MINUTES OF THE

      SENATE COMMITTEE ON JUDICIARY

 

      Sixty-seventh Session

      February 9, 1993

 

 

 

The Senate Committee on Judiciary was called to order by Chairman Mark A. James, at 1:30 p.m., on Tuesday, February 9, 1993, in Room 201 of the Cashman Center Building, Las Vegas, Nevada.  Exhibit A is the Meeting Agenda.  Exhibit B is the Attendance Roster.

 

 

COMMITTEE MEMBERS PRESENT:

 

Senator Mark A. James, Chairman

Senator R. Hal Smith, Vice Chairman

Senator Mike McGinness

Senator Dina Titus

Senator Raymond C. Shaffer

Senator Ernest E. Adler

 

COMMITTEE MEMBERS ABSENT:

 

Senator Lawrence E. Jacobsen (excused)

 

STAFF MEMBERS PRESENT:

 

Dennis Neilander, Senior Research Analyst

Maddie Fisher, Primary Secretary

Sherry Nesbitt, Committee Secretary

 

OTHERS PRESENT:

 

Robert D. Faiss, Counsel for The Nevada Resort Association

Kaye Zunino, Chief, Child Support Enforcement Program, State of    Nevada, Division of Welfare

Gerald E. Weiss, Deputy District Attorney

Nicholas Soraich, Office of Clark County District Attorney,

  Family Support Division

Granville Pridham, Deputy Attorney General,State of Nevada        Office of the Attorney General

Jake Bowman, Clark County and State of Nevada Representative,

  Republican Central Committee

Mollie Bowman, Clark County and State of Nevada Representative,

  Republican Central Committee

Kaycie Bowman, Clark County and State of Nevada Representative,

   Republican Central Committee

Thomas Roche, Member, State of Nevada Gaming Control Board

Victoria D. Riley, Representing The Nevada Trial Lawyers           Association

Karen C. Winckler, Member, Nevada Attorneys for Criminal Justice

Mark Griffin, Administrator, State of Nevada Securities Division

 

Senator James called the meeting to order, and presented an overview of the six committee meetings to be held in Las Vegas. Two meetings would be joint meetings with the Assembly Committee on Judiciary; Monday, February 15, 1993, at 1:30 p.m., to consider the report of the Child Support Statute Review Committee of the State Bar, and Wednesday, February 17, 1993, at 1:30 p.m., to consider the stalking bills having been introduced in the senate and assembly.  The meeting of the Senate Committee on Judiciary on Friday, February 19, 1993 would be held to consider a bill enhancing penalties for crimes committed against children, and the meeting Saturday, February 20, 1993 would be held to consider an amendment to the Nevada Constitution to appoint judges rather than selecting them initially by election.  Two guest legislators will be present on February 20, one from Pennsylvania and one from Arizona, who are members of their senate judiciary committees. 

 

Senator James opened hearing on Assembly Bill 51 (A.B. 51).

 

ASSEMBLY BILL 51:       Clarifies fee on collection of credit instruments held by certain gaming licensees.  (BDR 41-66)

 

