Bill Text: CA AB2327 | 2011-2012 | Regular Session | Chaptered
Bill Title: Charitable organizations: enforcement.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Passed) 2012-09-23 - Chaptered by Secretary of State - Chapter 483, Statutes of 2012. [AB2327 Detail]
Download: California-2011-AB2327-Chaptered.html
BILL NUMBER: AB 2327 CHAPTERED
BILL TEXT
CHAPTER 483
FILED WITH SECRETARY OF STATE SEPTEMBER 23, 2012
APPROVED BY GOVERNOR SEPTEMBER 23, 2012
PASSED THE SENATE AUGUST 22, 2012
PASSED THE ASSEMBLY AUGUST 27, 2012
AMENDED IN SENATE AUGUST 6, 2012
AMENDED IN SENATE JUNE 25, 2012
AMENDED IN ASSEMBLY APRIL 16, 2012
INTRODUCED BY Assembly Member Feuer
FEBRUARY 24, 2012
An act to amend Sections 12591.1 and 12599.6 of, and to add
Section 12599.8 to, the Government Code, relating to charitable
organizations.
LEGISLATIVE COUNSEL'S DIGEST
AB 2327, Feuer. Charitable organizations: enforcement.
(1) Under existing law, the Supervision of Trustees and
Fundraisers for Charitable Purposes Act governs charitable
corporations, unincorporated associations trustees, commercial
fundraisers, fundraising counsel, commercial coventurers, and other
legal entities who hold or solicit property for charitable purposes
over which the Attorney General has enforcement and supervisory
powers. The act requires that any person who violates any provision
of the act with the intent to deceive or defraud be liable for a
specified civil penalty. The act also requires that any person who
violates any provision of the act, regardless of intent, is liable
for a specified civil penalty.
This bill would revise those enforcement provisions to instead
provide that the Attorney General may issue a cease and desist order
whenever the Attorney General finds that any person or entity that
the act applies to has committed an act that would constitute a
violation of, or is operating in violation of, any provision of the
act. The bill would authorize the Attorney General to impose a
specified penalty on any person or entity for each act or omission
that constitutes a violation of the act, subject to certain
procedures. The bill would also authorize the Attorney General, if
the Attorney General had assessed a penalty against a person or
entity pursuant to these provisions, to suspend the registration of
that person or entity in accordance with certain procedures. The bill
would authorize a person or entity that the Attorney General has
filed an action against pursuant to the act to request a hearing to
review that action in accordance with certain procedures. The bill
would authorize the Attorney General to seek injunctive relief to
enforce the provisions of this act.
(2) Existing law, the Supervision of Trustees and Fundraisers for
Charitable Purposes Act, prohibits charitable organizations, as
defined, and commercial fundraisers for charitable purposes from
misrepresenting the purpose of the charitable organization or the
nature, purpose, or beneficiary of a solicitation. The act further
prohibits specified practices in the planning, conduct, or execution
of any solicitation or charitable sales promotion, including, among
others, operating in violation of, or failing to comply with, any of
the requirements of the act or orders of the Attorney General.
This bill would prohibit any person from knowingly submitting for
filing on behalf of any charitable organization any statement,
report, financial statement, attachment, or other information to be
filed with the Attorney General that contains information, a
statement, or an omission that is false or misleading.
(3) Existing law, the Supervision of Trustees and Fundraisers for
Charitable Purposes Act, requires charitable organizations to file
with the Attorney General periodic written reports, under oath,
setting forth information as to the nature of the assets held for
charitable purposes and the administration thereof by the
corporation, unincorporated association, or trustee, in accordance
with rules and regulations of the Attorney General.
This bill would require a charitable organization, in any year
that the balance sheet of that charitable organization shows that it
holds restricted net assets, while reporting negative unrestricted
net assets, to provide an explanation of its compliance with its
charitable trust responsibilities and proof of directors' and
officers' liability insurance coverage to the Attorney General's
Registry of Charitable Trusts.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 12591.1 of the Government Code is amended to
read:
12591.1. (a) Any person who violates any provision of this
article with intent to deceive or defraud any charity or individual
is liable for a civil penalty not exceeding ten thousand dollars
($10,000).
(b) The Attorney General may issue a cease and desist order
whenever the Attorney General finds that any entity or person that is
subject to the provisions of this article pursuant to Section 12581,
or its agent, servant, or employee, has committed an act that would
constitute a violation of, or is operating in violation of, this
article, or its implementing regulations, or an order issued by the
Attorney General, including, but not limited to, all of the
following:
(1) Has refused or failed, after notice, to produce any records of
the organization or to disclose any information required to be
disclosed under this article or Chapter 4 (commencing with Section
300) of Division 1 of Title 11 of the California Code of Regulations.
