Legislature(2017 - 2018)GRUENBERG 120

04/11/2017 05:30 PM JUDICIARY

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Audio Topic
05:35:39 PM Start
05:36:49 PM HB170
06:30:05 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Please Note Time Change --
+ Bills Previously Heard/Scheduled TELECONFERENCED
+= HB 170 AK SECURITIES ACT; PENALTIES; CRT. RULES TELECONFERENCED
Heard & Held
        HB 170-AK SECURITIES ACT; PENALTIES; CRT. RULES                                                                     
                                                                                                                                
5:36:49 PM                                                                                                                    
                                                                                                                                
CHAIR CLAMAN announced  that the only order of  business would be                                                               
HOUSE   BILL   NO.  170,   "An   Act   relating  to   securities,                                                               
registration,  exempt  securities, exempt  transactions,  broker-                                                               
dealers,   agents,   investment  advice,   investment   advisers,                                                               
investment adviser  representatives, federal  covered securities,                                                               
federal   covered   investment  advisers,   viatical   settlement                                                               
interests, small intrastate  security offerings, Canadian broker-                                                               
dealers, and Canadian agents;  relating to administrative, civil,                                                               
and  criminal enforcement  provisions, including  restitution and                                                               
civil penalties for violations;  relating to an investor training                                                               
fund; establishing  increased civil  penalties for  harming older                                                               
persons   and  vulnerable   adults;   relating  to   corporations                                                               
organized  under   the  Alaska  Native  Claims   Settlement  Act;                                                               
amending  Rules 4,  5,  54, 65,  and 90,  Alaska  Rules of  Civil                                                               
Procedure,  and Rule  602, Alaska  Rules of  Appellate Procedure;                                                               
and providing for  an effective date." [Before  the committee was                                                               
HB 170, Version 30-LS0333\J.]                                                                                                   
                                                                                                                                
5:37:50 PM                                                                                                                    
                                                                                                                                
CHAIR CLAMAN  referred to HB  170, Version J,  Sec. 45.56.670(a),                                                               
page 92, lines 16-18, which read as follows:                                                                                    
                                                                                                                                
          (a)  ...   A  person  convicted  of   violating  a                                                                    
     regulation or  order issued under  this chapter  may be                                                                    
     fined, but  may not  be imprisoned,  if the  person did                                                                    
     not know of the regulation or order.                                                                                       
                                                                                                                                
CHAIR  CLAMAN noted  there was  much discussion  during the  last                                                               
bill  hearing in  that the  section created  a misdemeanor  crime                                                               
without  a mental  state,  and  was pondering  the  merits of  an                                                               
amendment to remove  that language, and the  amendment would read                                                               
there wasn't a misdemeanor crime without a mental state.                                                                        
                                                                                                                                
5:38:50 PM                                                                                                                    
                                                                                                                                
KEVIN  ANSELM,  Director,  Division of  Banking  and  Securities,                                                               
Department  of  Commerce,  Community,  and  Economic  Development                                                               
(DCCED), offered her understanding  that the committee may decide                                                               
to delete the language on page  92, lines 16-18, and offered that                                                               
the division would not oppose  the amendment.  Although, she said                                                               
she wondered  whether the result  would be that there  then would                                                               
not be  a lesser penalty,  and prison would  be on the  table for                                                               
anyone convicted  of violating a  regulation or order,  as oppose                                                               
to this exception.                                                                                                              
                                                                                                                                
CHAIR  CLAMAN offered  concerns  from the  members regarding  the                                                               
whole notion of having some  lesser crime without a mental state,                                                               
and noted his sense that the  members were not bothered by having                                                               
a  misdemeanor  crime  that  wasn't  a felony  in  the  world  of                                                               
criminal  enforcement.   There  appears  to be  a  great deal  of                                                               
discomfort with having that strict liability, he stated.                                                                        
                                                                                                                                
MS. ANSELM  asked the question  that the fact that  this language                                                               
is within the "intentionally section,"  whether there would be an                                                               
interpretation  that it  would still  need to  be an  intentional                                                               
requirement.                                                                                                                    
                                                                                                                                
5:41:08 PM                                                                                                                    
                                                                                                                                
RENEE WARDLAW,  Assistant Attorney  General, Commercial  and Fair                                                               
Business  Section,  Department  of  Law,  said  she  agreed  with                                                               
Director  Anselm in  that intentionally  is currently  the mental                                                               
state  for a  felony  crime.   Currently,  it's  written that  if                                                               
someone were to violate the  statute or an associated regulation,                                                               
they would be liable  for a class C felony.   She referred to the                                                               
discussed language and  said she did not see  a provision related                                                               
to  a misdemeanor;  therefore, her  interpretation and  review of                                                               
the law,  which she may  have misstated during the  previous bill                                                               
hearing,  was that  currently there  actually  is no  misdemeanor                                                               
punishment in  the law.  In  the event the committee  did proceed                                                               
with a  criminal manner it  would only be  for a felony,  and the                                                               
Department of Law (DOL) would  have to prove that that particular                                                               
wrongdoer  performed the  act intentionally,  which  is a  higher                                                               
mental state.                                                                                                                   
                                                                                                                                