Mr. Robert D. Faiss, Esq., Lionel Sawyer & Collins, counsel for the Nevada Resort Association (N.R.A.) and Thomas Roche, a member of the Nevada Gaming Control Board testified in support of A.B. 51.  Mr. Faiss advised Richard Bunker, President of the N.R.A. was in attendance, and had asked Mr. Faiss to advise the committee the N.R.A. was pleased to join with Mr. Roche and the state Gaming Control Board in support of A.B. 51.  This bill would amend Nevada Revised Statutes (NRS) 463.3857 enacted in 1989 to extend the gross revenue license fee to money collected in payment of gaming credit instruments, commonly termed markers, after a casino goes out of business.  Mr. Faiss advised gaming on credit is big business in Nevada; in some instances, it can account for more than 50 percent of a casino's gross revenues from games.  In many cases that debt is paid immediately upon conclusion of play, in many others the debt is not paid for weeks or even months.  Therefore, when a casino operation closes, either due to sale or some other reason, it may have a great amount of gaming debt on its books which is collected later.  Prior to 1989 when NRS 463.3857 was enacted, a licensee had no obligation to pay a tax on gaming debts collected after closure of his casino.  A.B. 51 clarifies the intention of the legislature that a percentage fee be fairly assessed from every dollar earned from gaming operations whether the licensee collects the dollar while he is in business or after he goes out of business.  The fee is assessed in the same manner as if the licensee had remained in business.  As this is a fee that is not collected unless the casino goes out of business, there is no certain way to project the tax revenue.  However, it is estimated it could range from $300,000 to $1 million in additional tax payments from a casino which had been a major gaming credit operation.  This statute was implemented by the Nevada Gaming Commission in September, 1991 by the adoption of Regulation 6.125, which clarified ambiguities about the tax collection procedure.  Regulation 6.125, copies of which had been distributed to the committee (Exhibit C), was fashioned in the course of some 20 hearings over a 21-month period by the gaming industry and the gaming authorities.  This effort resulted in a tax collection procedure that the N.R.A. and the gaming authorities agree is efficient, fair and consistent with legislative intent.  The essential purpose of A.B.51 is to provide legislative concurrence with Regulation 6.125.  Mr. Faiss commended Tom Roche and Gaming Control Board Chairman Bible for their great contributions to the creation of Regulation 6.125, and to defer to Mr. Roche for any questions concerning enforcement of that regulation.

 

Senator James requested confirmation of his understanding of the desire of the N.R.A. under subsection 2(a) was an ad hoc determination, depending on the history of the particular gaming property.

 

Mr. Roche replied it was not as discretionary or ad hoc as might be thought.  They attempted in the regulation to make it purely an objective evaluation, rather than allowing the agents to come up with one conclusion as to what should be taxed, and allowing the licensee to come forward with another determination.  The regulation looks back at the historical collection records of the licensee, which determines the amount of the markers deemed collectible in the future.  This is the amount established at the final day of business, based on the historical collection trends, that then would be taxed.  It is not a simple process of the audit division sitting down and going through a marker listing and on a discretionary basis saying one is taxable and the other is not.  It is a purely analytical evaluation rather than a judgment call. 

 

Senator James' initial concern was the "monthly fee".  He thought since this was directed to operations closing, he wondered how the monthly fee would be assessed.

 

Mr. Roche responded the monthly fee was computed  by the former licensee in the same manner done when the license was in business.  They would take the collections accrued during the month, fill out a tax return, attach a check and submit all that to the Gaming Control Board.  What this regulation and the statute was attempting to do was basically to say you attempt to quantify the amount of taxes which will be ultimately collected on the final day of business so that the state would never be money out.  Having posted that bond, it would be matched as the actual collections come in on the markers, after the close of business.  In some instances, more will be collected than what was posted, in which case the licensee would have to pay more tax.  If less is collected than posted, they would apply for a refund after the period of time that they determine no additional amounts will be collected.  In closure of a business there would be a fairly fast horizon  where a conclusion is drawn that no more markers are going to be collected.  The customers have no incentive to come back and pay them off.  The window of opportunity will be fairly small for the licensees to collect these sums; Mr. Roach would guess 6 to 7 months maximum.  At this time, the licensee is required to keep adequate accounting records for 5 years after closure. The Board has the ability to assess them on tax issues while in business and for 5 years after the conclusion of business.

 

Senator James advised there would be no voting on legislation while the committee is in Las Vegas because of Senator Jacobsen's absence.  Testimony would be taken, bills would be brought up in working session in Carson City, the committee would take additional testimony as needed and vote at that time.

 

Mr. Faiss submitted as an exhibit a detailed memorandum prepared by Mr. Roche and sent to the industry on November 20, 1991 (Exhibit D), which spelled out in written form and greater detail exactly how the regulation would be enforced. 

 

The hearing on A.B. 51 was closed. 

 

The hearing on A.B. 5 was opened.

 

ASSEMBLY BILL 5:        Requires consideration of offender's obligation to pay child support for purposes of presentence investigation and granting probation.  (BDR 14-749)

 

Senator James advised A.B. 5 deals with presentence reports and requires inclusion in those reports of information concerning obligations of child support on the part of the offender.