(2) Has made a material false statement in an application,
statement, or report required to be filed under this article or
Chapter 4 (commencing with Section 300) of Division 1 of Title 11 of
the California Code of Regulations.
(3) Has failed to file a financial report, or has filed an
incomplete financial report, that is required by this article or
Chapter 4 (commencing with Section 300) of Division 1 of Title 11 of
the California Code of Regulations.
(4) Has engaged in any act prohibited pursuant to Section 12599.6.
(c) The Attorney General may impose a penalty on any person or
entity, not to exceed one thousand dollars ($1,000) per act or
omission, for each act or omission that constitutes a violation of
this article or Chapter 4 (commencing with Section 300) of Division 1
of Title 11 of the California Code of Regulations. At least five
days prior to imposing that penalty, the Attorney General shall
provide notice to the person or entity that committed the violation
by certified mail to the address of record at the Registry of
Charitable Trusts. Penalties shall accrue, commencing on the fifth
day after notice is given, at a rate of one hundred dollars ($100)
per day for each day until that person or entity corrects that
violation. Penalties shall stop accruing as of the date set forth in
the written notice provided by the Attorney General that the
violation or omission subject to penalties has been corrected or
remedied.
(d) If the Attorney General assesses penalties under this section,
the Attorney General may suspend the registration of that person or
entity in accordance with the procedures set forth in Section 999.6
of Title 11 of the California Code of Regulations. Registration shall
be automatically suspended until the fine is paid and no
registration shall be renewed until the fine is paid.
(e) Any person or entity that the Attorney General has filed an
action against pursuant to this section may request a hearing to
review that action in accordance with the procedures set forth in
Chapter 15 (commencing with Section 999.1) of Division 1 of Title 11
of the California Code of Regulations and rules adopted by the
Attorney General. Any request for hearing shall be made within 30
days after the Attorney General has served the person with notice of
the action. That notice shall be deemed effective upon mailing.
(f) The Attorney General may apply to a superior court of the
State of California for relief, and the court may issue a temporary
injunction or a permanent injunction to restrain violations of this
chapter, appoint a receiver, order restitution or an accounting, or
grant other relief as may be appropriate to ensure the due
application of charitable funds. Those proceedings shall be brought
in the name of the state.
(g) All penalties paid to the Attorney General pursuant to this
section shall be used by the Department of Justice in accordance with
the provisions of Section 12586.2.
(h) Any offense committed under this article involving a
solicitation may be deemed to have been committed at either the place
at which the solicitation was initiated or at the place where the
solicitation was received.
(i) Any person who violates only subdivision (c), (d), (e), or (f)
of Section 12586.1 shall not be liable for a civil penalty under
subdivision (b) if the person (1) has not received reasonable notice
of the violation and (2) has not been given a reasonable opportunity
to correct the violation. The Attorney General shall notify in
writing a person who violates only subdivision (c), (d), (e), or (f)
of Section 12586.1 that he or she has 30 days to correct the
violation.
(j) The recovery of a civil penalty pursuant to this section
precludes assessment of a late fee pursuant to Section 12586.1 for
the same offense.
SEC. 2. Section 12599.6 of the Government Code is amended to read:
12599.6. (a) Charitable organizations and commercial fundraisers
for charitable purposes shall not misrepresent the purpose of the
charitable organization or the nature or purpose or beneficiary of a
solicitation. A misrepresentation may be accomplished by words or
conduct or failure to disclose a material fact.
(b) A charitable organization must establish and exercise control
over its fundraising activities conducted for its benefit, including
approval of all written contracts and agreements, and must ensure
that fundraising activities are conducted without coercion.
(c) A charitable organization shall not enter into any contract or
agreement with, or employ, any commercial fundraiser for charitable
purposes or fundraising counsel for charitable purposes unless that
commercial fundraiser or fundraising counsel is registered with the
Attorney General's Registry of Charitable Trusts or, if not
registered, agrees to register prior to the commencement of any
solicitation.
(d) A charitable organization shall not enter into any contract or
agreement with, or raise any funds for, any charitable organization
required to be registered pursuant to this act unless that charitable
organization is registered with the Attorney General's Registry of
Charitable Trusts or, if not registered, agrees to register prior to
the commencement of the solicitation.
(e) Each contribution in the control or custody of a commercial
fundraiser for charitable purposes shall in its entirety and within
five working days of receipt (1) be deposited in an account at a bank
or other federally insured financial institution that is solely in
the name of the charitable organization on whose behalf the
contribution was solicited and over which the charitable organization
has sole control of withdrawals or, (2) be delivered to the
charitable organization in person, by Express Mail, or by another
method of delivery providing for overnight delivery.
