MINUTES OF THE meeting

of the

ASSEMBLY Committee on Commerce and Labor

 

Seventy-First Session

May 16, 2001

 

 

The Committee on Commerce and Labor was called to order at 4:12 p.m. on Wednesday, May 16, 2001.  Chairman Joe Dini, Jr. presided in Room 4100 of the Legislative Building, Carson City, Nevada.  Exhibit A is the Agenda.  Exhibit B is the Guest List.  All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

 

 

COMMITTEE MEMBERS PRESENT:

 

Mr.                     Joseph Dini, Jr., Chairman

Ms.                     Barbara Buckley, Vice Chairman

Mr.                     Morse Arberry Jr.

Mr.                     Bob Beers

Ms.                     Chris Giunchigliani

Mr.                     David Goldwater

Mr.                     Lynn Hettrick

Mr.                     David Humke

Ms.                     Sheila Leslie

Mr.                     Dennis Nolan

Mr.                     John Oceguera

Mr.                     David Parks

Mr.                     Richard D. Perkins

 

COMMITTEE MEMBERS EXCUSED:

 

Mrs. Dawn Gibbons

 

GUEST LEGISLATORS PRESENT:

 

Senator Terry Care, District No. 7

Senator Randolph Townsend, District No. 4

 

STAFF MEMBERS PRESENT:

 

Vance Hughey, Committee Policy Analyst

Crystal McGee, Committee Policy Analyst

Cheryl Meyers, Transcribing Committee Secretary

Darlene Nevin, Recording Committee Secretary

 

OTHERS PRESENT:

 

Dennis Haney, Representative, Nevada State Contractors Board, Las Vegas, Nevada

George Lyford, Director, Special Investigations, Nevada State Contractors Board, Las Vegas, Nevada

Margi Grein, Executive Officer, Nevada State Contractors Board, Las Vegas, Nevada

Christina Schofield, Citizen, Homeowner, Las Vegas, Nevada

Jesus Felix, Citizen, Homeowner, Las Vegas, Nevada

Brian Wexler, Citizen, Homeowner, Las Vegas, Nevada

Calvin Whitfield, Citizen, Homeowner, Las Vegas, Nevada

Kari Henrie, Citizen, Homeowner, Las Vegas, Nevada

Douglas Mormile, Citizen, Las Vegas, Nevada

L. Scott Walshaw, Commissioner of Financial Institutions, State of Nevada, Carson City, Nevada

Warren Hardy II, Representative, Lifeguard Pools, Las Vegas, Nevada

Lawrence Semenza, Representative, Anthony & Sylvan Pools of Nevada, Las Vegas, Nevada

John Sande, Representative, Nevada Bankers Association, Las Vegas, Nevada

Alfredo Alonso, Representative, CitiGroup, Las Vegas, Nevada

Judy Jacoboni, Representative and Owner, Tahoe Pool & Spa, Carson City, Nevada

Gordon de Paoli, Representative, Nevada Life and Health Insurance Guarantee Association, Reno, Nevada

Matt Sharp, Representative, Nevada Trial Lawyers Association, Reno, Nevada

Steve Holloway, Executive Vice President, Associated General Contractors, Las Vegas, Nevada

Richard Peel, Representative, Construction Industry Coalition, Henderson, Nevada

Renny Ashleman, Southern Nevada Homebuilders Association, Las Vegas, Nevada

Paul Georgeson, Representative, Associated General Contractors of Nevada, Las Vegas, Nevada

Jack Jeffrey, Representative, Southern Nevada Building and Construction Trades Council, Las Vegas, Nevada

Kent Lauer, Executive Director, Nevada Press Association, Reno, Nevada

Robert Barengo, Representative, Contractors Association and the Board of Medical Examiners, Las Vegas, Nevada

Adam Levine, Attorney at Law, Las Vegas, Nevada

Echo Penrose, Citizen, Reno, Nevada

Robert Ostrovsky, Representative, Employers Insurance Company of Nevada, Las Vegas, Nevada

Danelle Fanning, Citizen, Reno, Nevada

 

Senate Bill 216:  Makes various changes pertaining to contractors who engage in repair, restoration, improvement or construction of residential pools and spas. (BDR 52-1037)

 

Senator Care, Clark District 7, explained S.B. 216 originated with a phone call he received from a constituent that told an amazing story involving the non-construction of a pool in his backyard.  He had received a second phone call from another constituent a few weeks later that told basically the same story.  The two constituents did not know each other, and that was the beginning of the exploration into the subject of the bill. 

 

Senator Care reported he had investigated and found approximately 300 victims of Cascade Pool Company in Las Vegas.  The story involved an operator and his co-operators and a few nonexistent or illegal loan companies.  Loans were not being processed for the construction of pools, and workers left holes in backyards and, in some cases, no holes were dug at all.  Consumers were refusing to make the payments on pool loans because of shoddy workmanship and incomplete construction; however, they suddenly discovered their homes were being foreclosed on by loan companies in California.  Although some victims had gone to the District Attorney’s Office, the Attorney General’s Office, and other state agencies, there was concern that their complaints were not being heard.  Senator Care had no doubt there had been a scam, and some of the victims had lost their houses by foreclosure, regardless of whether or not they got the swimming pool.  The committee would hear testimony from victims who would tell them they had never even signed contracts.  He was aware of at least one consumer that ran the risk of having his house foreclosed immediately unless he was issued an emergency court injunction. 

 

Senator Care indicated he was not in the Senate in 1997 when the Sixty-Ninth Legislative Session revamped swimming pool laws.  It was unfortunate that industry was one that seemed to attract dishonest contractors; however, he added that, in researching his bill, he encountered many reputable swimming pool contractors as well.  Senator Care assured the committee the reputable pool companies did not have to worry about the passage of S.B. 216.

 

Senator Care explained on the last day to pass the bills out of the Senate an attempt was made to amend S.B. 216; however, they had run out of time.  Senator Care noted the Assembly Committee on Commerce and Labor had the First Reprint of S.B. 216 (Exhibit C), which included a proposed amendment.

 

Continuing, Senator Care stated, subsequent to the bill’s passage out of the Senate, he had discussions with the lending institutions and pool companies regarding minor changes to the bill.  Investigation of the complaints from the pool customers was handled by the Nevada State Contractors’ Board, specifically George Lyford, the Director of Special Investigations.  Senator Care wanted the committee to view S.B. 216 as a strong consumer bill.  If the bill passed in amended form, he believed the swimming pool industry would not have to be re-examined by the Legislature for years to come. 

 

Chairman Dini noted the bill made mention of a work card requirement for workers employed to work on a pool.  Senator Care confirmed that was correct.  Chairman Dini asked if the caliber of people the contractors hired had been a problem in the past.  Senator Care stated the issue was not so much the caliber of worker, but rather knowing who they were, where they were from, and where they went.

 

Assemblywoman Giunchigliani requested clarification if the person requiring a work card would only be a person constructing the pool and not someone that cleaned a pool after construction.  She was not in agreement with work cards as a general principle, and she asked if the intent was to require a document similar to a sheriff’s card that would serve as a fingerprint record.  Senator Care stated that was correct.  When the bill was heard in the Senate Committee on Commerce, Senator Carlton had a problem with the issuance of work cards as well.  He admitted he personally did not like the idea of having a government identification that would follow a person for the rest of his life; however, after learning about the swimming pool industry, he recognized there was a need.

 

Chairman Dini questioned if someone hired a repairman to repair his pool and the repairman was not a licensed contractor, would that person be required to have a permit.  Senator Care stated the bill was talking about repair, restoration, and construction of a residential swimming pool or spa.  The bill was not intended to target someone that just repaired the tile along the edge of the pool; rather, the bill addressed major swimming pool construction work.

 

Assemblyman Beers asked if there had been testimony in the Senate from any construction control companies that were referenced in the bill.  He was concerned that a $20,000 pool was an exceptionally small project for them to display such interest and involvement.  He did not know if control companies had established fees or if it was a fixed cost component for such work.  It could be a substantial issue for a $20,000 project.

 

Dennis Haney, representing the Nevada State Contractors’ Board, commented that question was addressed by the amendment.  The only time construction control was utilized was if a contractor was disciplined for not following the rules.  At that point, there would be a myriad of regulations the Contractors’ Board could apply to address the problems.  They could require payment and performance on every project or require construction control on every project.  It depended on the seriousness of the problem.  Before the amendment, it would have required construction control in every case; however, with the amendment it was required in cases of disciplinary action.

 

George Lyford, Director, Special Investigations, Nevada State Contractors’ Board, gave a brief overview of the situation.  The Contractors’ Board had begun looking at a particular pool contractor as a result of some workmanship issues that were reported to his office.  In the course of the investigation, one finance company was conspicuously present on all of the paperwork.  Subsequent investigation revealed that finance company was behind the entire action in Las Vegas.  The finance company and its corporate officers were fictitious, and the contractor filed the official documents with the Secretary of State’s Office using fictitious names.  The obvious intent was to hide the pool contractor’s ownership and control of the finance company.  He had never acquired licensing for anything in regard to the corporation and was using a post office mailbox, no phone number, and no physical address.

 

Continuing, Mr. Lyford explained, in dealing with prospective pool clients, one of the methods the contractor used was to offer to arrange financing for the cost of the pool and then get the buyer to agree to immediate ground-breaking.  The contractor would start excavation and, shortly thereafter, return to the buyer and tell him the original financing application had been rejected.  He would then suggest another finance company offering a loan with a higher interest rate.  Those interest rates went as high as 34 percent on some of the pools he financed. 

 

Mr. Lyford stated if the customer was delinquent on the pool payments, the contractor would start foreclosing on the house.  Mr. Lyford called the committee’s attention to a handout that explained some of the finance charges that were assessed on the buyers (Exhibit D).  A pool cost of $29,000 in some cases would be financed over 30 years and ultimately cost the homeowner $281,971.  There were other examples of financing costs that totaled over $300,000 for a pool.  Mr. Lyford included samples of the finance company’s letters to a consumer that had not even included signatures.

 

Mr. Lyford continued and explained when a customer inquired about the finance company the contractor claimed it was a company he could only contact through the mail.  The contractor disclaimed knowledge when asked by clients about the identity of the finance company.  In essence, the pool contractor was referring to himself as a correspondence lender.  Complaints were filed with the Financial Institutions Division of the state, and that Division initiated an inquiry.  The response from the pool contractor included a generic letter from the financial institution as proof he was still in business as a financial lending corporation. His stance remained unchanged until the Nevada State Contractors’ Board confronted him in March 2000, at which point the contractor admitted the whole operation was a scam.  As the owner of Cascade Pools, he stated he was doing it to benefit his clients by facilitating the loan required for the pool construction.  In reality, he was in the business of foreclosing on their houses.  The contractor was receiving the consumer’s money, but paying no taxes

 

In regard to the financing operation, Mr. Lyford stated there had been a total of $1.9 million in loans funded by the owner of Cascade Pools through the fictitious loan company.  He had done about $5 million of business through the Cascade Pool Company during the time period.  The pool contractor had sold the loans to his brother-in-law, B&K Jobelius, in Riverside, California, and the brother-in-law would then foreclose on the homes.  Apparently it was permitted by law in that state to assign a loan to a third party.  Consequently, there were a large number of people that had loans with fictitious companies with fictitious corporate officers making the payments.  Mr. Lyford explained there was a court injunction that had temporarily stopped the payments; however, the foreclosure proceedings had not been stopped.

 

Continuing, Mr. Lyford said the pool contractor left town and opened up a new pool company in Texas where there was no licensing board for swimming pools.  It was determined that the contractor’s license had been revoked in the state of Arizona.  Mr. Lyford acknowledged the case had demonstrated to the Nevada State Contractors Board some of the loopholes in the law covering the licensing of pool contractors.  He noted, in the Las Vegas telephone directory, there were 17 pool contractors that advertised financial services as part of their pool construction business. 

 

During the hearing on S.B. 216 in the Senate Commerce and Labor Committee, Mr. Lyford recalled a point of discussion involved the handout from the pool company (Exhibit E) advertising a beautiful pool for $14,998.  It was judged to be a based on the classic “bait and switch” tactic.  During that hearing, Senator Townsend pointed out that automobile dealers had certain requirements in advertising ensuring the customer would receive what was advertised.  That requirement for pool contractors was now contained in S.B. 216.  Mr. Lyford summarized by declaring the Cascade Pool operation was a massive scam from the beginning, and, unfortunately, the homeowners were still suffering the consequences.

 

Margi Grein, Executive Officer, Nevada State Contractors’ Board, commenced testimony and offered to review the key points of S.B. 216.  The bill would amend NRS Chapter 597, enacted in 1997.  That section of the law was designed to work with a bill that was vetoed, A.B. 512 of the Sixty-Ninth Legislative Session that was sponsored by Assemblyman John Lee.  The Nevada State Contractors Board was left with a partial law after the Sixty-Ninth Session and had adopted regulations to fill the void.

 

Ms. Grein explained Section 2 of S.B. 216 would direct the Contractors’ Board to adopt standards for pool contractors so the Board could regulate advertising schemes and prohibit the “bait and switch” tactics.  Section 3 of the bill dealt with the issue of a work card.  Her examination of 1996 records revealed a number of unscrupulous pool contractors with a habit of employing the same sales people, who had a propensity for moving from one company to the next.  There were 133 pool contractors in the state, and the practice of hiring the same people employed by multiple pool companies was evident.  Ms. Grein viewed S.B. 216 as providing a vehicle for tracking those individuals.  Section 4 of the bill would require greater involvement of construction control companies so there was some place for the funds to be held during construction of the pool. 

