Article 5. Criminal Forfeiture of California Financial Code >> Division 2. >> Chapter 1. >> Article 5.

If a person is convicted of a violation of Section 5303, 5304, 5305, or 5306, or is convicted of a felony for a violation of Section 25540 or 25541 of the Corporations Code in connection with the operation of a lending institution subject to the jurisdiction of the department pursuant to this division, or is convicted of a felony violation of Section 487 or 504 of the Penal Code in connection with the operation of a lending institution subject to the jurisdiction of the department pursuant to this division any property which constitutes or is derived from proceeds traceable to that violation is subject to forfeiture pursuant to this article.

(a) The prosecuting agency shall, prior to, in conjunction with, or subsequent to the criminal proceeding, file a petition of forfeiture with the superior court of the county in which the defendant has been or will be charged with the underlying criminal offense. The petition shall allege that the defendant has engaged in acts chargeable as crimes pursuant to the criminal provisions enumerated in Section 5320 and shall identify the property subject to forfeiture. A notice regarding the petition shall be provided, by personal service or registered mail, to every person who may have an interest in the property specified in the petition. However, if the notice cannot be given by registered mail or personal delivery, the notice shall be published for at least three successive weeks in a newspaper of general circulation in the county where the property is located. The notice shall state that any interested person may file a verified claim with the superior court stating the amount of their claimed interest and an affirmation or denial of the prosecuting agency's allegation. The notice shall set forth the time within which a claim of interest in the property seized is required to be filed.
  (b) If the property alleged to be subject to forfeiture is real property, the prosecuting agency shall, at the time of filing the petition of forfeiture, record a lis pendens in each county in which the real property is situated which specifically identifies the property by legal description, the name of the owner of record as shown on the latest equalized assessment roll, and assessor's parcel number. The judgment of forfeiture shall not affect the interest in real property of any third party which was acquired prior to the recording of the lis pendens.
  (c) If a petition of forfeiture is filed pursuant to this section prior to filing of the complaint in a criminal action, the prosecuting agency shall provide concurrent notice to any parties subject to the proposed forfeiture that they are targets of an anticipated criminal action.
  (d) If a petition of forfeiture is filed pursuant to this section prior to the filing of a complaint in a criminal action, the petition and any injunctive order shall be dismissed by operation of law, unless a criminal complaint or grand jury indictment is filed within 120 days after the filing of the petition. If a petition is dismissed pursuant to this section, it shall not be refiled, except upon the filing of a criminal complaint or grand jury indictment.

(a) Any person claiming an interest in the property may, at any time within 30 days from the date of the first publication of the notice of seizure, or within 30 days after receipt of actual notice, file with the superior court of the county in which the action is pending a verified claim stating his or her interest in the property or proceeds. A verified copy of the claim shall be given by the claimant to the Attorney General or district attorney, as appropriate.
  (b) (1) If, at the end of the time set forth in subdivision (a), an interested person, other than the defendant, has not filed a claim, the court, upon motion, shall declare that the person has defaulted upon his or her alleged interest, and it shall be subject to forfeiture upon proof of the provisions of subdivision (d).
  (2) The defendant may admit or deny that the property is subject to forfeiture pursuant to the provisions of this article. If the defendant fails to admit or deny or to file a claim of interest in the property or proceeds, the court shall enter a response of denial on behalf of the defendant.
  (c) (1) The forfeiture proceeding shall be set for hearing in the superior court in which the underlying criminal offense will be tried.
  (2) If the defendant is found guilty of the underlying offense, the issue of forfeiture shall be promptly tried, either before the same jury or before a new jury in the discretion of the court, unless waived by the consent of all parties.
  (d) At the forfeiture hearing, the prosecuting agency shall have the burden of establishing beyond a reasonable doubt that the defendant was engaged in actions in violation of Sections 5303, 5304, 5305, and 5306 and that the property specified in the petition otherwise meets the criteria for forfeiture under Section 5320. If a jury is the trier of fact, the verdict shall be unanimous in order to impose the forfeiture.

