Legislature(2009 - 2010)CAPITOL 120
03/11/2010 01:00 PM JUDICIARY
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* first hearing in first committee of referral
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HB 355 - CRIMINAL FINES FOR ORGANIZATIONS 2:31:13 PM CHAIR RAMRAS announced that the next order of business would be HOUSE BILL NO. 355, "An Act relating to criminal fines for organizations." 2:32:11 PM REPRESENTATIVE GRUENBERG, speaking as the sponsor, explained that HB 355 [and a proposed amendment are] designed to bring Alaska's criminal fines for organizations - corporations, partnerships, and the like - up to date, and to close a potential loophole in the law; the amendment, labeled 26- LS1385\E.1, Luckhaupt, 3/9/10, [which later became known as Amendment 1] read: Page 1, line 7: Delete "$1,000,000" Insert "$2,000,000 [$1,000,000]" Page 1, line 9: Delete "$200,000" Insert "$400,000 [$200,000]" Page 1, line 11: Delete "$25,000" Insert "$50,000 [$25,000]" Page 1, line 13: Delete "$10,000" Insert "$20,000 [$10,000]" REPRESENTATIVE GRUENBERG said that although the officers of a corporation could be imprisoned for wrongdoing, the corporation itself couldn't be imprisoned; however, a corporation could have criminal fines levied against it. Currently, an organization could be sentenced to pay a fine not to exceed the greater of: the existing fine amounts - currently listed on page 1, lines [7-13]; three times the pecuniary gain realized by the defendant as a result of the offense; or three times the pecuniary damage or loss caused by the defendant to another or to the property of another as a result of the offense. He also mentioned that members' packets contain an Alaska Law Review article dated December 2008 that addresses the issue of criminal liability as it pertains to organizations. REPRESENTATIVE GRUENBERG, to illustrate the loophole in existing law, referred to the federal corruption case involving the VECO Corporation, wherein although the company didn't realize any pecuniary gain - and the State of Alaska didn't realize any loss or damage - the company was certainly seeking pecuniary gain - and pecuniary loss or damage to the State - when it bribed certain Alaska lawmakers to defeat a tax that would have affected the oil and gas industry. House Bill 355 would close that loophole by stipulating that an organization may be sentenced to pay a fine of three times the pecuniary gain - or loss or damage to another - sought by the defendant via the commission of the offense. 2:35:59 PM REPRESENTATIVE LYNN asked how a potential gain, or potential loss or damage, could be calculated. For example, in the aforementioned case, under the bill, what would the criminal fines have amounted to? REPRESENTATIVE GRUENBERG acknowledged that in some cases, it could be difficult to determine the potential gain, or potential loss or damage. In those cases, the court could simply choose to sentence the organization to pay the appropriate fine as set out in AS 12.55.035(c)(1). In other cases, however, the potential gain, or potential loss or damage, could be calculated as being the amount sought by the organization via the commission of the offense. In the situation involving the VECO Corporation, for example, under the bill, the court could have calculated the potential loss of tax revenues to the State of Alaska, particularly given that there was evidence and witnesses in that case. Both existing statute and the proposed statute provide the court options with regard to what the maximum criminal fine could amount to, on a case-by-case basis, thereby addressing the fact that the amount of gain, or the amount of loss or damage, can sometimes be hard to calculate. REPRESENTATIVE GRUENBERG, in response to a question regarding the language of proposed AS 12.55.035(c)(2)(B) - which says in part, "sought by the defendant for the defendant or for others" - explained that an organization could be committing the offense on behalf of its clients. With regard to the situation involving the VECO Corporation, for example, under the bill, any pecuniary gain to its clients - either realized or sought - as a result of the commission of the offense would probably have been too speculative to determine and thus the court could simply have chosen an appropriate fine as set out in AS 12.55.035(c)(1). REPRESENTATIVE GRUENBERG, in response to questions, explained that any criminal fines received under the bill's provisions would go into the general fund (GF); that HB 355 is merely amending existing statutes pertaining to criminal fines for organizations; that the aforementioned Alaska Law Review article mentions specific Alaska cases involving the criminal liability of an organization - State v. ABC Towing and State v. Greenpeace, Inc. being just a couple of examples; and that he does not know why the VECO Corporation was not prosecuted under existing AS 12.55.035(c). 2:46:45 PM ANNE CARPENETI, Assistant Attorney General, Legal Services Section, Criminal Division, Department of Law (DOL), in response to questions, said that the DOL doesn't prosecute corporations very often under Title 11; that she would research why the VECO Corporation itself was not prosecuted; that some who work in the Office of Special Prosecutions & Appeals are in support of HB 355 and the proposed amendment increasing the fines, because in those situations where they can prosecute an organization for a criminal act, there is often a pecuniary gain realized by the corporation as a result of the offense it commits; and that such prosecutions don't take place very often. REPRESENTATIVE GRUENBERG, in response to questions, reiterated his opening remarks; noted that the largest of the existing set fines is $1 million, and that the aforementioned proposed amendment [would double that amount]; and ventured his understanding of some of the factors involved in the aforementioned legal cases, and what might have occurred had HB 355 been in place when those cases were heard in court. CHAIR RAMRAS noted that the last paragraph on page 6 of the aforementioned Alaska Law Review article says in part [original punctuation provided]: Collectively, ABC Towing and Greenpeace, Inc. confirm the existence of organizational criminal liability under state law. These decisions do little, however, to define the contours and limitations of that liability and, in fact, highlight problems with the existing laws. ABC Towing carves out an exemption for sole proprietorships. ... Greenpeace is also problematic in that it illustrates the ease with which organizations might compartmentalize their operations or duplicate themselves and thereby thwart criminal prosecution. ... These are shortcomings legislators need to address if the prosecution of organizations is to be effectively and consistently utilized. 2:51:50 PM REPRESENTATIVE GRUENBERG added that although HB 355 would be closing a loophole regarding unrealized gains, or unrealized losses or damages, sought by an organization via the commission of an offense, the Alaska Law Review article indicates that there are other changes to the "criminal corporate liability statutes" that might be warranted. In response to questions, he explained that the proposed amounts outlined in the aforementioned amendment were suggested by the DOL; that the existing fine amounts for misdemeanors have remained unchanged since they were first included in statute 20 years ago; that the existing maximum fine amount for a felony was enacted in statute in 2002; and that inflation since that time has been significant. CHAIR RAMRAS expressed interest in receiving information regarding how often existing AS 12.55.035(c) has been utilized over the last 10 years; what criminal-fine amounts were ordered; and whether such fines could be dedicated to specific purposes or governmental entities. REPRESENTATIVE GRUENBERG, in response to a question, indicated that although the DOL did not ask him to introduce HB 355, the DOL did provide input on the bill when he asked for it. He further indicated that the DOL suggested increasing the set criminal-fine amounts for misdemeanors and he'd simply included a new set criminal fine amount for felonies. 2:56:32 PM CLYDE (ED) SNIFFEN, JR., Senior Assistant Attorney General, Commercial/Fair Business Section, Civil Division (Anchorage), Department of Law (DOL), acknowledged that he had suggested the new amounts now listed in the proposed amendment, but indicated that HB 355 would not impact cases involving antitrust violations, which fall under the purview of his section. In response to a question, he said that he himself has not prosecuted anyone under AS 12.55.035(c). MS. CARPENETI added her understanding that the DOL has prosecuted [organizations] under AS 12.55.035(c), and agreed to research the specific details. CHAIR RAMRAS relayed that HB 355 would be held over.