 

Assemblyman Beers requested clarification on Section 4 and asked if it was one of the sections being amended.  Mr. Haney stated that was correct.  Chairman Dini asked for an overview on the bill as it was and then Mr. Haney could address the amendments.

 

Ms. Grein continued her testimony and explained Section 5 addressed any contract entered into, on, or after July 1, 2002.  If that contract did not comply with NRS 597.719 or any pool regulations of the state, the contract would be judged to be void and unenforceable against the owner.  As such, the obligation of the owner to repay the loan would be discharged.  Various disclaimer notices and availability of information stating the rights to cancel a contract would be required for inclusion in the contract.  The contractor had to state the terms of the financing available and what the consumer would be paying in total.  Finally, S.B. 216 would prohibit the purchase or acquisition of a loan from the pool contractor, his spouse, or a relative.

 

Regarding Section 6, Ms. Grein declared any violation of NRS 597.716 through 597.719 would be grounds for disciplinary action, with the violations handled as a Category D felony.  The bill did not prohibit any action the Contractors’ Board might take against the licensee for violations of NRS Chapter 624. 

 

Section 9 of S.B. 216 would require financial institutions, with approval from the Contractors’ Board, to develop standard contract requirements for pool contractors.  Section 10 would designate a representative of the Contractors’ Board to oversee the construction project and inform the contractors and homeowners of the requirements.  Section 11 would require a surety bond, establishment of a disciplinary board, and payment and performance bonds in certain circumstances.  Section 12, subsection 3, would mandate fingerprinting of the officers of the corporation.  Section 13 stated a pool contractor must supply a payment performance bond if they had previous complaints that resulted in disciplinary action or if the contract did not comply with the provisions of NRS Chapter 597. 

 

Ms. Grein explained to the committee the Nevada Contractors’ Board had conducted a random survey of contracts, and it was determined none of the contracts complied with current laws.  That indicated to her that the contractors were still receiving payments prior to the completion of any work.  In her judgment, the contractors had circumvented law by the way in which they wrote their contracts.  Section 15 addressed the need for construction control.

 

Dennis Haney, representing the Nevada Contractors’ Board, commenced testimony on the amendments to S.B. 216 (Exhibit F).  Chairman Dini asked if that document was Senate amendment No. 635.  Mr. Haney stated that was correct.  He explained the amendment would limit the work card to the sales people and the managerial personnel.  The language of Section 4 was changed to state if there was a violation that existed with a pool contractor, the Contractors’ Board could require construction control measures.  Section 4 subsection 3, of the amendment addressed the issue of pool permits issued to the homeowner.  That was the case when the pool contractor would instruct the homeowner to apply for the building permit for the pool.  In those instances, all of the contractors working for the homeowner would have to comply with the provisions of S.B. 216 as amended.  Section 4, subsection 7, would prohibit a pool contractor from having ownership or an interest in a finance company or receiving a “kickback.”  If a contractor was found in violation, it would be handled as a Class D felony. 

 

Continuing, Mr. Haney stated Section 9 was drafted based on the practices of companies such as Cascade Pools.  If a pool contract was issued on or before October 1, 2001, and it did not comply with the provisions of NRS Chapter 624, the pool contractor could not initiate foreclosure proceedings until the contract was revised.  Newly licensed contractors would be required to provide a consumer protection bond; however, existing contractors were not required to post a bond unless there had been disciplinary action.  Mr. Haney emphasized there were many options the Contractors’ Board could utilize if there had been disciplinary action. 

 

Regarding requirements for background investigations, Mr. Haney stated S.B. 216 would require all licensees to have a one-time background check to make sure there was no evidence of unscrupulous behavior.  Investigations during the past year revealed fictitious information, specifically, instances of contractors with no record of ever being born.  Mr. Haney added there was a limitation of five valid complaints filed against a contractor within a 15-day period.  In those instances, the Contractors’ Board could immediately suspend the license of the contractor or impose some of the bond conditions. 

 

Assemblyman Hettrick voiced concern that S.B. 216, as amended, seemed excessive in the licensing procedures.  The contractor would be required to have three different bonds, fingerprints, and a background check.  Additionally, the applicant could not own a financing company nor could he finance the pool construction.  As such, he feared many small contractors in northern Nevada would be put out of business.  Those contractors did not build enough pools in a year to comply with all of the requirements and mandated fees, and he asked if there could be some modifications to the amendment.  Assemblyman Hettrick agreed the background check served a purpose, and, currently, the cost for the check was a set amount; however, with the passage of S.B. 216, the background check fee would be unlimited and determined by the Contractors’ Board.  He viewed the remedies as “overkill” for dealing with the experience of one really bad pool contractor. 

 

Mr. Haney clarified many of the conditions Mr. Hettrick mentioned would only be required when there had been complaints against a contractor.  The fee assessed for the background check was limited and required of all contractors.  He added the background check was not intended to be a disciplinary tool.  Mr. Haney explained the other conditions were applied where there had been a hearing, and the Contractors’ Board determined there had been violations.

 

Assemblyman Hettrick asked if the background check applied to all contractors or just to pool contractors of residential pools and spas.  Mr. Haney replied it was only for residential pool and spa contractors.  Assemblyman Hettrick, comparing the home building industry to the pool construction business, stated inept or unscrupulous homebuilders could place a homeowner in far greater financial jeopardy than could a pool contractor.  Mr. Haney replied his office, the Nevada Contractors’ Board, had uncovered many more swindlers in the swimming pool industry.  It had been his experience the swimming pool companies were hustlers who practiced considerable “bait and switch” advertising.

 

Assemblyman Hettrick emphasized he had no dispute with pursuing the bad pool contractors; however, he did not want to make the law so onerous that reputable people could not become contractors. He reiterated his concern that in northern Nevada there would be situations where the inability of the contractor to provide financing would limit the contractor’s ability to attract business.  Assemblyman Hettrick questioned if the financing part of the language would apply only to a contractor who had been the subject of a complaint.

 

Mr. Haney stated it would apply to everyone; however, he clarified S.B. 216 did not prohibit the contractor from financing the pool.  It did state the contractor could not own part of a financial institution to which he referred his customers nor could he receive a “kickback” from that institution.

 

Assemblyman Hettrick requested clarification if that requirement only applied to a pool contractor and it did not apply to a house contractor who could still be a part owner of a financial institution or could receive a “kickback.”  Mr. Haney stated that was correct, saying the Contractors’ Board had not been aware of the practice of “kickbacks” for home loans.  Mr. Hettrick commented, although he agreed with the intent of the bill, he still believed it to be “overkill.”

 

Assemblyman Beers asked for clarification on the number of pool contractors in the Las Vegas phone directory.  Ms. Grein stated there were 17 who advertised pool construction with financing services.  Mr. Beers voiced concern the legislation would impact legitimate business practices that offered those services.  He acknowledged the Contractors’ Board had encountered cases of fraudulent loan activity; however, he could envision many cases where it would be a legitimate business activity for any building contractor to also handle the financing.  The lending of capital was a long-standing business practice.

 

Ms. Grein responded the Contractors’ Board had been concerned the consumer had no way of knowing about the contractor.  She emphasized the case under discussion was not an isolated one, and there had been more than 2,162 complaints received in the last three years.  Assemblyman Beers asked the witness how the number of complaints compared to the total number of pools.  Ms. Grein responded 21 percent of the total complaints filed came from only 1.4 percent of the licensees.  In terms of total licensees, there were approximately 5,000 permits processed each year for pool contractors. 

 

Assemblyman Beers rephrased and stated over the last three years, then there were 15,000 licensees, with complaints filed against 2,162 of those contractors.  Ms. Grein concurred and reiterated the figure represented 21.6 percent of the total complaints filed, and they accounted for 1.4 percent of all licensed contractors.  She had been dealing with those issues extensively since 1997, and the situation was not improving.  The Nevada Contractors’ Board office did not embrace over-regulation; however, they felt the time had come to enact stricter consumer protection laws.  It was essential to send a message to the industry that fraudulent activity in pool construction was not acceptable in Nevada.

 

Assemblyman Beers stated it was his contention that unless fraudulent activity was evident, it was acceptable for contractors to facilitate the financing of construction.  The mere fact a contractor had shares in a bank, he referred a pool customer to the bank for a loan, or even if he financed out of his own bank account did not suggest bad business.  The real issue was the fraudulent practice of that business activity.  In Assemblyman Beers’ view, S.B. 216 would be a blanket prohibition of a legitimate business practice, and it did not just address the cases of fraudulent activity.  Financing through the pool contractor could, in some cases, reduce the overall cost of the project for the homeowner. 

 

Ms. Grein suggested if the committee heard testimony directly from the affected homeowners, perhaps the bill could be further amended to the benefit of all parties.  Assemblyman Beers requested to first hear from the investigators on the issue of the consumers losing their homes to foreclosure. 

 

George Lyford, Director of Special Investigations for the Nevada Contractors’ Board, commenced testimony.  He explained to the committee the home foreclosures involved consumers who had signed loan documents with United Federal Financial that, in turn, filed notices of foreclosures.  Because there were signed loan papers, the issue became whether the consumers had been coerced to sign for the loans or if they had not been fully informed of the conditions of the loan or with whom they were doing business.  

 

Mr. Haney, of the Nevada Contractors’ Board, interjected there was a witness present who would testify that her name had been forged on the loan document.  Assemblyman Beers offered a rebuttal and stated that activity was already illegal, and S.B. 216 would not change that.  Chairman Dini declared he did not want to address all of the legal ramifications.  He acknowledged there was a problem in southern Nevada, and he wanted to hear from the witness.

 

Christina Schofield, a homeowner in Las Vegas and a victim of the scam, explained she had been entangled in the situation for over a year and in that time she had spoken to over 100 people in various agencies.  Ms. Schofield agreed the bill seemed harsh and there might be some legitimate people that would suffer for the acts of the criminals; however, the need for remedial action was evident in the numbers.  During the previous eight months, there had been 100 foreclosure notices issued, four of which were finalized, while 96 were returned.  Real people, real families, and real children were being put out on the street, and the criminals were taking their homes.  The issues were so confusing and convoluted that most of the homeowners did not begin to understand how the pool company perpetrated the scam.

 

To illustrate her point, Ms. Schofield announced Jesus Felix’s house would be auctioned by Nevada Title Company on Friday for a $29,000 loan to cover $90,000 for a swimming pool he never got.  She added Nevada Title knew the loan was unfunded.  As a matter of fact, none of the loans were funded since United Federal Financial never had any money.  Ms. Schofield appealed to the committee to determine some method to ensure money was actually in the financial institution.

 

Ms. Schofield said the human suffering could not be overstated.  Another witness, Mr. Wexler, was prepared to testify that he lost his home and his 401K retirement fund, and he was now living in a condominium.  There had been divorces over the issue and instances of the victims suffering from post-traumatic stress disorder.  In her own case, Nevada Title was going to auction her house on the 28^th of the month for the other half of the loan that was acquired with forged documents. 

 

Ms. Schofield felt S.B. 216 was a good first step in protecting the citizens and consumers of the state of Nevada.  The need was clearly evident after she had visited every agency in the state and received no satisfactory answers.  Had it been a simple crime, it would have been easy to prosecute; however, because the issue was so complicated, no one wanted to take the time to figure out what was happening.

 

In her judgment, the separation of the financing from the construction of the pool was critical.  To have the same person performing the contracting work as well as financing the loan meant complete control of the homeowner’s money.  Many consumers that were drawn into scams with “creative financing” were paying over $200,000 for a swimming pool that was never built.  Many other victims were Hispanics who were paying over $500 per month for a non-existent pool.  Ms. Schofield discovered none of the loan documents that went through United Federal Financial were legitimate.  There were no Housing and Urban Development (HUD) forms attached.  The scam was set up through City Mortgage and United Federal Financial that, in turn, worked through the title companies to cheat, deceive, and defraud consumers.  The state of Nevada’s Financial Investigations Division declared they could not regulate United Federal Financial because the company did not have the official status of a lending institution. 

 

Ms. Schofield stated she went to the District Attorney’s Office and was informed the office could not investigate; however, they would prosecute criminally if she obtained a civil conviction.  She then went to the Attorney General’s Office and was told it was not their duty to represent the citizens of the state of Nevada; they only represented state agencies (Exhibit G).  She then went to the Metropolitan Police Fraud Division, the Department of Business and Industry, the United States Federal Prosecuting Attorney, and the Federal Bureau of Investigation and did not receive any satisfaction.  Ms. Schofield viewed S.B. 216 as sending a message to illegal and fraudulent business operations that the state of Nevada would no longer tolerate such blatant consumer fraud.

 

Jesus Felix, a victim of the contractor scam in Las Vegas, commenced testimony.  When he initially inquired about the cost of a swimming pool for his backyard, the company came to his house and gave him an estimate of $21,000.  Although he never signed a contract, the swimming pool company broke down his fence and started excavation in his backyard.  Two weeks later he signed the contract; however, he was soon informed that the first contract was not approved, and, at that point, he signed a second contract.  A year went by, and the fence was still broken and the hole was still in his backyard.  His homeowner’s association threatened him with a lawsuit if he did not fix the wall and cover the hole.  He informed the association of the situation, and they agreed to wait.  Six months later the pool contractor sent some of his men to do the electrical work on the pool.  After another six months, pool workers completed the rebar, and, in the past year, they finally finished sandblasting the pool.

 

Mr. Felix announced to the committee he was scheduled to lose his house to the contractor within a week, and he did not know what to do.  His lawyer had succeeded in getting the foreclosure postponed for a month, and the month was now up.  The pool contractor informed Mr. Felix he would stop the foreclosure on the house if Mr. Felix would make the back payments on the pool.  The witness felt he should not have to pay for construction work that was never completed.  He had no pool and soon he would have no home.

