BILL ANALYSIS                                                                                                                                                                                                    

                                                                    AB 1395

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          Date of Hearing:   January 21, 2016


                                 Jimmy Gomez, Chair

          1395 (Salas) - As Amended January 4, 2016

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          Urgency:  No  State Mandated Local Program:  YesReimbursable:   


          This bill adds misdemeanor gambling to the list of crimes for  
          which a person can be prosecuted for money laundering.


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          FISCAL EFFECT:

          Moderate costs to the California Department of Corrections and  
          Rehabilitation (CDCR) of less than $150,000 (GF), if less than 5  
          persons are sentenced to prison per a year, instead of county  
          jail. According to CDCR, the annual contracted bed rate is  
          $27,000 per inmate.   

          Moderate nonreimbursable local costs for incarceration, offset  
          to a degree by fee revenue.   


          1)Background.  Under current law, a person convicted of money  
            laundering may be punished by imprisonment in county jail for  
            either a misdemeanor with a maximum of one year or a felony  
            and by a fine of not more than $250,000 or twice the value of  
            the property transacted, whichever is greater.  Current law  
            also provides various penalty enhancements for subsequent  
            convictions or if the dollar amount is greater.

            Current law defines "criminal activity" for purposes of money  
            laundering to mean a criminal offense punishable under the  
            laws of this state by death, imprisonment in the state prison,  
            or imprisonment for a county-jail eligible felony or from a  
            criminal offense committed in another jurisdiction punishable  
            under the laws of that jurisdiction by death or imprisonment  
            for a term exceeding one year.  

            Current law prohibits lotteries, with the exception of the  
            California State Lottery and bingo or raffles by qualified  
            charitable organizations, and violation of this crime is  


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            punishable as misdemeanor.  Current law also prohibits any  
            person from using or offering for use any method intended to  
            be used by a person interacting with an electronic video  
            monitor to simulate gambling or play gambling-themed games in  
            a business establishment that (a) directly or indirectly  
            implements the predetermination of sweepstakes cash,  
            cash-equivalent prizes, or other prizes of value, or (b)  
            otherwise connects a sweepstakes player or participant with  
            sweepstakes cash, cash-equivalent prizes, or other prizes of  
            value, except as specified.  

          2)Purpose.  According to the author, "In 2014, I authored  
            Assembly Bill (AB) 1439 to clarify that gambling at  
            sweepstakes cafes is illegal. Specifically, the bill made  
            internet gambling sweepstakes at these cafes an unfair  
            business practice and gave the Attorney General, district  
            attorneys, and city attorneys the authority to bring civil  
            suit to subject operators to civil penalties for violations.

            "On June 25, 2015 the California Supreme Court ruled in People  
            ex rel. v. Grewal that computerized sweepstakes found at  
            internet cafes are illegal under state gambling laws. In a  
            unanimous ruling, the court rejected arguments that the  
            sweepstakes are different from slot machines because they have  
            predetermined outcomes. 

            "Despite AB 1439 and the Grewal decision, new examples of  
            illegal gambling establishments have emerged. These operators  
            claim they are not offering gambling or sweepstakes, but  
            rather 'social gaming and mining.'  While the business model  
            may have changed, the underlying nature of the games these  
            cafes are offering has not. 


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            "AB 1395 would provide law enforcement with the ability to use  
            criminal remedies when combatting egregious cases of  
            organized, illegal gambling. Specifically, the bill  
            incorporates violations of the gambling laws into organized  
            crime and money laundering statutes. This approach has been  
            used successfully in other states and will give law  
            enforcement the right tools to go after illegal gambling."

            If the District Attorney prosecutes the "criminal activity  
            wobbler" as a felony, and prevails, and the individual  
            convicted is subject to state prison due to a prior qualifying  
            violent felony conviction, the incarceration will be served in  
            state prison instead of the county jail.

          3)Argument in Support.  According to the sponsor, the Kern  
            County District Attorney's Office, "As it stands now, a large,  
            organized criminal enterprise engaged in operating illegal  
            slots machines or lotteries can only be charged under the  
            gambling statutes with misdemeanors.  We strongly support the  
            passage of AB 1395 because it would enable prosecutors to  
            pursue money laundering violations in limited, severe cases of  
            illegal gambling when the proceeds of the gambling operations  
            exceed $5,000 within a seven-day period or $25,000 within a  
            thirty-day period.  We believe that without this proposed  
            legislative change, the industry responsible for developing  
            and promoting this form of gambling may very well continue to  
            move forward with their operations with the understanding that  
            it is 'worth the risk.'

          4)Prior Legislation:  AB 1439 (Salas), Chapter 592, Statutes of  


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            2014, prohibited any person, when conducting a contest or  
            sweepstakes, from using an electronic video monitor to  
            simulate gambling or play gambling-themed games that offers  
            the opportunity to win sweepstakes cash, cash equivalent  
            prizes, or other prizes of value

          Analysis Prepared by:Pedro R. Reyes / APPR. / (916)