Amended in Assembly March 19, 2015

California Legislature—2015–16 Regular Session

Assembly BillNo. 556


Introduced by Assembly Member Irwin

February 23, 2015


An act to amend Section 17510.85 of the Business and Professions Code,begin delete to amend Section 2225 of, andend delete to add Sectionbegin delete 2226 to,end deletebegin insert 2224.5 toend insert the Civil Code,begin delete to add Sections 6816 and 8818 to the Corporations Code,end delete and to amend Section 12596 of the Government Code, relating to trusts.

LEGISLATIVE COUNSEL’S DIGEST

AB 556, as amended, Irwin. Trusts: regulation and enforcement.

Existing law requires an individual or entity who for compensation solicits funds or property for charitable purposes to disclose that the solicitation is being conducted by a commercial fundraiser for a charitable purpose and the registered name of the commercial fundraiser.

This bill would also require an individual or entity who solicits funds or property for charitable purposes with the participation of a fundraising counsel for charitable purposes to make specified disclosures regarding the fundraising counsel. The bill would require the disclosures, if printed or if presented electronically, to be in at least 12-pointbegin delete type.end deletebegin insert type, and be clearend insertbegin insert and conspicuousend insertbegin insert.end insert

Existing law, the Supervision of Trustees and Fundraisers for Charitable Purposes Act, generally regulates charitable corporations, trustees, and other legal entities holding property for charitable purposes, commercial fundraisers for charitable purposes, and fundraising counsel for charitable purposes, among others, over which the state or the Attorney General has enforcement or supervisory powers. Existing law requires the Attorney General to establish and maintain a register of charitable corporations, unincorporated associations, and trustees subject to these provisions and of the particular trust or other relationship under which they hold property for charitable purposes. Existing law authorizes the Attorney General to bring any action against trustees or against any charitable corporation or director or officer thereof, to enforce a charitable trust, to impress property with a trust for charitable purposes, or to recover property or the proceeds thereof at any time within 10 years after the cause of action accrued.

This bill would authorize the Attorney General to bring an action for a violation of these provisions at any time within 10 years after the cause of action accrued. The bill would also authorize the Attorney General to bring an action for civil liability against a person who aids or abets a violation of these provisions at any time within 10 years after the cause of action accrued.

Existing law provides that one who wrongfully detains a thing is an involuntary trustee thereof for the benefit of the owner, and that one who gains a thing by fraud, or other wrongful act is an involuntary trustee of the thing gained for the benefit of the owner.

begin insert

This bill would authorize the Attorney General to bring an action for a violation of these provisions at any time within 10 years after the cause of action accrued.

end insert

This bill wouldbegin insert alsoend insert authorize the Attorney General to bring an action for civil liability against a person who aids or abets a violation of these provisions at any time within 10 years after the cause of action accrued.

begin delete

Existing law also imposes an involuntary trust for a period of 5 years upon the proceeds and profits from the sale or transfer of any thing or right of a felon, the value of which is enhanced by the notoriety gained from the commission of the felony, and specifies procedures whereby the beneficiaries of the trust, as defined, are authorized to enforce their rights under the trust. Existing law authorizes the Attorney General to bring an action to require proceeds or profits by a convicted felon to be held in an express trust within one year after the receipt of proceeds or profits, or one year after the date of the conviction, whichever is later.

end delete
begin delete

This bill would extend the period of the involuntary trust imposed upon the proceeds and profits of a felon to 10 years. The bill would authorize the Attorney General to bring an action to require the proceeds or profits of a felon to be held in an express trust within 10 years after the receipt of the proceeds or profits, or 10 years after the date of conviction, whichever is later. The bill would also authorize the Attorney General to bring an action for a violation of these provisions at any time within 10 years after the cause of action accrued.

end delete

Existing law, the Nonprofit Corporation Law, set forth standards of conduct for directors and officers of nonprofit public benefit corporations and provides that it is a crime for any director or officer of any corporation among other things, to knowingly engage in specified acts relating to fraud, to make materially false reports, to receive or acquire possession of the property of the corporation, or to falsify the books or accounts of the corporation.

This bill would authorize the Attorney General to bring an action for a violation of these provisions at any time within 10 years after the cause of action accrued. The bill would also authorize the Attorney General to bring an action for civil liability against a person who aids or abets a violation of the standards of conduct for directors and officers of nonprofit public benefit corporations at any time within 10 years after the cause of action accrued.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

P3    1

SECTION 1.  

Section 17510.85 of the Business and Professions
2Code
is amended to read:

3

17510.85.  