(a) Concurrent with, or subsequent to, the filing of the petition, the prosecuting agency may move the superior court for the following pendente lite orders to preserve the status quo of the property alleged in the petition of forfeiture:
  (1) An injunction to restrain all interested parties and enjoin them from transferring, encumbering, hypothecating or otherwise disposing of that property.
  (2) Appointment of a receiver to take possession of, care for, manage, and operate the assets and properties so that such property may be maintained and preserved.
  (b) No preliminary injunction may be granted or receiver appointed without notice, that meets the requirements of Section 5321, to all the interested parties, including actual notice to targets of the anticipated criminal action, and a hearing to determine that such an order is necessary to preserve the property, pending the outcome of the criminal proceedings, and that there is probable cause to believe that the property alleged in the forfeiture proceedings are proceeds or property interests forfeitable under Section 5320. However, a temporary restraining order may issue pending that hearing pursuant to the provisions of Section 527 of the Code of Civil Procedure.
  (1) In determining whether to issue a preliminary injunction or temporary restraining order in a proceeding brought by a prosecuting agency in conjunction with or subsequent to the underlying criminal proceeding, the court shall weigh the relative degree of certainty of the outcome on the merits and the consequences to each of the parties of granting the interim relief. If the prosecution is likely to prevail on the merits and the potential harm to the public outweighs the potential harm to the defendants and the interested parties, the court should grant injunctive relief. The court shall give significant weight to the following factors:
  (A) The public interest in preserving liquid capital and other financial assets pendente lite.
  (B) The difficulty of preserving financial assets pendente lite where the underlying alleged crimes involve issues of fraud and moral turpitude.
  (C) The fact that the requested relief is being sought by a public prosecutor on behalf of alleged victims of financial crimes.
  (D) The likelihood that substantial public harm has occurred where financial crimes are alleged to have been committed.
  (2) In determining whether to issue a permanent injunction or temporary restraining order in a proceeding brought by a prosecuting agency before the filing of a complaint in the underlying criminal proceeding, the court shall weigh the relative degree of certainty of the outcome on the merits and the consequences to each of the parties of granting the interim relief.
  (3) No injunctive order issued under this section shall impair the ability of a defendant or interested party to pay the actual legal fees or retainer for his or her legal defense to the criminal charges and the petition for forfeiture.
  (c) Notwithstanding any other provision of law, the court in granting these motions may order a surety bond or undertaking to preserve the property interests of the interested parties, but the court shall give significant weight to the unique circumstances of public agencies, as opposed to private litigants, in determining whether to order a surety bond or undertaking.
  (d) The court shall, in making its orders, seek to protect the interests of those who may be involved in the same enterprise as the defendant, but who were not involved in the commission of the violation of a crime enumerated in Section 5320.

(a) If the trier of fact at the forfeiture hearing finds that the alleged property or proceeds is forfeitable pursuant to Section 5320, the court shall declare that property or proceeds forfeited to the state or local governmental entity, subject to distribution as provided in Section 5325. No property solely owned by a bona fide purchaser for value shall be subject to forfeiture.
  (b) If the trier of fact at the forfeiture hearing finds that the alleged property is forfeitable pursuant to Section 5320, but does not find that a person holding a valid lien, mortgage, security interest, or interest under a conditional sales contract acquired that interest with actual knowledge that the property was to be used for a purpose for which forfeiture is permitted, and the amount due to that person is less than the appraised value of the property, that person may pay to the state or the local governmental entity which initiated the forfeiture proceeding, the amount of the difference between the appraised value of the property and the amount of the lien, mortgage, security interest, or interest under a conditional sales contract. Upon that payment, the state or local governmental entity shall relinquish all claims to the property. If the holder of the interest elects not to make that payment to the state or local governmental entity, the property shall be deemed forfeited to the state or local governmental entity and any indicia of ownership of the property shall be forwarded. The appraised value shall be determined as of the date judgment is entered either (a) by agreement between the holder of the lien, mortgage, security interest, or interest under a conditional sales contract and the governmental entity involved or (b) if they cannot agree, then by a court-appointed appraiser for the county in which the action is brought. A person holding a valid lien, mortgage, security interest, or interest under a conditional sales contract shall be paid the appraised value of his or her interest.
  (c) If the amount due to a person holding a valid lien, mortgage, security interest, or interest under a conditional sales contract is less than the value of the property and the person elects not to make payment to the governmental entity, the property shall be sold at public auction by the county if the district attorney is the prosecutor, by the city if the city attorney is the prosecutor, or by the Department of General Services if the Attorney General is the prosecutor. Notice of the sale shall be provided by one publication in a newspaper published and circulated in the city, community, or locality where the sale is to take place.

Notwithstanding that no response or claim has been filed pursuant to Section 5322, in all cases where property is forfeited pursuant to this article and, where necessary, sold by the Department of General Services or local governmental entity, the money forfeited or the proceeds of sale shall be distributed by the state or local governmental entity as follows:
  (a) To the bona fide or innocent purchaser, conditional sales vendor, or holder of a valid lien, mortgage or security interest, if any, and from the balance of any forfeited funds to any victim of a crime enumerated in Section 5320 committed by the defendant, up to the amount of his or her interest in the property or proceeds, when the court declaring the forfeiture orders a distribution to that person. The court shall endeavor to discover all such lienholders and protect their interests and may, at its discretion, order the proceeds placed in escrow for up to an additional 60 days to ensure that all valid claims are received and processed. The aggregate of all money distributed pursuant to this subdivision and all money received pursuant to a restitution order of a court shall not exceed the amount of the person's interest in the property or proceeds.
  (b) To the Department of General Services or local governmental entity for all expenditures made or incurred by it in connection with the sale of the property, including expenditures for any necessary repairs, storage, or transportation of any property seized under this article.
  (c) The balance of forfeiture funds remaining after the obligations in subdivisions (a) and (b) have been satisfied shall be paid to the general fund of the state or local governmental entity, whichever prosecutes.