply with the provisions in Business and
Professions Code Section 21647, which sets out the procedure for
placing a law-enforcement hold on suspected stolen property.
(Id, at pp. 274-277.)
It appears that this bill would provide that a law enforcement
officer cannot seize a suspected stolen item from a pawnbroker
unless the pawnbroker refuses to place a hold on the property.
The determination of how existing law not amended by this bill,
the provisions of this bill and constitutional provisions
concerning search and seizure will be interpreted and harmonized
in the courts is uncertain.
DOES THE BILL CREATE AMBIGUITIES OR CONSTITUTIONAL ISSUES
CONCERNING WHEN A PEACE OFFICER MAY OBTAIN A WARRANT TO SEARCH
THE BUSINESS OF A PAWNBROKER OR SECONDHAND DEALER?
4. Creating Financial Incentive through Forfeiture for Law
Enforcement to Enforce Secondhand Dealer License Laws -
Issues of "Bounty" and Influencing Law Enforcement
Priorities
This bill defines the operating an unlicensed secondhand goods
business and failing to report acquisitions of secondhand goods
as criminal profiteering by organized crime and authorizes
forfeiture of those profits. The proceeds of forfeiture from
unlicensed businesses will be divided as follows: 45% to the
city or county that instituted the forfeiture through the police
or sheriff; 45% and the city or county that litigated the
forfeiture through the office of the district attorney or city
attorney; and 10% to the Restitution Fund for victims of crime.
Representatives of the sponsor have argued that the offense of
acting as a secondhand property dealer without a license is a
low priority for law enforcement. As such, the state must offer
financial incentives for law enforcement and the government
entities that fund and employ law enforcement agencies to
investigate and prosecute unlicensed dealers.
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Designating that forfeiture proceeds shall be paid to the law
enforcement agency that seized the forfeited property has been
criticized as creating an improper bounty - an incentive for law
enforcement agencies to pursue investigations based on financial
interest, rather than public safety. While the proceeds of
forfeiture from unlicensed dealers would not be paid directly to
law enforcement agencies, representatives of the sponsor have
noted that the chief of police in a city or sheriff in a county
could press the city council and board of supervisors for
additional funding of the law enforcement agency from the
proceeds of forfeitures initiated by the law enforcement agency.
In an era where all government agencies have very tight
budgets, there could be significant pressure to use forfeiture
proceeds as a source of operating revenue for law enforcement
agencies.
The purpose of criminal asset forfeiture is to prevent organized
crime entities from profiting from crime and amassing assets
that would allow them to become more powerful and dangerous.
(Pen. Code � 186.2, subd. (d).) The Senate Public Safety
Committee analysis of the bill that added gang crimes to the
criminal profiteering laws<4> explained: "The California
Control of Profits of Organized Crime Act ('Little RICO"),
patterned after the federal RICO statute, was enacted in 1982
for the purpose of recovering the profits of organized crime."
The most common examples of organized crime are likely the Mafia
and criminal street gangs. Such organizations would appear to
present such a danger to the community that law enforcement
would not need any special incentive to pursue investigations
and arrests of participants and controllers of organized crime.
Where a law enforcement agency is successful in arguing that the
proceeds of forfeitures from illegally operated businesses
should be designated for the agency that initiated the
forfeiture, other entities and organizations representing a
range of licensed businesses and professions could well press
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<4> SB 1992 (Calderon), Ch. 844, Stats. 1996 - May 7, 1996
hearing.
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for similar forfeiture schemes to be adopted to protect them.
These businesses could very likely include contractors,
cosmetology and barbering, medical professionals, plumbers, or
any entity for which a license is required, including a simple
business license. While such businesses do not provide a means
for the fencing of stolen property, it could well be argued that
because the public is put at risk by unlicensed businesses, and
because unlicensed businesses can unfairly compete with licensed
businesses, forfeiture should be applied to any unlicensed or
improperly run business.
WOULD ANY OTHER LICENSED PROFESSIONALS - CONTRACTORS FOR EXAMPLE
- SEEK SIMILAR LAWS TO ENCOURAGE LAW ENFORCEMENT TO MAKE
INVESTIGATION OF UNLICENSED ACTIVITY AND ARREST OF OFFENDERS A
PRIORITY?
