Legislature(2005 - 2006)BELTZ 211
02/22/2005 03:30 PM STATE AFFAIRS
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SB 104-PERMANENT FUND DIVIDEND FRAUD CHAIR GENE THERRIAULT announced SB 104 to be up for consideration and asked Mr. Hove to come forward. 5:27:03 PM BRIAN HOVE, staff to Senator Ralph Seekins, paraphrased the sponsor statement. SB 104 seeks to strengthen the Department of Revenue's ability to investigate fraud associated with making a false application for a permanent fund dividend. Furthermore, submission of a fraudulent permanent fund dividend application would become a class C felony. In 2004 the Department of Revenue (DOR) examined over 1,600 fraud tips and audited over 1,700 permanent fund dividend (PFD) applications suspected of being fraudulent. This resulted in $1.4 million in denied or assessed dividends (1,500 + applications). Furthermore, there were three federal indictments and one conviction for crimes involving PFD fraud. The most common PFD fraud offense involves persons who forge the signature of another on the application (or related documents) with the intent of receiving a dividend to which they are not entitled. It's important to note that the bill is not intended to capture, for example, cases where husbands or wives sign for each other. However, the provisions of this legislation would apply in cases where the individual is attempting to steal from another person or from the state. Current law (AS 11.46.510) describes three separate degrees of forgery - the two most serious offenses are punishable as class B and C felonies, but are limited to cases involving various types of financial instruments such as currency, securities, deeds of trust, etc. Forgery in the third degree covers instances where a person intentionally makes a false statement on a written instrument (such as a PFD application). However, this offense is punishable as a class A misdemeanor only. The DOR proposal to elevate PFD fraud from a simple misdemeanor to a class C felony is expected to provide a more effective deterrent for this type of theft. Furthermore, SB 104 aids in identifying and curing instances of permanent fund dividend fraud by codifying in statute a fraud investigation unit within the Department of Revenue. This unit will assist the Department of Law in detecting and investigating instances of PFD fraud. 5:29:28 PM CHAIR THERRIAULT referenced the language on page 1, line 7 that says, "circumstances not proscribed under AS 11.56.225" and noted that it's the new section proposed in Section 2. He then asked whether his interpretation was correct that Section 1 exempts misrepresenting the permanent fund eligibility, but it's put back in through a new section of statute written to deal with it specifically. MR. HOVE suggested Sharon Barton answer the question. 5:30:26 PM CHAIR THERRIAULT read language on page 2, lines 6 through 8 and noted that it points back to Section 1. He asked for an explanation because it seems circular. SHARON BARTON, director, Permanent Fund Dividend Division, said the explanation should come from the legislative drafter. In reading it she came to the same conclusion decided it was written that way to make it clear that violations pertaining to PFDs would be dealt with under AS 11.56.225 and others would be dealt with under AS 11.56.210. CHAIR THERRIAULT asked if that includes all other falsification. MS. BARTON said un-sworn falsification. CHAIR THERRIAULT asked if this is specific and separate for PFDs. MS. BARTONS said that's correct. CHAIR THERRIAULT said he didn't understand why language on page 2, line 7 refers back to AS 11.56.210 so his staff would consult the drafters before final action was taken. MS. BARTON referenced language on page 2 and remarked it could be stated more elegantly by simply saying, "violates AS 11.56.210 and the statement is in an application for a permanent fund dividend". CHAIR THERRIAULT suggested the drafters might not have wanted to repeat the factors that go into a AS 11.56.210 violation so they refer to the criteria, but say that prosecution would be under a new section of law. MS. BARTON said she also thought that was the intent. MR. HOVE said they wanted to introduce the bill that day then return with a committee substitute (CS) at a subsequent hearing. MS. BARTON pointed to Section 2, paragraph (3), and said line 10 would read more clearly if it said, "a public employee with the intent to mislead that public employee about a person's eligibility" but it wouldn't change the intent of the statement. MR. HOVE restated his desire to return with a CS or several amendments. 