SB246

SECTION 1. The legislature finds that state law requires that of the total forfeited property and the sale proceeds thereof collected, twenty-five per cent is distributed to the seizing agency, twenty-five per cent is distributed to the prosecuting attorney, and fifty per cent is deposited into the criminal forfeiture fund, which is a revolving fund that is administered by the department of the attorney general. The attorney general is authorized discretionary use of the moneys from the criminal forfeiture fund to cover various expenses, including those necessary to seize, appraise, maintain, advertise, or sell forfeited property; for awards for information or assistance leading to a civil or criminal proceeding; supplemental payments to state and county agencies for law enforcement purposes; and costs arising in connection with training and education programs for law enforcement officers, enforcement activities of the drug nuisance abatement unit, and the law enforcement officer independent review board.

In Report No. 95-22, Sunset Evaluation of the Forfeiture Program, the auditor recommended that the criminal forfeiture fund be repealed because the fund was not necessary for the asset forfeiture program and repealing the fund would improve accountability and oversight of the expenditures of forfeiture proceeds. The auditor found that the fund failed to reflect a clear link between the benefits sought and charges made upon the users or beneficiaries of the program and instead served as a means to provide the program or users with an automatic means of support that is removed from the normal budget and appropriations process. The criminal forfeiture fund derived its revenues from property forfeited rather than from charges on the law enforcement officers who benefit from the fund.

However, in a follow-up of this recommendation under Appendix B of Report No. 18-09, Audit of the Department of the Attorney General's Asset Forfeiture Program, the auditor found that the recommendation to repeal the criminal forfeiture fund had not been implemented because circumstances changed to make that recommendation not applicable. Specifically, the criteria for the establishment and continuance of revolving funds under section 37-52.4, Hawaii Revised Statutes, were expanded by Act 130, Session Laws of Hawaii 2013, to include a clear link between the program and sources of revenue, as an alternative to the benefits sought and charges made nexus requirement. Accordingly, the auditor's Report No. 14-13, Review of Special Funds, Revolving Funds, Trust Funds and Trust Accounts of the Departments of the Attorney General and Business, Economic Development and Tourism, applied the new criteria and found that the criminal forfeiture fund continued to serve the purpose for which it was created and met the criteria for a revolving fund.

Despite the auditor's finding that the criminal forfeiture fund meets the criteria for continuance under section 37-52.4, Hawaii Revised Statutes, the other reasons to support the recommendation to repeal the fund under Report No. 95-22 are still valid. In that report, the auditor found that depositing money into the general fund would enhance legislative oversight and control over the actual use of the forfeiture funds because the funds would be subject to ordinary appropriation requirements. Furthermore, in Report No. 18-09, the auditor found that the asset forfeiture program was unable to adequately manage its funds because the program lacked basic accounting functions or internal controls. For example, the monthly or quarterly fund balance reports that are essential to facilitate managerial decision-making were not produced; annual program expenditure reports were produced for the sole purpose of reporting to the legislature; and management or other staff failed to review accounting-related data entry or yearly program expenditure reconciliation reports. Without basic accounting functions and proper internal controls in place to properly forecast revenues of and expenditures from the fund, the fund may no longer be self-sustaining, which is a requirement under section 37-52.4, Hawaii Revised Statutes. Therefore, the legislature further finds that legislative oversight will ensure transparency and accountability of the moneys in the criminal forfeiture fund.

The purpose of this Act is to improve accountability and oversight of the expenditures of the proceeds from forfeitures by repealing the criminal forfeiture fund and requiring that fifty per cent of the total forfeited property and the sale proceeds thereof collected pursuant to the Hawaii omnibus criminal forfeiture act under chapter 712A, Hawaii Revised Statutes, be deposited into the general fund instead.

SECTION 2. Section 712A-10, Hawaii Revised Statutes, is amended to read as follows:

"§712A-10 Administrative forfeiture. The prosecuting attorney may initiate administrative forfeiture of property other than real property, the estimated value of which is less than $100,000, or of any vehicle or conveyance, regardless of value. Administrative forfeiture shall be processed in the following manner:

[~~(1)~~] (a) The prosecuting attorney shall file a petition with the attorney general, pursuant to rules adopted by the attorney general[.];

[~~(2)~~] (b) The prosecuting attorney shall give notice of pending forfeiture by making reasonable efforts to serve a copy of the petition in a manner provided in section 712A-8(a) or 712A-8(b) on all persons known to have an interest in the property, together with instructions for filing a claim and cost or in pauperis bond, or a petition for remission or mitigation[.];

