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POLICY BRIEFING: Here's why Sen. Ted W. Lieu believes his corporate-fraud plan is needed
April 11, 2012
Good-government measure would help victims of corporate fraud and streamline restitution, speedy payments to victims
By Sen. Ted W. Lieu
28th Senate District
Anyone with a heart can sympathize with Shirley Mitchell.
As documented in a recent column by Dan Morain of The Sacramento Bee, a smooth-talking scam artist and disbarred lawyer named James A. Walker swindled the 84-year-old Elk Grove widow.
In exchange for Mitchell’s check, Walker promised her financial security and lifetime health care.
Instead, she lost more than $15,000 and has endured years of uncertainty.
She isn’t alone. Walker has ripped off hundreds of seniors for probably hundreds of thousands of dollars. He has since declared bankruptcy and disappeared.
Ten years ago, California lawmakers thought they found a way to help people like Mitchell.
In 2002, in direct response to widespread malfeasance by Enron, WorldCom, Tyco and others, the Legislature created the California Victims of Corporate Fraud Compensation Fund to help the innocent recover at least some of their losses.
The fraud-compensation fund is supported by an annual $2.50 fee on corporate disclosure statements, and so far has raised more than $14.5 million.
Seeking justice, more than 700 residents – each of whom judges have determined were victims of corporate fraud – have submitted claims to the fraud-compensation fund for out-of-pocket costs of up to $20,000.
To date, only seven claims have been paid, worth $112,500.
Any guesses on why so few have seen justice?
The answer: Red tape.
According to some, the enforcement language of the 2002 law is deficient, confusing and unclear. Even the office of the Secretary of State, charged with making fraud-compensation awards, acknowledges the fund is not running as intended.
One example: The fund’s regulations are overly burdensome and repetitious, often requiring most victims to retain an attorney to complete and submit compensation requests on a case that has already been settled by the courts. Remember, these victims usually are people of limited means already wrung through the judicial process.
The sad result: Most cases essentially must be re-litigated. Again, this comes after the offending corporations have already been held liable by court.
My measure, Senate Bill 1058, addresses those deficiencies by eliminating unnecessary hurdles and applying a common-sense – and speedy – approach that promises payment of valid claims.
Specifically, SB 1058 would:
• Pay victims the restitution they deserve within 90 days.
• Increase maximum restitution payments from $20,000 to $50,000 per victim.
• Stop allowing guilty corporations from contesting payments and blocking appeals.
• Expand judgments beyond California.
• Allow the court’s judgment to stand as proof the victim deserves payment.
In summary, SB 1058 would revamp the existing fraud-compensation structure, gut red tape and ensure speedy financial help, if not recovery, for those who deserve it the most. If you agree, your message of support to the address below would be welcome.
People like Shirley Mitchell deserve nothing less.
Sen. Ted W. Lieu, D-Torrance, chairs the Senate Labor and Industrial Relations Committee and represents nearly 1 million residents of Senate District 28, which includes the cities of Carson, El Segundo, Hermosa Beach, Lomita, Manhattan Beach, Redondo Beach and Torrance, as well as portions of Long Beach, Los Angeles and San Pedro. For more, visit www.senate.ca.gov/lieu