(a) An individual, corporation, or other legal entity
4who for compensation solicits funds or other property in this state
5for charitable purposes shall disclose prior to an oral solicitation
6or sales solicitation made by direct personal contact, radio,
7television, telephone, or over the Internet, or at the same time as
8a written solicitation or sales solicitation:

9(1) That the solicitation or sales solicitation is being conducted
10by a commercial fundraiser for charitable purposes.

11(2) The name of the commercial fundraiser for charitable
12purposes as registered with the Attorney General pursuant to
13Section 12599 of the Government Code.

14(b) An individual, corporation, or other legal entity who solicits
15funds or other property in this state for charitable purposes with
16the participation of a fundraising counsel for charitable purposes,
17as defined in Section 12599.1 of the Government Code, shall
18disclose prior to an oral solicitation or sales solicitation made by
19direct personal contact, radio, television, telephone, or via the
P4    1Internet, or at the same time as a written solicitation or sales
2solicitation:

3(1) That the solicitation or sales solicitation is being conducted
4with the participation of a fundraising counsel for charitable
5purposes.

6(2) The name of the fundraising counsel for charitable purposes
7as registered with the Attorney General pursuant to Section 12599.1
8of the Government Code.

9(c) The disclosures required pursuant to this section, if printed
10or if presented electronically, shall be in at least 12-pointbegin delete type.end delete
11begin insert type, and shall be clear and conspicuous, as defined in Section
1217601.end insert

begin delete
13

SEC. 2.  

Section 2225 of the Civil Code is amended to read:

14

2225.  

(a) As used in this section:

15(1) “Convicted felon” means any person convicted of a felony,
16or found not guilty by reason of insanity of a felony committed in
17California, either by a court or jury trial or by entry of a plea in
18court.

19(2) “Felony” means a felony defined by any California or United
20States statute.

21(3) (A) “Representative of the felon” means any person or entity
22receiving proceeds or profits by designation of that felon, on behalf
23of that felon, or in the stead of that felon, whether by the felon’s
24 designation or by operation of law.

25(B) “Profiteer of the felony” means any person who sells or
26transfers for profit any memorabilia or other property or thing of
27the felon, the value of which is enhanced by the notoriety gained
28from the commission of the felony for which the felon was
29convicted. This subparagraph shall not apply to any media entity
30reporting on the felon’s story or on the sale of the materials,
31memorabilia, or other property or thing of the felon. Nor shall it
32apply to the sale of the materials, as the term is defined in
33paragraph (6), if the seller is exercising his or her first amendment
34rights. This subparagraph also shall not apply to the sale or transfer
35by a profiteer of any other expressive work protected by the First
36Amendment unless the sale or transfer is primarily for a
37commercial or speculative purpose.

38(4) (A) “Beneficiary” means a person who, under applicable
39law, other than the provisions of this section, has or had a right to
40recover damages from the convicted felon for physical, mental, or
P5    1emotional injury, or pecuniary loss proximately caused by the
2convicted felon as a result of the crime for which the felon was
3convicted.

4(B) If a beneficiary described in subparagraph (A) has died,
5“beneficiary” also includes a person or estate entitled to recover
6damages pursuant to Chapter 4 (commencing with Section 377.10)
7of Title 3 of Part 2 of the Code of Civil Procedure.

8(C) If a person has died and the death was proximately caused
9by the convicted felon as a result of the crime for which the felon
10was convicted, “beneficiary” also includes a person described in
11Section 377.60 of the Code of Civil Procedure and any beneficiary
12of a will of the decedent who had a right under that will to receive
13more than 25 percent of the value of the estate of the decedent.

14(5) “Beneficiary’s interest” means that portion of the proceeds
15or profits necessary to pay the following:

16(A) In the case of a beneficiary described in subparagraph (A)
17or (B) of paragraph (4), those damages that, under applicable law,
18other than the provisions of this section, the beneficiary has or had
19a right to recover from the convicted felon for injuries proximately
20caused by the convicted felon as a result of the crime for which
21the felon was convicted.

22(B) In the case of a beneficiary described in subparagraph (C)
23of paragraph (4), those damages that, under all the circumstances
24of the case, may be just.

25(C) A beneficiary’s interest shall be reduced by the following
26amount:

27(i) Money paid to the beneficiary from the Restitution Fund
28because of the crime for which the felon was convicted.

29(ii) Money paid to the beneficiary by the convicted felon because
30of a requirement of restitution imposed by a court in connection
31with the crime for which the felon was convicted.

32(iii) Money paid to the beneficiary because of a judgment against
33the convicted felon based upon the crime for which the felon was
34convicted.

