BILL ANALYSIS Ó
SENATE COMMITTEE ON PUBLIC SAFETY
Senator Loni Hancock, Chair
2015 - 2016 Regular
Bill No: AB 1395 Hearing Date: June 14, 2016
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|Author: |Salas |
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|Version: |January 4, 2016 |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|JM |
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Subject: Money Laundering: Criminal Activity: Lotteries and
Gaming
HISTORY
Source: Kern County District Attorney
Prior Legislation:AB 1439 (Salas), Chapter 592, Statutes of 2014
Support: California District Attorneys Association; California
Police Chiefs Association; California State Sheriffs'
Association; City of Oakland; San Diego District
Attorney
Opposition:Legal Services for Prisoners with Children
Assembly Floor Vote: 69 - 2
PURPOSE
The purpose of this bill is to include misdemeanor and
infraction gambling offenses within the money-laundering
statutes, thus making the offenses punishable as felonies.
Existing law states that any person who conducts or attempts to
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conduct a transaction within a seven-day period involving a
monetary instrument or instruments of a total value exceeding
$5,000, or a total value exceeding $25,000 within a 30-day
period, through one or more financial institutions with the
specific intent to promote, manage, establish, carry on, or to
facilitate such conduct, or who knows that the monetary
instrument represents the proceeds of, or is derived directly or
indirectly from the proceeds of, criminal activity, as defined,
is guilty of the crime of money laundering. (Pen. Code, §
186.10, subd. (a).)
Existing law defines "criminal activity" for purposes of money
laundering to mean a felony. (Pen. Code, § 186.9, subd. (e).)
Existing law provides that 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 by a felony
sentence imposed pursuant to Penal Code § 1170, subdivision (h),
by a fine of not more than $250,000 or twice the value of the
property transacted, whichever is greater. On a second or
subsequent conviction, the maximum fine that may be imposed is
$500,000 or five times the value of the property transacted,
whichever is greater. (Pen. Code, § 186.10, subd. (a).)
Existing law enhances the penalty of a person convicted of money
laundering as follows:
a) A mandatory additional term of one year to be served
consecutive to the punishment if the value of the
transaction or transactions exceeds $50,000 but is less
than $150,000;
b) A mandatory additional term of two years to be
served consecutive to the punishment if the value of the
transaction or transactions exceeds $150,000 but is less
than $1,000,000;
c) A mandatory additional term of three years to be
served consecutive to the punishment if the value of the
transaction or transactions exceeds $1,000,000 but is
less than $2,500,000; or
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d) A mandatory additional term of four years to be
served consecutive to the punishment if the value of the
transaction or transactions exceeds $2,500,000. (Pen.
Code, § 186.10, subd. (c)(1).)
Existing law provides that if sentence for a felony is imposed
pursuant to Penal Code Section 1170, subdivision (h), the
defendant shall serve his sentence in a county jail unless he or
she has been convicted of a prior or current serious felony or a
sex offense for which registration is required. (Pen. Code §
1170, subd. (h).)
Existing law prohibits lotteries, with exceptions for the
California State Lottery, bingo for charitable purposes, and
charitable raffles conducted by a non-profit, tax-exempt
organization, and makes the violation of those crimes punishable
as a misdemeanor. (Pen. Code, §§ 319-329.)
Existing law defines a "lottery" as any scheme for the disposal
or distribution of property by chance, among persons who have
paid or promised to pay any valuable consideration for the
chance of obtaining such property or a portion of it, or for any
share or any interest in such property, upon agreement,
understanding or expectation that it is to be distributed or
disposed of by lot or chance whether called a lottery, raffle,
or gift enterprise, or by whatever name the same may be known.
(Pen. Code, § 319.)