5:42:32 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KOPP  related that there  does not appear to  be a                                                               
misdemeanor offense in this penalty structure.                                                                                  
                                                                                                                                
MS. WARDLAW answered correct.                                                                                                   
                                                                                                                                
REPRESENTATIVE KOPP  noted that if a  person was not guilty  of a                                                               
felony, the person could then only  be guilty of a violation.  In                                                               
other words, he related, in the  event the crime did not meet the                                                               
class  C felony  standard that  the person  did not  know of  the                                                               
regulation or order,  the person would be subject to  a fine, and                                                               
it would be prosecuted as a civil offense, noncriminal.                                                                         
                                                                                                                                
MS. WARDLAW answered correct.                                                                                                   
                                                                                                                                
5:43:27 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KOPP surmised  that violating  any regulation  of                                                               
this  chapter is  felony conduct  if the  crime was  committed on                                                               
purpose.   He asked whether  an argument  could be made  that all                                                               
intentional violations  rise to the level  of felony prosecution,                                                               
and  noted  surprised that  the  only  mental state  attached  is                                                               
intentionally, and all  violations would be considered  a class C                                                               
felony.    He  then  asked  whether  there  was  a  place  for  a                                                               
misdemeanor or a  lesser violation in the bill  because now there                                                               
is a gap between a felony and a traffic ticket.                                                                                 
                                                                                                                                
MS. WARDLAW  related that  DOL has a  host of  punishment avenues                                                               
available,  such   as  an   administrative  action   for  someone                                                               
violating  the   statute,  a  civil   avenue  contained   in  the                                                               
enforcement  section, AS  45.56.660, and  criminal avenues.   The                                                               
intention is that if DOL  did have a violator, the administrator,                                                               
together  with advisement  from  the  attorney general's  office,                                                               
would determine [the level of  the offense] based upon the facts.                                                               
Representative  Kopp  was  correct,  she  offered,  that  if  the                                                               
criminal avenue was  chosen, that violator would have  had to act                                                               
intentionally with  regard to their action  against investors, or                                                               
what  acts  they performed.    For  example,  she said,  if  they                                                               
intentionally sold or  offered a security to  investors which was                                                               
actually  a junk  bond  or  a security  with  no value,  criminal                                                               
action could  be taken.   Although, there would be  other factors                                                               
DOL  would  consider  to   determine  whether  an  administrative                                                               
action,  civil  action, or  a  criminal  action, would  be  best.                                                               
Therefore, the intention for the  enforcement section was to have                                                               
all of these  avenues available so when  the administrator looked                                                               
at the  particular facts  of the  case, together  with advisement                                                               
from  the  attorney  general's  office,  they  could  make  their                                                               
decision accordingly.                                                                                                           
                                                                                                                                
5:46:23 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  EASTMAN,  with  regard  to  the  traffic  ticket,                                                               
commented that "$100,000,  that's one heck of  a traffic ticket."                                                               
He  acknowledged that  he is  murky regarding  "knowing violation                                                               
versus  unknowing violation,"  and  pointed  to [Sec.  45.56.670,                                                               
page  92, lines  16-18] subsection  (a) and  related that  if the                                                               
description was  that the felony  mentioned here  necessitates an                                                               
intentional violation, then clearly  the discussion was not about                                                               
the  felony.   In the  event  this deals  with  a fine  of up  to                                                               
$100,000, just the fact that  someone made an intentional act but                                                               
they didn't necessarily know the  act was contrary to the section                                                               
continues in  the strict liability  category, he  related, unless                                                               
he was missing something.                                                                                                       
                                                                                                                                
5:47:56 PM                                                                                                                    
                                                                                                                                
MS.   ANSELM  remarked   that  she   may   not  have   understand                                                               
Representative Eastman's  question correctly, but  under criminal                                                               
enforcement, the  mens rea is  intentional, except  currently, if                                                               
there is  a violation of  a regulation or  order it is  usually a                                                               
"lesser sort  of issue."   In essence,  she explained,  there are                                                               
two different  standards in there,  and "one  says you can  go to                                                               
jail --  you can go to  prison, the other  one says, no."   As to                                                               
the civil penalties, the division  would like to see it increased                                                               
up to  $100,000 per  violation, but  that does  not mean  that is                                                               
what  the division  would use  because it  is careful  in how  it                                                               
accesses civil  penalties.   The division  wants its  response to                                                               
fit  the activity  and, she  opined, that  would not  change when                                                               
raising the amount that can be paid for a violation.                                                                            
                                                                                                                                
5:49:06 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  EASTMAN offered  an analogy  that he  happened to                                                               
unknowingly trespass on someone's  property because no signs were                                                               
posted.  He  said he violated because it was  his intention to go                                                               
to that  area, except it  wasn't a knowing  violation.    In this                                                               
type of situation, he asked, what  would be the requirement for a                                                               
degree of negligence,  or something else.  He said  he would hope                                                               
that it was not  simply that the person did not  know there was a                                                               
regulation,  the  person violates  the  regulation,  and now  the                                                               
person is on the hook for, perhaps, a large penalty.                                                                            
                                                                                                                                
