California Disclosure Bill Clears First Legislative Hurdle And DOC Spells “Relief”

by Allen Matkins

This being an even numbered year, last Friday (June 1) was the deadline for each house to pass bills that were introduced in that house.  Joint Rule 61(b)(11).  Although it was initially close, I was disappointed to see that the Senate passed SB 1208 (Leno) by a 21-15 vote after initially failing to pass on a 20-18 vote.

As I wrote last month in “Disclosure Bill May Put Retirees At Risk“, this bill imposes additional disclosure requirements on publicly traded companies incorporated in California or qualified to transact intrastate business in California pursuant to the California Disclosure Act.

Here is the version of SB 1208, as amended in the Senate on May 7, 2012.  Here is my letter opposing the bill.

California Department of Corporations Spells “Relief”

Last Friday, the Department of Corporations announced that it had obtained a judgment in the amount of $16.2 million against two corporations as “relief defendants”.  The case actually began several years ago with the Department issuing a desist and refrain order against an issuer for the offer and sale of securities without qualification.  Although many enforcement actions end with the entry of an order, this case progressed into a civil action and ultimately in a default judgment against the issuer and three individuals.  The court ordered those defendants to pay restitution and civil penalties of $6.5 million for 260 violations of Corporations Code Section 25110 and $9.95 million for 398 violations of Section 25401.

The Department also obtained a multi-million dollar default judgment against two corporate “relief defendants”.  But what exactly is a “relief defendant”?  The Court’s Statement of Decision (submitted by the Department) provides this explanation:

"A relief defendant is one that: (a) has received ill-gotten funds; and (b) does not have a legitimate claim to those funds.  (Janvey v. Adams (5th Cir. 2009) 588 F.3d 831, 834; SEC v. Colello (9th Cir. 1998) 139 F.3d 674, 677.)  The legal concept of a relief defendant is a general principle drawing from the court’s equitable powers and the court’s inherent ability to recover ill-gotten gains for the benefit of injured victims.  (SEC v. Colello (9th Cir. 1998) 139 F.3d 674, 676; Commodity Futures Trading Comm. v. IBS, Inc. (W.D.N.C. 2000) 113 F. Supp. 2d 830, 852.)"

 Commenting on the Governor’s Reorganization Plan

Several people have asked me about how to comment (either for or against) the Governor’s Reorganization Plan (See “Governor’s Reorganization Plan Strips DOC Of Enforcement Authority“, “Will Demoting the DFI, DOC and DRE Matter?“, “The Department of Real Estate And The Naturopathic Medicine Committee – Separated At Birth?“, and “Reorganization Plan Dooms Dual Banking System And Diminishes The Availability Of Small Business Credit“).  I suggest that you send your comments by letter or email to both your state Assemblymember and Senator.  You can identify your Assemblymember and Senator using this online search tool.  The tool will provide you links to your legislators’ websites which provide contact information.  You should ask that your representative send your comments to the appropriate committee consultant in each house.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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