BILL ANALYSIS Ó AB 1395 Page 1 Date of Hearing: January 21, 2016 ASSEMBLY COMMITTEE ON APPROPRIATIONS Jimmy Gomez, Chair AB 1395 (Salas) - As Amended January 4, 2016 ----------------------------------------------------------------- |Policy |Public Safety |Vote:| 4 - 1 | |Committee: | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | ----------------------------------------------------------------- Urgency: No State Mandated Local Program: YesReimbursable: No SUMMARY: This bill adds misdemeanor gambling to the list of crimes for which a person can be prosecuted for money laundering. AB 1395 Page 2 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. COMMENTS: 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 AB 1395 Page 3 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. AB 1395 Page 4 "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 AB 1395 Page 5 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) 319-2081