[~~(3)~~] (c) The attorney general shall give notice of intention to forfeit the property administratively by publication in the manner provided in section 712A‑8(c). Notice by publication shall include:

[~~(a)~~] (i) A description of the property;

[~~(b)~~] (ii) The estimated value of the property;

[~~(c)~~] (iii) The date and place of the seizure;

[~~(d)~~] (iv) The offense for which the property is subject to forfeiture;

[~~(e)~~] (v) Instructions for filing a claim and cost or in pauperis bond, or a petition for remission or mitigation; and

[~~(f)~~] (vi) Notice that the property will be forfeited to the State if a claim and cost or in pauperis bond or petition for remission or mitigation is not filed in substantial compliance with this section[.];

[~~(4)~~] (d) Persons claiming an interest in the property may file either a petition for remission or mitigation of forfeiture, or a claim and cost or in pauperis bond, but not both, with the attorney general, within thirty days of notice by publication or receipt of written notice, whichever is earlier. Notwithstanding section 1-29, the thirty-day time period prescribed [~~herein~~] is computed by excluding the first day and including the last day, unless the last day is a Saturday, Sunday, or holiday and then it is also excluded, and the thirty-day time period runs until the end of the next day [~~which~~] that is not a Saturday, Sunday, or a holiday. "Holiday" includes any day designated as a holiday pursuant to section 8-1[.];

[~~(5)~~] (e) Any person claiming seized property may seek remission or mitigation of the forfeiture by timely filing a petition with the attorney general. A petition for remission or mitigation shall not be used to challenge the sufficiency of the evidence to support the forfeiture or the actions of any government official, but shall presume a valid forfeiture and ask the attorney general to invoke the executive power to pardon the property, in whole or in part. The petition shall be signed by the petitioner and sworn on oath before a notary public and shall contain the following:

[~~(a)~~] (i) A reasonably complete description of the property;

[~~(b)~~] (ii) A statement of the interest of the petitioner in the property, as owner or interest-holder, which may be supported by bills of sale, contracts, or mortgages, or other documentary evidence; and

[~~(c)~~] (iii) Facts and circumstances sufficient to show whether the petitioner:

[~~(i)~~] (A) Owns or holds an interest in the seized property as defined by section 712A-1;

[~~(ii)~~] (B) Had any knowledge that the property was or would be involved in any violation of the law;

[~~(iii)~~] (C) Had any knowledge of the particular violation [~~which~~] that subjected the property to seizure and forfeiture; and

[~~(iv)~~] (D) Had any knowledge that the user of the property had any record, including arrests, except when the person was acquitted or the charges dismissed due to lack of evidence, for the violation [~~which~~] that subjected the property to seizure and forfeiture or for any crime [~~which~~] that is similar in nature.

Any subsequent pleadings or written communications alleging matters pertaining to [[]subparagraph[~~] (b) or (c) of this [paragraph]] must~~] (ii) or (iii) shall also be signed by the petitioner and sworn on oath before a notary public[.];

[~~(6)~~] (f) If the attorney general, with sole discretion, determines that remission is not warranted, the attorney general may discretionarily mitigate the forfeiture where the petitioner has not met the minimum requirements for remission but where there are present other extenuating circumstances indicating that some relief should be granted to avoid extreme hardship. Mitigation may also be granted where the minimum requirements for remission have been met, but the overall circumstances are such that the attorney general determines that complete relief is not warranted. Mitigation shall take the form of a money penalty imposed upon the petitioner [~~which~~] that shall be deposited into the [~~criminal forfeiture~~] general fund [~~established under~~] pursuant to section 712A-16. Extenuating circumstances include:

[~~(a)~~] (i) Language or culture barrier;

[~~(b)~~] (ii) Humanitarian factors, such as youth or extreme age;

[~~(c)~~] (iii) Presence of physical or mental disease, disorder, or defect;

[~~(d)~~] (iv) Limited or peripheral criminal culpability;

[~~(e)~~] (v) Cooperation with the seizing agency or the prosecuting attorney; and

[~~(f)~~] (vi) Any contributory error on the part of government officials[.];

[~~(7)~~] (g) It shall be the duty of the attorney general to inquire into the facts and circumstances alleged in a petition for remission or mitigation of forfeiture. However, no petitioner is entitled to a hearing on the petition for remission or mitigation. Hearings, if any, shall be held at the discretion of the attorney general[.];

