BILL ANALYSIS Ó AB 2759 Page 1 Date of Hearing: May 4, 2016 ASSEMBLY COMMITTEE ON APPROPRIATIONS Lorena Gonzalez, Chair AB 2759 (Levine) - As Introduced February 19, 2016 ----------------------------------------------------------------- |Policy |Judiciary |Vote:|10 - 0 | |Committee: | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | |Banking and Finance | |11 - 0 | | | | | | | | | | | ----------------------------------------------------------------- Urgency: No State Mandated Local Program: NoReimbursable: No SUMMARY: This bill allows an individual who is a victim of corporate fraud and who wins a judgment against a corporate officer, but is unable to collect the judgment from the officer, to collect damages from the Corporate Fraud Compensation Fund (Fund) as a similarly situated victim of corporate fraud with a judgment against a corporation is currently able to do. AB 2759 Page 2 FISCAL EFFECT: Expanding the type of claims eligible against the Fund will result in unknown additional expenditures. Estimated fund expenditures in 2016-17 are $1.5 million. Additional valid claims would likely increase expenditures by several hundred thousand dollars annually. According to the SOS, the Fund had a balance of $11.9 million as of January 2016. COMMENTS: 1)Background. The Victims of Corporate Fraud Compensation Fund (Fund), which is administered by the Secretary of State (SOS), provides a measure of relief to persons who have been victims of corporate fraud and won a judgment against a corporation, but who are unable to collect the judgment from the corporation after diligent efforts to do so. The Fund, which was established through legislation in 2002, is funded by fees on corporate filings. In SB 1058 (Lieu), Chapter 564, Statutes of 2012, codified, with some modifications, the rules governing the process of filing claims, recovering restitution, and challenging denials as promulgated by the SOS. SB 1058 also increased the maximum amount that one claimant may recover for any single judgment from $20,000 to $50,000. 2)Purpose. This bill allows a victim of corporate fraud and who wins a judgment against a corporate officer, but is unable to collect the judgment, to collect damages from the Fund, just as is currently provided to a similarly situated victim of corporate fraud. This proposal is based on the reality that few victims of corporate fraud are able to obtain judgments against corporations, and that there are few claims made against the Fund. As a result, the Fund is not adequately serving its intended purpose. This bill would allow more AB 2759 Page 3 victims of corporate fraud to access the funds for which they are intended. Analysis Prepared by:Chuck Nicol / APPR. / (916) 319-2081