MS. ANSELM  referred to  some of the  enforcement orders  she had                                                               
discussed during  the last  bill hearing,  and noted  pointed out                                                               
that  within  some  of  the  orders  there  are  quite  egregious                                                               
activities.    For instance,  taking  money  from an  ailing  and                                                               
elderly  Alaska   halibut  fisherman  through  cold   calls,  the                                                               
division only  went after a  civil penalty and  nothing criminal.                                                               
She then referred to the people  who arrived in Alaska from Texas                                                               
and  stole  $3.1 million  from  Alaskans,  the division  did  not                                                               
propose a  criminal penalty.   She explained that "it  would have                                                               
to  be  an   egregious  sort  of  situation,"   and  noted  that,                                                               
currently, Alaska  has not had  many criminal cases, but  it also                                                               
has  not  had  the  enforcement  tools  necessary  to  deal  with                                                               
enforcement that  this Act would  give the division.   Therefore,                                                               
she said, she could not offer any good examples.                                                                                
                                                                                                                                
5:51:11 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  EASTMAN   asked  whether  there  are   any  other                                                               
elements  to  the  offense  other than  strict  liability  and  a                                                               
regulation was  violated, such as  any degree of  negligence that                                                               
would normally be required in order to issue a fine.                                                                            
                                                                                                                                
MS. WARDLAW  referred to Sec.  45.56.670, [page 92,  lines 12-18]                                                               
and advised  that the mental  state is still  "intentionally" and                                                               
the  last line  [lines  16-18] merely  allow the  DOL  to have  a                                                               
lighter version of a felony.   In the event a person who violated                                                               
the law did  not know about the law or  the regulation associated                                                               
with the law, they could  not be imprisoned which, she explained,                                                               
is why the last  line was included.  A class  C felony means that                                                               
in the event  someone violated the law, and they  could either be                                                               
imprisoned or receive a fine up  to $100,000, except in the event                                                               
they did not know  about the law, they could only  be fined up to                                                               
$100,000, and  not imprisoned.   She remarked that  the committee                                                               
was using  the word  "knowingly," which  had some  legal meaning,                                                               
but in this case the language  was simply saying that if a person                                                               
did not know the law, they  were not subject to imprisonment, but                                                               
were subject to a fine.                                                                                                         
                                                                                                                                
5:53:23 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE LEDOUX asked  why a person must  have knowledge of                                                               
something in  order to have  committed a crime, usually  mens rea                                                               
means that  a person actually  intends to do something,  not that                                                               
they know whether  its legal or illegal.  She  then asked whether                                                               
there [are other  laws or regulations] in which  an agency adopts                                                               
a  regulation and  the  agency regulation  sets  forth an  actual                                                               
criminal act.  She pointed  out that the legislature decides what                                                               
are, and  are not,  crimes.  She  referred to  Sec. 45.56.670(a),                                                               
[page 92, lines 12-16], which read as follows:                                                                                  
                                                                                                                                
          (a)  A  person  who  intentionally  violates  this                                                                    
     chapter, a  regulation adopted  under this  chapter, or                                                                    
     an  order   issued  under   this  chapter,   except  AS                                                                    
     45.56.550  or  the  notice filing  requirements  of  AS                                                                    
     45.56.330 or 45.56.445,  is guilty of a  class C felony                                                                    
     punishable by  imprisonment under AS 12.55.125  or by a                                                                    
     fine of not more than $100,000, or by both.                                                                                
                                                                                                                                
REPRESENTATIVE LEDOUX  stated that the  legislature's prerogative                                                               
is to  actually determines  what is a  crime, and  asked whether,                                                               
other  than securities  law and  this bill,  there was  any place                                                               
where the  legislature lets an  agency decide what is  a criminal                                                               
act.                                                                                                                            
                                                                                                                                
5:55:19 PM                                                                                                                    
                                                                                                                                
MS. ANSELM responded that she  would have to research that issue,                                                               
and  was unaware  whether Ms.  Wardlaw  knew the  answer at  this                                                               
moment.                                                                                                                         
                                                                                                                                
REPRESENTATIVE LEDOUX  stressed that  she was  uncomfortable with                                                               
the idea of allowing an agency determine what is a crime.                                                                       
                                                                                                                                
5:55:53 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE REINBOLD  inquired as  to which agency  would make                                                               
the decision as to whether [an offense] was a felony.                                                                           
                                                                                                                                
MS.  ANSELM  responded  that  the   decision  would  be  made  by                                                               
Department   of  Commerce,   Community  &   Economic  Development                                                               
(DCCED), working  with the Department of  Law, Attorney General's                                                               
Office as that is the state's attorney.                                                                                         
                                                                                                                                
REPRESENTATIVE  REINBOLD   surmised  that   no  court   would  be                                                               
involved.                                                                                                                       
                                                                                                                                