[~~(8)~~] (h) The attorney general shall provide the seizing agency and the petitioner a written decision on each petition for remission or mitigation within sixty days of receipt of the petition unless the circumstances of the case require additional time, in which case the attorney general shall notify the petitioner in writing and with specificity within the sixty-day period that the circumstances of the case require additional time and further notify the petitioner of the expected decision date[.];

[~~(9)~~] (i) Any person claiming seized property may seek judicial review of the seizure and proposed forfeiture by timely filing with the attorney general a claim and bond to the State in the amount of ten per cent of the estimated value of the property or in the sum of $2,500, whichever is greater, with sureties to be approved by the attorney general, upon the condition that if the claimant fails to prove that claimant's interest is exempt from forfeiture under section 712A-5, the claimant shall pay the State's costs and expenses, including reasonable attorneys fees incurred in connection with a judicial proceeding. In lieu of a cost bond, a claimant may file an in pauperis bond sworn on oath before a notary public. An in pauperis bond shall be in the form set out in the appendix to the rules of penal procedure. The claim shall be signed by the claimant and sworn on oath before a notary public and shall comply with the requirements of section 712A-12(5). Upon receipt of the claim and bond, the attorney general shall notify the prosecuting attorney who may discretionarily continue to seek forfeiture by petitioning the circuit court for forfeiture of the property within forty-five days of receipt of notice that a proper claim and bond has been filed. The prosecuting attorney may also elect to honor the claim in which case the prosecuting attorney shall notify the seizing agency and authorize the release of the seizure for forfeiture on the property or on any specified interest in it[.];

[~~(10)~~] (j) If a judicial forfeiture proceeding is instituted subsequent to notice of administrative forfeiture pursuant to paragraph [~~(9),~~] (i), no duplicate or repetitive notice shall be required. The judicial proceeding, if any, shall adjudicate all timely filed claims. At the judicial proceeding, the claimant may testify, present evidence and witnesses on the claimant's behalf, and cross-examine witnesses who appear at the hearing. The State may present evidence and witnesses in rebuttal and in defense of its claim to the property and cross-examine witnesses who appear at the hearing. The State has the initial burden of showing by a preponderance of the evidence that the claimant's interest in the property is subject to forfeiture. On such a showing by the State, the claimant has the burden of showing by a preponderance of the evidence that the claimant's interest in the property is not subject to forfeiture[.];

[~~(11)~~] (k) In the event a claim and bond [~~has~~] have not been filed in substantial compliance with this section, or if the attorney general, with sole discretion, determines that remission or mitigation is not warranted, the attorney general shall order forfeited all property seized for forfeiture. In the event the attorney general, with sole discretion, determines that remission or mitigation is warranted, the attorney general shall notify the seizing agency and the prosecuting attorney and order the release of the seizure for forfeiture on the property or on any specified interest in it. There shall be no appeal from the attorney general's decision or order of forfeiture or remission or mitigation[.]; and

[~~(12)~~] (l) Administrative proceedings and the adoption of rules under this section are exempt from the requirements of chapter 91, the Hawaii administrative procedure act, and are adjudicatory functions for the purposes of applicable sections of the Hawaii Revised Statutes."

SECTION 3. Section 712A-16, Hawaii Revised Statutes, is amended to read as follows:

"§712A-16 Disposition of property forfeited. (1) All property forfeited to the State under this chapter shall be transferred to the attorney general who:

(a) May transfer property, other than currency, which shall be distributed in accordance with subsection (2) to any local or state government entity, municipality, or law enforcement agency within the State;

(b) May sell forfeited property to the public by public sale; provided that for leasehold real property:

(i) The attorney general shall first offer the holder of the immediate reversionary interest the right to acquire the leasehold interest and any improvements built or paid for by the lessee for the then fair market value of the leasehold interest and improvements. The holder of the immediate reversionary interest shall have thirty days after receiving written notice within which to accept or reject the offer in writing; provided that the offer shall be deemed to be rejected if the holder of the immediate reversionary interest has not communicated acceptance to the attorney general within the thirty-day period. The holder of the immediate reversionary interest shall have thirty days after acceptance to tender to the attorney general the purchase price for the leasehold interest and any improvements, upon which tender the leasehold interest and improvements shall be conveyed to the holder of the immediate reversionary interest[.];

