BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 160|
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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)
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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.
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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).)
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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
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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.
4)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.
5)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.
6)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
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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
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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.:YesLocal: 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,
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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
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