MS. ANSELM answered  that, of course, a court  would be involved,                                                               
[a complaint] must  be filed with the court, and  there must be a                                                               
trial before someone was [convicted].                                                                                           
                                                                                                                                
REPRESENTATIVE  REINBOLD asked  whether the  division would  file                                                               
the charges, and to explain the process.                                                                                        
                                                                                                                                
MS.  ANSELM  replied that  the  charges  would  be filed  by  the                                                               
attorney  general's office  or  the  appropriate law  enforcement                                                               
agency.                                                                                                                         
                                                                                                                                
MS. ANSELM, in response to  Representative Reinbold, advised that                                                               
it is her understanding that the  case would proceed as a regular                                                               
court case.                                                                                                                     
                                                                                                                                
5:57:30 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  LEDOUX  questioned  that  even  though  the  case                                                               
proceeds  like  a regular  court  case,  the department  actually                                                               
created  the crime  through a  regulation, and  not by  appearing                                                               
before  a legislative  committee to  advise  that "A,  B, and  C"                                                               
should be  elements of a crime.   She again stressed  that she is                                                               
uncomfortable with [that authority given to an agency].                                                                         
                                                                                                                                
5:57:57 PM                                                                                                                    
                                                                                                                                
CHAIR  CLAMAN advised  that to  the extent  the committee  passed                                                               
this bill with  this section included, the  committee created the                                                               
crime,  the department  was not  creating  the crime  in that  it                                                               
would create the  regulations that read what a person  had to do,                                                               
and then  if they didn't, that  becomes a crime.   He opined that                                                               
this does not give the  agency the authority to write regulations                                                               
defining crimes differently than  what the legislature was saying                                                               
in the bill.  He commented that he may be wrong.                                                                                
                                                                                                                                
5:58:25 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE LEDOUX  stressed that  if the language  is nothing                                                               
other  than   what  is  in   the  bill,  then  a   regulation  is                                                               
unnecessary.    Obviously,  she   expressed,  it  is  giving  the                                                               
department  authority to  take this  chapter and  construe it  in                                                               
such  a manner  that a  person  could end  up with  a felony  for                                                               
violating a regulation.                                                                                                         
                                                                                                                                
MS. ANSELM answered  that she was unsure this  language gives the                                                               
department any  more authority to  issue regulations than  in any                                                               
other situation.   Although, she  advised, if someone  violates a                                                               
regulation there are  a number of things that can  happen to that                                                               
person.  Regulations must arise  from laws, and regulations do go                                                               
through a  process by which they  are vetted before they  are put                                                               
in place, and she was unsure  whether that was different from any                                                               
other [regulation process].                                                                                                     
                                                                                                                                
REPRESENTATIVE LEDOUX said, presumably,  the legislature does not                                                               
let the  Department of Public Safety  (DPS) come up with  its own                                                               
interpretation of  [laws], and through  regulation say  one thing                                                               
or another, that authority belongs to the legislature.                                                                          
                                                                                                                                
MS. ANSELM  reminded the committee  that a judge would  always be                                                               
involved in any sort of criminal activity.                                                                                      
                                                                                                                                
6:00:50 PM                                                                                                                    
                                                                                                                                
CHAIR   CLAMAN   explained   that   that  was   not   the   issue                                                               
Representative  LeDoux   raised,  the   issue  was   whether  the                                                               
department can issue  a regulation that becomes a  crime, as that                                                               
authority is  limited to the  legislature.  He remarked  that the                                                               
legislature could make it a  crime to violate the regulation, the                                                               
question was whether the regulation itself created a crime.                                                                     
                                                                                                                                
REPRESENTATIVE LEDOUX nodded her head in agreement.                                                                             
                                                                                                                                
MS.  ANSELM answered  that she  did not  know whether  there were                                                               
situations where crimes were  established through regulation, and                                                               
deferred to Ms. Wardlaw.                                                                                                        
                                                                                                                                
6:01:46 PM                                                                                                                    
                                                                                                                                
MS.  WARDLAW explained  that the  language on  the first  line is                                                               
model  language and  it  may  or may  not  fit  the Alaska  State                                                               
Legislature  and  its  authority.   In  a  practical  sense,  she                                                               
offered,  she  sincerely  doubted   the  division  would  take  a                                                               
criminal action  if someone  did not  violate a  statute outlined                                                               
under AS  45.56.   In the event  the committee  was uncomfortable                                                               
with "us taking criminal enforcement  against the regulation that                                                               
was  adopted into  the chapter,  or  an order  issued under  this                                                               
chapter," it  probably would  not make a  difference in  the tool                                                               
kit of enforcement abilities, she said.                                                                                         
                                                                                                                                
6:02:45 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE REINBOLD noted that  Representative LeDoux and she                                                               
agreed on  this issue and  she would co-sponsor  legislation with                                                               
Representative LeDoux  regarding administrative  law.   She asked                                                               
Ms. Anselm,  for transparency purposes,  to advise  the committee                                                               
which organization encouraged  this law to be  brought before the                                                               
body.                                                                                                                           
                                                                                                                                