 

Kaye Zunino, Chief, Child Support Enforcement Program, State of Nevada, Division of Welfare and Gerald E. Weiss, Deputy District Attorney assigned to the Child Support Program testified. An outline of  Ms. Zunino's testimony is Exhibit E. Ms. Zunino stated four services were provided by the Child Support Enforcmeent Program; locattion of absent parents, establishment of paternity, establishment of child support orders and enforcement of child support orders.  It was a federal/state/county cooperative program with much of the enforcement being done through the district attorney's office.  Their case load is in excess of 50,000 in Nevada, and in fiscal year 1992 their collections were in excess of $40 million.  Ms. Zunino advised Nicholas Soraich, the administrator of the Clark County District Attorney's Family Support Division was present at the meeting.  About 70 percent of the agency's caseload was in Clark County, with an equal amount of the actions taken and collections.  Several years ago, Fourth Judicial District Judge Thomas Stringfield contacted John Slansky, Chief of the Department of Parole and Probation and Ms. Zunino, with a suggestion the two agencies work together to insure that persons on probation pay and stay current in their child support obligation.  Although Judge Stringfield suggested this requirement could be handled internally, and Ms. Zunino and Mr. Slansky would be working toward that through cooperative effort of their two offices, the judge further suggested the requirement be codified to emphasize the importance of fulfilling a child support obligation.  Judge Stringfield followed up a telephone conference call with a letter (Exhibit F) suggesting two amendments to Chapter 176 of Nevada Revised Statutes (NRS).  The amendments proposed were: to Nevada Revised Statutes (NRS) 176.145 to require the Department of Parole and Probation to include as part of its presentence investigation information as to whether or not the defendant has an obligation for support, and if so, whether he is in arrears on that obligation; and to Nevada Revised Statutes (NRS) 176.185 to encourage and allow the court to consider, as a condition of probation the imposition of certain conditions to facilitate timely payments by the defendant of his child support obligation, if the defendant was otherwise eligible for probation.  Although granting the court's discretion in its application, the Child Support Division believes statutory inclusion will emphasize the importance of one's obligation to support his or her children. 

 

Mr. Weiss felt Ms. Zunino had covered the mechanics of the bill.

 

Senator James asked if the amendment of A.B. 5 in the Assembly Committee on Judiciary accomplished the desired objective.

 

Ms. Zunino replied the original language was too restrictive and an oversight on the part of the Child Support Division.  The wording could not be changed in time as the bill was one of the first introduced in the session.  The amendment was requested at the time of hearing by the assembly judiciary committee.  It was never the intent of the Child Support Division to restrict the courts with regard to this requirement; only that they might use it as a consideration in granting probation.  The defendant must be otherwise eligible for probation.

 

Senator James voiced his concern and asked for the legislative record that the fact that someone has an obligation of child support is made known to the judge, he guessed the division was to utilize the threat of denying probation as a hammer to enforce the person to pay the child support.

 

Ms. Zunino stated she did not know whether the division wanted to make it that strong.  Their desire was if the individual is eligible for probation otherwise and there was a child support arrearage owing and the individual does owe current child support, the judge may wish to consider the fact that the person keep current in his support as a condition of the probation.

 

Senator James stated this was his understanding.  It does no good to say since child support is owed this is a basis for denying probation.  It needs to be as a condition. 

 

Karen C. Winckler, member of the Nevada Attorneys for Criminal Justice testified she did not oppose the bill, but in hearing the testimony thought the record should be made clear on one issue.  Number 4 in section 2 states ". . .the court shall when determining the conditions of that probation . . ..".  "Shall" is a word that possibly shold be changed or amended to "may" if that was the intention of the previous speakers.  The court, in reading that statute, may infer from the way it is written they must consider that and must make it a condition of the probation.  Her concern was if this is written as a condition of probation, should the probationer fail to make the support payments this could be considered a reason to revoke probation  and to put the person in prison.

 

Senator James agreed this was a good point, but believed it needed to be "shall" due to the wording.  The court "may" already consider. If this bill accomplished anything, the court was being legislatively directed to consider this obligation of child support.  The court was not being told what it had to do, but  that it had to consider this aspect of the presentence report.  The language said ". . .it shall consider the imposition of such conditions as would facilitate timely payments by the defendant of his obligation, if any, for the support of a child. . ."

