Legislature(2005 - 2006)BELTZ 211

02/22/2005 03:30 PM STATE AFFAIRS

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Heard & Held
Heard & Held
Heard & Held
Bills Previously Heard/Scheduled
              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                                                                    
     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                                                               
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                                                               
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                                                               
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                                                               
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                                                               
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                                                               
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.                                                                  

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