MS. ANSELM advised  that the original bill had  been presented to                                                               
the legislature  a number of  times, and generally  brought forth                                                               
through  the  Division  of Banking  and  Securities  through  the                                                               
Department   of  Commerce,   Community  &   Economic  Development                                                               
(DCCED), and  had several times  been introduced as  a governor's                                                               
bill.                                                                                                                           
                                                                                                                                
REPRESENTATIVE REINBOLD  advised that that was  not her question,                                                               
and  noted  their conversation  prior  to  this hearing  and  the                                                               
mention of  the National Conference  of Commissioners  on Uniform                                                               
State  Laws (ULC).   She  said  she wanted  that organization  on                                                               
record, and  asked whether Alaska  had state membership  or state                                                               
representation.                                                                                                                 
                                                                                                                                
MS.   ANSELM   responded   that  the   National   Conference   of                                                               
Commissioners on  Uniform State  Laws (NCCUSL) provides  a number                                                               
of uniform  state laws,  and none  of the  states belong  to this                                                               
organization.    The NCCUSL  is  considered  a learned  group  of                                                               
scholars  from  across the  country  in  various disciplines,  it                                                               
works with  everything from  probate law  to securities  law, and                                                               
several pages of  different laws.  She explained  that the NCCUSL                                                               
suggests  to  states  that  their laws  be  uniform  [with  other                                                               
states], thereby, assisting  businesses operating state-to-state,                                                               
for example.                                                                                                                    
                                                                                                                                
6:06:26 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE REINBOLD  said she is  a fan of  state sovereignty                                                               
and federalism,  and asked whether any  organizations fund "these                                                               
scholars," or  whether any type  of lobbying was involved  in any                                                               
manner.                                                                                                                         
                                                                                                                                
MS. ANSELM  answered that she  was not  aware of any  lobbying or                                                               
funding for NCCUSL.                                                                                                             
                                                                                                                                
6:07:14 PM                                                                                                                    
                                                                                                                                
CHAIR  CLAMAN  clarified  to  Representative  Reinbold  that  the                                                               
NCCUSL is  also called the  Commission on Uniform Laws,  which is                                                               
the  same commission  that brought  forward  the Revised  Uniform                                                               
Fiduciary Access  to Digital Assets  Act to this committee.   The                                                               
legislature tends to  see uniform laws come forward  on a regular                                                               
basis through that process, and all  50 states are members of the                                                               
group, he advised.                                                                                                              
                                                                                                                                
REPRESENTATIVE REINBOLD  asked Chair Claman to  bring the answers                                                               
to her request to the committee.                                                                                                
                                                                                                                                
CHAIR  CLAMAN offered  that,  for  example, Commissioner  Deborah                                                               
Behr  is  one  of  the   designed  Alaska  commissioners  on  the                                                               
Commission  on  Uniform  Laws,   and  approximately  4-6  retired                                                               
persons from Alaska are involved in the group.                                                                                  
                                                                                                                                
6:08:25 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KOPP explained  to  Representative Reinbold  that                                                               
the  Commission on  Uniform Laws  was established  over 50  years                                                               
ago,  and his  direct  experience with  the commission  involved:                                                               
interstate extradition acts for  people with felony warrants; how                                                               
states agree  to extradite  offenders wanted  in other  states on                                                               
felony  warrants; an  extraditable  offense; and  whether or  not                                                               
those states will extradite.   The Commission on Uniform Law sets                                                               
uniform laws  that apply  to child  custody cases  depending upon                                                               
where the  child was born,  if the  custodial parent is  from the                                                               
state  making  the claim  for  the  child,  or if  the  custodial                                                               
parents have  moved, there  are many  factors states  have worked                                                               
out together.   For example,  in situation "A," if  these factors                                                               
apply then this  is how "we, as states," will  resolve it without                                                               
fighting, basically.   It  is a  long established  commission, he                                                               
pointed out,  there is nothing  nefarious or hidden in  there, it                                                               
has been  necessary for states  to be  at peace with  one another                                                               
and resolve a whole list  of administrative issues that otherwise                                                               
would literally  be a lawsuit  every time.   It's the  way states                                                               
interact in  commerce, administrative, family, and  criminal law,                                                               
and it is very effective, he described.                                                                                         
                                                                                                                                
6:09:55 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   REINBOLD   asked   whether  Alaska   has   state                                                               
representation as  commissioners, such  as Deborah  Behr, because                                                               
it was  said that  there was  no state  membership, and  no state                                                               
representation.                                                                                                                 
                                                                                                                                
CHAIR CLAMAN stated  that rather than vetting  the question "what                                                               
does the uniform law commission do,"  when Ms. Anselm was not the                                                               
correct person  to answer that  question, he could talk  with her                                                               
off  record because  the committee  does not  need to  spend more                                                               
time on  it today.   He advised  Representative Reinbold  that it                                                               
would have  been a good question  to ask when the  committee took                                                               
up the fiduciary asset act, which was a Uniform Law Act.                                                                        
                                                                                                                                