 

Brian Wexler, a resident of Las Vegas, commenced testimony and related his ordeal with Cascade Pools that started in August 1998.  The pool company had contacted him with a proposal to build a pool.  He informed Cascade Pools that, in the past, he had contacted other companies and was rejected for financing.  His income to debt ratio was not good, and he owed the IRS $10,000.  The contractor from Cascade Pools told him it was not a problem because they had “creative financing” available for clients like him.

 

Mr. Wexler explained the idea of “creative financing” was to build him a $40,000 pool; however, on the loan application paperwork, the cost of the pool would be inflated by $10,000, which would enable Cascade Pools to “kick back” the $10,000 to Mr. Wexler so that he pay off the IRS.  Mr. Wexler agreed to the plan and allowed them to start the pool.  The very next day, the pool workers knocked down his wall and started excavation in his backyard.  He still had not signed a contract and, when he asked, Cascade Pools informed Mr. Wexler they were still working on the financing, and the contract was forthcoming.

 

Continuing, Mr. Wexler stated eight months later, in April 1999, he signed the contract.  Cascade Pools justified the delay by saying it had approached many lenders, and no one would give him financing.  There was one company, however, that would finance the loan for the pool construction, namely United Federal Financing.  The pool contractor warned Mr. Wexler if he did not sign the contract, there would be no financing, and he would be stuck with a hole in his backyard.  Mr. Wexler was charged $13,000 in loan origination fees and 30 percent interest on the loan.  At the end of the 30-year loan, the total cost of the pool would be $383,400, a drastic difference from the original quote of $40,000.  To make matters worse, the contractor announced he could not “kick back” that $10,000 for the IRS debt until the pool was completed.  When Mr. Wexler asked the contractor when the pool would be completed, he was told it would be within three to four weeks.

 

Mr. Wexler explained three to four months elapsed and, by then, the IRS was demanding payment.  In order to satisfy that debt, he withdrew the money from his 401K retirement fund and his checking and savings accounts and paid off the IRS.  When he contacted Cascade Pools, the contractor commented that he would “kick back” the $10,000 directly to Mr. Wexler rather than to the IRS; however, the contractor threatened Mr. Wexler not to miss a pool payment because then they could withhold the $10,000. 

 

Faced with mounting debt, Mr. Wexler could not afford to make both a house payment and a pool payment.  Six more months went by, and he had missed six house payments but never missed a pool payment.  When the contractor told Mr. Wexler the pool was completed, Mr. Wexler asked for the $10,000 to pay off his mortgage.  He was informed by Cascade Pools that he could not have the refund until the landscaping was done.  When Mr. Wexler protested and stated he did not care about the landscaping, the contractor declared since Mr. Wexler was behind on his mortgage payments, he was now considered a bad risk and, therefore, they would not refund the $10,000.  Mr. Wexler, hearing “we” in reference to that decision from the financing company, asked the contractor if he was United Federal Financing.  The contractor stated of course he was United Federal Financing Corporation, and, at that point, Mr. Wexler called his lawyer.  The lawyer’s advice to Mr. Wexler was to walk away from his house before they could foreclose on it.  He filed bankruptcy and lost his home. 

 

Calvin Whitfield, a Las Vegas resident, was the next in a series of pool scam victims to testify on behalf of S.B. 216.  Mr. Whitfield explained when his family was initially contacted by Cascade Pools he was in the Merchant Marines and preparing to go overseas.  When he returned home from the Bay Area for weekend leave, he discovered the pool contractor had already dug a hole in the backyard.  The excavation was within five feet of the door, and he immediately informed the contractor he had a problem with the location of the pool.  Mr. Whitfield reminded the contractor that he had signed no contract.  Additionally, no one had given the workers permission to enter his property, select the location for the pool, tear up the landscaping, and destroy the backyard.  His story had a similar ending as reported by other witnesses.  After much duress, Mr. Whitfield paid Cascade Pools $38,000 that he borrowed from his mother-in-law to stop the foreclosure of his home. 

 

Mr. Whitfield reiterated there were many people that had been victimized by Cascade Pools and were now facing bankruptcy as a direct result of the scam.  In retrospect, it became apparent the contractor had deliberately targeted the middle-class neighborhoods.  Mr. Whitfield could not understand why the state of Nevada let the contractor leave the state with a “slap on the hand.”  He also could not understand why the state had not done anything to stop that man who was really involved in racketeering and money laundering.

 

Assemblywoman Buckley raised the subject of the Victim Recovery Fund that was passed in the last legislative session.  She recalled it started with limited funds, and she wondered if that could be a resource to help any of the victims of the pool scam.

 

Ms. Grein, Nevada Contractors’ Board, offered to respond, and she indicated the fund could possibly help.  She had asked the Attorney General’s Office to give her an opinion as to the date the fund started, and she was told that the victims could start filing claims on July 1, 2001; however, it was not known if the compensation could be retroactive to cover losses for the last four years or if it would only cover events after the effective date.  She assured the committee she would inform the homeowners of that decision as soon as possible.

 

Assemblywoman Giunchigliani asked Ms. Grein if she knew how many construction control companies there were in the Las Vegas area.  Ms. Grein replied she was not sure of the number.  Ms. Giunchigliani asked if Cascade Pools was a licensed contractor.  Ms. Grein stated the contractor was licensed.  The Nevada Contractors’ Board office had processed the complaints, referred the issue to the Board for a hearing, and Cascade Pools was fined and their license was revoked.  The contractor challenged that decision in court; however, the Contractors’ Board won.  Ms. Grein announced they had taken the issue as far as they could, and she was present at the hearing to seek some financial relief and justice for the victims.

 

Ms. Giunchigliani asked, if the man was a licensed contractor, was there any requirement to know the names and addresses of his employees.  Ms. Grein replied there was no requirement for those records.  Ms. Giunchigliani asked if there was any requirement for a list of contractors, subcontractors, or sales people employed by the company used.  Ms. Grein stated, “No.”

 

Mr. Haney, representing the Nevada Contractors’ Board, offered to clarify and stated only the list of the principals in the business was given to the Contractors’ Board.  That was the purpose of the amendment to S.B. 216.  His office had discovered the sales people were often independent contractors that moved from job to job. 

 

Assemblywoman Giunchigliani asked if, by regulation, the Board could require the contractors to provide names of people employed.  Mr. Haney stated he was not sure they could at that point.  The testimony that had been heard was just on Cascade Pools, and he did not want the committee to believe there was only one company that had been guilty of disreputable business practices.  The license for Aqua Blue Pools had also been revoked after more than 30 people had been victimized by that company.  The pool construction scam was not an isolated incident. 

 

Chairman Dini asked the dollar amount of a bond required of the pool contractors.  Mr. Haney stated the bonds ranged from $1,000 to $100,000, and typically a bond would be $30,000.  One of the benefits of S.B. 216 would be to allow the Contractors’ Board to increase the bond to $500,000.  Chairman Dini stated it would seem the contractor would have to be bonded for every project.  Mr. Haney commented the authority to require a bond was in the bill; however, it could only be requested if they had been previously found to be in violation of the law.  There was a need not to unjustly penalize the reputable pool contractors. 

 

Assemblyman Beers asked if there had been any thought to just revoking the contractor’s license instead of resorting to construction control requirements and the application and issuance of a bond for every project.  He was concerned a contractor who was required to meet all of those conditions might not be competitive.  As such, it was conceivable the law could force a contractor to become more illegitimate in order to recover all of the extra costs.  Assemblyman Beers reiterated his question and asked why the state did not just revoke the license.

 

Mr. Haney, Nevada Contractors’ Board, stated, in his judgment, the contractors that did not want to stay in business would leave.  The contractors that stayed in business would be monitored, and, although they did not necessarily make them bond every project, the Board could require a bond and impose penalties if they deemed it necessary.  Mr. Haney recalled when his office tracked the Cascade Pools contractor to Houston, Texas, where a local radio station did an expose on the contractor.  Although there were no license requirements in Texas, they hoped it would help to discredit the contractor.

 

Kari Henrie, a resident of Las Vegas, commenced testimony as a victim of the Cascade Pool Company.  She had many problems with the construction of the pool, including cracking and leaking; however, the biggest headache was not the pool itself but the financing aspect of the contract.  Ms. Henrie emphasized if Cascade had built her pool with legitimate financing, she would have had a legitimate lender to sue or she could have withheld funds from Cascade.  Her dilemma was compounded by the fact she was dealing with two lending institutions.  She had a $42,000 pool and a loan of $21,000 financed by a legitimate lender she had found.  The legitimate lender released checks to Cascade as work progressed on the pool.  The other lender was United Federal Financial, and she began making payments immediately when the pool construction was started.  In total, she had sent 13 checks to United Federal Financial.  It took the contractor over 13 months to finish her pool, and, at that point, through the contractor’s brother-in-law she still owed the man $21,000.  That part of the financing was to a lending institution with fraudulent corporate officers that was never licensed in Nevada.

 

Continuing, Ms. Henrie explained she was facing foreclosure on her home if she did not make the payments.  At the heart of the issue was the fact the loan had never been funded.  If she did not have the $21,000 loan on her house, she could refuse to pay the contractor, and he could take her to court; however, as it stood, the contractor had total control.  The contractor declared he did not have to fix the leaking plumbing, the cracks, or anything else on the pool because technically he was the lender.  The contractor told her he was United Federal Financial, and he had no money in that corporation.  It was apparent he could do whatever he wanted, and she had no control.  She had to pay him or face foreclosure on her house.

 

Ms. Henrie voiced disbelief that the lender seemed to be out of the reach of the law.  She had made payments for a year to a lender that was never licensed, never had any money in the corporation, and never performed.  Once the trust deed was filed, there was no need for him to work on the pool or honor the lending contract.  According to the Nevada Licensing Division, if he was not licensed as a financial institution in Nevada, he was technically and legally out of their jurisdiction, and he could not be regulated.

 

Douglas Mormile, a resident of Las Vegas, was the next witness to testify as a victim of the pool scam.  His ordeal began in August 1999, when he had a pool started that took over a year to complete.  Following construction, he had spent an additional $8,000 to repair a leak in the pool that caused the formation of a sinkhole 8 feet in length by 6 feet deep beneath his house.  The sinkhole was of such magnitude that he was able to pump water and mud through the hole for about three hours and it never filled. 

 

Mr. Mormile complained to the Contractors’ Board, and, following inspection of his backyard, the Board investigators ordered the pool contractor to complete the repairs on his pool; however, the contractor never performed any repairs.  Mr. Mormile admitted he had also been victimized by the lending institution as was described by other witnesses.  His pool, originally estimated at $14,000, was costing approximately $180,000.  The stress to his family could not be overstated.  The ordeal interfered with his ability to go to work, and he believed he lost one job because of time spent away from the job.  As with the other victims, Mr. Mormile had exhausted all options to deal with the problem, and he hoped the testimony would be enough to convince the committee that something had to be done to ensure it never happened again.

 

Assemblyman Goldwater referred to a documented scheme that was drafted during the legislative session.  He wondered why the lending process was not monitored by the mortgage companies, which, he felt, should have known United Federal Financial was not a licensed lender.

 

Scott Walshaw, Commissioner of Financial Institutions, State of Nevada, offered to respond and explained it was his understanding that his office issued a “cease and desist” order to United Federal Financial in the summer of 1998.  That decision was based on a complaint filed with the Consumer Compliance Officer alleging there was difficulty in obtaining paperwork from a lending firm.  His office served the contractor, Mr. Majoroff, with a “cease and desist” order.  Mr. Majoroff responded he should be exempt from licensing because of a provision in the statutes that stated an individual could lend his personal money without having to get a license.  The response back to the contractor was that he was not considered an individual because he formed a corporation, and the presumption was he was conducting business without a license.  Mr. Majoroff’s next defensive stance was to claim he was an investor.

 

Assemblyman Goldwater asked if the contractor’s regulatory status changed after the 1999 legislative session.  Mr. Walshaw replied, if the question was in reference A.B. 64 of the Seventieth Session, he did not believe there was any provision that dealt with the issue under discussion.

 

Continuing with the chronology of events, Mr. Walshaw stated after the contractor, Mr. Majoroff, was presented with the “cease and desist” order, the contractor arranged to have his loans originate with a licensed mortgage company.  That mortgage company initiated the paperwork on the loans, but Mr. Majoroff provided the funding for the loan, effectively becoming an investor of the mortgage company.  It was entirely legitimate under statute.

 

Assemblyman Goldwater recalled a provision in A.B. 64 of the Seventieth Session that allowed for the short term and full funding of loans.  He questioned if those provisions would apply to some of the victims present.  Mr. Walshaw stated that was possible depending upon their circumstances.  Mr. Goldwater explained when he had talked to the Attorney General, there was some question as to the location of the crime and which office would have the jurisdiction.  He believed that was cleared up in A.B. 64 of the Seventieth Session, and a threat of criminal prosecution could be made.

 

Mr. Walshaw agreed and believed that would have applied to the licensed mortgage company if they had been charged with a crime.  Under A.B. 64 of the Seventieth Session, the Attorney General’s office would have been charged with the responsibility of bringing criminal action.  Assemblyman Goldwater asked if that would have been applicable in the cases described by the witnesses in the room.  Mr. Walshaw replied he did not believe the mortgage company was ever implicated as a criminal and culpable party in any action.

