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Disgorgement bill proposed to compensate victims of fraud
By RIA ROEBUCK JOSEPH
THE CENTER SQUARE CONTRIBUTOR
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(The Center Square) - Assemblymember
Brian Maienschein (D-San Diego) has authored a bill that would require companies that have violated the law to give up the profits that they made through their illegal conduct. Money collected would be held in a newly created Restitution Fund in the state Treasury. Proceeds from this fund would be used to provide restitution for any victim who cannot otherwise be compensated.
Assemblymember Maienschein has the support of Attorney General Rob Bonta who is sponsoring AB 1366. The new legislation was announced today in a release by the attorney general’s office.
“Under AB 1366, the restitution would be funded from the ill-gotten gains of businesses that violate California’s consumer protection laws, rather than through taxes or fees charged to law-abiding businesses.
Specifically, AB 1366 would allow the Attorney General to seek the remedy of disgorgement in actions brought under the Unfair Competition Law and False Advertising Law,” the release said.
Victims of fraud are entitled to restitution after a judgment has been reached but in many cases the business becomes insolvent and files for bankruptcy, leaving the victim without recourse.
In one such case pointed out by Mr. Bonta, the AG obtained a $20 million judgment against Paul Blanco’s Good Car Company in November 2022. Ultimately, Paul Blanco became insolvent, went out of business and left its victims with little to no compensation.
“When a predatory business takes advantage of a consumer, it’s only right that the proceeds gained from illegal conduct should go towards compensating victims rather than remaining in the bank accounts of bad actors,” Assemblymember Maienschein stated.
Current California consumer protection laws do not include a disgorgement clause like those already enacted in states like Arizona and New York. The bill proposes to implement another safeguard for California consumers alongside the Civil Penalty Fund that allows the federal government through the Consumer Financial Protection Bureau, to make victims financially whole.
