BILL ANALYSIS Ó SENATE JUDICIARY COMMITTEE Senator Hannah-Beth Jackson, Chair 2015-2016 Regular Session AB 556 (Irwin) Version: June 19, 2015 Hearing Date: June 30, 2015 Fiscal: Yes Urgency: No RD SUBJECT Charitable trusts: regulation and enforcement DESCRIPTION Existing law, the Uniform Supervision of Trustees and Fundraisers for Charitable Purposes Act (Charitable Purposes Act), authorizes the Attorney General (AG) to bring specified civil actions against trustees or other persons holding property in trust for charitable purposes or against any charitable corporation or any director or officer thereof, at any time within 10 years after the cause of action accrued. This bill would apply an identical 10 year statute of limitation to any action brought by the Attorney General: pursuant to specified involuntary trust laws under the Civil Code; arising out of a violation of the Charitable Purposes Act, pursuant to specified involuntary trust laws, or pursuant to the Nonprofit Corporation Law; and against a person who aids or abets a violation of the Charitable Purposes Act, specified involuntary trust laws, or the Nonprofit Public Benefit Corporations laws. This bill would modify the definitions of "commercial fundraiser for charitable purposes" and "fundraising counsel for charitable purposes," as specified. BACKGROUND The Attorney General (AG) oversees registered charities to AB 556 (Irwin) Page 2 of ? ensure that funds received are properly managed and devoted to charitable programs. The office derives its authority from the Uniform Supervision of Trustees and Fundraisers for Charitable Purposes Act, which was originally enacted in California in 1959. This law generally requires every person or entity that holds or solicits property for charitable purposes in California to file specified documents and information, including annual financial statements, with the AG. These reports are in turn used by the AG to investigate and litigate cases of charity fraud and mismanagement by trustees and directors of charities. In 1989, in order to protect the interests of a donor and the donee charitable organization, the Act was expanded to also apply to commercial fundraisers who solicit for charitable purposes (a commercial fundraiser is not a charity, but usually an individual or corporation engaged in business for-profit). (SB 502 (Lockyer, Ch. 307, Stats. 1989).) The provisions for commercial fundraisers were further strengthened in 1991 and 1992 by adding a bond requirement for commercial fundraisers and by adding a requirement that any person or entity who for compensation solicits funds or other property for charitable purposes, must disclose that the solicitation is being conducted by a commercial fundraiser for charitable purposes. Significantly, commercial fundraisers were thereafter required to also disclose, upon receiving a written or oral request from a person solicited, the ratio of total expenses of the fundraiser to the total revenue received by the fundraiser. (See AB 838 (Peace, Ch. 569, Stats. 1991); SB 1682 (Boatwright, Ch. 511, Stats. 1992); AB 3066 (Sher, Ch. 249, Stats. 1992).) Then in 1998, AB 1810 (Davis, Ch. 445, Stats. 1998) was enacted in response to an increasing practice by sophisticated commercial fundraisers to hire "fundraising counsels" or enter into partnerships with "commercial conventurers," in order to downplay the extraordinary costs of their fundraising and exclude administrative costs from their annual financial reports because the commercial fundraisers were aware that high fundraising costs and administrative expenses-which translate into smaller distributions to the charity-can discourage donors from making donations. (See Sen. Judiciary Com. analysis of AB 1810 (1998-1999 Reg. Session), Jul. 21, 1998.) Accordingly, AB 1810 sought to close any loophole in the law by requiring registration and reporting of fundraising counsels and commercial conventurers. In doing so, the bill also renamed the Act from the Uniform Supervision of Trustees for Charitable Purposes Act to its current title of the Supervision of Trustees AB 556 (Irwin) Page 3 of ? and Fundraisers for Charitable Purposes Act. Other bills have also been enacted to provide the Attorney General with additional tools and resources in the supervision and enforcement of this Act. As a result of some of those changes, the Attorney General may now also issue cease and desist orders for violations of this Act or its implementing regulations; impose specified civil penalties for each act or omission that constitutes a violation; suspend the registration of a person or entity where a penalty has been assessed; or apply to a superior court for relief and obtain a temporary or permanent injunctive order. Notably, the Charitable Purposes Act provides a 10 year statute of limitations for the Attorney General to bring an action against trustees or other persons holding property in trust for charitable purposes or against any charitable corporation or any director or officer thereof, to enforce a charitable trust or to impress property with a trust for charitable purposes or to recover property or the proceeds thereof for and on behalf of any