 

In response, Assemblyman Goldwater judged the mortgage company to have had involvement and, further, it was obvious they were engaging in actions that were not in good faith.  It appeared the mortgage company was very quick to file liens against the homeowners and, regardless of the outcome, the homeowners were greatly impacted by the threat of losing their homes.  Assemblyman Goldwater emphasized Mr. Walshaw’s office, the Financial Institutions Division, and the Attorney General needed to intervene and declare the whole thing a sham.  The pool contractor was obviously creating distance between each of his business entities so he could avoid prosecution.

 

Mr. Walshaw defended his agency and explained by the time the case came to their attention a year had elapsed and the pool company was out of business, having surrendered its license in anticipation of legal action.  Mr. Goldwater stated, in the future, with the passage of S.B. 216, that type of scam would be prosecuted by Mr. Walshaw’s office and the Attorney General’s Office.

 

Mr. Walshaw clarified, saying if there was evidence that a licensed mortgage company was suspected of a criminal behavior, the case would be referred to the Attorney General’s Office.  Assemblyman Goldwater remarked if illegal practices were obvious, especially to the Nevada Contractors’ Board, he wanted assurance the state of Nevada would not be myopic and would respond expeditiously with, as a minimum, the threat of criminal prosecution.  Mr. Walshaw concurred with the statement and assured the committee his office would follow through in the future.  He reiterated the case under discussion was complicated by the fact that the company had ceased to do business before the threat of prosecution could be made.  Mr. Walshaw added if he re-examined the case involving Interstate Mortgage and the recent indictment, he could see how the law would apply.

 

Assemblyman Beers interjected that he thought the mortgage company under discussion was unlicensed.  Mr. Walshaw replied there was some confusion regarding their status.  Mr. Majoroff’s company, Unified Federal Financial, had been issued a “cease and desist” order by his office in August 1998, for conducting business without a mortgage company license.  Mr. Majoroff, in response, claimed the loans originated with a licensed mortgage company in which he was an investor.  In retrospect, it became apparent to all parties if Mr. Majoroff had not defrauded his clients on the construction of a quality pool, it was likely the loans would have been paid and the contracts honored in the normal course of business.  The pool contractor had not delivered on his product.

 

Warren Hardy, representing Lifeguard Pools, viewed S.B. 216 as an effective means to deal with a legitimate problem.  Mr. Hardy’s client appreciated Senator Care’s willingness to hear their concerns, and he was present to voice his support of Senator Care’s amendment.  That amendment would authorize a list enabling the Nevada Contractors’ Board to track down the pool contractors that did not comply with the rules, specifically those in violation of NRS Chapter 624.  Mr. Hardy concluded by assuring the committee there were some very good, reputable pool contractors in Las Vegas.

 

Lawrence Semenza, representing Anthony & Sylvan Pools of Nevada, stated most of the provisions of S.B. 216 would not apply to his client whose business practices were strictly lawful.  Anthony and Sylvan Pools provided a performance bond for each contract as a guarantee to the client the pool would be finished.  Mr. Semenza, in reflecting on the testimony presented, believed the problems originated with the mortgage lending practices for financing the swimming pools.  In defense of investigative agencies, he reminded the committee it was very easy to criticize investigators and criminal prosecutors; however, in reality, those types of investigations took a substantial amount of time and effort.  He speculated that, in the future, there would be indictments in that particular case either by the United States for mail fraud or by the state of Nevada’s District Attorney’s Office.

 

Mr. Semenza offered to review his recommendations for changes to Amendment No. 635 proposed by Senator Care (Exhibit H).  Following consultation with Mr. Haney, they had drafted modifications to the language addressing the requirement of a work card, specifically to add the words “independent contractor or employee.”  In Section 3 on line 14, Mr. Semenza suggested the deletion of the last sentence requiring an annual renewal of a work card, stating the timeline should be determined by the sheriff’s department in the area of origin (e.g., Clark County or the city of Las Vegas).

 

Continuing, Mr. Semenza called attention to Section 4, subsection 7, and recommended the addition of the language “for such loan” after the sentence that stated, “receive remuneration or any other thing of value.”  That statement clarified, if a person was applying for a loan, he could not receive anything of value from the lender in exchange for receipt of the loan.

 

Referring to Section 5, subsection b, Mr. Semenza proposed the deletion of the phrase “or any other assistance” in regard to a contractor helping a customer find a loan.  In Section 9 it was his recommendation to remove the “Commissioner of Financial Institutions” from language that would require that he provide a standardized contract for the construction of pools in Nevada.  Mr. Semenza recommended the responsibility of the Contractors’ Board should be to adopt mandatory terms that would be included in all contracts for the repair, restoration, improvement, or construction of a pool or spa.  He would also include in that section the language “such mandatory terms shall not be waived or limited by contract or in any other manner.”

 

Chairman Dini asked the witness if he believed S.B. 216 with the proposed amendments would help solve the problem and assist those people who had been victimized by the unscrupulous pool dealers.  Mr. Semenza indicated he was speaking personally and not on behalf of his clients in stating he was not sure by the way the bill was drafted if it would address all of the problems experienced by the victims.  Some procedures, such as the background investigation, would help; however, he believed, even if the Contractors’ Board had conducted a background check on the owner of Cascade Pools, it might not have revealed anything in the owner’s past to indicate a propensity for criminal activity.  The background check and the fingerprints would only expose a problem when there had been convictions or previous arrests.  Mr. Semenza was also pessimistic about the value of using a work card to track people moving from job to job, and, in his judgment, it would not stop the illegal practice.

 

Assemblywoman Buckley, reflecting on the testimony, thought the state of Nevada could do more by making it clear that, if a contractor was proven to have engaged in illegal activity, it would insulate the homeowner from foreclosure.  Ms. Buckley recommended the Attorney General become more involved in helping victims, such as those who testified.  She also thought the clarification of the date of the Recovery Fund should be included in S.B. 216 to facilitate access to funds by the victims.  For the homeowners who had already been victimized, the proposed requirements for work cards and bonds would be little consolation.  She wanted to help the people that were scammed. 

 

Assemblyman Humke voiced concern to Chairman Dini regarding the paucity of remedies available to the victims, except for options involving the criminal justice system or filing a civil suit.  Mr. Humke recalled the testimony in which the witness stated he was not credit-worthy in the eyes of standard credit financial institutions, but the desire for a pool and believing the promises of a disreputable contractor entangled him in the scam.  Mr. Humke believed consumer education could be the key in prevention and perhaps certain industries would be interested in participating in those classes.

 

In response, Mr. Semenza believed some portions of S.B. 216 would assist not only the Contractors’ Board, but would standardize some of the contractual provisions between the pool contractor and the homeowner.  He supported the suggestion of creating an ombudsman office to field inquiries from the pool contractors as well homeowners considering the purchase of pools.  The ombudsman program could be the vehicle for targeting effective consumer education, as well as fielding questions about legal terms and conditions of contracts, the selection of a pool contractor, and the homeowner’s obligations.  He voiced his agreement with Mr. Humke that the bill was too late for those homeowners who had already been scammed.

 

Mr. Hardy indicated his client, Lifeguard Pools, had met with several members of the pool industry in Las Vegas, and they had formed an association to voluntarily create a recovery fund within the association.  Part of the funds would be used for education of the public, while a portion of the funds would be awarded to a homeowner to help get a pool completed or repaired.  Mr. Hardy declared the response from the industry had been tremendous.

 

John Sande, representing the Nevada Bankers Association, had spoken to the sponsor of S.B. 216, who asked Mr. Sande to request deletion of subsections 1 and 2 of Section 5.  The deletion would include any other comparable provisions in the proposed amendment.  Mr. Sande called attention to subsection 3 of Section 5 where it mentioned the “affiliate or an associate of a contractor was making the loan.”  The term “affiliate or associate” could be subject to broad interpretation, in his judgment.  In regard to Section 5, it would require that any time a financial institution made a loan that was used to repair, restore, improve, or construct a residential pool and there were violations by a contractor, it would make the contract between the contractor and the owner null and void.  The financial institution would be prohibited from collecting on the loan; as such, it was obvious the banks would be hesitant to make loans.  Mr. Sande noted when a homeowner applied for a loan, such as a home equity loan, he was not required to disclose all of his intended uses for the loan.  There had been assurance given during the testimony in the Senate that the provision would be removed.  Because of time deadlines, that had not happened. 

 

Chairman Dini requested clarification if the deletion included all of Section 5.  Mr. Sande replied it was just subsections 1 and 2 of Section 5, and perhaps the definition of financial institution could also be removed.  He added subsection 2 also had some inconsistencies with banking procedures, and he recommended they be removed as well. 

 

Speaker Perkins asked Mr. Sande if he had the opportunity to present his recommendations for amended language in the Senate hearing.  When Mr. Sande replied in the affirmative, Speaker Perkins then asked if the Senate had rejected the concepts.  Mr. Sande replied they were assured the deletions would be made; however, apparently on the day the bill was passed, the amendments had fallen through the cracks, and as such, his amended language was technically not rejected by the Senate committee.

 

Speaker Perkins voiced concern that bills were supposed to be in reasonably good amended form by the time they made it to the second House of the Legislature.  There were many amended bills, and he was not sure how the Assembly could deal with that dilemma.

 

Alfredo Alonso, representing the CitiGroup, offered to comment on Speaker Perkins question.  The deletion of the subsections had been discussed at the workshop, and he acknowledged there was an understanding between all parties the language would be removed.  The oversight was confusing, and nobody had a reasonable explanation.  Mr. Alonso stated, in the case of CitiBank, there were many refinancing loans approved, and often homeowners would request additional monies to cover the cost of a new pool.  Mr. Alonso voiced concern the language of S.B. 216 could actually impact an entire mortgage on a home. 

 

Ms. Grein, Nevada Contractors’ Board, clarified the provisions Mr. Alonso mentioned were agreed upon in the Senate; however, Senator Care was unable to complete the amendment in time and wanted to meet the deadline for passage of the bill out of the Senate.

 

Ms. Henrie interjected she had some questions for Mr. Walshaw.  Chairman Dini suggested she should fax the questions to his office, and they would get the answers to any questions for her.

 

The next witness, Judy Jacoboni, represented Tahoe Pool and Spa, a swimming pool construction company owned by her family.  In listening to the testimony, she had been encouraged by the committee’s responses to several of her major concerns.  She had not attended the Senate committee hearings because the bill, as drafted, appeared to have little effect her business; however, after the amendments were proposed, she feared the bill would put small business owners like hers out of business.  Ms. Jacoboni stated she was assured by Senator Care that S.B. 216 would be amended on the Senate floor, and they did everything they could to have Senator Care listen to their position.

 

Continuing, Ms. Jacoboni offered several suggestions.  She urged the committee to delete Section 3 that dealt with work cards.  In her company, she employed 17 skilled craftsmen that worked in swimming pool trades, and they would have to obtain work cards in four different counties.  It would not present a problem for a pool business in Clark County that operated in one county; however, in the northern part of Nevada, that would mean 80 work cards for her company employees.  Ms. Jacoboni had contacted all four county sheriffs for cost estimates, and some of them could not quote a fee because there was no provision for that type of work card yet.  Based on the responses she did receive, fingerprinting and a normal work card could cost up to $79.00 for one work card.  If she obtained 80 cards, the cost was estimated to be $6,400 the first year.  The time involved for the workers to obtain the work cards would be at least two days at a cost of another $2,000.  Ms. Jacoboni declared she would have to pass that overhead on to her customers. 

 

Ms. Jacoboni continued with her recommendations for amended language and suggested the deletion of Section 4 relating to construction control.  To her knowledge, there were five or six construction control companies in northern Nevada.  She contacted Sierra Nevada Builders Control and was told the minimum charge would be $500 or one percent of the contract (whichever was greater) for them to oversee swimming pool construction, repair, restoration, or improvement projects.  As with the overhead associated with obtaining work cards, that $500 would be passed on to their clients.

 

For clarification, Ms. Jacoboni provided a handout (Exhibit I) to the committee with examples of invoices a typical customer would receive before and after S.B. 216 was passed in its present form.  Clients would billed an additional $575 for a repair, restoration, or improvement of a pool; however, not for new construction.  She urged the committee to delete the words “repair, restoration, or improvement” as those constituted the majority of the jobs performed by her company and were typically small jobs for under $2,000.

 

Ms. Jacoboni also requested the committee look at Section 6 that authorized prosecution as a Class D felony.  She did not believe a swimming pool contractor should be threatened with a charge of a Class D felony and imprisonment for non-compliance on a contract or if one of his employees had not obtained a work card.  Regarding Section 12, the witness explained it dealt with background checks.  In her judgment, if the contractor had been in business for a long time, as in the case of her company that had been in northern Nevada since 1977, and the company had been conducting business legitimately, Ms. Jacoboni did not feel they should be required to have a background check as a condition of their license renewal. 

 

In conclusion, Ms. Jacoboni reported she had contributed to the Victims Recovery Fund through her license fees, and she would be pleased if the victims of the pool scam could get some funds to help them.  She had received a letter from the chamber of commerce stating their agreement with her opposition to S.B. 216, as amended, and a copy of that letter had been provided to the committee.  She urged the committee to consider her comments in their deliberation.

 

Assemblyman Humke questioned the practical use of a work card in the swimming pool industry.  He was aware the work card approach was utilized in the gaming industry, and it received tremendous support from law enforcement personnel; however, in his view, the pool industry was an entirely different situation. 

 

Christina Schofield, a homeowner from Las Vegas, commenced testimony.  It was her understanding the Nevada Department of Financial Institutions had exchanged letters and had corresponded extensively with Mr. Majoroff since 1998.  In 1999, a memo from the Attorney General was sent to the Department of Financial Institutions informing that agency the loans were invalid.  In 1999, when the “cease and desist” order was issued, Cascade Pools and United Federal Financial failed to abide by that order and did not cease or desist.  To make matters worse, the Department of Financial Institutions was aware of that fact, she commented.

