BILL ANALYSIS Ó
AB 160
Page 1
Date of Hearing: April 7, 2015
Counsel: Gabriel Caswell
ASSEMBLY COMMITTEE ON PUBLIC SAFETY
Bill Quirk, Chair
AB
160 (Dababneh) - As Amended 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:
a) pimping and pandering;
b) counterfeiting of any registered trademark;
c) illegal piracy of recordings or audiovisual works;
d) embezzlement;
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e) securities fraud;
f) state tax fraud;
g) insurance fraud;
h) grand theft;
i) money laundering; and
j) 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
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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).)
a) Have the same or a similar purpose, result, principals,
victims, or methods of commission, or are otherwise
interrelated by distinguishing characteristics;
b) Are not isolated events; and/or
c) 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).)
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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):
a) Any property interest whether tangible or intangible,
acquired through a pattern of criminal profiteering
activity; and
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.
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):
a) 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;
b) 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
c) To the State's General Fund or local governmental
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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.
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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:
a) To the bona fide or innocent purchaser, conditional
sales vendor, or holder of a valid lien, mortgage, or
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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.
b) 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.
c) 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.
a) Pattern of Criminal Activity: "Pattern of criminal
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profiteering activity" means engaging in at least two
incidents of criminal profiteering (listed above), that
meet the following requirements
i) Have the same or a similar purpose, result,
principals, victims, or methods of commission, or are
otherwise interrelated by distinguishing characteristics;
ii) Are not isolated events; and/or
iii) Were committed as a criminal activity of organized
crime.
b) 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
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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
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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.
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"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.
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"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.
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"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
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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
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American Civil Liberties Union
California Attorneys for Criminal Justice
Analysis Prepared
by: Gabriel Caswell/PUB. S./(916) 319-3744
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