5:34:39 PM SENATOR ELTON commented if this bill passes and PFD fraud is moved into AS 11, and SB 95 passes as well, people convicted of PFD fraud would be required to submit to a DNA swab. He wasn't commenting on whether that would be bad, but that's what would happen. CHAIR THERRIAULT replied "You had the limiting crimes against the person in [SB 95]." SENATOR ELTON read, "any crime covered in AS 11 or against a person or a felony under AS 11" so this would be a felony under AS 11. CHAIR THERRIAULT said he would look into that. 5:35:35 PM CHAIR THERRIAULT asked Mr. Poag whether the committee had discussed anything that he might want to clarify. 5:35:51 PM CRIS POAG, civil division Department of Law, said although he isn't in the criminal division he helped Director Barton draft similar legislation. Definitely, he said, paragraph (2) could be cleared up using the language Director Barton suggested and he agreed with her recommendation for changing the language in paragraph (3) as well. He suggested they consult Mr. Guaneli as to whether the bill would trigger a requirement for DNA testing. He didn't know what triggers the testing requirement, but if the trigger were a felony conviction then this bill would trigger that requirement. Furthermore, "If felonies are the trigger, the behavior that is exhibited in these types of offenses is very consistent with other felony level behavior." Misrepresenting permanent fund eligibility is very similar to other felony offenses such as forgery, perjury, and theft in the second degree. Therefore, you don't have to be concerned that this is treated as a felony and that a DNA sample would be required. PFD fraud doesn't need to be treated as a felony, it could be treated as a misdemeanor, but the Department of Revenue (DOR) is very vulnerable to permanent fund fraud because this crime isn't reported. It's left entirely to the DOR to determine who is fraudulently applying for and obtaining PFDs, which makes them a bit more vulnerable than the typical victim. The Department of Revenue isn't the true victim in these cases, he stressed, it's all Alaskans; every PFD is reduced by the number of fraudulent applications that are accepted each year. It's expensive and time consuming for the permanent fund fraud unit to ferret out these types of events, investigate them and pursue a prosecution. That's why we think it's appropriate, but not necessary to raise this to a felony level crime, he concluded. 5:38:32 PM CHAIR THERRIAULT remarked he didn't necessarily agree that nobody reports PFD crimes because 1,600 fraud tips were reported through the fraud tip line. MR. POAG agreed the fraud tip line has proven to be very effective and the tips have generally been accurate. However, absent motive or incentive finding fraud is a difficult task when 635,000 applications come in every year. Raising public awareness and pursuing the crime as a felony may have a strong deterrent effect, he suggested. CHAIR THERRIAULT asked whether most of the people using the fraud line were acting as good Samaritans or were most on a vendetta against their neighbor. MR. POAG said it's his understanding the axe to grind component is often the catalyst but there are good Samaritans as well. SENATOR BETTYE DAVIS asked whether the fraud unit has access to federal records. MR. POAG replied they don't and he assumed she was referring to the National Crime Information Center (NCIC). That, he said, is one of the collateral consequences and reasons for this legislation. 5:41:04 PM SENATOR DAVIS asked where that is referenced in the bill. MR. POAG acknowledged there is no reference. The Permanent Fund Division would have to make an application to the Department of Public Safety and the application would be forwarded to the NCIC for review to determine whether criminal justice agency work was being conducted for criminal purposes. It's a federal decision rather than a state decision, he said. CHAIR THERRIAULT commented he remembers overhearing someone announce that "My husband and I are waiting for our dividends and then we're out of here [for good]." Wasn't that person committing fraud, he asked. MR. POAG said it depends on whether they qualify for an allowable absence, but it sounds as though they didn't intend to return and if that had been reported, someone would have followed up on the tip. SENATOR ELTON said he would like to receive follow up information to show a correlation because he has always assumed that a person who is disingenuous on a FPD application isn't the type to commit a violent crime where DNA evidence might be left. MR. POAG said he would find out what triggers a DNA test requirement. SENATOR ELTON said what he's really interested in is finding out whether there is a correlation between this kind of felony and felonies that are crimes against a person where law enforcement may collect DNA evidence. MR. POAG clarified he was referring to the distinction between crimes against persons and crimes against property. SENATOR ELTON repeated he was interested in the data. CHAIR THERRIAULT asked Mr. Poag to provide the information to the committee and announced he would hold SB 104 in committee.