BILL ANALYSIS                                                                                                                                                                                                    

                                                                     AB 556

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          Date of Hearing:  May 6, 2015


                                 Jimmy Gomez, Chair

          556 (Irwin) - As Amended April 7, 2015

          |Policy       |Judiciary                      |Vote:|10 - 0       |
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          |             |Privacy and Consumer           |     |11 - 0       |
          |             |Protection                     |     |             |
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          Urgency:  No  State Mandated Local Program:  NoReimbursable:  No


          This bill:


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          1)Expands the definition of "commercial fundraiser for  
            charitable purposes" with regard to the Attorney General's  
            (AG's) authority to enforce disclosure requirements for  
            charity fundraisers.

          2)Establishes a ten-year statute of limitations for enforcement  
            actions against charity fundraisers, consultants, and other  
            third parties who engage in fraud or other prohibited conduct.

          FISCAL EFFECT:

          Any additional costs to the AG's office would be minor and  
          absorbable within its existing resources.


          1)Background. The AG is responsible for regulating charities and  
            the professional fundraisers who solicit on their behalf. This  
            oversight is meant to protect charitable assets for their  
            intended use and ensure that charitable donations contributed  
            by Californians are not misused and squandered through fraud  
            or other means.  All charitable trustees and fundraising  
            professionals are required to register and file annual  
            financial disclosure reports with the Registry of Charitable  
            Trusts in the AG's office before soliciting in California.   
            The attorneys and auditors of the AG's Charitable Trusts  
            Section investigate and bring legal actions against charities,  
            their officers and directors, and fundraising professionals  
            that misuse charitable assets or engage in fraudulent  
            fundraising practices.

          2)Purpose. According to the author, recent enforcement cases  
            have highlighted examples where persons performing  


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            professional fundraising services attempted to circumvent  
            disclosure requirements by registering as fundraising counsel  
            rather than as commercial fundraisers.  In response, this bill  
            would revise the definition of "commercial fundraiser for  
            charitable purposes" to include additional actions and types  
            of fee arrangements that the author believes warrant a  
            disclosure to the public that the actions are being carried  
            out by a third party fundraiser for compensation.  For  
            example, the bill would require a person or entity that plans,  
            manages, counsels, advises, or prepares material for the  
            solicitation of funds for charitable purposes to register as a  
            commercial fundraiser if he or she is compensated by a  
            percentage interest in the funds received through solicitation  
            rather than by a flat fee.

          3)Statute of Limitations. Under Section 12596 of the Supervision  
            of Trustees and Fundraisers for Charitable Purposes Act, the  
            AG may bring an enforcement action for fraud or other  
            violations by the trustees, officers, or directors of a  
            charitable organization at any time within ten years of the  
            cause of action. Because cases involving charity fraud are  
            often complex and cover misconduct from an extended period of  
            time, the author contends, the ten-year statute of limitations  
            is appropriate. However, Section 12596 does not apply to other  
            parties such as fundraisers, consultants, or accountants who  
            may have directly participated in, or aided and abetted the  
            fraud; instead they are subject to either a three- or four-  
            year statute of limitations, depending on the cause of action.  
            Accordingly, this bill would establish a ten-year statute of  
            limitations for all persons or entities involved in the fraud  
            to make this consistent with the same period that applies to  
            directors and officers of the charity.  

          Analysis Prepared by:Chuck Nicol / APPR. / (916)  


                                                                     AB 556

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