 

Ms. Winckler stated in her experience as a criminal defense attorney when conditions of probation were not met the probation officer comes back before the court with revocation proceedings.  If the person could not pay the support due, one solution the judge had presented to him was to revoke probation and put the person in prison. 

 

Senator James viewed incarceration as something which would arguably prevent the person from trying to pay the child support, therefore this was inconsistent with the intent of the bill, which was to get the support paid.  He reiterated the only effect of the bill was a threat; either probation would not be granted unless support was paid, or probation would be revoked.  The judge needed the discretion to determine if the person was really going to be able to pay the support if he remained free or if the person needed to be put back behind bars.

 

Ms. Winckler asked Senator James to confirm if what he stated was if a probationer failed to make child support payments, this would be sufficient grounds, within the court's discretion, to revoke probation and put the person behind bars.

 

Senator James affirmed that is what the bill seemed to say.

 

Senator Adler also affirmed that is correct. 

 

Senator James added if this was not the intent, he saw no need for this legislation.  The only teeth it had was a threat to require the person to pay. When he originally read the bill at introduction in the assembly, before amendment, it said if the person did not pay the support, probation was either denied or revoked.  He considered that as possibly unconstitutional, punishing someone criminally for a civil default.  All that was left was to give the judge the direction and power to say if the person did not pay the support that person may lose their freedom.  That was this committee's understanding.

 

Ms. Winckler saw the only problem as when and if that were to happen, a probationer would be revoked because of his or her failure, and would be limited to the issue of whether or not he or she was revoked due to failure to pay child support.  That would be an issue that would have to be addressed to the supreme court.  This was a civil matter and there existed some criminal laws directed to child support now.  It could be a revocation based on both civil and criminal matters.  She wanted the record to be clear when and if it went to the supreme court for clarification that this was an issue which needs to be addressed.

 

Senator James agreed.  He did not want the issue to go to the supreme court, and this was what he was trying to avoid.  He asked legislative counsel his view.  Possibly a better analysis needed to be submitted to the committee before passage.  His initial concern was punishing someone criminally for a civil violation.  In reading what is already the law, subsection (b) says "Such information about his characteristics, his financial condition, the circumstances affecting his behavior .. . .". Senator James pointed out the things considered in a presentence report to decide whether a person gets probation or they go to jail appeared to be things beyond his or her criminal behavior. Payment of child support may be one of them. 

 

Ms. Winckler stated the financial condition in that section of part (b) goes to the defendant's ability to pay fines and take care of restitution.  The investigator analyzed the financial situation of the person to enable the court to determine if a fine is appropriate or what the size of the fine should be.  Also, sometimes restitution was made a condition of probation.  This was why this language was there.

 

Senator Adler did not believe this bill contained a constitutional problem.  He had seen judges impose, as a condition of probation, someone getting their General Equivalency Diploma or high school diploma, and other things such as this which are essentially behavioral. The court was trying to get the probationer to reform their behavior.  They had also been ordered to submit to drug testing, and other things including a parole program then in effect where a person was required to submit to drug and alcohol testing four times per day.  This seemed like a fairly rigorous standard.  Senator Adler did not see this condition as any different.  In talking with Mr. Slansky from the Department of Parole and Probation, they had such a heavy caseload and were aware of prison overcrowding to the degree that functionally, Senator Adler believed the violator would have to do this more than once to receive prison time.  He did not believe on any technical violation, which this would be considered, Parole and Probation would recommend prison time.  They were aware the state did not have the money to house every technical violator.  He believed the only time a person would go to prison was if the judge had the person on the program, the person had the ability to pay, he did not pay, was sent back out again, and did not pay again, flatly refusing to go along with the program.  Senator Adler thought a judge might revoke probation, but doubted it would be on the first violation.

 

Ms. Winckler agreed generally that what Senator Adler said is correct.  Her only concern was if there was an ongoing civil dispute and the person had the ability to pay, then was a probationer in a criminal matter and through the criminal courts was ordered to pay that child support and refused to pay, this might be the exact situation she was speaking of.  In most cases the court had wide discretion to set conditions of probation and as Senator Adler said that discretion was not usually used by the Department of Parole and Probation to harass people, only to help them achieve greater goals in life.

 

Senator James understood the concern.  He advised he would ask that Mr. Neilander give the committee a further report on the issue raised by Karen Winckler.

