Legislature(2005 - 2006)CAPITOL 120
04/29/2005 04:00 PM House JUDICIARY
| Audio | Topic |
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| Start | |
| SB104 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 104 | TELECONFERENCED | |
| += | TELECONFERENCED |
ALASKA STATE LEGISLATURE
HOUSE JUDICIARY STANDING COMMITTEE
April 29, 2005
4:12 p.m.
MEMBERS PRESENT
Representative Lesil McGuire, Chair
Representative Tom Anderson
Representative John Coghill
Representative Pete Kott
Representative Les Gara
Representative Max Gruenberg
MEMBERS ABSENT
Representative Nancy Dahlstrom
COMMITTEE CALENDAR
CS FOR SENATE BILL NO. 104(JUD)
"An Act relating to the crimes of unsworn falsification in the
first and second degrees and false information or report;
requiring the establishment of a permanent fund dividend fraud
investigation unit in the Department of Revenue; and providing
for an effective date."
- HEARD AND HELD
PREVIOUS COMMITTEE ACTION
BILL: SB 104
SHORT TITLE: PERMANENT FUND DIVIDEND FRAUD
SPONSOR(S): SENATOR(S) SEEKINS
02/14/05 (S) READ THE FIRST TIME - REFERRALS
02/14/05 (S) STA, JUD
02/22/05 (S) STA AT 3:30 PM BELTZ 211
02/22/05 (S) Heard & Held
02/22/05 (S) MINUTE(STA)
02/24/05 (S) STA AT 3:30 PM BELTZ 211
02/24/05 (S) Moved CSSB 104(STA) Out of Committee
02/24/05 (S) MINUTE(STA)
02/28/05 (S) STA RPT CS 4DP SAME TITLE
02/28/05 (S) DP: THERRIAULT, ELTON, HUGGINS, DAVIS
03/01/05 (S) JUD AT 8:30 AM BUTROVICH 205
03/01/05 (S) Heard & Held
03/01/05 (S) MINUTE(JUD)
03/02/05 (S) JUD AT 8:30 AM BUTROVICH 205
03/02/05 (S) Moved CSSB 104(JUD) Out of Committee
03/02/05 (S) MINUTE(JUD)
03/02/05 (S) JUD RPT CS 3DP 2NR NEW TITLE
03/02/05 (S) DP: SEEKINS, THERRIAULT, HUGGINS
03/02/05 (S) NR: FRENCH, GUESS
03/07/05 (S) TRANSMITTED TO (H)
03/07/05 (S) VERSION: CSSB 104(JUD)
03/09/05 (H) READ THE FIRST TIME - REFERRALS
03/09/05 (H) STA, JUD
04/05/05 (H) STA AT 8:00 AM CAPITOL 106
04/05/05 (H) Moved Out of Committee
04/05/05 (H) MINUTE(STA)
04/06/05 (H) STA RPT 4DP 1NR
04/06/05 (H) DP: LYNN, ELKINS, GRUENBERG, SEATON;
04/06/05 (H) NR: GARDNER
04/29/05 (H) JUD AT 4:00 PM CAPITOL 120
WITNESS REGISTER
SENATOR RALPH SEEKINS
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Sponsor of SB 104.
CHRISTOPHER C. POAG, Assistant Attorney General
Commercial/Fair Business Section
Civil Division (Juneau)
Department of Law (DOL)
Juneau, Alaska
POSITION STATEMENT: Responded to questions during discussion of
SB 104.
SHARON BARTON, Director
Central Office
Permanent Fund Dividend Division
Department of Revenue (DOR)
Juneau, Alaska
POSITION STATEMENT: Provided comments and responded to
questions during discussion of SB 104.
ACTION NARRATIVE
CHAIR LESIL McGUIRE called the House Judiciary Standing
Committee meeting to order at 4:12:58 PM. Representatives
McGuire, Anderson, Coghill, Gruenberg, and Gara were present at
the call to order. Representative Kott arrived as the meeting
was in progress.
SB 104 - PERMANENT FUND DIVIDEND FRAUD
4:13:06 PM
[Contains discussion of HB 127 and HB 273 and the adoption of a
committee substitute (CS) that incorporates those bills into SB
104.]
CHAIR McGUIRE announced that the only order of business would be
CS FOR SENATE BILL NO. 104(JUD), "An Act relating to the crimes
of unsworn falsification in the first and second degrees and
false information or report; requiring the establishment of a
permanent fund dividend fraud investigation unit in the
Department of Revenue; and providing for an effective date."
SENATOR RALPH SEEKINS, Alaska State Legislature, sponsor,
relayed that 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 (PFD), and would
make the crime of submitting a fraudulent PFD application a
class C felony. In 2004 the Department of Revenue (DOR)
examined over 1,600 fraud tips and audited over 1,700 PFD
applications suspected of being fraudulent. This resulted in
$1.4 million in denied or assessed dividends, three federal
indictments, and one conviction for crimes involving PFD fraud.
SENATOR SEEKINS offered his understanding that 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 apply to
situations 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 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, et cetera.