charitable trust or corporation. While this 10 year statute of limitations has been in existence since 1965 and affords the Attorney General's office additional time to investigate and pursue action against those in violation of the law, it is limited with respect to the parties that the Attorney General can bring an action against. Accordingly, this bill, sponsored by the Office of the Attorney General, seeks to provide additional 10 year statutes of limitations under which the AG can pursue various actions against those who violate or aid and abet in violations of the Charitable Purposes Act. The bill also seeks to close a loophole in the law by better defining the differences between "fundraising counsels" and "commercial fundraisers." CHANGES TO EXISTING LAW Existing law , the Uniform Supervision of Trustees and Fundraisers for Charitable Purposes Act (hereinafter "Charitable Purposes Act," or "Act"), generally governs all charitable corporations, unincorporated associations, trustees, commercial fundraisers for charitable purposes, fundraising counsel for charitable purposes, commercial coventurers, and other legal entities holding or soliciting property for charitable purposes. Existing law provides the Attorney General (AG) with primary enforcement and supervisory powers over these entities, and requires that the AG maintain a register of charitable organizations subject to the Act. (Gov. Code Sec. 12580 et AB 556 (Irwin) Page 4 of ? seq.) Existing law specifies that the AG has broad powers under common law and California statutory law to carry out its charitable trust enforcement responsibilities and that these powers include, but are not limited to, charitable trust enforcement actions under: the Charitable Purposes Act; specified laws on involuntary trusts under the Civil Code; the Nonprofit Corporations Law; specified provisions under the Probate Code relating to trusts and trustees; the Unfair Competition Law and specified law on false advertising; and specified Penal Code provisions relating to lotteries and charitable solicitations. (Gov. Code Sec. 12598(a).) Existing law requires every charitable corporation, unincorporated association, and trustee subject to the Charitable Purposes Act to file with the AG an initial registration form, under oath, as specified, within 30 days after the entity initially receives property, except as specified. Existing law also generally requires that these entities file with the AG periodic written reports, as specified. (Gov. Code Secs. 12585, 12586.) Existing law requires a "commercial fundraiser" to register with the AG's Registry of Charitable Trusts prior to soliciting or receiving and controlling any funds, assets, or property, and to file an annual financial report of funds, assets, or property solicited on behalf of each charitable purpose or organization, as specified. (Gov. Code Sec. 12599.) Existing law prohibits a commercial fundraiser for charitable purposes from soliciting in the state on behalf of a charitable organization unless that charitable organization is registered or is exempt from registration with the AG's Registry of Charitable Trusts. (Gov. Code Sec. 12599(m).) Existing law generally defines "commercial fundraiser for charitable purposes" to mean any individual, corporation, unincorporated association, or other legal entity who for compensation does any of the following: solicits funds, assets, or property in this state for charitable purposes; AB 556 (Irwin) Page 5 of ? as a result of a solicitation of funds, assets, or property in this state for charitable purposes, receives or controls the funds, assets, or property solicited for charitable purposes; or employs, procures, or engages any compensated person to solicit, receive, or control funds, assets, or property for charitable purposes. (Gov. Code Sec. 12599(a).) Existing law requires there to be a written contract between a commercial fundraiser for charitable purposes and a charitable organization for each solicitation campaign, event, or service, as specified. The contract must be available for inspection by the Attorney General and contain specified information. (Gov. Code Sec. 12599(h).) Existing law requires that a "fundraising counsel for charitable purposes" register with the AG's Registry of Charitable Trusts, prior to managing, advising, counseling, consulting, or preparing material for, or with respect to, the solicitation in this state of funds, assets, or property for charitable purposes, and to file (1) an annual report listing each person, corporation, unincorporated association, or other legal entity for whom the fundraising counsel has performed specified services for compensation, and (2) a statement certifying that the fundraising counsel had a written contract with each listed person, corporation, unincorporated association, or other legal entity that complied with specified requirements. (Gov. Code Sec. 12599.1.) Existing law generally defines a "fundraising counsel for charitable purposes" as any individual, corporation, unincorporated association, or other legal entity who is described by all of the following: for compensation plans, manages, advises, counsels, consults, or