 

Continuing, Ms. Schofield stated, long before City Mortgage withdrew its mortgage license and distanced itself from the problem, she had submitted a list of names and loan documents to the Department of Financial Institutions, urging them there was a need to subpoena the records and check them.  The records for City Mortgage were located at the Department of Financial Institutions.  As a citizen, she felt there should be an order to evaluate those loan documents by an independent third party.  Ms. Schofield suspected there was very valuable information in those records, and there were certain agencies that were not telling the truth.  She was motivated by the belief it was important for the consumers and the people of the state of Nevada to be treated fairly and to be represented by regulatory agency that would take action on the problems. 

 

George Lyford, the Director of Special Investigations for the Nevada Contactors’ Board, asked to clarify several points.  United Federal Financial was a non-licensed, unregistered finance company.  It conducted business with City Mortgage, a licensed registered company that had an employee working in the office of Cascade Pool filling out the paperwork for construction loans.  The paperwork was filled out by the licensed company and then sold right back to United Federal Financial.  There was collusion between a licensed and un-licensed company. 

 

Mr. Lyford emphasized the primary reason for a work card was to identify workers and where they were working.  His agency was aware of situations where a licensed contractor left town as a result of the 1997 legislation, but later returned as a hidden owner of another pool company.  Mr. Lyford admitted it took his office almost one year to identify them as the hidden owners, to revoke the license of that company, and to force them out of town.  Those same workers with revoked licenses would invariably resurface in a new location, and when they reappeared, they were engaged in the same illegal behavior.  Mr. Lyford illustrated his point by saying that Mr. Majoroff’s father had been a pool contractor in California, and he had learned the trade and the financing scheme from his father.  Mr. Lyford was confident those facts would have been uncovered if there had been a complete background check, and a work card was a critical piece of that effort. 

 

Assemblywoman Giunchigliani requested clarification if the Attorney General was maintaining a position of non-involvement and, if so, which agency ended up with jurisdiction.  Mr. Lyford explained when the case was opened they initially contacted the Attorney General’s Office and had received a negative response to their request for help.  As a result, the Special Investigations Unit pursued the investigation, prepared a complaint, filed it with the Clark County District Attorney’s Office, and was proceeding with the first stage of a grand jury.  Mr. Lyford stated he had also referred the case to the Internal Revenue Service, and they too had initiated an investigation.  Simultaneously, he had forwarded the bankruptcy aspects of it to the Federal Bureau of Investigation; however, the United States Attorney’s Office had declined to proceed with the bankruptcy violations based on the fact the other criminal violations were being pursued locally.  He had not yet contacted the postal inspectors because they had the same issues.  Ms. Giunchigliani reiterated there appeared to be no jurisdictional language in the bill, and Mr. Lyford agreed.

 

Chairman Dini closed the hearing on S.B. 216 and opened the work session on S.B. 252. 

 

Senate Bill 252:  Makes changes concerning Nevada Life and Health Insurance Guaranty Association Act. (BDR 57-683)

 

Chairman Dini reminded the committee they had heard testimony and discussions between trial lawyers and Mr. Gordon de Paoli, representing the Nevada Life and Health Insurance Guarantee Association.  Those parties had now reached an agreement and had returned to testify.  He called the committee’s attention to the work session document (Exhibit J).

 

Gordon de Paoli commenced testimony and explained Vance Hughey, Committee Policy Analyst, had requested that Mr. de Paoli meet with Matt Sharp, the representative for the Nevada Trial Lawyers Association.  The purpose of that meeting was to reach agreement on the language of S.B. 252.  Mr. de Paoli explained agreement was reached to delete the word “rider” on page 8, line 42 of the bill.

 

Matt Sharp, representing the Nevada Trial Lawyers Association, confirmed the deletion of the word “rider” was acceptable and would clarify what was available through the guarantee fund.

 

ASSEMBLYMAN HUMKE MOTIONED TO AMEND AND DO PASS S.B. 252.

 

ASSEMBLYWOMAN GIUNCHIGLIANI SECONDED THE MOTION.

 

MOTION CARRIED UNANIMOUSLY.

 

Senate Bill 274:  Revises provisions governing rights and duties of contractors and subcontractors under contracts or subcontracts. (BDR 54-593)

 

Steve Holloway, Executive Vice President, Associated General Contractors, accompanied by Richard Peel, of the Construction Industry Coalition, and Renny Ashleman, of the Southern Nevada Homebuilders Association, commenced testimony on S.B. 274.  Mr. Holloway stated the bill as written was a consensus bill and had the support of construction company owners, developers, general contractors, and subcontractors.  Specifically, the bill was supported by the Sheetmetal and Air Conditioning Contractors National Association, the National Electrical Contractors Association, the Mechanical Contractors Association, the Plumbing and Mechanical Contractors of Nevada, the Southern Nevada Air Conditioning, Refrigeration Service Contractors Association, the Associative Building Contractors, the Insulation Contractors, the Mason Contractors Association of Southern Nevada, the Nevada Contractors Association, the Northern Chapter of the Associated General Contractors, the Nevada Association of Mechanical Contractors, the National Association of Industrial Office Parks, the Building Trades Council, and the AFL-CIO.

 

Mr. Holloway pointed out the bill was intended to amend NRS 624.610 that was enacted in 1975.  In his judgment, the statute was intended to allow contractors to stop work if they were not paid for their services on a job.  Unfortunately, some contracts had provisions where the penalties were so great that, if a contractor legitimately stopped work for non-payment, the penalties under the contract would exceed the cost to just complete the project for free.  The bill voided those types of penalties.  The bill also attempted to provide a process that was both fair to the owner, the developer, the contractor, and the subcontractor.  Mr. Holloway called the committee’s attention to a short amendment that would clarify several of the provisions in the bill (Exhibit K).

 

Richard Peel, representing the Construction Industry Coalition, gave a brief description of S.B. 274 and explained it was comprised of three parts.  The first portion addressed NRS 624.610, the second dealt with NRS 624.620, and the third covered the contractor/subcontractor relationship.  Mr. Peel wanted to address the language covering the owner and contractor relationship and its impact on NRS 624.610. 

 

Mr. Peel explained that S.B. 274, as amended in Section 8.1, provided that the homeowner’s payment to his contractor would be due on or before the payment due date set forth, if there was schedule for payments in the contract.  If there was no schedule for payments in the contract or, if the contract was oral, payment would be due within 21 days after the owner’s receipt of the contractors’ payment request or progress pay bill.

 

Continuing, Mr. Peel described the intent of Section 8.2, subsections (a) and (b) as allowing the homeowner to withhold a portion of the payment to be made to a contractor, if a homeowner gave written notice.  That portion would be a retention amount set forth in the contract to cover situations where the value of work was substandard or the materials for which payment was being sought had not yet been provided.

 

A homeowner could withhold from a contractors pay request the amount the owner had or could be required to pay for a state or union notice, per NRS Chapter 608 that dealt with wages, NRS Chapter 612 that dealt with unemployment, or NRS Chapter 616 that dealt with worker’s compensation.  A homeowner could also require submission of waivers and releases in order to make a payment to a contractor; however, if the contractor was not paid in cash, the waiver and release must be conditioned upon the check clearing the bank and would become unconditional after the check cleared the bank.  The waiver and release would be limited to the amount of the payment received.

 

Regarding Sections 8.3 and 8.4, Mr. Peel explained that language dealt with a homeowner’s written notice of withholding and the requirement it be issued on or before the date the payment was due, that it be in writing, that it identify the amount that would be withheld, the reason for the withholding, and be signed by an authorized agent of the owner.  The owner had an obligation to pay any undisputed amount of the particular progress request that was being sought.  If a contractor gave notice of the correction and a reason for withholding, an owner had to pay for completed items on or before the due date of the next progress paid bill.  Additionally the owner must provide a new notice of any withholding of any uncompleted items, but was obligated to pay for those that had been completed by the contractor’s notice of correction or the reason for withholding. 

 

Continuing with his testimony, Mr. Peel, in reference to Section 11.1, stated a contractor could stop work upon ten day’s notice if the owner failed to pay or give notice of a withholding and the time periods required by the bill.  Sections 11.1 and 11.2 granted a contractor the right to terminate the contract by written notice 15 days after he stopped work or 15 days after the owner caused the work to be stopped, provided the contractor had given a 10-day written notice and the owner failed to allow work to resume within the 10-day period.  If the contractor was paid the amount due prior to his termination, then he would have to resume work.  Section 11.3 indicated if the contractor stopped work, the owner could terminate the contract.

 

Assemblyman Beers requested clarification of the itemization of work not completed and remarked it sounded as if there would be line items for the details of the contract.  He wondered if what they were proposing would work for a standard less a specific percent of contract invoicing.  Mr. Peel stated that was correct, and the bill would work for either scenario.

 

In Section 11.4 Mr. Peel explained if the contractor or the homeowner terminated the contract, the contractor was entitled to recover from the owner the cost of labor, materials furnished, profit overhead, and lost profits plus interest that were incurred prior to the date of termination.  Additionally, a court could award to a prevailing contractor his attorney’s fees.  A prevailing contractor had been defined to be a contractor that stopped or terminated work for reasonable cause.  Section 11.5 indicated if a contractor stopped work, his subcontractors could also stop work.  If a contractor terminated his contract with the homeowner, his subcontractors could terminate their contracts with the contractor.  Section 11.7 stated an owner was not entitled to damages if a contractor stopped work or terminated his contract for reasonable cause and in accordance with the act.  In Section 9.1 a contractor had to give a copy of all notices to his subcontractors, and in Section 9.2 a contractor could not be required to waive any of the rights provided by the bill.  Section 9.4 indicated the act did not apply to a contract between a residential owner and a contractor or between a contractor and a public body.  Section 9.5 required an owner to give subcontractors and suppliers information about payments made to a contractor within five days of a written request. 

 

Mr. Peel commented he had described the coverage as it related to an owner and contractor relationship.  The contractor and subcontractor relationship was almost identical.  Reading from Exhibit K, Mr. Peel reviewed points of the amendments, specifically in Sections 5, 6, and 11.  In Section 5, a subsection would be added stating if there was a payment schedule set forth in a written contract, a contractor would have an obligation to pay either within ten days of the date the contractor received payment for the subcontractor’s work or in accordance with a schedule for payments set forth in the written contract -whichever occurred first.  The goal was to try to get the money passed down from the owner to the contractor and to the subcontractor as quickly as possible. 

 

The next proposed change to the bill would be in Section 6, subsection 8.  The language “reasonable cause” and “lower-tiered subcontractor” would be added for clarification.  Section 11, subsection 7, had the same changes proposed as for Section 6.  The final proposed amendment would be added to Section 12 of S.B. 274 and related to NRS 624.620.  The statute currently read that once a structure had been completed, a contractor could give the owner notice the building was available for use or occupancy.  There were many construction projects that had nothing to do with a building or structure, but did relate to work of improvement.  Borrowing the definition set forth in NRS 108.222, a work of improvement could refer to a commercial pipeline project or tenant improvements, for example, and the language needed modification. 

 

Assemblyman Nolan referred to the provision that would permit a contractor and subcontractors to stop working on a project and asked, if a primary contractor elected to discontinue work, did it automatically release his subcontractors from working on the project.  He wondered if the provision put the primary contractor in the position of leveraging the consumer by stating if he quit the job so did all of the subcontractors.

 

Mr. Peel stated the goal was to encourage payment for services.  In his judgment, S.B. 274 was clear in that it stated when payment was to be made by the owner to the contractor.  The contractor was only entitled to stop work if he had complied with the bill as drafted.  Work stoppage would occur for cases of non-receipt of payment, as set forth in the written contract, or, if it was a verbal agreement, it would be within 21 days of the date the progress bill was submitted.  The subcontractors could also stop work if the contractor stopped work for non-payment.  On the other hand, the homeowner had the right to withhold money for specific reasons.  If the owner believed payment was not due, he could give the written notice of withholding and advise the contractor what he needed to do in order to be in compliance or to correct the problem. 

 

Assemblyman Nolan posed a hypothetical situation involving a primary contractor in a dispute with the owner.  If the owner was not paying the primary contractor and the contractor elected not to continue work, could the contractor inform all of the subcontractors who would likely stop work?  Mr. Peel acknowledged that possibility, and he added he could not assure the committee that a contractor would not use that as leverage; however, the contractor would have no control over whether the subcontractors would actually exercise their right to stop work.

 

Renny Ashleman, representing the Southern Nevada Homebuilders, offered brief comments in support of S.B. 274.  In his view, it would reduce instances of non-payment in the construction industry, and it would cut down on some the litigation and arbitration.  He thanked the coalition for their cooperation.

 

Paul Georgeson, representing the Associated General Contractors of Nevada, endorsed the bill with the proposed amendments.  He believed it would be a good bill for the contractors of Nevada.

 

Jack Jeffrey, representing the Southern Nevada Building and Construction Trades Councils and speaking for Danny Thompson of the AFL-CIO, declared their strong support of S.B. 274. 

 

Dennis Haney, representing the Nevada State Contractors’ Board, firmly supported the bill for the homebuilders and the coalition.

 

Chairman Dini closed the hearing on S.B. 274 and stated he would entertain a motion.

 

ASSEMBLYMAN HETTRICK MOTIONED TO AMEND AND DO PASS S.B. 274

 

ASSEMBLYWOMAN LESLIE SECONDED THE MOTION.

 

MOTION CARRIED UNANIMOUSLY.

 

Chairman Dini opened the hearing on S.B. 513.

