Lorena Gonzalez, Attorney General Becerra Announce Legislation to Combat California’s Underground Economy

Friday, February 22, 2019

SAN DIEGO – (Friday, Feb. 22, 2019)  – California Attorney General Xavier Becerra and Assemblywoman Lorena Gonzalez (D-San Diego) today at the Port of San Diego unveiled legislation to substantially strengthen the state’s efforts to combat the illegal underground economy in California that targets the most vulnerable members of our community.

Assembly Bill 1296 will expand California’s unique, multi-agency task force of law enforcement professionals known as the Tax Recovery and Underground Economy (TRUE) Team that currently operates out of Sacramento and Los Angeles.

“The underground economy hurts everyone: workers who are left without protection, consumers who are sold dangerous or fake products, and the state as we lose tax money,” Assemblywoman Gonzalez said. “This task force is a unique, collaborative approach for law enforcement to breakdown its usual silos and execute wider solutions for targeting the underground economy.”

Sponsored by Attorney General Becerra, whose Department of Justice leads the TRUE Team, AB 1296 was announced today at a press conference with members of the pilot program’s task force. Established in 2014, the pilot program has allowed agencies in Sacramento and Los Angeles to work together to investigate and prosecute the most outrageous felony-level multijurisdictional underground economic crimes in California. AB 1296 builds on the success of a state pilot program by permanently establishing law enforcement teams in Sacramento and Los Angeles and authorizing additional teams in the three other major metropolitan regions of the state: San Diego, the Bay Area, and Fresno.

“With underground economic crime, our workers get exploited, business owners face unfair competition, consumers get ripped off, and taxpayers bear the burden,” Attorney General Becerra said. “AB 1296 expands on successful efforts to prosecute violators and recover funds involved in wage theft, tax evasion, counterfeit commerce and other economic crimes. The funds recovered become available to benefit cheated workers, our schools, law enforcement and our communities.”

California’s underground economy generates between $60 to $140 billion in unreported revenue annually, according to a University of California at Los Angeles Labor Center report, depriving the state of $8.5 billion in corporate, personal, and sales and use taxes each year. In September 2018, Attorney General Becerra announced the results of a year-long investigation that led to charges against a family of four for labor exploitation and human trafficking. In October 2018, Attorney General Becerra also announced that the State of California regained lost state revenues from an underground prescription drug business, from an illegal pharmaceutical scheme and from operators who possessed counterfeit merchandise intended for sale.

Since the beginning of the pilot program, investigative teams have identified $482 million in unreported gross receipts and $60 million in associated tax loss to the state. Additionally, through its criminal enforcement actions, the pilot program has recovered over $25 million in lost tax revenue, victim restitution, and investigation costs.

The legislation strengthens the program by ensuring multi-agency collaboration between several governmental entities, including the Department of Justice, the Department of Tax and Fee Administration, the Franchise Tax Board, and the Employment Development Department. Together these agencies combat wage theft, tax evasion and other crimes in the underground economy.

For questions on Assembly Bill 1296 or to schedule an interview with Assemblywoman Gonzalez, contact Sami Gallegos 209-658-7617