prepares material for, or with respect to, the solicitation in this state of funds, assets, or property for charitable purposes; does not solicit funds, assets, or property for charitable purposes; does not receive or control funds, assets, or property solicited for charitable purposes in this state; and does not employ, procure, or engage any compensated person to solicit, receive, or control funds, assets, or property for charitable purposes. (Gov. Code Sec. 12599.1(a).) AB 556 (Irwin) Page 6 of ? Existing law requires a written contract between a fundraising counsel for charitable purposes and a charitable organization for each service to be performed by the fundraising counsel for the charitable organization, as specified. The contract must be available for inspection by the AG and contain specified information, such as: a clear statement of the fees and any other form of compensation, including commissions and property, that will be paid to the fundraising counsel; and a statement that the fundraising counsel will not at any time solicit or receive or control funds, assets, or property for charitable purposes, or employ, procure, or engage any compensated person to solicit, receive, or control funds, assets, or property for charitable purposes. (Gov. Code Sec. 12599.1(f).) Existing law provides the AG authority to investigate transactions and relationships of corporations and trustees subject to the Charitable Purposes Act for the purpose of ascertaining whether or not the purposes of the corporation or trust are being carried out in accordance with the terms and provisions of the articles of incorporation or other instrument. (Gov. Code Sec. 12588.) Existing law authorizes the AG to refuse to register or revoke or suspend the registration of a charitable corporation or trustee, commercial fundraiser, fundraising counsel, or coventurer whenever the AG finds that the charitable corporation or trustee, commercial fundraiser, fundraising counsel, or coventurer has violated or is operating in violation of any provisions of the Charitable Purposes Act. (Gov. Code Sec. 12598(e).) Existing law authorizes the Attorney General to bring an action against trustees or other persons holding property in trust for charitable purposes or against any charitable corporation or any director or officer thereof to enforce a charitable trust or to impress property with a trust for charitable purposes or to recover property or the proceedings thereof for and on behalf of any charitable trust or corporation at any time within 10 years after the cause of action accrued. (Gov. Code Sec. 12596.) Existing law requires any individual, corporation, or other legal entity who for compensation solicits funds or other property in this state for charitable purposes to disclose prior AB 556 (Irwin) Page 7 of ? to an oral solicitation or sales solicitation, as specified, or at the same time as a written solicitation or sales solicitation: that the solicitation or sales solicitation is being conducted by a commercial fundraiser for charitable purposes; and the name of the commercial fundraiser for charitable purposes as registered with the Attorney General pursuant to specified law. (Bus. & Prof. Code Sec. 17510.85.) Existing law provides that one who wrongfully detains a thing is an involuntary trustee thereof, for the benefit of the owner. Existing law also provides that one who gains a thing by fraud, accident, mistake, undue influence, the violation of a trust, or other wrongful act, is, unless he or she has some other and better right thereto, an involuntary trustee of the thing gained, for the benefit of the person who would otherwise have had it. (Civ. Code Secs. 2223, 2224.) This bill would specify that the disclosures required under existing law prior to an oral solicitation or sales solicitation, or at the same time of a written disclosure or sales solicitation, must be in at least 12-point font, and be clear and conspicuous, as specified, if printed or presented electronically. This bill would authorize the AG to bring an action pursuant to specified laws relating to involuntary trustees at any time within 10 years after the cause of action accrued. This bill would also authorize the AG to bring a civil action for a violation of the Nonprofit Corporation Law at any time within 10 years after the cause of action accrued. This bill would authorize the AG, notwithstanding the limited application of the Charitable Purposes Act to certain entities, to bring a civil action against a person who aids or abets a violation of that Act, specified laws relating to involuntary trusts, or the Nonprofit Public Benefit Corporations' article providing standards of conduct for directors and management, at any time within 10 years after the cause of action accrued. This bill would expand the definition of a "commercial fundraiser for charitable purposes" to include a person or entity who for compensation plans, manages, advises, counsels, consults, or prepares material for, or with respect to, the solicitation in this state of funds, assets, or property for charitable purposes, but is disqualified as a "fundraising AB 556 (Irwin) Page 8 of ? counsel for