 

Senate Bill 513:  Makes various changes to provisions relating to investigations and proceedings for disciplinary action by regulatory bodies who regulate certain professions, occupations and businesses. (BDR 54-81)

 

Kent Lauer, Executive Director of the Nevada Press Association and speaking on behalf of more than 40 newspapers, commenced testimony in support of S.B. 513.  He explained to the committee the intent of the bill was to prohibit various professional and occupational licensing boards from imposing secret discipline.  The bill would ensure the boards, whose primary mission was to protect the public, would not be affected by secrecy, especially in matters of discipline concerning those under their regulation.  Mr. Lauer stated S.B. 513 was necessary to bring consistency to the laws and regulations.

 

To illustrate his point, Mr. Lauer described a case from November 1995 when the Board of Homeopathic Medical Examiners issued a letter of admonishment in response to serious allegations made against a Las Vegas homeopath.  The Board refused to release that letter of admonishment and the complaints that led to the action.  The most recent example of secret discipline was in August 2000, when the Nevada Board of Psychological Examiners secretly disciplined a Reno psychologist.  The terms of the settlement were not even revealed to the citizens who had originally made the allegations against the psychologist.  Mr. Lauer noted the one couple that had made the allegations was not allowed to hear the punishment, and he wondered how they would know it was just.  The sole intent of S.B. 513 was to ensure those boards could not impose secret discipline.

 

Chairman Dini asked how many boards would be impacted by the new law.  Mr. Lauer stated he did not have an accurate figure, but he estimated approximately 30 boards.

 

Assemblyman Goldwater recalled the Legislature had dealt with those issues in the past, especially in regard to one particular board.  He voiced concern the proposed legislation could invade an area in which the Nevada Legislature did not want to be involved.  Mr. Goldwater acknowledged that Mr. Lauer was correct in stating if someone had entered into a settlement or somehow violated statute, it should be public record; however, the language in Section 5, line 25 through 31 stated a person could only be accused of something if he “allegedly committed a violation” and if the consent agreement was a public record.  As such, a person did not have to even be convicted, but just enter into a settlement of an accusation, and that became a public record.  Mr. Goldwater felt the one circumstance that encouraged settlements was the fact the parties involved did not want to become part of the public record or want their family name published.  Even if someone was innocent, he might enter into a settlement to avoid embarrassment.  Under S.B. 513, that would no longer be possible.  He asked Mr. Lauer if there was a way to amend the language to apply only to situations where a person was found to be in violation.

 

Mr. Lauer responded that once someone entered into a settlement, he was, by the fact of entering into the settlement, admitting some sort of guilt.  Assemblyman Goldwater strongly disagreed with that view, and he added if that was the logic behind the bill, he would not support it.  In his judgment, the bill should be amended to state if a person was found in violation, it would be public record; however, if there was a settlement that was not contingent on conviction but contingent on privacy, the state had to allow for that arrangement.  Assemblyman Goldwater voiced concern over a non-guilty party being subjected to public embarrassment and becoming part of an official record.

 

Mr. Lauer asked if the details of the settlement would include a statement that the person was not admitting any guilt.  Assemblyman Goldwater stated he was not sure, saying the state could not conceive of all possible conditions of a settlement or the relationship between the regulators and the regulated.  He recommended deletion of the word “allegedly” from the language of the bill.

 

Ms. Grein, Executive Officer of the Nevada State Contractors’ Board, testified in support of the concept.  She explained her agency was responsible for providing people the information they needed to make their own decisions.  If complaints were filed, the public needed to know the disposition of the complaints.  When her employees negotiated settlement agreements, a desirable solution to expedite the process, they would state what was alleged and what the settlement would be to settle the problem.  Ms. Grein emphasized the Contractors’ Board always approved those issues in a public hearing.

 

Senator Townsend, District 4 offered to clarify and stated S.B. 513 was the result of an incident that occurred with a licensee in northern Nevada.  A serious complaint was brought before the Board of Psychological Examiners and, because of the sensitive and controversial nature of the complaint, some of the testimony and the settlement agreement were sealed.  It was the contention of his committee that if the goal of a licensing board was to protect the public interest and not the licensee, then how would a member of the public know that licensee had entered into a stipulation and had been disciplined.  Senator Townsend declared the answer was the public would not know.

 

Continuing, Senator Townsend explained, in working with the Press Association, he attempted to deal with the remaining boards that had no prohibition against sealed disciplinary action and bring them into compliance.  The activities surrounding a complaint would be consistent under S.B. 513.  Any complaint and subsequent investigation would be private; however, if there was any form of disciplinary action (e.g., a one-day suspension, $500 fine), that action would be made public.  As a result of working with the various boards and the press association, the language of the bill was drafted.

 

Assemblyman Goldwater voiced a need to balance the protection of the public while exposing government secrecy.  In Section 7, subsection 2 it stated, when considering disciplinary action, “all other documents and information considered by the board” were public record.  That information would include the results of psychological evaluations in which a person was found to be emotionally or mentally unfit, medical records, and other private documents.  Mr. Goldwater was uncertain if that information was protected somewhere else in statute or if S.B. 513 would create unfairness.  If a contractor’s license was revoked and the claim was made that he was psychologically unfit, Mr. Goldwater wondered if that should be a matter of public record.

 

Senator Townsend acknowledged his point was well taken.  He recalled, in discussion with various board representatives, the issue had been raised of where to draw the line in protecting the privacy of the licensee.  In his judgment, the entire investigation should be conducted privately.  There was concern if the complaints were made public, it could invite a multitude of additional complaints, some of which may have no merit.  Senator Townsend explained the licensee was protected throughout the course of the investigation.  The board would carefully weigh all of the information and determine if they wanted to issue a reprimand or enter into a stipulation.  At that point, it would become public record. 

 

Senator Townsend voiced agreement with Assemblyman Goldwater’s point regarding lines 47, 48 and 49.  The language “all documents and information considered by the board” would include consideration by the Contractors’ Board of someone’s mental stability, and that sensitive information could become public under S.B. 513.  The issue would be the extent to which that information could disadvantage the licensee if he was to appeal the disciplinary action to the next level (i.e., district court).  Senator Townsend summarized by stating he did not believe the investigative paperwork should be made public.  Whenever there was attorney/client privilege or information that would prejudice the licensee on an appeal, confidentiality was in order. 

 

Robert Barengo, representing the Nevada Contractors Board and the Board of Medical Examiners (BME), stated the BME first started working on the bill with Senator Townsend last summer, and they were largely responsible for the language and the intent of the bill.  Section 1 covered the initial process that would be used to address personal complaints or letters and determine the relative merit of the complaints.  Section 2 contained language to handle the formal complaint, described as being akin to a District Attorney’s office filing paperwork with the justice court or the district court.  That document would be used for the public hearing and presented as evidence against the defendant.  Mr. Barengo noted those records and the hearings would be public.  Section 8.2 would impose order and discipline, as well as provide the findings of fact and conclusions of law, all of which would be a matter of public record.  Mr. Barengo concluded by saying they were trying to address the concerns with privacy, and, if there was a spurious complaint, they did not want that to be made public.

 

Assemblyman Goldwater reiterated his concerns on the issue of privacy and called attention to Section 1 where an allegation of a complaint and entrance into a settlement would be made public.  He asked if the documents and information that supported the engagement of the settlement would become public record.  Mr. Barengo acknowledged there could be some other actions that took place during that period of time that would keep the board from having findings in that case, and they would not move forward.

 

Assemblyman Goldwater once again voiced concern over the possibility of a psychological evaluation of a licensee becoming a matter of public record.  The language in Sections 5 and 7 was a concern to him because there might be items such as a psychological evaluation, medical records, or financial records that needed to remain confidential during negotiations and fact-finding.  If the records did not materially relate to the discipline or if there could be a settlement that satisfied the board while still keeping the records private, Assemblyman Goldwater thought that would be a better solution.

 

Senator Townsend offered to make a distinction between stipulation and a ruling by the board for disciplinary actions.  If a licensee and the board agreed, the licensee could stipulate he would not commit the violation again, or he could declare he had done nothing wrong.  That stipulation would be the public record.  As a condition of the stipulation, the licensee would agree not appeal it to the district court.  There was no need for documentation protected for an appeal.

 

On the other hand, if there was a ruling that stated the person violated a provision of a license and the board ruled on that issue, the ruling and the supporting documentation that enabled the board to make that decision would become public.  The work documents, however, would not all be made public because at that point the licensee would still have the right to appeal the decision.

 

Assemblyman Goldwater remarked he was trying to understand the language in the bill, and he appreciated their efforts to clarify.  In response, Senator Townsend explained they had to craft the bill in the most eloquent manner.  If there was a comfort level with other language, he would be able to work with other representatives of the bill to change it.

 

Assemblywoman Giunchigliani referred to Section 3 and asked if the individual was found to be in violation, would the board then be allowed to collect attorney’s fees or awards of costs, for example.  She wondered if that could be potentially abused. 

 

Mr. Barengo replied the typical scenario would be the regulatory body received a complaint, performed an investigation, and then filed a public complaint against the individual in front of his own board.  There would then be a formal proceeding, and if the person was convicted in front of his regulatory board, then his board would be entitled to recover the costs listed in Section 3.  Mr. Barengo remarked that most of the boards already had the stipulation in their laws.

 

Assemblywoman Giunchigliani suggested the committee should determine which regulatory boards currently had that provision because it appeared to be new language to her.  Mr. Barengo replied the bill drafters and others had reviewed all of the boards, blacked out the current references, and did create new language in one section to capture existing and conforming rules.  Ms. Giunchigliani asked if an individual was entitled to have representation at the hearings, and Mr. Barengo responded in the affirmative.

 

Ms. Giunchigliani, voicing concern with Section 5.5, declared she wanted to reread the entire bill again to have a better understanding.  Senator Townsend offered to address her question in regard to attorney’s fees and costs.  The issue that had been discussed with him was those boards who lacked coverage for attorney’s fees and costs, usually the smaller boards, had a problem disciplining someone because the cost to them could interfere with their quarterly board activities.  They could not recover the cost because there were not enough license fees.  As such, the smaller boards needed language that was already part of the statutes covering larger boards’ activities.  Ms. Giunchigliani remarked she had thought all of the boards, including the smaller ones, had the use of the Attorney General; however, she was beginning to realize the service was not being offered uniformly. 

 

Senator Townsend stated some of the boards for various reasons had hired outside counsel, and that was usually the larger boards because their legal activities were extremely dominant.  In some cases, the legal work would use up all of the services of one attorney general.  Not everyone had a deputy attorney general; however, they all had some type of legal counsel.

 

Assemblywoman Buckley echoed the concerns about the recovery of attorney’s fees in the cost section of S.B. 513.  In her view, the first paragraph of Section 3 stated if the regulatory body determined someone violated a provision, the regulatory body could assess all of the fees for the attorney advising the board, any of their own costs which were open-ended with respect to the disciplinary proceedings, and the cost of the investigation and the hearings.  She believed that was the purpose of the licensing fees paid to the regulatory board.  Ms. Buckley doubted the ability of the smaller more obscure boards to generate enough revenue through those fees.  She added some of the boards varied in their expertise and their sophistication, and she would be worried about giving them that authority.

 

Mr. Barengo responded that the boards he had researched already had that language in their regulations, and the language seemed to be standard in most cases.  Ms. Buckley asked if he could supply the committee with that list.  She could not find the provision covering attorney’s fees in the rules covering the Dental Board.  Mr. Barengo stated he had researched the Nevada Contractors’ Board and the Medical Board, and they had the language in their regulations.

 

Ms. Grein of the Nevada Contractors’ Board offered to comment.  In 1993 the Attorney General issued a blanket revision to all boards under Title 54.  It allowed them to impose fines and recover the costs of their investigation and attorney’s fees.  At that time, there was much discussion because the Attorney General wanted to make sure a board was not imposing fees just to accommodate their budget.  Because of that concern, the language in each statute was drafted to minimize that possibility.  In her organization, they did use the statute; however, they also applied scrutiny to the individual situation.  If the Contractors’ Board attempted to recover costs, the Board could recommend that the contractor would be responsible for restitution and other costs incurred by the Board. 

 

Assemblywoman Buckley asked the Chairman if the staff could give the committee some background on the Attorney General’s revision and the statutes. 

 

Assemblyman Hettrick acknowledged part of his concerns had been addressed; however, he wanted to return to the phrase “all documents and information.”  He recalled an issue involving boxing licenses last session, and, after much discussion, he believed they ended up with the language “all other pertinent documents and information.”  The point he wanted to make was there appeared to be protection during the investigation phase; however, if during the investigation, what would happen if a bankruptcy action from 40 years ago was uncovered.  If the investigation resulted in a disciplinary action, would everything the board discovered, including the bankruptcy, become part of the public record? 

 

Assemblyman Hettrick reiterated the language specified “all other documents and information considered,” and there was no distinction between information gathered during the investigation and information included in the decision-making or penalty phase.  He believed it could be argued that the information became public record once a decision was made.  In his judgment, only the information used to define the disciplinary action should be part of the public record.  Other investigative information was immaterial, did not apply to the case, and had no reason to be released.

 

Mr. Barengo did not disagree; however, he suggested if the wording of S.B. 513 was carefully re-examined, Mr. Hettrick would agree with him.  He explained if a complaint was made to the board, the individual would have to prove his case and supply information to the board.  Those were the other documents used to consider the disciplinary action.  An individual would not be required to file the information to which Mr. Hettrick had referred.  It was the material that was used to prove the case such as the information used in a district court.  The investigative reports, the attorney work products, and other materials were protected under Section 1 in the bill.  Whatever was filed with the board to initiate the complaint and whatever information was used to prosecute the individual would be the information that became public record.