(ii) If the holder of the immediate reversionary interest fails to exercise the right of first refusal provided in subparagraph (i), the attorney general may proceed to sell the leasehold interest and any improvements by public sale[.]; and

(iii) Any dispute between the attorney general and the holder of the immediate reversionary interest as to the fair market value of the leasehold interest and improvements shall be settled by arbitration pursuant to chapter 658A;

(c) May sell or destroy all raw materials, products, and equipment of any kind used or intended for use in manufacturing, compounding, or processing a controlled substance or any untaxed cigarettes in violation of chapter 245;

(d) May compromise and pay valid claims against property forfeited pursuant to this chapter; or

(e) May make any other disposition of forfeited property authorized by law.

(2) All forfeited property and the sale proceeds thereof, [~~up to a maximum of three million dollars per year,~~] not previously transferred pursuant to [[]subsection[]] (1)(a) [~~of this section~~], shall, after payment of expenses of administration and sale, be distributed as follows:

(a) One quarter shall be distributed to the unit or units of state or local government [[]whose[]] officers or employees conducted the investigation and caused the arrest of the person whose property was forfeited or seizure of the property for forfeiture;

(b) One quarter shall be distributed to the prosecuting attorney who instituted the action producing the forfeiture; and

(3) Property and money distributed to units of state and local government shall be used for law enforcement purposes, and shall complement, but not supplant, the funds regularly appropriated for such purposes.

(4) [There is established in the department of the attorney general a revolving fund to be known as the criminal forfeiture fund, hereinafter referred to as the "fund" in which shall be deposited one-half of the proceeds of a forfeiture and any penalties paid pursuant to section 712A-10(6).] All moneys [~~in the fund~~] deposited into the general fund pursuant to subsection (2)(c) and any penalties paid pursuant to section 712A-10(f) shall be [~~expended by the attorney general and are~~] appropriated for the following purposes:

(a) The payment of any expenses necessary to seize, detain, appraise, inventory, safeguard, maintain, advertise, or sell property seized, detained, or forfeited pursuant to this chapter or of any other necessary expenses incident to the seizure, detention, or forfeiture of such property and such contract services and payments to reimburse any federal, state, or county agency for any expenditures made to perform the foregoing functions;

(b) The payment of awards for information or assistance leading to a civil or criminal proceeding;

(d) The payment of expenses arising in connection with programs for training and education of law enforcement officers;

(e) The payment of expenses arising in connection with enforcement pursuant to the drug nuisance abatement unit in the department of the attorney general; and

(f) The payment of expenses arising in connection with the law enforcement officer independent review board in the department of the attorney general.

(5) The attorney general may, without regard to the requirements of chapter 91, [~~promulgate~~] adopt rules [~~and regulations~~] concerning the disposition of property, the use of the [~~fund,~~] moneys appropriated in accordance with subsection (4), and compromising and paying valid claims against property forfeited pursuant to this chapter.

(6) [~~Not~~] No less than twenty days prior to the convening of each regular session, the attorney general shall provide to the legislature a report on the use of the Hawaii omnibus criminal forfeiture act during the fiscal year preceding the legislative session. The report shall include:

(a) The total amount and type of property seized by law enforcement agencies;

(b) The total number of administrative and judicial actions filed by prosecuting attorneys and the disposition thereof;

(c) The total number of claims or petitions for remission or mitigation filed in administrative actions and the dispositions thereof;

(d) The total amount and type of property forfeited and the sale proceeds thereof;

(e) The total amount and type of property distributed to units of state and local government;

(f) The amount of money deposited into the [~~criminal forfeiture~~] general fund[;] pursuant to subsection (2)(c) and any penalties paid pursuant to section 712A-10(f); and

(g) The amount of money expended by the attorney general from any appropriation from the [~~criminal forfeiture~~] general fund under subsection [~~(5)~~] (4) and the reason for the expenditures."

SECTION 4. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.

SECTION 5. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 6. This Act shall take effect upon its approval; provided that the amendments made to section 712A-16, Hawaii Revised Statutes, by section 3 of this Act shall not be repealed when that section is reenacted on June 30, 2022, pursuant to section 7(3) of Act 161, Session Laws of Hawaii 2016.

INTRODUCED BY:	_____________________________

THE SENATE	S.B. NO.	246
THIRTIETH LEGISLATURE, 2019
STATE OF HAWAII