charitable purposes" pursuant to the definition of that term. This bill would further clarify that a commercial fundraiser for charitable purposes does not include an escrow agent or "caging company," as specified, which receives or controls funds received as a result of a solicitation for charitable purposes. This bill would modify the definition of "fundraising counsel for charitable purposes" to clarify that "compensation" received for planning, managing, advising, counseling, consulting, or preparing material for, or with respect to, the solicitation in this state of funds, assets, or property for charitable purposes, is something other than a percentage of the funds, assets, or property received as a result of a solicitation campaign. This bill would further modify the definition of "fundraising counsel for charitable purposes" to clarify that a person or entity is deemed to receive or control funds, assets, or property if any of the following apply: it has the right to approve or veto any payment from an escrow account to which funds received from a solicitation for charitable purposes are subject; it maintains an interest in an account into which solicited funds are deposited; it has the right to access funds, assets, or property received from a solicitation for charitable purposes and held by a caging company; it has any ownership or management interest in any other entity that receives or controls the funds, assets, or property solicited for charitable purposes, including, but not limited to, an escrow agent or caging company, but not including a federally insured financial institution; or it receives any financial benefit, directly or indirectly, from any other individual or entity that receives or controls the funds, assets, or property solicited for charitable purposes, other than the trustee or charitable corporation soliciting the funds, assets, or property for charitable purposes. This bill would provide that any person or entity who, for compensation, plans, manages, advises, counsels, consults, or prepares material for, or with respect to, the solicitation in this state of funds, assets, or property for charitable purposes, but does not meet the qualifications of a "fundraising AB 556 (Irwin) Page 9 of ? counsel for charitable purposes," as specified, shall be deemed to be a "commercial fundraiser for charitable purposes," as described, unless excluded by the section defining that term. This bill would specify for these purposes that "commercial fundraiser for charitable purposes" does not include: a "trustee" or "charitable corporation," as defined, or any employee thereof; an individual who is employed by or under the control of a commercial fundraiser for charitable purposes that is registered with the AG; or any federally insured financial institution that holds, as a depository, funds received as a result of a solicitation for charitable purposes, or an escrow agent or "caging company," as defined, that receives or controls funds received as a result of a solicitation for charitable purposes. This bill defines a caging company for purposes of the above definitions as a business that receives contributions, processes donor mail, and deposits all contributions into an account under the sole control of the charitable organization. This bill would make other technical or non-substantive changes. COMMENT 1. Stated need for the bill According to the author: The Attorney General is responsible for regulating charities and the professional fundraisers who solicit on their behalf. The purpose of this oversight is to protect charitable assets for their intended use and ensure that the charitable donations contributed by Californians are not misused or squandered through fraud or other means. [ . . . ] Existing law regulates for-profit companies that raise money on behalf of a charity but keep a portion of the money raised as profit. Companies that solicit money on behalf of charitable organizations, "commercial fundraisers," are required to disclose to donors that a paid professional fundraiser was involved in the solicitation campaign. "Fundraising counsel" - persons or entities that plan, manage, or advise charities on their charitable solicitations AB 556 (Irwin) Page 10 of ? activities for profit but do not directly engage in solicitations - are not subject to the same transparency requirements. Both commercial fundraisers and fundraising counsel are required to register with the Attorney General's office. The distinctions between commercial fundraisers and fundraising counsel are that commercial fundraisers hold assets and do the direct solicitation, while fundraising counsel do not. Sometimes, in order to avoid falling into the commercial fundraiser category, which requires disclosure to consumers that the solicitation is being conducted by a commercial fundraiser, fundraising companies will make it falsely appear that the company providing advice and the company receiving donations are separate. Other times, fundraising counsel will receive substantial portions of a charity's donations through fundraising fees, because they own more than one company involved in the charity's fundraising program. Cases