REPRESENTATIVE REINBOLD  argued that "She said  that they brought                                                               
this bill forth"  and Representative Reinbold wanted  to know the                                                               
origin of this bill.                                                                                                            
                                                                                                                                
CHAIR CLAMAN responded  that the question had  been answered, the                                                               
structure  of the  bill started  from the  Commission on  Uniform                                                               
Laws,  and  Ms.  Anselm  was  clear  in  that  explanation.    He                                                               
reiterated  that Ms.  Anselm should  not be  asked to  respond to                                                               
questions regarding  the Commission  on Uniform Laws  because she                                                               
was not directly involved with the commission.                                                                                  
                                                                                                                                
6:11:52 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KOPP referred to  the language in [Sec. 45.56.670,                                                               
page  92] lines  13-14, and  said that  as Representative  LeDoux                                                               
mentioned, the committee could be  promulgating regulations by an                                                               
administrative  agency  that  could  end  up  determining  felony                                                               
conduct.   He suggested the  committee decide whether  it prefers                                                               
that language in the chapter because  the DOL appeared to have no                                                               
commitment one way or the other as to deleting the language.                                                                    
                                                                                                                                
He said  that it was  his hope that if  conduct was a  felony, it                                                               
would be a felony because it  was dealing with laws pertaining to                                                               
the United  States Securities and  Exchange Commission,  and many                                                               
of  those laws  are felonies.   In  the event  the committee  was                                                               
actually basing  this on the  United States Code, which  does say                                                               
whether something is a felony or  not, then there could be a good                                                               
reason for having some leeway in there  as long as it was tied to                                                               
conduct that  was already  a federal felony.   He  commented that                                                               
his comments  were directed to  Chair Claman as an  attorney, and                                                               
he was unsure whether this was the time to visit that issue.                                                                    
                                                                                                                                
6:13:02 PM                                                                                                                    
                                                                                                                                
CHAIR CLAMAN suggested that because  amendments on this bill will                                                               
be heard  tomorrow, the  sensible thing would  be to  ask someone                                                               
from the  Department of  Law (DOL),  Criminal Division  to appear                                                               
and  offer  input because  this  subsection  was making  everyone                                                               
uncomfortable, curious,  and worried.   He noted  he did  have an                                                               
amendment drafted with regard to subsection (a) on page 92.                                                                     
                                                                                                                                
6:14:14 PM                                                                                                                    
                                                                                                                                
CHAIR CLAMAN  referred to [Sec.  45.56.670], subsection  (a), and                                                               
commented that as he read  the subsection, a person charged under                                                               
this  felony provision  would  be  subject to  a  fine  of up  to                                                               
$100,000, but  not imprisonment  under the  language in  the last                                                               
sentence,  "if  the  person  didn't know  of  the  regulation  or                                                               
order."  He asked whether he  was correctly reading that the fine                                                               
would be up to $100,000.                                                                                                        
                                                                                                                                
MS. ANSELM answered in the affirmative.                                                                                         
                                                                                                                                
6:15:12 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  LEDOUX  opined  that   somewhere  she  read  that                                                               
anything with  a fine over  "X" amount  of dollars was  a felony,                                                               
and if  less than $5,000 was  a misdemeanor.  She  commented that                                                               
"$100,000, as Representative Eastman said,  that is one hell of a                                                               
traffic fine."                                                                                                                  
                                                                                                                                
REPRESENTATIVE  LEDOUX then  pointed out  that a  person receives                                                               
certain  protections  when charged  with  either  a felony  or  a                                                               
misdemeanor,  foremost is  the right  to a  jury trial.   In  the                                                               
event an action was simply a  violation, the person then does not                                                               
receive their  right to a  jury trial,  and she remarked  that it                                                               
was  problematic  that someone  could  be  fined up  to  $100,000                                                               
without the right to a jury trial.                                                                                              
                                                                                                                                
[REPRESENTATIVE KOPP spoke off record and could not be heard.]                                                                  
                                                                                                                                
REPRESENTATIVE LEDOUX laughingly  opined that Representative Kopp                                                               
was pointing her to the Sixth Amendment.                                                                                        
                                                                                                                                
REPRESENTATIVE  REINBOLD opined  that  Representative LeDoux  and                                                               
she now have agreed on a second issue.                                                                                          
                                                                                                                                