 

Mr. Neilander, Senior Research Analyist, stated he would speak to the issue and advised the revocation of probation was the basis upon which the person served the remainder of the sentence, but the sentence itself was based on the underlying criminal conviction, not the civil failure to pay child support.  He believed after initial review this line of reasoning was where the proposal might hold up constitutionally. 

 

Senator James asked Mr. Neilander go over this again when the committee had a working session on the bill.  It was definitely a policy consideration as to whether an essentially civil consideration was incorporated into the criminal system at the sentencing time.

 

The hearing was closed on A.B. 5.

 

The hearing was opened on A.B. 74.

 

ASSEMBLY BILL 74:       Imposes additional penalty for criminal violation of certain provisions governing securities and commodities if victim is 65 years of age or older.  (BDR 15-508)

 

Senator James advised A.B. 74 was an amendment of the existing statute which enhanced penalties for crimes committed against persons 65 years of age and older.

 

Granville Pridham, Deputy Attorney General and Mark Griffin, Administrator of the State of Nevada Securities Division located in Las Vegas gave oral testimony.

 

Mr. Griffin advised he was at the meeting on behalf of the secretary of state in support of A.B. 74 which enhanced the penalties for the commission of crimes against elderly persons 65 years of age and more for violations of the Securities Act and the Commodities Act of the State of Nevada.  The Securities Division regulated an investment environment in Nevada, and investigated violations of these two acts.  They had, in recent years, significant instances of elderly people being victimized by violations of these two acts.  He had been associated with state securities regulations for 8 years, both in Nevada and other states.  Elderly people were targeted for these scams in a very pernicious way.  They were vulnerable to investment frauds of varying types for a variety of reasons, among which is their tendency to trust because of their background, being disassociated with past experience wherein they had a natural skepticism.  They tended to have large amounts of savings from which they needed to derive a substantial living past retirement.  They tended, although he did not want to imply they are in any way less than able to deal with financial matters, to be very vulnerable to sophisticated investment fraud pitches and sophisticated forms of persuasion and pressure. They tended to put particular credence in the term "guarantee," as in a guaranteed investment.  They did not seem to understand that word in the current investment community had little if no meaning, and should have been a red flag for them.  Guarantee in the past made some sense and there was some backing to it, but was, at the current time, used by unscrupulous promoters in a very bad way.  These older people  were targeted by unscrupulous promoters by the use of cold calls over telephone wires and sophisticated pitches.  The harm was more severe to our elderly population because they had no practical means to recover from serious financial setbacks in their golden years.  The money they had earned over the course of a lifetime was intended to be their source of income; once that source is gone, elderly people had little if no recourse to recover that money.  Mr. Griffin had instances of interesting antecdotal stories which had accumulated over the course of a lifetime; he did not want to go into these except one example.  Names of elderly people became associated with certain cold calling lists.  The people who solicited them for investments knew their age and financial circumstances and were able to talk to elderly people in such a way to discover more about their financial circumstances.  These lists were traded, cost a great deal of money and were worth a lot to unscrupulous promoters who knew these lists produce a sizeable income for them in their schemes.  A few years back the most productive cold calling list was known as "the widow's list."  Regulators in New York state found it was named in this way because it consisted of people in the elderly category who were widowed.  The most productive of all cold calling lists was what was known as the "recent widow's list," meaning these people had lost a spouse within the past 6 months, making them extremely vulnerable to pitches and possibility of losing a life insurance benefit as well.  Mr. Griffin's department had witnessed many instances of targeting of elderly people.  He believed he was in a previous hearing before this committee when Senator Adler mentioned an instance in Carson City.  This was referred to in the course of Senator Raggio testifying about his bill.  That case was referred to in generic terms, but Mr. Griffin believed it was a case his department handled.  He believed the net received from that scam was $1.2 million from 18 people, all of whom would be somewhat in this category.  Those people did not have the ability to recover financially from that scam.