5. Secondhand Property Dealers are Broadly Defined in Existing
Law - Separate Regulatory Scheme for Flea Markets and Swap
Meets
Business and Professions Code Section 21626 defines a
"secondhand dealer" as any person or entity "whose business
includes buying, selling, trading, taking in pawn, accepting for
sale on consignment, accepting for auctioning, or auctioning
secondhand tangible personal property." (Italics added.) A
person or entity is a secondhand dealer regardless of whether or
not secondhand property transactions form the major part of the
person's or entity's business. For example, it would appear
that a music store that regularly accepts a few instruments on
consignment is a secondhand dealer. However, Business and
Professions Code Section 21625 states that the intent of the
reporting system for tangible personal property is to regulate
"persons whose principal business" is dealing in tangible
personal property so as to curtail theft and prevent and detect
sales tax evasion.
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Court Decisions
There are surprisingly very few appellate decisions discussing
who is a secondhand property dealer. A litigant in one
appellate case has provided the Committee, the author and the
sponsor with a decision from the Court of Appeal of California,
Second Appellate District, in
Los Angeles interpreting and applying the Los Angeles City
ordinance regulating secondhand dealers. In that case, the
appellate court held that a person who buys and collects, but
does not sell, used books and "ephemera" is not a secondhand
dealer within the meaning of the local ordinance. (Hopp v. City
of Los Angeles (2010) 183 Cal.App.4th 713,717-722.) The Los
Angeles ordinance at issue in Hopp is similar to state law in
defining persons who buy property as secondhand dealers. As
such, the decision in Hopp could well to apply to a similar
challenge of state law.
Opinion of the Attorney General
Bakersfield City Attorney Virginia Gennaro requested an opinion
as to who is required to hold a license as a "secondhand dealer"
under the Business and Professions Code. In response, the
California Attorney General issued an opinion finding that "[a]
person is required to hold a license as a "secondhand dealer"
if: (a) he or she owns a "drop-off" store located within the
state where secondhand tangible personal property is accepted
for sale to be conducted on an Internet auction Web site, (b)
the property is held for display or in storage at the store or
off the premises, (c) the property is advertised and sold by an
Internet auction Web site, (d) the store owner arranges for
payment and delivery of the property sold, and (e) he or she
charges the seller a fee for services rendered. (88
Ops.Cal.Atty.Gen. 41 (April 6, 2005).)
6. Sentencing Issues - the Bill Creates a New Felony by Requiring
a Person Claiming Ownership in Property that has been taken
from a Pawnbroker to File a Claim under Penalty of Perjury
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One of the major parts of this bill concerns protection of the
property rights and interests of pawnbrokers in property
acquired by the pawnbroker that has been reported stolen, lost
or embezzled. Under existing law, in cases where the property
has been taken from the pawnbroker for a criminal investigation
or case, Financial Code Section 21206.8 requires a person
claiming ownership in the property to notify the pawnbroker of
the claim.
This bill requires a person claiming ownership of the property
to file a statement under penalty of perjury (declaration)
setting out the factual basis for the claim. The person or
entity with custody of the property - police officer, judge,
clerk or other party - shall notify the pawnbroker of the claim
and provide the pawnbroker with a copy of the declaration.
Because this bill creates a requirement that a person claiming
ownership in property taken from pawnbroker to file a statement
under penalty of perjury, the bill effectively creates a new
felony. Perjury is the willful making of a materially false
statement. Perjury is a felony, punishable pursuant to Penal
Code Section 1170, subdivision (h), by a jail term of two, three
or four years. (Pen. Code �� 118 and 126.), 1f the convicted
person is prohibited by law from serving an executed felony
sentence in jail, such as person currently or previously
convicted of a serious felony, the executed sentence must be
served in jail.
It appears that issues of ownership of lost, stolen or embezzled
property found in the possession of a pawnbroker arise
relatively frequently. It cannot be estimated how often
claimants would file false claims of ownership under penalty of
perjury and become subject to a felony prosecution under the
terms of this bill. However, persons convicted of this new form
of perjury would add to the jail and prison population. This
includes convicted defendants who are granted probation, as
probation typically involves a term in the county jail as a
condition of probation.
WOULD THIS BILL AFFECT JAIL AND PRISON POPULATION NUMBERS AND
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REALIGNMENT?
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