BILL ANALYSIS                                                                                                                                                                                                    ”



                                                                    AB 2759


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          ASSEMBLY THIRD READING


          AB  
          2759 (Levine)


          As Amended  May 27, 2016


          Majority vote


           ------------------------------------------------------------------ 
          |Committee       |Votes|Ayes                  |Noes                |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |----------------+-----+----------------------+--------------------|
          |Judiciary       |10-0 |Mark Stone, Wagner,   |                    |
          |                |     |Alejo, Chau, Chiu,    |                    |
          |                |     |Gallagher, Weber,     |                    |
          |                |     |Holden, Maienschein,  |                    |
          |                |     |Ting                  |                    |
          |                |     |                      |                    |
          |----------------+-----+----------------------+--------------------|
          |Banking         |11-0 |Dababneh, Travis      |                    |
          |                |     |Allen, Achadjian,     |                    |
          |                |     |Bonilla, Brown, Chau, |                    |
          |                |     |Gatto, Kim, Low,      |                    |
          |                |     |Ridley-Thomas, Mark   |                    |
          |                |     |Stone                 |                    |
          |                |     |                      |                    |
          |----------------+-----+----------------------+--------------------|
          |Appropriations  |20-0 |Gonzalez, Bigelow,    |                    |
          |                |     |Bloom, Bonilla,       |                    |
          |                |     |Bonta, Calderon,      |                    |
          |                |     |Chang, Daly, Eggman,  |                    |
          |                |     |Gallagher, Eduardo    |                    |








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          |                |     |Garcia, Roger         |                    |
          |                |     |HernŠndez, Holden,    |                    |
          |                |     |Jones, Obernolte,     |                    |
          |                |     |Quirk, Santiago,      |                    |
          |                |     |Wagner, Weber, Wood   |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |
           ------------------------------------------------------------------ 


          SUMMARY:  Seeks to compensate victims of corporate fraud  
          committed by corporate officers from the Victims of Corporate  
          Fraud Compensation Fund (Fund).  Specifically, this bill: 


          1)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 after diligent  
            efforts to do so, to collect damages from the Fund as a  
            similarly situated victim of corporate fraud with a judgment  
            against a corporation would be able to do.


          2)Specifies that attorney fees are not costs that can be  
            recovered from the Fund and declares that the limitation on  
            attorney fees is declaratory of existing law.


          3)Eliminates the requirement in existing law that the Fund must  
            pay interest to a claimant on an unpaid claim in the event  
            that it does not have enough money to pay a claim when it is  
            initially submitted for payment.


          4)Defines relevant terms.


          FISCAL EFFECT:  According to the Assembly Appropriation  
          committee, expanding the type of claims eligible against the  








                                                                    AB 2759


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          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 Secretary of State  
          (SOS), the Fund had a balance of $11.9 million as of January  
          2016.


          COMMENTS:  According to the Secretary of State's Office, the  
          Victims of Corporate Fraud Compensation Fund had a balance of  
          approximately $11,900,000 as of January 2016.  According to  
          information provided by the author: 




               The Victims of Corporate Fraud Compensation Fund has not  
               received any applications based upon a criminal  
               restitution order against AGA Financial Inc.  However,  
               the Victims of Corporate Fraud Compensation Fund has  
               received numerous claims based upon four criminal  
               restitution orders naming James Koenig and Asset Real  
               Estate and Investment Company in a related criminal  
               proceeding.  The first three criminal restitution orders  
               named victims who testified at trial.  Administrative  
               review has been completed for all of the submitted  
               Applications based upon the first three restitution  
               orders and the Victims of Corporate Fraud Compensation  
               Fund has paid out more than $1.1 million dollars to  
               victims named in the three orders.


               The court issued its fourth restitution order, on June  
               24, 2015, naming victims who had not testified at trial.   
               The Victims of Corporate Fraud Compensation Fund received  
               nearly 300 claims based upon the June 24, 2015 criminal  
               restitution order.  Unfortunately, James Koenig has filed  
               a Notice of Appeal with respect to the June 24, 2015  
               criminal restitution order which is still pending.   








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               California Corporations Code sections 2281(f) and 2282(a)  
               preclude the payment of claims while an appeal is  
               pending.  Therefore, the Victims of Corporate Fraud Fund  
               is statutorily precluded from awarding applications based  
               upon the June 24, 2015 criminal restitution order until  
               the appeal has run its course.


          Statement of the Author.  According to the author:  


                We know that there are victims of corporate fraud that  
               are unable to access the victims of corporate fraud  
               compensation fund.  That is because to access the fund an  
               individual must have been a victim of a corporation that  
               has been convicted.  Very rarely are corporations charged  
               with crimes almost always it is an individual who is  
               charged with a crime.  AB 2759 will correct this problem  
               and allow many individuals who should have access to the  
               fund access.




          Access to the Victims of Corporate Fraud Compensation Fund.  If  
          a plaintiff successfully obtained a judgment against an officer  
          of a corporation based upon the tortious act by the officer him  
          or herself; the act of the officer on behalf of the corporation;  
          or the act of the officer violated the "Responsible Corporate  
          Officer Doctrine," the plaintiff's theory of liability would be  
          based upon misdeeds of the corporation that are attributable to  
          the officer (and vice versa).  It therefore seems reasonable to  
          provide such a plaintiff with the same remedies available to a  
          plaintiff who obtains a judgment against the corporation itself.




          Analysis Prepared by:                                             








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                          Alison Merrilees / JUD. / (916) 319-2334  FN:  
          0003146