 

Senator Adler stated he supported and believed this is a good bill.  He was concerned, as in the Carson City case that nothing is being done about the mechanism by which the scam artists were getting people to those trust seminars.  He believed the trust seminars presented a unique opportunity to defraud old people.  Advertised in the newspapers as living trust seminars, they caught the attention of seniors, most of whom were very interested in avoiding probate.  The seniors showed up at those seminars thinking the person putting on the seminar was either an attorney or some sort of licensed insurance sales broker, through the State of Nevada.  Often the person was neither.  He was selling them the trust which probably was not well-drafted because the promoters were not within either of those two industries which typically draft trusts. Once they got the seniors in there they tried to sell them securities.  Senator Adler's only complaint about A.B. 74 was he would like to have seen some language added to insure if people put on trust seminars they be licensed with the Nevada State Bar or with the Nevada Insurance Commissioner's Office. Those people were bonded and if they did something which they probably would not, recovery for the victims was possible.  He believed there was a big gap in the law where it was vague as to who could have a trust seminar and who could not. Once they got the elderly people in there they sales-pitched the securities or whatever other products they wished to sell.

 

Mr. Griffin stated this was only one of a variety of different means of enticing or inducing the elderly to come into a situation where they may become defrauded.  His experience was if the faucet was turned off on that particular scam, which he was in favor of doing, the faucet would open up on another scheme. 

 

Senator Adler's problem with the trust seminars was, the defendants in the Carson City case were all convicted, and then he saw a new trust seminar in the newspaper.  It really bothered him that it seemed to continue on even after the convictions.

 

Senator James agreed with Senator Adler's concern.  He believed it was part and parcel of a number of areas where some legislation was needed to protect all the public, but particularly this select group which has these specific financial concerns in addition to some vulnerability.  He believed it would be appropriate for Senator Adler to bring forward before the committee a bill draft proposing changes in that area, and the committee would be happy to present it.  He knew Senator Titus had some legislation she is considering bringing up before the committee.  Senator James reaffirmed A.B. 74 is a penalty enhancement measure for which he had questions.  He asked Mr. Griffin regarding the way the bill was drafted, could a subsection (i) be added?  Why was the bill drafted as it was with an entire separate section dealing with Chapter 90 and 91?  Was it merely a syntax problem? 

 

Mr. Griffin answered he was not associated with the drafting and could only speculate why it was drafted this way.  He would not be opposed to simply including a subsection (i).

 

Mr. Pridham stated he had suggested the enhancement penalty because he had prosecuted the securities violations for the previous year in the State of Nevada.  In all cases, the primary group of victims had been elderly people.  He submitted his proposal a couple of different ways, and because of the syntax, if they wanted to keep it ". . .any person who commits the crime of . . ."  it did not fit.  He submitted another form in which it would fit with the syntax, but was more awkward, as all of the different crimes contained within the securities and commodities act had to be spelled out, making the form longer. 

 

Senator James asked if they would expect there to be any fiscal impact on the office of the attorney general. The Department of Prisons submitted the fiscal note on A.B. 74 and said  "There will be no fiscal impact from this legislation during the next biennium because it is not possible to get the violators into the system that fast."  The fiscal note went on to say "It is doubtful that the effect of this measure would be measurable.  It is thus expected that this change in the law will have little if any fiscal posture on the Department of Prisons.  Since the implementation of the Nevada Corrections Information System of 1987, the department has not had occasion to add a code to the system to designate this type of crime."  Senator James was concerned that what was done here would not have any impact.

 

Mr. Pridham believed there would eventually be impact, but it would be minimal.  Until 1992, he did not believe there had been anyone actually prosecuted and convicted under the Securities and Commodities Act in the State of Nevada.  In the last session, the legislature approved a new position for the Attorney General's Office to specifically prosecute criminal violations of the Securities and Commodities Act.  Since the approval of that position, which he filled, his office had been prosecuting these crimes, but only in the past year had they gotten people into the prison system based upon convictions of violations of the Securities and Commodities Act.  They could not prosecute hundreds of people under this act because each case is quite voluminous in the amount of documents involved, and the number of victims.  They had a relatively small number of criminals who victimize a large number of elderly persons and investing individuals.  In the years to come there would be some impact, but there would not be dozens of this type of criminal in the prison system based upon this enhancement.

 

Senator James asked what type of restitution provisions existed in the law, if the attorney general instituted a criminal as opposed to a civil action initiated by one of these investors.