(f) Regardless of injury, the following acts and practices are
prohibited in the planning, conduct, or execution of any solicitation
or charitable sales promotion:
(1) Operating in violation of, or failing to comply with, any of
the requirements of this act or regulations or orders of the Attorney
General, or soliciting contributions after registration with the
Attorney General's Registry of Charitable Trusts has expired or has
been suspended or revoked.
(2) Using any unfair or deceptive acts or practices or engaging in
any fraudulent conduct that creates a likelihood of confusion or
misunderstanding.
(3) Using any name, symbol, emblem, statement, or other material
stating, suggesting, or implying to a reasonable person that the
contribution is to or for the benefit of a particular charitable
organization when that is not the fact.
(4) Misrepresenting or misleading anyone in any manner to believe
that the person on whose behalf a solicitation or charitable sales
promotion is being conducted is a charitable organization or that the
proceeds of the solicitation or charitable sales promotion will be
used for charitable purposes when that is not the fact.
(5) Misrepresenting or misleading anyone in any manner to believe
that any other person sponsors, endorses, or approves a charitable
solicitation or charitable sales promotion when that person has not
given consent in writing to the use of the person's name for these
purposes.
(6) Misrepresenting or misleading anyone in any manner to believe
that goods or services have endorsement, sponsorship, approval,
characteristics, ingredients, uses, benefits, or qualities that they
do not have or that a person has endorsement, sponsorship, approval,
status, or affiliation that the person does not have.
(7) Using or exploiting the fact of registration with the Attorney
General's Registry of Charitable Trusts so as to lead any person to
believe that the registration in any manner constitutes an
endorsement or approval by the Attorney General. The use of the
following statement is not prohibited:
"The official registration and financial information regarding
(insert the legal name of the charity as registered with the Registry
of Charitable Trusts) can be obtained from the Attorney General's
Web site at http://caag.state.ca.us/charities/. Registration does not
imply endorsement."
(8) Representing directly or by implication that a charitable
organization will receive an amount greater than the actual net
proceeds reasonably estimated to be retained by the charity for its
use.
(9) With respect to solicitations by commercial fundraisers for
charitable purposes on behalf of law enforcement personnel,
firefighters, or other persons who protect the public safety,
issuing, offering, giving, delivering, or distributing any honorary
membership cards, courtesy cards, or similar cards, or any stickers,
emblems, plates, or other items that could be used for display on a
motor vehicle, and that suggest affiliation with, or endorsement by
any public safety personnel or a group comprising such personnel.
(10) (A) Soliciting for advertising to appear in a for-profit
publication that relates to, purports to relate to, or that could
reasonably be construed to relate to, any charitable purpose without
making the following disclosures at the time of solicitation:
(i) The publication is a for-profit, commercial enterprise.
(ii) The true name of the solicitor and the fact that the
solicitor is a professional solicitor.
(iii) The publication is not affiliated with or sponsored by any
charitable organization.
(B) Where a sale of advertising has been made, the solicitor,
prior to accepting any money for the sale, shall make to the
purchaser the disclosures required by subparagraph (A) in written
form and in conspicuous type.
(11) Representing that any part of the contributions solicited by
a charitable organization will be given or donated to any other
charitable organization unless that organization has consented in
writing to the use of its name prior to the solicitation. The written
consent shall be signed by one authorized officer, director, or
trustee of the charitable organization.
(12) Representing that tickets to events will be donated for use
by another, unless all of the following requirements have been met:
(A) The charitable organization or commercial fundraiser has
commitments, in writing, from charitable organizations stating that
they will accept donated tickets and specifying the number of tickets
they are willing to accept.
(B) The donated tickets will not, when combined with other ticket
donations, exceed either of the following:
(i) The number of ticket commitments the charitable organization
or commercial fundraiser has received from charitable organizations.
(ii) The total attendance capacity of the site of the event.
(g) A person shall not knowingly submit for filing on behalf of
any charitable organization any statement, report, financial
statement, attachment, or other information to be filed with the
Attorney General that contains information, a statement, or an
omission that is false or misleading.
(h) A ticket commitment from a charitable organization alone, as
described in clause (i) of subparagraph (B) of paragraph (12) of
subdivision (f), does not constitute written consent to use of the
organization's name in the solicitation campaign.
SEC. 3. Section 12599.8 is added to the Government Code, to read:
12599.8. For any year that the balance sheet of a charitable
organization shows that it holds restricted net assets, while
reporting negative unrestricted net assets, the organization shall
provide an explanation of its compliance with its charitable trust
responsibilities and proof of directors' and officers' liability
insurance coverage to the Attorney General's Registry of Charitable
Trusts.