Existing law states that every person who deals, plays, or
carries on, opens, or causes to be opened, or who conducts
either as owner or employee, whether for hire or not, any game
of faro, monte, roulette, lansquenet, rouge et noire, rondo,
tan, fan-tan, seven-and-a-half, twenty-one, hokey-pokey, or any
banking or percentage game played with cards, dice, or any
device, for money, checks, credit, or other representative of
value, and every person who plays or bets at or against any of
those prohibited games is guilty of a misdemeanor punishable by
a fine not less than $1,000 or by imprisonment in the county
jail not exceeding 6 months, or by both the fine and
imprisonment. (Pen. Code, § 330.)
Existing law 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
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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. (Bus. & Prof. Code,
§ 17539.1, subd. (a)(12).)
This bill expands the definition of "criminal activity" to
include misdemeanor and infraction gambling violations for
purposes of money laundering.
RECEIVERSHIP/OVERCROWDING CRISIS AGGRAVATION
For the past several years this Committee has scrutinized
legislation referred to its jurisdiction for any potential
impact on prison overcrowding. Mindful of the United States
Supreme Court ruling and federal court orders relating to the
state's ability to provide a constitutional level of health care
to its inmate population and the related issue of prison
overcrowding, this Committee has applied its "ROCA" policy as a
content-neutral, provisional measure necessary to ensure that
the Legislature does not erode progress in reducing prison
overcrowding.
On February 10, 2014, the federal court ordered California to
reduce its in-state adult institution population to 137.5% of
design capacity by February 28, 2016, as follows:
143% of design bed capacity by June 30, 2014;
141.5% of design bed capacity by February 28, 2015; and,
137.5% of design bed capacity by February 28, 2016.
In December of 2015 the administration reported that as "of
December 9, 2015, 112,510 inmates were housed in the State's 34
adult institutions, which amounts to 136.0% of design bed
capacity, and 5,264 inmates were housed in out-of-state
facilities. The current population is 1,212 inmates below the
final court-ordered population benchmark of 137.5% of design bed
capacity, and has been under that benchmark since February
2015." (Defendants' December 2015 Status Report in Response to
February 10, 2014 Order, 2:90-cv-00520 KJM DAD PC, 3-Judge
Court, Coleman v. Brown, Plata v. Brown (fn. omitted).) One
year ago, 115,826 inmates were housed in the State's 34 adult
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institutions, which amounted to 140.0% of design bed capacity,
and 8,864 inmates were housed in out-of-state facilities.
(Defendants' December 2014 Status Report in Response to February
10, 2014 Order, 2:90-cv-00520 KJM DAD PC, 3-Judge Court, Coleman
v. Brown, Plata v. Brown (fn. omitted).)
While significant gains have been made in reducing the prison
population, the state must stabilize these advances and
demonstrate to the federal court that California has in place
the "durable solution" to prison overcrowding "consistently
demanded" by the court. (Opinion Re: Order Granting in Part and
Denying in Part Defendants' Request For Extension of December
31, 2013 Deadline, NO. 2:90-cv-0520 LKK DAD (PC), 3-Judge Court,
Coleman v. Brown, Plata v. Brown (2-10-14). The Committee's
consideration of bills that may impact the prison population
therefore will be informed by the following questions:
Whether a proposal erodes a measure which has contributed
to reducing the prison population;
Whether a proposal addresses a major area of public safety
or criminal activity for which there is no other
reasonable, appropriate remedy;
Whether a proposal addresses a crime which is directly
dangerous to the physical safety of others for which there
is no other reasonably appropriate sanction;
Whether a proposal corrects a constitutional problem or
legislative drafting error; and
Whether a proposal proposes penalties which are
proportionate, and cannot be achieved through any other
reasonably appropriate remedy.
COMMENTS
1.Need For This Bill
According to the author and the sponsor:
In 2014, I authored Assembly Bill (AB) 1439 to clarify
that gambling at sweepstakes cafes is illegal. The
bill made internet gambling sweepstakes at these cafes
an unfair business practice and gave the Attorney
General, district attorneys, and city attorneys the
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authority to bring civil suit to subject operators and
civil penalties for violations.