 

Mr. Pridham answered typically very little restitution was made to the victims.  The money was either spent or hidden in such a manner it was unobtainable.  The best his office had been able to recover was about 50 percent of the funds actually obtained through the fraud, when the securities investigation had resulted in knowledge of a new company or individual selling those bogus securities or commodities, and the perpetrators could be arrested in a relatively short period of time.  The money recovered was whittled down somewhat because it was put into receivership and the receivers bills had to be paid.   Therefore the best anyone had actually recovered was less than 50 percent.  The normal scenario was the investors possibly received 10 cents on the dollar, or nothing.  In the Carson City case a substantial amount of money was involved and at the time the Securities Division closed that company down, he believed there was only $700 left in the savings account. The Attorney General's Office attempted to implement as much restitution as possible, however, there was generally little, if any, money left by the time they get involved.  Another good reason for enhancement of the elderly person was many times the elderly victims had no idea they have been victimized.  They were told it was a long-range investment, and did not question it until years had passed.  By the time they began to ask questions, the person who took their money was gone.  The perpetrators of these schemes needed to be incarcerated longer than they had been.   In the Carson City case one defendant who was going to be going to trial March 2, 1993 went out and committed violations of the Commodities Act while on bail.  Mr. Pridham had recently concluded the trial in Minden where the defendant was convicted, but these persons tended to go out and perpetrate further schemes because they were relatively simple to do if the perpetrator had a telephone.

 

Senator Adler advised he had a client who was in the construction business, and Don Landrum, the defendant going to trial in the Carson City case, leased equipment from the senator's client, then re-sold the equipment.  These people wreaked havoc on everything.  They victimized elderly people, got into leasing and real estate scams, as well as more types of illegal activities than a person could possibly count.  These individuals completely disrupted the community.  The trust fund and securities scam is only one of a sideline of several other scams they perpetrated.

 

Mr. Pridham added in all of his cases, he did not only deal with first time offenders, but with people who may not have been charged previously.  He had not had a case where that case was the first instance the defendant had committed this sort of a criminal act.  Because of the nature of the white collar crime in the past, it had been treated lightly, as if to say "there is no blood, therefore no crime has been committed."  Many of those persons had never been arrested or prosecuted for their past bad acts, which were exactly the same as those for which the Attorney General's Office was then prosecuting them.  Those individuals did tend to victimize the elderly person.  A.B. 74 would only insure that when a person was convicted of a violation of the Securities or Commodities Act, that person would serve a substantial amount of time in prison.  This would hopefully prevent that individual from victimizing someone else in the future.

 

Senator James understood Chapter 90 is a securities violation and Chapter 91 is a commodities violation.

 

Mr. Griffin affirmed these were the two chapters dealing with regulation of those two types of instruments.

 

Senator James asked if the violators were ever prosecuted under the mini Racketeer Influenced and Corrupt Organizations Act (RICO) statute.

 

Mr. Pridham answered he did, and the defendant who was just convicted in Minden was charged with obtaining money under false pretenses so that Mr. Pridham could get the elderly person enhancement because that already would be reason for enhancement.  Several victims in that case were more than 65-years of age.  Mr. Pridham charged the defendant, in addition to violations of the Commodities Act, with obtaining money under false pretenses and racketeering.  The jury convicted the defendant on the two counts of obtaining money under false pretenses and the one count of racketeering, and deadlocked on the commodities crimes.

 

Senator James asked if racketeering should be an enhancement as well, or did it contain its own enhancement provision?  He knew racketeering had its own penalties and under the racketeering statute predicate acts could be used which were not necessarily criminal convictions, but showing the predicate act within the past several years, which would support a conviction for racketeering where it might not support one of the specific crimes enumerated.  He wondered if Mr. Pridham believed this should be enhanced. 

 

Mr. Pridham believed it would be unnecessary to put racketeering in the bill specifically because many of the crimes already listed were predicate acts for the racketeering crime.

 

Senator James asked if a person committed these crimes in violation of the Securities or Commodities Act over several years, and then the person was in court for racketeering, could a predicate act, a prior conviction, be used?  There would be two predicate acts and an existing scheme which the Attorney General's Office was proving, and the person would be convicted under the racketeering law but not necessarily under the predicate acts. 