involving charity fraud are often complex, fact-intensive, and cover misconduct occurring over an extended period of time. Existing law allows the Attorney General a 10 year statute of limitations for fraud conducted by officers and directors of the charity. Other parties such as fundraisers, accountants, etc. who directly participate in or aid and abet the fraud[, however,] are subject to either a three or four year statute of limitations, depending on the cause of action. AB 556 will close loopholes in for-profit solicitation disclosure laws by requiring fundraisers who have any ownership or management interest in any other entity also involved in a charitable solicitation to register as commercial fundraisers and therefore be subject to disclosure to donors. The bill also states that if a fundraiser takes a percentage of the funds raised through the solicitation rather than a flat fee, they should register as commercial fundraisers. The bill will also extend the 10 year statute of limitations to include all persons and entities involved in the fraud. [Accordingly,] AB 556 will uphold consumer and donor confidence in charitable giving by increasing transparency and accountability for charitable fundraisers. The sponsor of this bill, the Office of the Attorney General AB 556 (Irwin) Page 11 of ? (AG), indicates that recent litigation exposed some of the shortcomings with both the existing 10 year statute of limitations and the laws that distinguish a "commercial fundraiser" from a "fundraising counsel," which is discussed further in Comment 2 below. The AG writes that: AB 556 will address and correct both legal deficiencies identified in the Help Hospitalized Veterans litigation and improve transparency and accountability for all for-profit charitable fundraisers. The bill expands existing transparency requirements for "commercial fundraisers" to include "fundraising counsel," closing the loophole in current law that allows for-profit fundraisers to avoid disclosing to prospective donors whether a portion of their gift will be diverted to a paid company. The bill also broadens the Attorney General's statute of limitations for enforcement actions to include commercial fundraisers, fundraising counsel, and other third party entities that aid and abet charity fraud, ensuring that all culpable parties are held equally accountable. This legislation will significantly improve the Attorney General's ability to protect charitable assets and empower responsible charitable giving. By enhancing existing safeguards against fraud, AB 556 will maintain consumer confidence in donating to the many nonprofit organizations that work to make a difference in their state. 2. Bill seeks to better distinguish commercial fundraisers for charitable purposes from fundraising counsels for charitable purposes. Under the Supervision of Trustees and Fundraisers for Charitable Purposes Act ("Charitable Purposes Act," or "Act"), all charitable entities that hold or solicit property for charitable purposes must register with and disclose certain information to the Attorney General. Most pertinent to this bill are commercial fundraisers and fundraising counsel. These classifications, and the distinctions between those entities, are quite significant. Indeed, AB 1810 (Davis, Ch. 445, Stats. 1998) sought to close loopholes that had previously enabled sophisticated commercial fundraisers to hire "fundraising counsels" in order to downplay the extraordinary AB 556 (Irwin) Page 12 of ? costs of their fundraising and exclude administrative costs from their annual financial reports which might otherwise discourage donors from making donations due to the fact that high administration costs translate into less money for the charity. (See Sen. Judiciary Com. analysis of AB 1810 (1998-1999 Reg. Session), Jul. 21, 1998.) Accordingly, while under the current Act, both charitable fundraisers and fundraising counsel must register with and file certain documents and information with the AG, commercial fundraisers must disclose to donors that the solicitation is being conducted by a commercial fundraiser for charitable purposes and, upon request, disclose their percentage of total fundraising expenses (which signals to the donor how much money actually ends up going to the charitable purposes). (See Bus. & Prof. Code Sec. 17510.85 and Gov. Code Sec. 12599(j).) Additionally, while fundraising counsels have to provide the AG with an annual list of the charitable organizations for which the fundraiser has performed services and make its written contracts with those charitable organizations available for inspection to the AG, commercial fundraisers must not only make their contracts available for inspection, but also specifically disclose to the AG, on an annual basis, their: (1) total revenue; (2) the fee or commission charged by the commercial fundraiser for charitable purposes; (3) salaries paid by the commercial fundraiser for charitable purposes to its officers and employees; (4) fundraising expenses; (5) distributions to the identified charitable organization or purpose; and (6) the names and addresses of any director, officer, or employee of the commercial fundraiser for charitable purposes who is a director, officer, or employee of any charitable organization listed in the annual financial report. (See Gov. Code Secs. 12599.1(d)-(f), 12599(d).) Indeed, the more onerous filing and disclosure requirements for commercial fundraisers appear justified given that the definition of fundraising counsel presumes that the fundraising counsel's involvement generally stops at managing, advising, counseling, consulting, or preparing materials for, or with respect to, the solicitation of donations. Unlike their commercial fundraiser counterparts, entities seeking to register as fundraising counsel must not solicit the donation directly, or receive or control the donation, or employ anyone to engage AB 556 (Irwin) Page 13 of ? in such activities. That being said, the AG, the sponsor of this bill, provides information that suggests that the lines between these two types of entities engaged in charitable activities is being blurred by some who seek to take advantage of the "fundraising counsel" classification, but then engage in activities that would seem to fall under the category of commercial fundraising. As described by the sponsor: In 2012, Attorney General Harris filed suit against Help Hospitalized Veterans (HHV), a charity that solicited donations to support programs serving veterans and active-duty military improperly diverted more than $4.3 million in funds toward the purchase of golf memberships, condominiums, and excessive executive compensation. The scheme included loans made by HHV to American Target Advertising, a for-profit firm that directed the charity's vast direct-mail fundraising operation while making substantial payments to HHV's former president. Another fundraising firm, Creative Direct Response, made deceptive statements in its direct mail solicitations to imply that there were minimal or no fundraising expenses associated with the campaign, while in actuality, HHV incurred substantial costs. Meanwhile, the nonprofit used accounting gimmicks to inflate the amount of income purportedly spent on providing veterans' services while artificially minimizing the amount reportedly spent on fundraising. [Footnote excluded.] [. . . D]espite the fact that American Target Advertising and Creative Direct Response each unilaterally orchestrated elaborate fundraising campaigns for HHV-designing fundraising materials, managing prospective donor mailing lists, etc.-neither were legally registered as "commercial fundraisers" because the direct mail was turned over to HHV for final mailing. Instead, both companies filed as "fundraising counsel." A "caging operation" was used to siphon donations off to the firms, paying out millions of dollars in fees before turning any money over to the charity. Because these firms stopped just short of physically sending the solicitations they designed, none of the materials contained written disclosures that would have been required if the campaigns were conducted by "commercial fundraisers." In total, between 65-72 percent of the annual gross revenue HHV received from donors over the years went to the charity's fundraising operation. AB 556 (Irwin) Page 14 of ? This bill would help close the loophole in the law, by better defining who is a commercial fundraiser, and who is a fundraising counsel. First, the bill would expand the definition of a commercial fundraiser to also include any person or entity who for compensation plans, manages, advises, counsels, consults, or prepares material for, or with respect to, the solicitation in this state of funds, assets, or property for charitable purposes, but is otherwise disqualified as a fundraising counsel under the latter's definition. Further, the bill would modify the fundraising counsel definition to clarify that "compensation" received for its services, is something other than a percentage of the funds, assets, or property received as a result of a solicitation campaign, and to clarify that a person or entity is deemed "to receive or control funds, assets, or property"-and therefore not a fundraising counsel-if it: has the right to approve or veto any payment from an escrow account to which funds received from a solicitation for charitable purposes are subject; maintains an interest in an account into which solicited funds are deposited; has the right to access funds, assets, or property received from a solicitation for charitable purposes and held by a "caging company" (defined as a business that receives contributions, processes donor mail, and deposits all contributions into an account under the sole control of the charitable organization); has any ownership or management interest in any other entity that receives or controls the funds, assets, or property solicited for charitable purposes, including, but not limited to, an escrow agent or caging company, but excluding a federally insured financial institution; or receives any financial benefit, directly or indirectly, from any other individual or entity that receives or controls the funds, assets, or property solicited for charitable purposes, other than the trustee or charitable corporation soliciting those donations. 