6:17:06 PM                                                                                                                    
                                                                                                                                
CHAIR CLAMAN  said that  to make this  even more  complicated, he                                                               
turned to  the last sentence  in subsection (a), [page  92, lines                                                               
16-18]  and  said the  way  it  reads,  this  is actually  not  a                                                               
misdemeanor provision.   He  described it  as a  felony provision                                                               
and paraphrased,  "A person convicted  of violating  a regulation                                                               
or order  under this chapter ...  so, the only conviction  can be                                                               
for the felony."  Now, he  remarked, there is this conviction for                                                               
a felony  which actually requires  that the  person intentionally                                                               
violated the  chapter, and  explained that  intentional violation                                                               
of a  law, under traditional  construction in  criminal statutes,                                                               
means knowledge  of the  circumstances, the  thing the  person is                                                               
violating,  such as  the  illegal act  of  breaking into  someone                                                               
house,  for example.   The  problem is  that "now  you have  this                                                               
thing you  are trying to  say, you don't  know it's --  you don't                                                               
know that  it's -- you don't  know about the regulation  or order                                                               
but that's the very thing you  are supposed to know about to make                                                               
an  intentional violation."    He  pointed out  that  there is  a                                                               
problem  with  this  sentence  because,   how  can  a  person  be                                                               
convicted of intentional action if  the person didn't know of the                                                               
regulation or order.                                                                                                            
                                                                                                                                
6:18:47 PM                                                                                                                    
                                                                                                                                
MS.  ANSELM commented  that  she did  not  believe many  criminal                                                               
actions would arise from this  Act, as there are civil violations                                                               
and administrative violations.   She said she  understand why the                                                               
committee was  focusing here,  but there are  a whole  panoply in                                                               
this law  of actions that  the division  can take, in  concert or                                                               
not, with  the attorney general's  office.  She then  deferred to                                                               
Ms. Wardlaw.                                                                                                                    
                                                                                                                                
MS.  WARDLAW said,  in  deference to  Sec.  45.56.670, she  would                                                               
defer to  her earlier testimony regarding  criminal liability for                                                               
a  violation  of a  regulation  or  an  order.   Based  upon  the                                                               
committee's  discussion, she  offered  a  potential amendment  to                                                               
delete  the  language on  lines  13-14,  and she  paraphrased  as                                                               
follows: "a  regulation adopted under  this chapter, or  an order                                                               
issued under this chapter, ...."  thereby, making the language on                                                               
lines 16-18  null and void.   She related, "If, in  fact, we only                                                               
associated criminal  liability" with  the violation of  a section                                                               
of  the chapter  - meaning  statutory language,  then it  becomes                                                               
irrelevant  if  someone knows  about  a  regulation or  an  order                                                               
issued under this chapter.                                                                                                      
                                                                                                                                
6:20:52 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE LEDOUX  responded to  Chair Claman's  comment that                                                               
in order  to be guilty  of something, the  person has to  know it                                                               
was against  the law.   In that  regard, she said,  "You couldn't                                                               
say," that a  person from a country  which practices cannibalism,                                                               
and the  person didn't realize  cannibalism was against  the law.                                                               
She  opined that  the intent,  the mens  rea is  that the  person                                                               
actually has  to know  what they are  doing, they  don't actually                                                               
have to know  that it's against the law.   For example, there are                                                               
countries that  practice honor deaths,  and a person  cannot come                                                               
to  the United  States and  kill their  daughter because  she was                                                               
fooling around, and the defense be  that it was perfectly okay in                                                               
their country  and; therefore, expect  to be exempt from  the law                                                               
because they  don't know the law.   She said that  isn't mens rea                                                               
"kind of, not knowledge of the  law, but not -- but you knowingly                                                               
intended  to  do  something, and  knowledge  actually  that  it's                                                               
illegal or not has nothing to do with it."                                                                                      
                                                                                                                                
6:22:16 PM                                                                                                                    
                                                                                                                                
CHAIR  CLAMAN offered  that the  distinction  raised was  between                                                               
"malum  in se  offenses versus  malum prohibitum  offenses."   He                                                               
referred  to  the situations  about  killing  your child  because                                                               
that's the  custom, or cannibalism  because that's the  custom in                                                               
another culture, and in the  United States, that conduct is wrong                                                               
in  and of  itself for  malum in  se.   Whereas, the  notion that                                                               
"knowing misrepresentations" by  not putting specific information                                                               
in  a   securities  disclosures   is  wrong,  not   because  it's                                                               
inherently wrong, but  because there are laws that  say that when                                                               
a person offers a security  disclosure, these are the five things                                                               
they are  supposed to say, for  example.  In theory,  he offered,                                                               
those  are not  as inherently  known to  be improper,  which gets                                                               
into malum  prohibitum and  gets into  the question  of knowledge                                                               
about  the fact  that  that particular  conduct  was illegal,  as                                                               
opposed to killing the neighbor  which is clearly illegal, unless                                                               
it's self-defense.   A tax return, for example,  the person would                                                               
have  to be  able to  show knowledge  of what  they are  actually                                                               
supposed to  be reporting to be  able to show that  was enough to                                                               
be criminal conduct, he explained.                                                                                              
                                                                                                                                
6:23:55 PM                                                                                                                    
                                                                                                                                
CHAIR  CLAMAN noted  that under  Title 45,  there is  intentional                                                               
language similar  to subsection (a),  and the chair of  the House                                                               
Labor and Commerce Standing  Committee, Representative Kito, will                                                               
bring  a  list  of  the  offenses  involved  that  are  based  on                                                               
intentional violations  and how that  works so there is  a bigger                                                               
picture.                                                                                                                        
                                                                                                                                
