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Jan. 30: Affinity fraud; Legislative update

Posted - Jan. 30, 2011 at 9:00 a.m.



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In this Sunday Edition, KSL's Scott Haws explores proposed bills to punish those who take advantage of family and friends. Sen. Ben McAdams, D-Salt Lake City, and former U.S. Attorney Brett Tolman discuss affinity fraud. Also, Deseret News reporter Lisa Riley Roche reflects on the first week of the 2011 Utah State Legislative Session.

Segment 1: Affinity fraud

For over a year now in Utah, the agencies that investigate white-collar crime have been swamped with a caseload that, for the state's reputation, is embarrassingly large. Now, a state senator is proposing a novel new plan of attack that may be an effective weapon against a particular kind of fraud, and his proposal has bipartisan support.

To discuss affinity fraud, Sunday Edition welcomes Sen. Ben McAdams and Brett Tolman. McAdams has worked as a securities attorney and as Mayor Ralph Becker's legislative liaison. Former U.S. Attorney Brett Tolman is currently in private practice at Ray, Quinney and Nebeker, and involved in white-collar criminal defense.

Utah is known for a number of things -- unfortunately, fraud capitol is one of them. Over the last seven years, the state has ordered more than $200 million paid back to companies or individuals who have been victims of securities schemes, but $1.4 billion has been lost.


We are a very trusting citizenry in Utah and people can prey on that. But there is also another aspect of it, we are also a citizenry that wants to make money and wants to be successful.

–Brett Tolman


The guests explain why Utahns are particularly susceptible to fraud.

"We are a very trusting citizenry in Utah and people can prey on that," explains Tolman. "But there is also another aspect of it, we are also a citizenry that wants to make money and wants to be successful."

"This is an instance where one of our greatest strengths which is we are a trusting community. We see the best in others and we are entrepreneurial. We want to succeed," McAdams describes. "That is one of the strengths of the people in Utah but it is also one of the things that make us peculiarly gullible."

McAdams has two bills that will soon be discussed on Capitol Hill. The first creates additional, enhanced penalties for perpetrators of affinity fraud.


We see the best in others and we are entrepreneurial. We want to succeed. That is one of the strengths of the people in Utah but it is also one of the things that make us peculiarly gullible.

–Sen. Ben McAdams


"Affinity fraud is something hard to quantify," says McAdams. "You know it when you see it, but how do you put a definition around that and that's what we are trying to do. So what we are saying is when an individual commits fraud and they are able to perpetrate that fraud because they exercise undue influence because of a position of authority, a position of trust, and leverage that position to convince the investor buy into the fraud. We want to give that an additional criminal penalty. We should crack down harder on that because they are abusing that status in the community."

The second bill provides incentives to whistleblowers.

"People are reluctant to tell on somebody who they may know... and sometimes these promoters of a fraud will say 'if you comply with an investigation, you're cut off, you're not going to get anything back and you're done.' So there's an economic incentive for people who may have information to clam up and stay silent," McAdams explains. "What we are trying to do with this is to overcome the economic incentive to stay quiet with an economic incentive to come forward."

McAdams is also working on a bill that addresses mortgage schemes. It has not been made public yet.

Tolman says responsibility also falls to the investor and this legislation highlights this type of fraud resulting in "greater awareness and a heightened responsibility on the community itself to be aware that you will be preyed on by even those closest to you."

Segment 2: First week at the Utah Legislature

The Utah State Legislature began its 2011 session on Jan. 24, tackling a variety of issues.

Several bills made it out of committee and are on the way to becoming law. Rep. Paul Ray's, R-Clearfield, proposal to require anyone under 18 who suffers a concussion while playing a sport to get medical clearance to continue playing was unanimously approved. A bill that would make Spice a controlled substance will move to the House for consideration. Advertising may soon be allowed on the sides of public school buses after a House committee approved Rep. Jim Bird's, R-West Jordan, proposal. And Rep. Curt Oda's, R-Clearfield, bill to change the state's animal cruelty law to make it legal to shoot and kill feral animals hit the national scene. It was featured on Comedy Central's "Colbert Report."


One of the strongest messages the governor had was against the federal government. He was very clear that Utah needs to stand up and assert itself against federal mandates and other dictates from Washington.

–Lisa Riley Roche


Deseret News political reporter Lisa Riley Roche joins Sunday Edition to discuss some of the highlights from the first week.

Gov. Herbert delivered the State of the State Address on Jan. 26.

"One of the strongest messages the governor had was against the federal government," explains Roche. "He was very clear that Utah needs to stand up and assert itself against federal mandates and other dictates from Washington. He actually went so far as to say 'Washington, Utah is not a colony, it's a state.' That message resonated very strongly with the conservatives in the Legislature, many of whom have been preaching state sovereignty for years and carrying their own message bills to deliver a similar statement to Washington."

He also talked about funding growth in public education.

The governor's budget has created some controversy among lawmakers who think cuts need to be made.

"The governor came up with a budget proposal that did not include cuts to departments," Roche says. "He feels the state can rely on continued economic growth over the next couple years to fill some of the holes being left by the end of federal stimulus and other one-time monies and sources lawmakers have gone to in the past couple years to try to balance the budget."

Rep. Carl Wimmer's, R-Herriman, bill to designate a state firearm passed the House with some opposition.

"Several members questioned why you want to have school children coloring pictures of the state bird, the state flower, the state cooking pot and the state gun. Some people felt that might not be appropriate for school children, but they were in the minority," says Roche.

Immigration has been a hot topic for months, with a lot of focus on Rep. Stephen Sandstrom's, R-Orem, Arizona-type bill.

"Sandstrom's bill has a lot of support, especially among conservatives in the House who want to see a tough enforcement bill on the immigration issue pass this session," Roche explains. "So what's happened is House Republicans in their caucus this week pushed their leadership this week to make sure a vote comes out for a vote on its own merits. There has been a lot of talk about lumping together all the different proposals, some enforcement, some guest worker, some other suggests to solving some of the other immigration concerns into a single omnibus bill. House Republicans don't want to see that and they made that clear to their leadership... what happens in the Senate may well be a different story."

Rep. Sandstrom told Roche this week that he looking at a separate guest worker bill. "He is not talking about accommodating workers who are already here illegally. He is talking about easing the federal VISA process for agricultural workers."

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