3. Specified actions by the Attorney General to enforce the Charitable Purposes Act are already subject to a 10 year statute of limitations Under the Charitable Purposes Act, the AG may bring an action against trustees or other persons holding property in trust for charitable purposes or against any charitable corporation or any AB 556 (Irwin) Page 15 of ? director or officer thereof, to enforce a charitable trust or to impress property with a trust for charitable purposes or to recover property or the proceeds thereof for and on behalf of any charitable trust or corporation, for up to 10 years after the action accrued. According to the AG, however, in the Help Hospitalized Veterans case, "despite significant evidence that Creative Direct Response had made serious misrepresentations in its solicitations to over 40,000 potential donors, subject to over $4 million in civil penalties, the firm was successful on demurrer and was not held accountable for its role in the HHV fraud." The sponsor explains that this occurred because of the narrow application of the 10 year statute of limitations under existing law: [E]ven though the Attorney General's enforcement authority under the Supervision of Trustees and Fundraisers for Charitable Purposes Act applies to fundraising counsel, the express language of the Act's special 10-year statute of limitations covering officers and directors of charities does not cover causes of action against third parties, including fundraisers, even though they participate in the charity fraud. The court in the HHV case instead applied the standard 3-year statute of limitations for fraud to Creative Direct Response's conduct and ruled that the action could not proceed against the fundraiser. Since charitable trust enforcement actions are often complex, fact-intensive, and cover an extended period of time, a 10-year statute of limitations is necessary in order to ensure that all who commit misconduct involving charities are held accountable for their actions. Accordingly, this bill seeks to provide a broader 10-year statute of limitation that would allow the AG to also bring an action at any time within 10 years after the cause of action accrued: (1) pursuant to specified involuntary trust laws under the Civil Code; (2) arising out of a violation of the Charitable Purposes Act, pursuant to specified involuntary trust laws, or pursuant to the Nonprofit Corporation Law; and (3) against a person who aids or abets a violation of the Charitable Purposes Act, specified involuntary trust laws, or the Nonprofit Public Benefit Corporations laws. As a matter of public policy, shorter limitations periods serve important policy goals that help to preserve both the integrity AB 556 (Irwin) Page 16 of ? of our legal system and the due process rights of individuals. Their purpose is to prevent the assertion of stale claims and, ultimately, "to promote justice by preventing surprises through the revival of claims that have been allowed to slumber until evidence is lost, memories have faded, and witnesses have disappeared." (3 Witkin Cal. Proc. Actions Sec. 433.) That being said, here, existing law already envisions providing the AG with longer periods of time to bring enforcement actions-albeit against a narrower number of individuals. This longer period is largely justified by the potential complexity of the underlying cases and the time and work that can be required to both uncover fraud and to pursue those involved. Arguably, therefore, the 10 year statute of limitations should be based upon the underlying act, and not necessarily a small subset of potential bad actors against whom the action would be brought against. Support : American Cancer Society Cancer Action Network; California Association of Nonprofits (CalNonprofits); Christian Appalachian Project; Disabled American Veterans; DMA Nonprofit Federation; Easter Seals; Feed the Children; Food and Water Watch; Food for the Poor; March of Dimes California Chapter; Network American Institute for Cancer Research; Wounded Warrior Project, Inc. Opposition : None Known HISTORY Source : Attorney General Related Pending Legislation : None Known Prior Legislation : AB 2327 (Feuer, Ch. 483, Stats. 2012) revised the enforcement provisions of the Charitable Purposes Act. SB 1262 (Sher, Ch. 919, Stats. 2004) See Background. SB 2015 (Sher, Ch. 475, Stats. 2000) amended the Charitable Purposes Act to grant the AG additional enforcement tools and AB 556 (Irwin) Page 17 of ? resources, including: ability to assess late fees; authority to suspend or revoke registrations; the ability to impose criminal penalties for violations of the Act; and the appropriation of all fines, penalties, attorney's fees and costs to the AG for the administration and enforcement of the Act. AB 1810 (Davis, Ch. 445, Stats. 1998) See Background. SB 1682 (Boatwright, Ch. 511, Stats. 1992) See Background. AB 3066 (Sher, Ch. 249, Stats. 1992) See Background. AB 838 (Peace, Ch. 569, Stats. 1991) See Background. Prior Vote : Assembly Floor (Ayes 78, Noes 0) Assembly Appropriations Committee (Ayes 17, Noes 0) Assembly Privacy and Consumer Protection Committee (Ayes 11, Noes 0) Assembly Judiciary Committee (Ayes 10, Noes 0) **************