CHAIR  CLAMAN, in  response  to  Representative Reinbold's  note,                                                               
explained the  Latin phrases he  had offered, as follows:   Malum                                                               
in  se essentially  means,  "evil in  and of  itself  by the  act                                                               
itself."   Malum prohibitum, prohibitum  being some  variation of                                                               
prohibited, means, "evil  because we decided that it  is an issue                                                               
to a  law or regulation that  says so."  For  example, start with                                                               
the 10 Commandments, Thou shall  not kill thy neighbor, except in                                                               
self-defense, is malum in se;  and malum prohibitum would be Thou                                                               
shalt pay  your taxes every year  and fill out your  tax returns,                                                               
and  truthfully report  your income.   He  explained that  in the                                                               
event a  person had  a pattern of  knowingly not  disclosing that                                                               
information it would be malum prohibitum.                                                                                       
                                                                                                                                
REPRESENTATIVE  LEDOUX  asked  whether   those  are  legal  terms                                                               
because she did not remember those phrases from law school.                                                                     
                                                                                                                                
CHAIR CLAMAN answered that they are legal terms.                                                                                
                                                                                                                                
6:26:53 PM                                                                                                                    
                                                                                                                                
CHAIR CLAMAN asked  whether anyone was interested  in a sectional                                                               
analysis or  to gavel out  and come back tomorrow  for amendments                                                               
as everyone appeared focused on Sec. 45.56.670(a).                                                                              
                                                                                                                                
REPRESENTATIVE KOPP noted that the  committee did get through the                                                               
sectional analysis at a high  level and he was comfortable moving                                                               
on to amendments.                                                                                                               
                                                                                                                                
REPRESENTATIVE  REINBOLD   disagreed  that  the   committee  went                                                               
through a sectional analysis at  a high level, and then corrected                                                               
herself as she recalled the previous presentation.                                                                              
                                                                                                                                
MS. ANSELM answered that she had gone through many of the                                                                       
sections during her PowerPoint presentation, but she did not go                                                                 
through all of the sections.                                                                                                    
                                                                                                                                
CHAIR CLAMAN suggested to Representative Reinbold that if she                                                                   
wanted a more detailed analysis of the sections to ask Ms.                                                                      
Anselm to stop by her office.                                                                                                   
                                                                                                                                
[HB 170 was held over.]                                                                                                         

Document Name Date/Time Subjects
HB170 ver J 4.7.17.pdf HJUD 4/7/2017 1:00:00 PM
HJUD 4/11/2017 5:30:00 PM
HJUD 4/12/2017 1:00:00 PM
HB 170
HB170 Sponsor Statement 4.7.17.pdf HJUD 4/7/2017 1:00:00 PM
HJUD 4/11/2017 5:30:00 PM
HJUD 4/12/2017 1:00:00 PM
HB 170
HB170 Sectional Analysis 4.7.17.pdf HJUD 4/7/2017 1:00:00 PM
HJUD 4/11/2017 5:30:00 PM
HJUD 4/12/2017 1:00:00 PM
HB 170
HB170 Repealers List 4.7.17.pdf HJUD 4/7/2017 1:00:00 PM
HJUD 4/11/2017 5:30:00 PM
HJUD 4/12/2017 1:00:00 PM
HB 170
HB170 DCCED Whitepaper 4.7.17.pdf HJUD 4/7/2017 1:00:00 PM
HJUD 4/11/2017 5:30:00 PM
HJUD 4/12/2017 1:00:00 PM
HB 170
HB170 Supporting Document-Letter ANCSA Regional Association 4.7.17.pdf HJUD 4/7/2017 1:00:00 PM
HJUD 4/11/2017 5:30:00 PM
HJUD 4/12/2017 1:00:00 PM
HB 170
HB170 Supporting Document-Letter NASAA 4.7.17.pdf HJUD 4/7/2017 1:00:00 PM
HJUD 4/11/2017 5:30:00 PM
HJUD 4/12/2017 1:00:00 PM
HB 170
HB170 HJUD Slide Presentation 4.7.17.pdf HJUD 4/7/2017 1:00:00 PM
HJUD 4/11/2017 5:30:00 PM
HJUD 4/12/2017 1:00:00 PM
HB 170
HB170 Additional Document-Enforcement Comparison Chart 4.7.17.pdf HJUD 4/7/2017 1:00:00 PM
HJUD 4/11/2017 5:30:00 PM
HJUD 4/12/2017 1:00:00 PM
HB 170
HB170 Fiscal Note DCCED-DBS 4.7.17.pdf HJUD 4/7/2017 1:00:00 PM
HJUD 4/11/2017 5:30:00 PM
HJUD 4/12/2017 1:00:00 PM
HB 170
HB170 Fiscal Note DHSS-SDSA 4.7.17.pdf HJUD 4/7/2017 1:00:00 PM
HJUD 4/11/2017 5:30:00 PM
HJUD 4/12/2017 1:00:00 PM
HB 170