 

Mr. Pridham had not researched that particular issue.  He believed he could use a prior conviction if the act for which the conviction had been one of the listed predicate acts or crimes related to racketeering.  He believed it would not hurt to include racketeering in A.B. 74.

 

Senator James asked Mr. Pridham to let the committee know if there should be something added for racketeering.  Mr. Pridham's office could go after these offenders in some instances if they were conducting themselves in a pattern of racketeering activity.  They could be charged under that when they could not be charged under the specific enumerated acts. 

 

Senator Smith had a serious problem with A.B. 74 from the standpoint it was a feel-good piece of legislation rather than something that was going to help the victim.  No one would be prosecuted for a $250 fine, and that $250 might be extremely important to the person who was scammed.  He wondered why the threshold was put in at this amount, and would like to have seen the threshold be realistic, so that prosecution might occur.

 

Mr. Pridham advised the threshold amount of $250 was in subsections (f) and (g) because of the felony statute.  This made it a felony to take $250 or more.  In the securities violation there was no enumeration of a dollar value. 

 

Senator Smith asked if Mr. Pridham was referring to registered, legitimate securities or bunko securities.

 

Mr. Pridham advised a violation of the Securities and Commodities Act could involve a registered security.  In his experience it normally involved unregistered securities.  There were many provisions that could be violated in the Securities and Commodities Act which were not tied to any specific dollar amount.  Any violation of the act would result in this enhancement if the victim was 65-years of age or more.  It would not have to be someone who had invested say, $1,000.

 

Senator Smith presented a hypothetical situation of an account executive (A.E.) in a securities firm who had clients to whom the A.E. sold good securities, one client being a real sucker for buying every security suggested, and the A.E. would be getting commission on every security sold.  The ability of the client to buy more had been exhausted, if the client needed the money with which to live.  Would Mr. Pridham prosecute that account executive? 

 

Mr. Griffin answered they were talking about the more illegitimate aspects of the securities business, what he referred to as exotic securities, the types of things heard about on street corners and not in the halls of brokerage firms.  Mr. Griffin had past experience dealing with prosecutions where the amounts were not significant amounts in terms of size but the conduct was significant.  He believed what Mr. Pridham was saying is their office looks both at the conduct and the size of the amount in determination of prosecution.  The situation he believed Senator Smith was referring to is churning, where advantage was taken of a situation where an elderly person had a certain amount of money in an account and the broker sold a security to them which was not all that productive or  appropriate.  There were other means short of criminal remedies to deal with that, and Mr. Griffin's office did that on a regular basis.  They sued in a civil capacity, went against a person's license, and usually those were resolved out of court with full restitution.  In those instances, which in the attorney general's opinion fall somewhat short of a criminal mandate, they approached them in other ways.

 

Senator Smith confirmed his concern that sanctions against the person who did such a deed, and restitution for the victim were available.

 

Mr. Griffin responded people in a situation where they were dealing with the wire houses, the larger firms such as Merrill Lynch and Dean Witter were in a much better situation.  These firms were much more responsive to complaints about the activities of their account executives.  The Attorney General's Office had a very good working relationship with that type of business.

 

Senator James asked Mr. Pridham and Mr. Griffin to contact Dennis Neilander.  He believed a person could be convicted under RICO based on prior convictions or prior bad acts not necessarily a conviction in a current proceeding for prosection of the racketeering violation.  It might be well, since the Attorney General's Office was considering enhancement of the violations in the type of offender targeted, the habitual type of person.  That was one law Senator James thought was created specifically for that purpose. 

 

Mr. Griffin and Mr. Pridham agreed to report back to the committee to advise if enhancement of violation of racketeering should be added.

 

The hearing was closed on A.B. 74.

 

Senator James adjourned the meeting at 2:40 p.m.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

                                    RESPECTFULLY SUBMITTED:

 

 

 

                                                            

                                    Sherry Nesbitt

                                    Committee Secretary

 

 

 

APPROVED BY:

 

 

 

 

                                 

Senator Mark A. James, Chairman

 

 

DATE:                           

??

 

 

 

 

 

 

 

     Senate Committee on Judiciary

     February 9, 1993

     Page 1

 

 

     Senate Committee on Judiciary

     February 9, 1993

     Page 1