35(D) In the case of an unsatisfied existing judgment or order of
36restitution against the convicted felon and in favor of a beneficiary,
37any money paid to the beneficiary pursuant to this section shall be
38applied to reduce the amount of the unsatisfied judgment or order.

39(6) “Materials” means books, magazine or newspaper articles,
40movies, films, videotapes, sound recordings, interviews or
P6    1appearances on television and radio stations, and live presentations
2of any kind.

3(7) “Story” means a depiction, portrayal, or reenactment of a
4felony and shall not be taken to mean a passing mention of the
5felony, as in a footnote or bibliography.

6(8) “Sale” includes lease, license, or any other transfer or
7alienation taking place in California or elsewhere.

8(9) “Proceeds” means all fees, royalties, real property, or other
9consideration of any and every kind or nature received by or owing
10to a felon or his or her representatives for the preparation for the
11purpose of sale of materials, for the sale of the rights to materials,
12or the sale or distribution by the convicted felon of materials
13whether earned, accrued, or paid before or after the conviction. It
14includes any interest, earnings, or accretions upon proceeds, and
15any property received in exchange for proceeds.

16(10) “Profits” means all income from anything sold or
17transferred by the felon, a representative of the felon, or a profiteer
18of the felony, including any right, the value of which thing or right
19is enhanced by the notoriety gained from the commission of a
20felony for which a convicted felon was convicted. This income
21may have been accrued, earned, or paid before or after the
22conviction. However, voluntary donations or contributions to a
23defendant to assist in the defense of criminal charges shall not be
24deemed to be “profits,” provided the donation or contribution to
25that defense is not given in exchange for some material of value.

26(b) (1) All proceeds from the preparation for the purpose of
27sale, the sale of the rights to, or the sale of materials that include
28or are based on the story of a felony for which a convicted felon
29was convicted, shall be subject to an involuntary trust for the
30benefit of the beneficiaries set forth in this section. That trust shall
31continue until 10 years after the time of payment of the proceeds
32to the felon or 10 years after the date of conviction, whichever is
33later. If an action is filed by a beneficiary to recover his or her
34interest in a trust within those time limitations, the trust character
35of the property shall continue until the conclusion of the action.
36At the end of the 10-year trust period, any proceeds that remain
37in trust that have not been claimed by a beneficiary shall be
38transferred to the Controller, to be allocated to the Restitution
39Fund.

P7    1(2) All profits shall be subject to an involuntary trust for the
2benefit of the beneficiaries set forth in this section. That trust shall
3continue until 10 years after the time of payment of the profits to
4the felon or 10 years after the date of conviction, whichever is
5later. If an action is filed by a beneficiary to recover his or her
6interest in a trust within those time limitations, the trust character
7of the property shall continue until the conclusion of the action.
8At the end of the 10-year trust period, any profits that remain in
9trust that have not been claimed by a beneficiary shall be
10transferred to the Controller, to be allocated to the Restitution
11Fund.

12(3) Notwithstanding paragraph (2), in the case of a sale or
13transfer by a profiteer of the felony, the court in an action under
14subdivision (c) shall, upon an adequate showing by the profiteer
15of the felony, exclude from the involuntary trust that portion of
16the profits that represents the inherent value of the memorabilia,
17property, or thing sold or transferred and exclusive of the amount
18of the enhancement to the value due to the notoriety of the
19convicted felon.

20(c) (1) Any beneficiary may bring an action against a convicted
21felon, representative of the felon, or a profiteer of a felony to
22recover his or her interest in the trust established by this section.

23(2) That action may be brought in the superior court of the
24county in which the beneficiary resides, or of the county in which
25the convicted felon resides, or of the county in which proceeds or
26profits are located.

27(3) If the court determines that a beneficiary is entitled to
28proceeds or profits pursuant to this section, the court shall order
29the payment from proceeds or profits that have been received, and,
30if that is insufficient, from proceeds or profits that may be received
31in the future.

32(d) If there are two or more beneficiaries and if the available
33proceeds or profits are insufficient to pay all beneficiaries, the
34proceeds or profits shall be equitably apportioned among the
35beneficiaries taking into account the impact of the crime upon
36them.

37Prior to any distribution of any proceeds to a beneficiary, the
38court shall determine whether the convicted felon has failed to pay
39any portion of a restitution fine or penalty fine imposed by a court,
40or any restitution imposed as a condition of probation. The court
P8    1shall also determine whether the felon is obligated to reimburse a
2governmental entity for the costs of his or her defense and whether
3a portion of the proceeds is needed to cover his or her reasonable
4attorney’s fees incurred in the criminal proceeding related to the
5felony, or any appeal or other related proceeding, or in the defense
6of the action brought under this section. The court shall order
7payment of these obligations prior to any payment to a beneficiary,
8except that 60 percent of the proceeds or profits shall be reserved
9for payment to the beneficiaries.