 

Assemblyman Hettrick reiterated that the complaint and other documents filed by the board could be released.  It was what the board would file, and that would be any information they chose to release.  In his judgment, it could have nothing to do with the case, and the board could chose to release the whole file.

 

Mr. Barengo disagreed and stated that was not the way it worked.  Using the example of the Board of Medical Examiners, he explained they had a “charging board” that reviewed and made a decision to file complaints, and there was a “disciplinary board.”  Although it was technically the same board, they divided the tasks among members because it would be an unfair practice to have the same people trying the case as those who had fielded the complaint.  The board members that had the responsibility to file charges against a licensee did not take part in the disciplinary action.

 

Assemblyman Hettrick responded the board that handled the complaint could choose to file any documents from the investigation.  Mr. Barengo stated those documents would only include those needed to prove their case.  Mr. Hettrick reiterated they could still chose to file whatever they wanted because nothing limited their ability to take any part of the investigative file and make it part of the official case.  Mr. Barengo concurred that was correct because certain information could be a necessary part to prove their case.

 

Assemblyman Hettrick re-emphasized that the bill language implied information could become a matter of public record whether it was necessary or not.  Mr. Barengo stated his concern would be that the state might unfairly limit the ability of a regulatory board to file adequate information to successfully prosecute the case.  In response, Mr. Hettrick suggested the language be amended to state “all other pertinent documents and information” had to be released.  He wanted to minimize the possibility of a regulatory board inadvertently including a confidential medical record.  That record could include sensitive information regarding a terrible disease suffered 40 years ago, and it would be in the public record.  Mr. Hettrick summarized by declaring if information was not pertinent, it should not be part of the public record.  Mr. Barengo replied if the information was not used to determine guilt, it would not be in the record.

 

Mr. Hettrick acknowledged they were likely in agreement about the intent; however, he did not believe the language was clear and captured that intent.  He was asking for assurance that only pertinent information be included in the public record.

 

Ms. Grein interjected the Nevada Administrative Procedures Act [NRS Chapter 233B] covered the situations to which Mr. Hettrick was referring, and all regulatory boards had to comply with that act.  Part of the documents that supported a board’s decision were public record once the individual was disciplined.

 

Mr. Barengo offered to clarify and stated they would be; however that was a new section in the act.  He understood Mr. Hettrick’s concern, and he speculated language could be added; however, he did not want to limit the rights of a regulatory board to prosecute nor restrict the type of evidence they could present for the prosecution of a violation.

 

Assemblywoman Giunchigliani asked Mr. Barengo if Section 5 of S.B. 513 prohibited a regulatory board from entering into a settlement of a violation.  Mr. Barengo clarified Section 5, lines 20 and 21, stated a regulatory body could not settle or otherwise resolve an alleged violation.  He explained a violation was labeled an alleged violation after the board decided to file a formal complaint.  The language was not stated specifically in those lines, however it was tracked throughout the bill when discussing complaints.  The matter was considered to be a complaint until such time the board decided to file a charge of violation.  When it was filed, it became public record, and, from that point in time, a board could not conduct itself privately to settle a violation. 

 

Assemblywoman Giunchigliani requested clarification of a situation where the board had investigated a complaint, decided the individual had violated a regulation, and then decided to file the complaint against the person.  It was her understanding that, at that point, the individual could not enter into any kind of settlement.  Mr. Barengo indicated the bill stated except in number 2.  Ms. Giunchigliani responded, if the individual was an actual person, they could approve a consent agreement without complying with subsection 1 if they posted a notice.  She stated a person could not even deal with a negotiated agreement unless there was an actual public hearing.  Mr. Barengo stated that covered the boards where there was only one member on the board. 

 

Ms. Giunchigliani commented she appreciated what the intent of the bill appeared to be; however, she did not believe all information should be available for the public record.  It was essential the state of Nevada did not cross that fine line between the public’s right to know and the individual’s right to privacy.  In conclusion, she remarked she still did not have a clear understanding of how the bill was structured to handle those problems.

 

Senator Townsend clarified, in order to understand the intent of the bill, there were two issues that should be differentiated.  In the Department of Business and Industry, regulatory authority resided with the Commissioner of Insurance and Financial Institutions.  As such, there was not a board with members, but an individual.  The bill, S.B. 513, had to differentiate between the two scenarios.  If a licensee was to be disciplined by the Commissioner of Financial Institutions, there would be no board hearing; however, if the Commissioner decided to fine an institution a sum of money, the Commissioner must first post the ruling and make it a public notice.  The purpose was to inform the public about regulatory action against that institution by the Commissioner.

 

Assemblyman Goldwater concurred with Senator Townsend; however, he added a number of regulatory boards could pass judgment on mental soundness and use that information to ultimately determine if the person could be licensed.  Under the language of “all documents and information considered,” a psychological evaluation could be released.  If the board determined the individual was not medically or mentally sound, they could release that information; however, the actual psychological evaluation would not be a matter of public record.  In his view, Mr. Goldwater stated the psychological history of an individual from birth was not relevant to the disciplinary action.

 

Mr. Barengo responded if the committee wanted proof of relevance, he believed it was present in the language; however, he had no problem adding the phrase “relevant to disciplinary action.”  It was clearly not the intention to require that all records become public in the cases mentioned.  Whatever information the board needed to prosecute the case should be filed as a matter of public record.

 

Assemblywoman Buckley stated she was in philosophical agreement with the openness in the public record; however, she voiced concern over a lack of uniformity in legislation.  If there were bills heard by the Legislature that dealt with openness, all of the bills should be passed.  There could be bills defeated that would prohibit secrecy or settlements that hurt people, while a bill filed by a regulatory board was passed.

 

Assemblyman Hettrick called attention to earlier comments made by Assemblyman Goldwater in which he opined there would have to be a public record if there was a determination of an alleged violation.  As Mr. Hettrick understood Section 5.5 on line 23, the complaint or other documents filed by the board to initiate an action and all other documents considered by the board to determine disciplinary action would be public records.  The individual would not necessarily have consented nor admitted guilt.  A regulatory board could just decide to hold a disciplinary hearing, and it would be public record.

 

Mr. Barengo rebutted by saying records were judged to be public “when determining to impose discipline.”  Mr. Hettrick replied the language said “whether or not to impose,” and if the word “whether” was stricken he would agree with Mr. Barengo.  As it read, with the word “whether,” as soon as the board filed the action, it was public record.  Mr. Barengo understood what Mr. Hettrick was saying; however, he stated the bill language needed to be read in its entirety.  He called the committee’s attention to line 5 where it stated, “complaints and charges filed with the board and the material compiled as a result of an investigation of those complaints and charges were confidential.”  In his view, the complaint and other documents filed by the board to initiate disciplinary action, the investigatory information, the work product, and all the information accumulated were confidential.  After the board filed the complaint, the information was public, and the procedure was clear in Section 4.

 

Assemblyman Hettrick acknowledged the point Mr. Barengo was making; however, as he read the section, he envisioned it could lead to a court case.  It stated clearly if the information was going to be considered by the board when determining whether to impose discipline, it would be public.  Mr. Barengo replied that would be after the complaint had been filed, there had been a hearing, and the board was looking at the evidence to determine action.  Mr. Hettrick countered if the board decided against disciplinary action, it was still public record, although there had been just a complaint.  Mr. Barengo agreed with the statement.  Mr. Hettrick added the state of Nevada could not do that.  Mr. Barengo commented he was correct, but said it was analogous to a court of law where, from the time the complaint was filed, the matter was public information. 

 

Chairman Dini commented he would put S.B. 513 into the work session for the next meeting.  He agreed the committee needed to hear more information on the issue.

 

Kent Lauer of the Nevada Press Association, in reflecting on the issues raised by Assemblyman Goldwater, posed a question about settlements and whether they should be kept private, especially in cases where the individual under complaint had viewed settlement as a way to make the issue disappear.  He cited the situation with the disreputable pool contractor discussed earlier and asked if a secret settlement with the Contractors’ Board was an option for that individual.  Under the terms of a secret settlement, if a homeowner called to check on the references for that pool contractor, the Contractors’ Board could be prohibited from revealing the complaints and settlement. 

 

Adam Levine, Attorney at Law, offered to clarify some of the issues.  He practiced administrative law that included cases defending the holders of professional licenses and matters related to disciplinary actions.  His comments were not directed at what had been described as the primary purpose of the bill (i.e., to prohibit private discipline), but rather subsection 3, regarding the attorney’s fees and costs.

 

Continuing, Mr. Levine cited the case, Burleigh v. State Bar of Nevada [98 Nev. 140 (1982)], which was first referenced by Ms. Grein.  That case was followed the next year by a similar, but more important case, In re Ross, [99 Nev. 1 (1983)].  Both cases dealt with the issue that it was a violation of due process when a board or an entity with executive responsibility for its own finances could impose financial penalties that, in turn, were used to fund their own operations.

 

After those two cases were decided, the Attorney General’s Office became involved and, to address that issue, published a formal opinion of the Attorney General, 94-09.  The opinion addressed the due process problems identified in the two cases, and, as a result, statutes were passed requiring all regulatory boards, with authority to impose fines, to deposit those funds into Nevada’s General Fund, rather retaining the monies in the board’s own account.  That eliminated any suggestion of an incentive to convict in order to recoup the fees.  If a regulatory board was in need of funds, it would be permitted under the statutory schemes to petition the Nevada Board of Examiners to have their attorney’s fees and investigation costs repaid. 

 

Mr. Levine called the committee’s attention to the language in subsection 3 of S.B. 513.  He voiced concern the wording would re-instate legal language from the early 1980’s and precipitate problems similar to those of the two lawsuits.  He asked the committee to read a letter (Exhibit L) he had received from the Attorney General’s Office in 1999.  The case involved a regulatory board that did not have the ability to collect fees.  The Board of Veterinary Medical Examiners utilized the “consent to free process” in order to extort fees to which they were not otherwise entitled.  The letter stated if the client entered into a consent decree and paid the board $5,000, including the attorney’s fees, the Board would not pursue a hearing; however, if she did not accept the offer, the Veterinary Board would instigate a hearing and generate bad publicity.  Costs of the hearing were threatened to be as high as $15,000.  Ultimately, that was the outcome of the case.  The doctor was eventually cleared by the district court and the decision was thrown out; however, she was still facing an order to pay $15,000, a financially devastating penalty. 

 

Continuing, Mr. Levine stated he suspected subsection 3, as written, was probably unconstitutional because it would authorize regulatory boards to impose fees and recover costs for everything, including the disciplinary hearing.  He reminded the committee that most statutes did not authorize the awarding of attorney’s fees and costs.  It was customary to specify only the costs incurred to impose discipline, and that was standard language for every regulatory board.  The proposed legislation, as written, could include cost recovery for actions leading up to the point of the hearing, but not necessarily the hearing itself.  Mr. Levine speculated that if there was a law that authorized cost recovery for the disciplinary hearing itself, there could be a problem with the Fourteenth Amendment Due Process Clause.

 

To illustrate his point, Mr. Levine cited a 1999 case in California dealing with that exact issue.  The court’s decision hinged on the right to protect an individual’s property interest in his professional license, judged to be a guarded constitutional right.  When the state attempted to infringe upon that right, due process required the state allow the person a hearing; however, it violated fundamental principles of due process to require a doctor, an ophthalmologist, or any other licensed person to pay for that due process.  When the state filed disciplinary charges, it put the doctor or the licensee in the position of being a defendant.  The only means he had to defend himself was through the hearing set up by the regulatory board.  Mr. Levine emphasized it was unconstitutional to threaten a doctor with the possibility of unlimited financial penalties simply to exercise his constitutional right to a hearing.

 

In his judgment, Mr. Levine stated such a statutory scheme would create a disincentive, invoke a fear of subsequent reprisal in the form of monetary penalties, and ultimately impede the right to a due process hearing.  He did not believe any one would object to a disciplinary board convicting an individual and then imposing cost recovery for attorney fees or for the investigation leading up to the hearing; however, it could be used as a basis to extort.  Mr. Levine stated once there was a charge for the cost of the hearing itself, the board was levying a penalty against an individual who chose to exercise his fundamental constitutional rights.

 

Chairman Dini thanked the witness and closed the hearing on S.B. 513,announcing that further discussion would resume in the next work session.  The hearing on S.B. 330 was opened.

 

Senate Bill 330:  Makes various changes relating to financial businesses. (BDR 54-748)

 

Assemblywoman Buckley provided background information on the issues leading up to the drafting of S.B. 330.  It related to an e-mail she received from Pat Zenzle of the Household Bank who explained the process required of the company to establish an out-of-state location.

 

Ms. Buckley’s concerns were directed to paragraphs four and five on page two of the bill.  In discussions with Mr. Barengo before the hearing, he indicated it was bill drafter language and did not really have anything to do with the intent of the bill.  Ms. Buckley stated she e-mailed the bill drafter and was informed the language in question was put in the bill at the request of the bill sponsor.  Ms. Buckley asked Chairman Dini if he would accept a motion to amend and do pass, deleting the language in Section 2, lines 13 through 17 and the same language on page 5, lines 5 through 8.

 

ASSEMBLYWOMAN BUCKLEY MOTIONED TO AMEND AND DO PASS S.B. 330 BY DELETING LANGUAGE IN SECTION 2 AND PAGE 5 OF THE BILL AND THE AMENDMENTS OFFERED BY THE CREDIT UNIONS AND IN THE WORK SESSION DOCUMENT (EXHIBIT J).

 

ASSEMBLYWOMAN GIUNCHIGLIANI SECONDED THE MOTION.

