PA 09-193—sHB 6339

Judiciary Committee

Finance, Revenue and Bonding Committee

Banks Committee

AN ACT CONCERNING THE FORFEITURE OF PROPERTY OBTAINED BY SECURITIES FRAUD

SUMMARY: This act extends the definition of racketeering activity under the Corrupt Organizations and Racketeering Activity Act (CORA) to include violations of the federal Currency and Foreign Transactions Reporting Act by broker-dealers and specifies that CORA applies to securities fraud and related offenses under the Uniform Securities Act. CORA provides for criminal penalties and property forfeiture (see BACKGROUND).

The act requires the chief state's attorney, in consultation with the attorney general, chief court administrator, and banking commissioner, to study the (1) establishment of a fund to hold money and proceeds of property forfeited under CORA for securities fraud and related offenses and (2) most appropriate way to administer the fund to provide restitution to victims. The chief state's attorney must report findings and recommendations to the Judiciary Committee by March 31, 2010.

EFFECTIVE DATE: October 1, 2009, except the provision on the study, which is effective upon passage.

BACKGROUND

CORA

CORA punishes racketeering activity. It subjects violators to (1) one to 20 years in prison, a fine of up to $25,000, or both; (2) forfeiture of property acquired, maintained, or used in violation of CORA including profits, appreciated value, and sale proceeds; and (3) forfeiture of any interest, claim against property, or contractual right affording a source of influence over any enterprise the violator established, operated, controlled, conducted, or participated in.

On conviction, the court or jury determines whether property is subject to forfeiture. After hearing evidence, the court can authorize the chief state's attorney to seize property in the name of the state. If property the defendant owned before judgment of forfeiture was transferred to avoid forfeiture, the court can set aside the transfer. The court can make appropriate orders to protect the rights of innocent parties.

The court can order property to be converted to cash. The court can provide for the rights of an innocent party, government, or business that is superior to the state if they are known to the court or prosecutors. The court can order property to be given to a state agency that can use it, order it sold or transferred to an innocent party, or order equitable relief.

The court can appoint a receiver to facilitate property disposition and act as a fiduciary of the state. The receiver must post a bond as ordered by the court, comply with court orders, file a final report on disposition of the property, and deposit net proceeds with the court. The court compensates the receiver from the proceeds.

Money forfeited to the state or the proceeds of forfeited property is deposited in the General Fund.

The chief state's attorney can compromise, remit, or mitigate a claim or potential claim.

At any time in a CORA prosecution when there is probable cause to believe a defendant has property that is subject to forfeiture, the court can (1) prohibit a defendant from transferring, depleting, or diminishing the property; (2) appoint a receiver for the property; or (3) permit the defendant to transfer the property on posting security. The court can also issue orders to protect innocent parties.

The state can file a CORA lien notice with town clerks and other officials of this or other states and the law specifies procedures regarding these liens (CGS 53-393 et seq. ).

Federal Currency and Foreign Transactions Reporting Act

This federal law requires financial institutions to keep records of cash purchases of negotiable instruments; file reports of cash transactions exceeding $10,000; and report suspicious activity that might be money laundering, tax evasion, or other criminal activities (31 USC 5311 et seq. ).