10(e) (1) The Attorney General may bring an action to require
11proceeds or profits received by a convicted felon to be held in an
12express trust in a bank authorized to act as a trustee.

13(2) An action may be brought under this subdivision within 10
14years after the receipt of proceeds or profits by a convicted felon
15or 10 years after the date of conviction, whichever is later.

16That action may be brought in the superior court of any county
17in which the Attorney General has an office.

18(3) If the Attorney General proves that the proceeds or profits
19are proceeds or profits from the sale of a story or thing of value
20that are subject to an involuntary trust pursuant to this section, and
21that it is more probable than not that there are beneficiaries within
22the meaning of this section, the court shall order that all proceeds
23or profits be deposited in a bank and held by the bank as trustee
24of the trust until an order of disposition is made by a court pursuant
25to subdivision (d), or until the expiration of the period specified
26in subdivision (b).

27(4) If the Attorney General prevails in an action under this
28subdivision, the court shall order the payment from the proceeds
29or profits to the Attorney General of reasonable costs and attorney’s
30fees.

31(f) (1) In any action brought pursuant to this section, upon
32motion of a party the court shall grant a preliminary injunction to
33prevent any waste of proceeds or profits if it appears that the
34proceeds or profits are subject to the provisions of this section,
35and that they may be subject to waste.

36(2) Upon motion of the Attorney General or any potential
37beneficiary, the court shall grant a preliminary injunction against
38a person against whom an indictment or information for a felony
39has been filed in superior court to prevent any waste of proceeds
40or profits if there is probable cause to believe that the proceeds or
P9    1profits would be subject to an involuntary trust pursuant to this
2section upon conviction of this person, and that they may be subject
3to waste.

4(g) Any violation of an order of a court made pursuant to this
5 section shall be punishable as contempt.

6(h) The remedies provided by this section are in addition to
7other remedies provided by law.

8No period of limitations, except those provided by this section,
9shall limit the right of recovery under this section.

end delete
10

begin deleteSEC. 3.end delete
11begin insertSEC. 2.end insert  

Sectionbegin delete 2226end deletebegin insert 2224.5end insert is added to the Civil Code, to
12read:

13

begin delete2226.end delete
14begin insert 2224.5.end insert  

An action brought by the Attorney General pursuant
15tobegin insert Section 2223 or 2224end insertbegin delete this titleend delete may be brought at any time within
1610 years after the cause of action accrued.

begin delete17

SEC. 4.  

Section 6816 is added to the Corporations Code, to
18read:

19

6816.  

An action brought by the Attorney General for a violation
20of this chapter may be brought at any time within 10 years after
21the cause of the action accrued.

end delete
begin delete22

SEC. 5.  

Section 8818 is added to the Corporations Code, to
23read:

24

8818.  

An action brought by the Attorney General for a violation
25of this chapter may be brought at any time within 10 years after
26the cause of the action accrued.

end delete
27

begin deleteSEC. 6.end delete
28begin insertSEC. 3.end insert  

Section 12596 of the Government Code is amended
29to read:

30

12596.  

(a) begin deleteAn end deletebegin insertA civil end insertaction brought by the Attorney General
31against trustees or other persons holding property in trust for
32charitable purposes or against any charitable corporation or any
33director or officer thereof to enforce a charitable trust or to impress
34property with a trust for charitable purposes or to recover property
35or the proceeds thereof for and on behalf of any charitable trust or
36corporation, may be brought at any time within 10 years after the
37cause of action accrued.

38(b) begin deleteAn end deletebegin insertA civil end insertaction brought by the Attorney General for a
39violation of this article, pursuant tobegin delete Title 8 (commencing with
40Section 2223) of Part 4 of Division 3end delete
begin insert Section 2223 or 2224end insert of the
P10   1Civil Code, or pursuant to Division 2 (commencing with Section
25000) of Title 1 of the Corporations Code, may be brought at any
3time within 10 years after the cause of action accrued.

4(c) Notwithstanding Section 12581, the Attorney General may
5bringbegin delete an action for civil liabilityend deletebegin insert a civil actionend insert against a person
6who aids or abets a violation of this article, Section 2223 or 2224
7of the Civil Code, or Article 3 (commencing with Section 5230)
8of Chapter 2 of Division 2 of Title 1 of the Corporations Code, at
9any time within 10 years after the cause of action accrued.



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