SENATOR SEEKINS noted that the crime of forgery in the third
degree covers instances where a person intentionally makes a
false statement on a written instrument such as a PFD
application, but this offense is punishable only as a class A
misdemeanor. The bill's 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 will aid in identifying and curing instances of permanent
fund dividend fraud by codifying in statute a fraud
investigation unit within the DOR. This unit will assist the
Department of Law (DOL) in detecting and investigating instances
of PFD fraud.
SENATOR SEEKINS offered his understanding that once the fraud
investigation unit is established, it will have access to
national databases for the purpose of locating those who are
committing PFD fraud. He posited that everyone knows someone of
whom they suspect PFD fraud, and opined that such fraud should
be considered a serious offense, and characterized it as fraud
committed against both the state and the people of Alaska. He
concluded by urging support for the bill.
4:17:39 PM
REPRESENTATIVE GARA said he supports the effort of making the
crime of PFD fraud a class C felony for all of the
aforementioned reasons. However, he added, it seems like such a
crime should already be a class C felony because PFD's have been
above the amount of $500 and because the same elements are
present as for the crime of theft in the second degree, which is
a class C felony. He asked what is it that is not in the law
now but which will be gained by the adoption of SB 104.
SENATOR SEEKINS suggested that the Department of Law could
better answer that question.
4:18:55 PM
CHRISTOPHER C. POAG, Assistant Attorney General, Commercial/Fair
Business Section, Civil Division (Juneau), Department of Law
(DOL), said that it is correct that PFD fraud is a class C
felony, but only if the person actually receives the PFD. The
goal of SB 104 is to catch the person and charge him/her with a
class C felony before the PFD is received; such charges would
ensue as a result of investigations conducted after PFD
applications are received and before PFDs are distributed.
Currently, if a PFD from a fraudulent application is not
received, then the crime is merely attempted theft - a class A
misdemeanor. In response to a question, he explained that the
attempt of a crime lowers the offense one grade.
REPRESENTATIVE GARA surmised, then, that the bill will only
result in a higher penalty and not in an easier prosecution.
MR. POAG clarified that the bill will actually do both of those
things. He elaborated by saying that the current most effective
statute to use to prosecute the aforementioned offense is not
that pertaining to theft, but rather that pertaining to unsworn
falsification because such covers the main elements of what is
occurring. By raising the offense to a class C felony it will
become easier to prosecute because it will get additional
attention and will be treated as a higher class of offense with
similar connotations to crimes such as forgery and perjury.
Currently, though, the crime of fraudulently filing a PFD
application doesn't fit into either of those offenses. For the
most part, he added, crimes involving PFDs are discovered before
the PFD is received and so the theft [statute] isn't applicable.
REPRESENTATIVE GARA acknowledged Mr. Poag's points.
4:22:00 PM
SHARON BARTON, Director, Central Office, Permanent Fund Dividend
Division, Department of Revenue (DOR), thanked the sponsor for
bringing SB 104 forward, and opined that both components of the
bill are important to the division, both the penalty provision
and the statutory designation of a fraud unit, which will give
the division access to federal databases and enhance the
division's ability to track down those outside the state who are
committing PFD fraud.
4:23:01 PM
REPRESENTATIVE ANDERSON moved to adopt 24-LS0519\X, Cook,
4/28/05, as the work draft. There being no objection, Version X
was before the committee.
CHAIR McGUIRE explained that Version X incorporates provisions
from both her bill - HB 127 - and Representative Weyhrauch's
bill - HB 273. Version X includes from HB 127 the provisions
regarding providing peace corps volunteers and members of U.S.
Olympic Teams with allowable absences, and provides for civil
penalties, and includes from HB 273 the provision regarding
holding the PFDs of those absent from the state in trust for
them upon their return to the state.
MS. BARTON said that the division has looked at the statistics
pertaining to those that leave the state and then return, and
does not begrudge distributing PFDs to those that are
legitimately residents of the state but are out of the state for
more than 180 days on allowable absences. However, what the
division has learned from the aforementioned statistics - which
would not be considered to have been derived from a
statistically valid study - is that no group, based on the
different allowable absence categories, returns even 50 percent
of the time to the state, and that the dollar amount of PFDs
paid to such individuals over the years is substantial -
approximately $86.1 million. [This provision of Version X -
from HB 273 -] proposes a substantial change [in procedure] as
well constitutes a big policy change that perhaps has not yet
been fully discussed or explored. In concept, though, it does
address a problem that has been observed by the division for
some time.
CHAIR McGUIRE asked Ms. Barton to comment on possible technical
changes.
4:26:58 PM
MS. BARTON relayed that the division has looked at two
particular aspects, one of them being what she characterized as
a programmatic problem. For example, she explained, in a
situation where the applicant is out of state for five years
while serving in the military and is killed after being deployed
to Iraq, he/she would not be able to return to the state for the
required period and so his/her estate would not be entitled to
the PFDs that he did qualify for. She suggested that the
legislature might want to consider whether or not to include a
provision that addresses the situation of an applicant dying
while on an allowable absence.
REPRESENTATIVE GRUENBERG asked Ms. Barton if she has a technical
amendment to suggest that would address such situations.