 

MOTION CARRIED UNANIMOUSLY TO AMEND AND DO PASS S.B. 330.

 

Senate Bill 566:  Requires release of certain liens created by former state industrial insurance system. (BDR S-1478)

 

Chairman Dini invited Echo Penrose, a resident of Reno and the proponent of the amendment (Exhibit J), to testify.  Ms. Penrose stated she had a problem with understanding the bill.  When Senator Raggio had originally drafted S.B. 566, she thought he had done a good job; however, she did not fully understand the issues and had proposed an amendment that would delete Section 1, lines 1 through 8.  Chairman Dini clarified those lines were language in the existing law and had to stand. 

 

Crystal McGee, Committee Policy Analyst, declared Chairman Dini was correct in his assessment.  Lines 3 through 8 of Section 1 captured transitional language from S.B. 37 of the Seventieth Session.  Those lines were intentionally retained in the bill, and only subsection 2 was impacted.  Subsection 1 could not be changed.  After reviewing a current reprint of the bill, Ms. Penrose stated she was confused because subsection 2 appeared to contradict subsection 1.

 

Robert Ostrovsky, representing the Employers Insurance Company of Nevada (EICON), stated the transitory language was clear recognition that when an insurance company left the state, they took with them their assets and liabilities.  Mr. Ostrovsky explained the language in the section gave the new insurance company an opportunity to go after those items on the books that were legitimately collectable.  The amendments suggested they would release liens prior to 1997.  Liens after that date were in the three-year period, and that issue was being clarified with the Senate amendments.  Because he had agreed to the language in the bill, currently the insurance company would effectively lose money.  They did feel obligated to release liens in lieu of the fact there were many companies that owed his company premiums.  The previous statute provided a way to collect premiums where they were insured or uninsured.

 

Ms. Penrose stated she had a list of all of the liens in Washoe County.  Most of them were recorded in 1998; however, the interest due dates were past due, the liens had expired, and they should not be collected.  The recording date was adjusted six months to a year past the due date, and the liens would be vulnerable to execution, collection, and foreclosure.  She believed the definition of the expired liens should be three years from the date the interest became due, and anyone could determine that date by looking at the date of the liens.  She had found three liens that were left over and could be subject to foreclosure at the end of the month.  After those, there were none available for foreclosure.

 

Chairman Dini suggested she support the bill and let it pass the committee.  Ms. Penrose voiced her agreement; however, she still believed there should be a change in the January 2000 date mentioned because any liens recorded up to January 2000 would be included in the foreclosure language.  She felt the date should be changed back to January 1997. 

 

Assemblywoman Buckley argued if the date was changed there would be a change in the statutory scheme with regard to the three-year period.  If the committee had more time, they could explore the date changes; however, she was afraid the whole bill would be set aside if additional changes were proposed.  Ms. Penrose stated she wanted the bill to be passed. 

 

In response to Assemblywoman Buckley, Mr. Ostrovsky voiced his agreement with her statement and agreed it was a small step in the right direction.  He anticipated there would probably be a dispute over the number of liens available and the counties involved.  The process could be expected to be lengthy.  Mr. Ostrovsky suggested to Ms. Penrose that the bill might help her to win her lien case. 

 

Ms. Buckley offered to make a motion in order to get some resolve on the issue during the current session.

 

ASSEMBLYWOMAN BUCKLEY MOTIONED TO DO PASS S.B. 566.

 

ASSEMBLYWOMAN GIUNCHIGLIANI SECONDED THE MOTION.

 

Ms. Penrose asked if the motion included her amendment.  Chairman Dini stated the bill would remain the way it was written without her amendment.  Assemblywoman Buckley commented the 1997 date would be included in the bill, and she felt the date would help some of the people, including Ms. Penrose.  Ms. Buckley anticipated further changes would be submitted during the next session.  She voiced concern if the changes suggested by Ms. Penrose were attached to the bill for voting, there would not be enough time to pass anything.  Ms. Penrose agreed and stated she was just concerned about the date.

 

MOTION CARRIED UNANIMOUSLY TO DO PASS S. B. 566.

Mr. Ostrovsky offered his assurance to the committee he would do everything possible to help Ms. Penrose release her lien.  Ms. Penrose asked if the passage of S.B. 566 indicated her lien was released.  Assemblyman Beers explained to Ms. Penrose the bill would be voted on by the full Assembly and then go to the Governor for signature or veto.

 

The hearing on S.B. 245 was opened.

Senate Bill 245:  Provides for regulation of interpreters for persons who are deaf or whose hearing is impaired. (BDR 54-231)

 

Chairman Dini made introductory comments and explained Assemblyman Parks was the Chairman of the subcommittee researching the bill.  That subcommittee had recommended to amend and do pass S.B. 245 to the main committee.  He asked Mr. Hughey to review the amendments presented in Exhibit J as Exhibit A. 

 

Vance Hughey, Committee Policy Analyst, called the committee’s attention to the work session packet that contained the report of the subcommittee and a number of proposed amendments.  The first proposal was to change the effective dates in various provisions of the bill for persons currently working as interpreters for the deaf.  That language would provide additional time for individuals to become certified and for the industry to evaluate and respond to the needs of the educational opportunities for students that would be practicing interpreting.  The second proposal was to amend Section 8 of S.B. 245 by adding a new subsection 4.  That language would exempt from the provisions of the bill for a period of time any person that was employed by a school district as a licensed teacher of students with disabilities.  That exemption would be removed when the remainder of the bill’s timelines became effective in July 2005.

 

Continuing, Mr. Hughey reported he had spoken with Kristen Roberts, Senior Deputy Legislative Counsel, and she suggested the committee consider a transitional provision that would require the Commission on Professional Standards and Education to adopt regulations for the endorsement of teachers that were consistent with the provisions of S.B. 245.  She explained the Commission was responsible for setting the qualifications for licensure and the endorsement of teachers.  She felt if the bill was going to require teachers of the hearing impaired to be certified, that requirement should be part of the process imposed by the Commission on Professional Standards and Education.  She indicated if the provision was adopted, it should have an effective date that would give the Commission sufficient time to adopt the required regulations.

 

Mr. Hughey described the third proposal as providing an exemption from the penalty provisions of the bill for a person that provided interpreter services in certain medical or legal emergencies or as otherwise provided in federal law.  After meeting with the legal division, he had been advised there were emergency situation exemptions that should be placed in Section 8 of the bill because that section already set forth the exemptions of the bill where provisions did not apply. 

 

Ms. Roberts, Legal Counsel, also identified some laws in other states that had language the committee could consider.  In Minnesota the law provided for signing assistance in a medical emergency until the assistance of a certified interpreter could be obtained.  In North Dakota there was an exception for communication in situations involving emergency medical care or delivery of government service to a deaf person.  If the committee included that type of exemption, the legal division recommended specific wording, rather than just “except in an emergency.”

 

Continuing, Ms. Roberts explained the second provision was related to personnel shortages, based on a subcommittee recommendation to address a shortage of certified interpreters, especially in the rural areas.  She recalled the subcommittee had discussed a federal regulation that provided for a grace period when a local school district could not find eligible professional staff.  A legal draft of the subsection to address that issue was included in the packet.  The new subsection would state, under certain conditions, a person could engage in interpreting in a public or private school for not more than three years without having met the requirements of the subsection.  Ms. Roberts explained there would need to be a demonstrated shortage of personnel in the geographical vicinity of the school district.  Additionally, the school district or private school that hired the person must make ongoing good faith efforts to recruit and hire certified interpreters.  The person hired to fill the vacancy would have to make satisfactory progress towards meeting the certification requirements as outlined in S.B. 245.  The last amendment was technical language to allow additional options for qualifying to practice as an interpreter in a public or private school.

 

Assemblywoman Giunchigliani requested clarification from Danelle Fanning, a resident of Reno and the bill’s chief proponent, about why a public school teacher that was licensed to teach hearing-impaired students would also have to receive a certificate to be an interpreter.  She wondered if the teachers were interpreting when they were talking and signing during an individual educational profile (IEP).

 

Ms. Fanning explained the bill language specifically addressed situations where teachers of the deaf or interpreters went beyond the scope of their classroom duties and interpreted on school premises for assemblies, counseling sessions, or law enforcement personnel.  In her judgment, if a teacher was interpreting, they should be required to satisfy the criteria outlined in the bill. 

 

Assemblywoman Giunchigliani countered the teachers could only be working with children on the campus if were licensed.  She was aware there were occasions when a teacher was directed by the supervisor to perform certain duties.  She voiced concern if the teacher would be judged to be insubordinate if the teacher refused because he was technically not certified.  Ms. Giunchigliani remarked that teachers were already meeting strict requirements to have endorsements, a license, certificates from the Counsel of Education of the Deaf, and a bachelor’s or master’s degree.  Additionally, 18 hours in coursework covering characteristics and methods plus additional certification may be required.

 

Ms. Giunchigliani acknowledged the spirit of the bill; however, she voiced concern over placing an undue burden on individuals who were already licensed.  It appeared S.B. 245 was directed at those individuals who did not have any form of a license or certification.  If the teachers were interpreting for the hearing-impaired during off-duty hours, then they should come under the requirements of the bill and become certified; however, if interpreting during the normal course of a school day, she agreed there could be a problem.

 

In response, Ms. Fanning explained most programs for teachers of the deaf did not require any sign language skills.  The intent of her amendments was to address those teachers of the deaf who substituted in classes when interpreters were absent.  As substitutes, they did not necessarily have to fulfill any requirement for interpreting.

 

Ms. Giunchigliani read from the bill on page three and stated the teachers had to complete an educational interpreter performance assessment administered by the Boy’s Town National Research Hospital.  She asked when the assessment was offered.  Ms. Fanning replied it was offered on an “as needed basis,” and individuals could contract to take the assessment or the school districts could contract with Boy’s Town.  In response to Ms. Giunchigliani, Ms. Fanning explained the cost was $250, and most interpreters paid for their own testing and certification.  Ms. Giunchigliani remarked it created an additional financial burden on the teachers.  She acknowledged Ms. Fanning’s efforts; however, still had concern about the impact on the educators.

 

Assemblyman Hettrick remarked the amendments would extend all of the timeframes until 2005, past the next legislative session.  He recalled the school district representatives present in the subcommittee meeting voiced no concern with S.B. 245, as long as they would be exempt until it was put into effect.  As such, there would be an opportunity for the school districts to hire and train personnel.  Mr. Hettrick concurred with Ms. Giunchigliani’s concern over teachers having to pay for the assessment.

 

Ms. Giunchigliani had received feedback from teachers who were not represented in the subcommittee meeting.  The prevailing sentiment was that the school district was not fairly representing them, because the district could order them to interpret, and they would have to comply.  Ms. Giunchigliani was aware of instances where schools had been known to assign Spanish-speaking aides to interpret in an IEP, and she considered that entirely inappropriate. 

 

Assemblyman Hettrick offered to clarify and stated the subcommittee really studied the training issue.  The training was available on the Internet or in classes where any number of people could participate and reduce the overall cost.  Mr. Hettrick admitted he had some concerns when the bill was first introduced; however, he believed now with the subcommittee work, S.B. 245 was a much better bill.

 

ASSEMBLYWOMAN BUCKLEY MOTIONED TO AMEND AND DO PASS S.B. 245.

 

ASSEMBLYWOMAN LESLIE SECONDED THE MOTION.

 

Chairman Dini suggested they incorporate the emergency language that was included in the North Dakota law.  Assemblywoman Buckley asked if the sponsor would work with Ms. Giunchigliani to deal with any practical issues.  Chairman Dini suggested there be an amendment drafted and the bill reprinted.  He asked Ms. Giunchigliani if she would prefer language exempting teachers of special education from certification.  Mr. Giunchigliani stated that would be her preference; however, she did not want to injure the bill or the sponsor.

 

Ms. Fanning stated it would be a good faith effort to insist teachers that had the ability to sign also fulfill the requirements.  She had mentioned in the subcommittee they were going to be speaking to Western Community College about a training program.  The college indicated it would implement the training by the fall semester, if they could find funding for the position.  Ms. Giunchigliani stated she would rather work with Ms. Fanning to craft an amendment and bring something to the Assembly floor. 

 

MOTION CARRIED UNANIMOUSLY TO AMEND AND DO PASS S.B. 245.

Returning to S.B. 216, Chairman Dini commented he was not sure how to handle the bill.  In response, Assemblywoman Buckley stated she had e-mailed Senator Care and told him the bill needed some revisions, especially in the area of protection for good companies.  Senator Care replied he thought it had been worked out and asked for a day or two to review it.  Chairman Dini countered the bill needed a lot of work, and he did not think there was enough time to accomplish a review and revision.

 

Assemblyman Goldwater reminded the committee there were two issues that had been brought up in the hearing that were still pending.  The first was the passage of A.B. 64 of the Seventieth Session.  If the criminal statutes had been in place at that time, and the Division of Financial Institutions had been granted the authority they now have, the whole pool construction scam would have been discovered sooner.  He noted there was a bill currently pending that would create a Mortgage Company Commission, and, in his judgment, that commission, with the help of the Attorney General, would voraciously prosecute the owner of Cascade Pools.

 

In conclusion, Chairman Dini stated the committee would work with Senator Care; however, he was not enthusiastic about having another hearing on the bill, and he did not believe the law would fix the problem.

 

Seeing no other business before the committee, Chairman Dini adjourned the meeting at 8:10 p.m.

 

RESPECTFULLY SUBMITTED:

 

Cheryl Meyers

Committee Secretary

 

 

APPROVED BY:

 

                       

Assemblyman Joe Dini, Jr., Chairman

 

DATE: