Legislature(1993 - 1994)
04/08/1994 01:15 PM House JUD
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 362 - CHILD SUPPORT:CRIMINAL/CIVIL REMEDIES CHAIRMAN PORTER introduced discussion of HB 362, welcoming first Phillip Petrie. Number 765 PHILLIP PETRIE, Operations Manager, Child Support Enforcement Division, introduced himself and MARY GAY, Director, Child Support Enforcement Division, both of whom were present to testify with regard to HB 362. MARY GAY, Director, Child Support Enforcement Division, presented testimony in support of HB 362. "The Child Support Enforcement Division supports and requests that you pass CS HB 362 because this legislation would allow the division to overcome recent court decisions regarding the statute of limitations in child support cases. The current statute of limitations is ten years. Without this legislation it would require that the division send several thousand cases to law to obtain judgments on the cases in order to protect the arrears for the children and for the state of Alaska. Also, the other section of the legislation concerning the aiding and abetting in the nonpayment of child support; this is one of the areas that is most difficult to collect on. And it's because of the intentional transfer of assets to avoid the payment of child support." Number 778 REP. JAMES: "I feel very strongly about people who do fraudulent things to get out of any kind of an obligation. I feel very strongly about that. On the flip side of that, though, I have a lot of sympathy for some child support cases where a second family is put in jeopardy to protect the first family. Not that I think people should walk away from their obligation, but I've seen some efforts by the Child Support Enforcement, not only in this state but in other states, that I believe have - because the law is on their side, they don't take anything into consideration. Now, I understand what this is, Phil, and maybe you can answer for me; is this to hold a second person liable for giving someone else the freedom to do that? Say, for instance, is this if someone were married a second time, and he put all of his assets in his second wife's name? And then he doesn't work someplace, so he doesn't have to pay child support? Is that the kind of thing that was happening?" MR. PETRIE: "You're absolutely correct." REP. JAMES: "Does this, then, does this affect anyone else who wouldn't be doing that, in a negative way?" Number 800 MR. PETRIE: "No, ma'am, it does not. It is specifically designed to affect those individuals - and it's not just someone who would marry someone, but friends and relatives; that is, we have demonstrated cases that we're preparing now for court, where someone either forms corporations, businesses or transfers all their assets. There has to be (1) a support order in place prior, because they have to know that they have an obligation to pay; and (2) they have to intentionally do it. And that's exactly what it's designed to do. And there are many instances of transfers of fishing permits to brothers and other relatives, and then that person fishes, and the money still goes to the obligor, but technically, we can't hold the brother responsible for the payments. "The same way with forming a corporation or a company. Current spouses in one particular case formed a major trucking company driving these long haul double-trailer trucks for construction and gravel. They do not have CDLs or commercial drivers licenses. The business makes money. It has contracts. But when you send a withholding order to the business they say that their husbands are not employed. Obviously, the husbands are doing the driving and they are doing the maintenance on the vehicles. That's the type of case we're looking for." REP. JAMES: "Mr. Chairman, if I might follow up just on that issue. My next question is: That's fraud, no matter who they owe the money to. Why should we just do this for child support? Isn't there already a provision in the law when there's fraud and there's a debt? And there's a judgement? That you can find these people guilty of fraud?" Number 816 MR. PETRIE: "There are general provisions for defrauding anyone, but you have to usually show that you have a contract; you have to show that you have something to build (a case around), and that there's an action under the law. The AGs tell us that we don't have that clearly, in the current statutes in the law, and that child support -- I don't know of any other area where someone has had a judgement, say, because they've owed something to a private person, and then they started a new business that that private person has charged them with fraud. We've run this particular legislation by the Attorney General's office that we work with in Anchorage, and they feel it is a valuable asset because of the nature of how people transfer those assets. Probably the only other place that I would know that something like this takes place regularly is in the drug industry, and they have the asset seizure and the forfeiture provisions of the federal statute. You don't have anything similar, and I'm not asking for anything similar, in state statute. But it's a laundering of money and assets." Number 829 REP. JAMES: "I guess that what it generally does in all other issues, it becomes a matter of economics, as to whether or not it is worth taking that to court to find out whether or not they're fraudulent and that sort of thing. And I'm wondering about the economics in this. Is this going to close the gap of the amount of money that it's going to cost to do that so that it will be financially feasible to do this? Or is this opening up something that's just going to spend more money to get less?" Number 837 MR. PETRIE: "It narrows the ability to litigate and to avoid the allegation that they did that. Currently, we could take them to court, and we could fight for years to try to get the money under the general fraud statute, but this particularly sets out standards. It says, if you do this, and you know this, then this is the statute we can charge you under. And it would make it clear, and we believe would cut costs, and it would substantially increase collections." Number 844 REP. JAMES: "I am concerned any time that we take the rights away from someone without having due process for them. In other words, it could be assumed that maybe they're doing this, and maybe there's some legal reason why they're not? Is that ever a case?" MS. GAY: "They have to have due process, because it will go through court." MR. PETRIE: "It's a criminal charge, so they have the due process in court. And if it's a felony, it would go before a grand jury; if it's a misdemeanor, it would be brought before the court. So that the due process issue is clearly there for them to argue that it was an innocent misrepresentation, or they didn't know." Number 850 MS. GAY: "Also, in most cases, if you started to bring the action, people, if they realized the penalty involved, would probably come to a settlement, and we wouldn't have to have the expense. And I also believe that this legislation, when one or two cases occur, will send a message to society: That this type of activity is going to be met with penalty. And they will refrain from doing so." REP. JAMES: "I like that position." Number 860 CHAIRMAN PORTER: "I might add that you might want to look at and perhaps even track it down in the Senate and support the Uniform Fraudulent Transfers Act. It came through this committee, and as a matter of fact it was sponsored by this committee. It would cover assets that were transferred in order to evade your obligation also. Which will give you the right to go after them even though that boat was transferred to the brother. It has a reasonable standard for establishing that that was the cause of the transfer." Number 866 REP. JAMES: "I remember that bill going through here, and that was one of the things I was talking about in the first place. Because I'd like to have the law be tight enough that it's not just child support, but it's all these other areas that would preclude people from doing these fraudulent transfers. That was my first point." MR. PETRIE: "I admit, Mr. Chairman, and Rep. James, I was unaware that that bill was moving through the House." CHAIRMAN PORTER: "It's out of the House." MS. LOPER: "It's in Senate Labor & Commerce, and - " (Side A of tape ends abruptly.) TAPE 94-58, SIDE B Number 000 (Text at beginning of Side B cut off.) CHAIRMAN PORTER: "...evidence to support that this was a transfer to get out of this obligation is in the action of the transfer itself; in other words, if there were not adequate compensation passed, or received, or any of those kinds of considerations that made it a dubious market value transfer, then the burden shifts to him to prove that he wasn't doing it in order to get out of that obligation." Number 023 REP. NORDLUND: "I definitely support the bill, but I would note that it creates a new class of crime, some of which is a Class B, Class A, and even a Class C; Class A and B misdemeanors and Class C felony, and I don't see any fiscal note here from the Department of Corrections. If there's any utility in this I assume that there are people that it would actually be enforced upon, and that there would be an impact on the Department of Corrections, and there should be a fiscal note here." Number 040 MR. PETRIE: "Our experience, at least, in the last five to six years, is that we're not getting incarceration, and even in criminal nonsupport cases, that our primary aim is to recover the money, and not to incarcerate people, and we wouldn't use this against people that don't have the assets to pay. If there is any incarceration, it's been for very short periods of time, and usually within that short period of time they come up with the money or a substantial part of the money. Most recently, in 1992, two men spent four days in jail over a weekend until they could come up with the money, $10,000 and $10,400 each, (before each) could come out. And it was a matter of arranging the financing. I don't anticipate realistically that even under the Class A felony that any judge in the state would sentence someone to a period of incarceration. It also tracks with current federal legislation called the Family Support Recovery Act, which makes it a felony not to pay child support in the amount of $5,000, a federal felony. One of the things that that did, it said states have to exhaust all remedies first, and this would keep us out of going into the federal court quite as quickly. First offense is a federal misdemeanor. "But this really, as Mary Gay stated, places pressure on someone that has the assets, to come up with the money to pay the child support. It's within the realm of possibility that a judge could sentence someone, but it's highly doubtful. And in all the cases that I've dealt with in the past three years, one sentence was 120 days; they suspended 110; he never served ten days; we sent it back, and the judge imposed the ten days. So. It really is not a real burden, I don't believe, on the Department of Corrections. You're probably looking at maybe 10 to 20 of these cases prosecuted a year, and we're hoping that the deterrent value will even not necessitate that." Number 091 REP. NORDLUND: "I just want to point out though, that we're talking about the person who aids in the nonpayment of child support, not the person who actually didn't pay the support, who could be put in jail here, so if you were talking about the individual who actually was supposed to be making the child support payments, obviously it would be counter- productive if they were in jail, because they wouldn't even have the opportunity to make money to pay the child support. This applies to folks who aid - not the obligors themselves." Number 114 MS. GAY: "The person that aids in doing something like that does it for a benefit, for them, usually. For themselves, or for the person who is close to them. I believe that this legislation is like drunk-driving laws. We have very stiff drunk-driving laws these days, and it does deter individuals from driving while intoxicated. And I should hope that this legislation would do the same thing; deter individuals from taking part in activities like this. And that obligors would pay their child support." REP. NORDLUND: "I am completely in support of the intent of the bill." Number 130 REP. KOTT: "I am going to air my same concerns as I did in an earlier committee. Basically, in conjunction with what Rep. Nordlund has already brought out. And that is, under this provision here, aiding and abetting, we have a Class C felony situation that's there, even though the crime for nonpayment of support is a Class A misdemeanor. So we have placed a higher degree or a higher penalty if you're aiding and abetting. And a situation that comes to mind to me would be, somebody comes knocking on the door, a woman answers the door, there's some questions about where her husband's at or what he's doing, and (the person at the door) identifies himself, and she is reluctant to give him the information. Her husband has an ex-wife and some children that he's supposed to be supporting. They are compelling her to provide the information, even though, if this were in court - now, the court wouldn't have a wife testify against her husband. Yet this is more of an administrative matter, and we're allowing it to occur here, with a potential penalty of it being a felony, and losing all the rights associated with felony activities." Number 155 MR. PETRIE: "I believe the courts do require a wife to testify if that wife is also engaged in a criminal act with the husband. I'm sure, maybe someone from the Department of Law can clarify, but I've been in law enforcement 28 years, and there are instances --it's true that a wife can't be compelled to testify about a husband's criminal act, but if that wife is involved in criminal activity, then she can be. But it's not even a compelling thing in this nature. We build a case by going back and researching property records, researching business records, researching bank account records, and we can identify a trail of transfers of when someone transfers the assets. You can clearly show that they owe child support because they have a court administrative order and the obligation. It's not as simple as just going up and knocking on the door and asking where your husband is. We have to build a case that the grand jury in a felony case would accept, or that the courts would accept or that the courts would accept even in a misdemeanor case, to show that we can prove the intentional and willful acts of that individual. And I do believe a wife or any relative could be held under those circumstances, to come in and testify or provide the information, if they are a part of the criminal enterprise. I'm loosely terming it, but it's a term that you use, it's a criminal enterprise, when someone gets together to evade a law. So, I don't believe that's a real concern, and I think that the AG's office would have brought it to our attention at the time, because they clearly understand that we're talking about current spouses, friends and relatives when we proposed this legislation or when this legislation was drafted." Number 194 REP. KOTT: "I would be a little bit concerned whether or not they would in fact be guilty by association, or would be a party to the criminal act, until such time as they failed to provide the information. Are they innocent until proven guilty or are they guilty by association to the husband, who has failed to render payment?" Number 202 MR. PETRIE: "No, it's not guilty by association. It they're operating a business, and the business is making money, and we send a withholding order to the business that says, we understand that John Jones, your husband, works for your business and they send us back what we call an answer to inquiries, that by statute is supposed to be truthful, and they sign, and it's notarized, and they say, John Jones doesn't work for me, never has worked for me, yet we can prove through circumstances that that's his only means of support; for instance, the people with the CDLs and the trucks, it's not comprehensible, that these particular people -- We can show that the husbands are the ones that are driving the trucks, maintaining the trucks, yet the business and all of the bank records and in this particular case the husbands are even signing the wife's names to checks, that are going through the business accounts. So, that's the kind of effort that you have to put into to prove this case. I believe the court would just...dismiss a case if we brought it to it on a basis of association merely because someone was married to an obligor that owed child support." Number 227 MS. GAY: "Rep. Kott, I'd also like to mention that the division has many court actions, and a limited amount of funds for the Department of Law, and that we do not frivolously bring suits. We make sure that everything is covered before we initiate an action, and only in the most severe cases do we initiate that action." Number 238 REP. NORDLUND: "I just wanted to make one other comment that mitigates against my concern that there not being a fiscal note here from Corrections, and that is that to the extent the Child Support Enforcement Division is able to collect payments, will have a direct impact on the payments we make for AFDC and other forms of welfare payments." Rep. Nordlund further observed that it would be difficult to predict the effect, but an effect there would be. CHAIRMAN PORTER: "That's quite true. We're always conscious of things that might cost money but we never take any money away from those agencies that we've saved a little for, so...with that in mind, what is the wish of the committee?" REP. NORDLUND: "I would move that we pass out HB 362 with individual recommendations and a zero fiscal note." CHAIRMAN PORTER: "Is there discussion? Is there objection? Seeing none, the bill is moved. Thank you." ADJOURNMENT The House Judiciary Standing Committee adjourned at 2:30 p.m.
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