MS. BARTON offered her understanding that Legislative Legal and
Research Services is working on one.
4:30:41 PM
MR. POAG said that in reviewing HB 273, he became concerned that
for all practical purposes, the division would be deciding that
those who are on allowable absences are not in fact eligible for
a PFD until they are able to prove that they intend to return to
Alaska and remain indefinitely, that the state would hold their
checks until they came back to the state and proved that fact.
He said he determined that this is in effect a change in
eligibility criteria. He relayed that he is not a big fan of
telling a person that he/she is eligible for a PFD but then
refusing to give it to him/her.
MR. POAG went on to list the current criteria for qualifying for
a PFD - found in AS 43.23.005 - and explained that to say that a
person is eligible under those criteria but then not give
him/her a PFD would probably provide that person with a decent
argument that he/she has a vested interest in the PFDs that
he/she has been determined to be eligible for. So to try to
avoid those issues, he said, he would recommend that the
eligibility criteria be modified such that a person who meets
all of the current requirements but is on an allowable absence
be conditionally found eligible conditioned upon his/her return
to Alaska and demonstration of an intent to remain indefinitely.
This will avoid the issue of determining that a person is
eligible but holding the PFD hostage and essentially taking it
away after saying that the person is eligible.
MR. POAG relayed that he has reviewed state cases regarding this
issue, and noted that in those cases a constitutional issue was
triggered by a person's constitutional rights to travel. In one
case the court addressed this issue by finding that the
impingement on the right to travel was minor and the state's
purpose - that being to ensure that the PFD goes only to those
that are permanent residents - was sufficient to justify that
impingement. However, in that case and in one other, the
persons were found to not be eligible for PFDs. He predicted
that an amendment would be important if the court were to apply
the precedents established in those two cases. He noted that
the state constitutional right to travel is more protective than
the federal constitutional right to travel, and posited that if
[the provisions of HB 273] are found to pass constitutional
muster under the Alaska State constitution, they will also do so
under the U.S. Constitution.
4:34:27 PM
CHAIR McGUIRE relayed that she'd already discussed with the
sponsor the concept of incorporating into SB 104 the provisions
of HB 127 but had only just recently considered incorporating
provisions of HB 273. However, should concerns with HB 273's
provisions arise, she suggested, the committee could simply
remove those provisions and then report Version X from committee
along with an appropriate title change resolution.
CHAIR McGUIRE, after ascertaining that no one else wished to
testify, closed public testimony on SB 104.
4:36:41 PM
REPRESENTATIVE GARA opined that they should insert the
provisions that are likely to meet constitutional muster, and
indicated that he is in favor of the provisions from HB 273 but
noted that he does have a couple of reservations [about them].
He offered his belief that those who are not earning money while
they are absent, or those who are gone for educational reasons
should not have to wait until they return to the state to get
their PFDs; he indicated that he has an amendment to that effect
[original punctuation provided]:
Page 10, line 6
Delete "AS 43.23.008(a)(1)-(8) or (10)-(15)"
Insert "AS 43.23.008(a)(3), (4), (10), (11), (14)
or (15)."
CHAIR McGUIRE asked whether there would be any equal protection
issues arising from such an amendment.
MR. POAG noted that the equal protection analysis is a sliding
scale, and that the main focus will be on whether the groups
that are to be treated differently are similarly situated. If
such is the case, and the groups have the same needs, the same
interests, and the same reasons for receiving a PFD, but they
are then treated differently, then the state would be opening
itself up to an equal protection attack. However, if the groups
have different needs and are not similarly situated, and if
legislative findings could be provided to illustrate why those
groups are different, then there is a pretty good argument that
there isn't an equal protection issue. The current statute
carves out a whole host of allowable absences, and the [Alaska]
Supreme Court has been very approving of those "bright line"
rules, he concluded.
4:40:25 PM
REPRESENTATIVE GARA offered his belief that in an equal
protection analysis regarding a PFD, the court says it is okay
to treat people differently as long as there is some rational
basis for doing so. He stated that the rational reason that
would be used in his proposed amendment is that the person is
not making money. He remarked that carving out a similar
exception for congressmen would be a legislative policy call.
CHAIR McGUIRE expressed a desire to hold the bill over for the
purpose of researching constitutional issues.
MR. POAG indicated he could easily draft language that would
address members' concerns and further their wishes with regard
to the direction they want the bill to proceed in.
CHAIR McGUIRE offered her understanding that the sponsor is
amenable to some of the changes being proposed, and said she
would have committee staff work with the DOL and the sponsors'
staff on the other issues that have been raised.
REPRESENTATIVE GRUENBERG mentioned the issue raised by Ms.
Barton.
MS. BARTON remarked that if Representative Gara's proposed
amendment regarding those who don't earn money is adopted, then
the issue of eligibility for those who accompany such
individuals should also be considered.
REPRESENTATIVE GARA offered his understanding that such people
are addressed in his suggested amendment.
[SB 104, Version X, was held over.]
ADJOURNMENT
4:44:44 PM
The House Judiciary Standing Committee was recessed at 4:44 p.m.
to a call of the chair. [The meeting was never reconvened.]
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