On June 25, 2015 the California Supreme Court ruled in
People ex rel. v. Grewal 61 Cal.4th 544, 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.
Although the law enforcement community intends to
continue pursing these gambling promoters, current
California law offers prosecutors very limited tools
with which to fight this battle. Specifically, all
violations of the Penal Code provisions regarding slot
machines and lotteries are misdemeanors.
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. 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.
2.Penalties for Money Laundering
Under current law, money laundering is punishable as a
"wobbler," meaning that it may be charged and punished as a
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misdemeanor or a felony. The crime of money laundering requires
the defendant to conduct a transaction with money or funds
knowing that the money or funds, rather than the transaction,
represents the proceeds of, or is derived directly or indirectly
from the proceeds of, criminal activity. The money or funds
must be composed of at least $ 5,000 of proceeds from criminal
activity. In order to be guilty of money laundering, the
defendant must either (1) have the specific intent to promote,
manage, establish, carry on, or facilitate the promotion,
management, establishment, or carrying on of any criminal
activity, or (2) know the monetary instrument represents the
proceeds of, or is derived directly or indirectly from the
proceeds of, criminal activity. (People v. Mays (2007) 148 Cal.
App. 4th 13; Pen. Code, § 186.10, subd. (a).)
The penalties may be enhanced with additional jail or prison
time for felony money laundering if the transaction amount
exceeds $50,000. (Pen. Code, § 186.10, subd. (c).) The
defendant may also be fined up to $250,000 or two times the
value of the property transacted, or on a second or subsequent
offense, $500,000 or five times the value of the property
transacted, whichever is greater. (Pen. Code, § 186.10, subd.
(a).)
This bill would authorize the use of the money laundering
penalty scheme for unlawful gambling and lotteries, which are
mostly misdemeanor offenses, but appear to include some
infractions. Currently, only felonies may be prosecuted under
money laundering. In order to receive the enhanced penalty for
money laundering, the defendant must have committed the
underlying offense, here unlawful gambling or lotteries, and in
addition the elements of money laundering must be proven.
3.This Bill would apply to a Wide Range of Low-Level Gambling,
such as Raffles or Lotteries not Conducted by Specified
Tax-Exempt Organizations
Existing law applies money laundering to any felony, although as
a practical matter only crimes producing profits or income to
the perpetrator are covered by the law. This bill applies money
laundering laws to every gambling-related offense in two
chapters of the Penal Code, from Section 319 through 337z.
These sections make criminal virtually every form of lottery,
raffle or bingo game not conducted by a registered charitable
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organization, regardless that a lottery or raffle could have the
same purpose as a game conducted by an exempt charity or other
entity licensed to do so. These sections also cover any kind of
betting on sports or other contests. Applied strictly, it
appears that NCAA basketball tournament bracket office pools
constitute illegal gambling.
Most of the offenses are misdemeanors, although it appears that
the chapters include two infractions. One infraction (Pen. Code
§ 336.9) applies to participants in a betting pool, such as an
office NCAA tournament or Super Bowl pool. The other infraction
(Pen. Code § 337k) is a first time offense of "advertis[ing], or
facilitate[ing] the advertisement of, nonparimutuel <1>wagering
on horse races." A second or subsequent offense is a
misdemeanor.
It appears that the purpose of the bill is to stop ongoing
commercial gambling operations in Internet cafes and the like.
The author explains the reason for the bill: "[O]rganized
criminal enterprises engaged in operating illegal slot 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 $5000.00 within a
seven-day period or $25,000.00 within a thirty-day period."
The bill includes activity that goes beyond "limited severe
cases of illegal gambling." Members may wish to consider
whether the bill could be drafted so as to apply to those
targeted by the sponsor.
4.Prior Legislation
AB 1439 (Salas), Chapter 592, Statutes of 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.
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<1> In parimutuel betting, all bets are combined and the odds
calculated, the house takes a percentage and the proceeds are
distributed to the winners.
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