Consumer Protection

SAN FRANCISCO -- Attorney General Kamala D. Harris today announced a $10.4 million grant program for organizations that provide housing counseling and legal services to homeowners.  The grant funds were secured through the National Mortgage Settlement with the goal of providing assistance to homeowners impacted by California's foreclosure crisis.

The California Department of Justice will award Consumer Assistance Grants for housing counseling and legal service providers ranging from $150,000 to $750,000 per organization.  A Homeowner Bill of Rights Implementation Grant of approximately $1 million will also be awarded to assist in the implementation of California’s new homeowner protection legislation sponsored by the Attorney General this year.

Grant applications must be received electronically no later than January 14, 2013.  Details regarding the application process can be found at http://oag.ca.gov/grants.

The California State Bar, under the leadership of Executive Director Joe Dunn, will work with the Attorney General’s office to administer the grants.

The California Homeowner Bill of Rights, signed into law earlier this year, restricts dual-track foreclosures, where a lender forecloses on a borrower despite being in discussions over a loan modification to save the home.  It also guarantees struggling homeowners a single point of contact at their lender with knowledge of their loan and direct access to decision makers, and imposes civil penalties on fraudulently signed mortgage documents.

The California Homeowner Bill of Rights expanded Attorney General Harris’ response to the state’s foreclosure and mortgage crisis. Attorney General Harris created a Mortgage Fraud Strike Force in March, 2011 to investigate and prosecute misconduct related to mortgages and foreclosures. In February 2012, Attorney General Harris negotiated a commitment from the nation’s five largest banks to dedicate an estimated $18 billion to mitigate harm to California homeowners caused by bank conduct in the foreclosure process.

SAN FRANCISCO -- Attorney General Kamala D. Harris today filed a lawsuit against eBay for entering into a “handshake” hiring agreement with Intuit that prohibited the company from recruiting and hiring one another's employees.

The complaint alleges that from 2006 to 2009, senior executives at eBay and Intuit agreed not to recruit employees who worked for the other company, and eBay agreed not to hire any Intuit employees. As a result, employees of both companies were prevented from seeking potentially better-paying positions. The companies passed on talented employees because of their anticompetitive agreement.

“The pact harmed employees and it harmed competition,” said Attorney General Harris. “If California is going to continue to be the high-tech capital of the world, we can’t allow anticompetitive conduct that prevents talent from going where it’s put to its highest use.”

The complaint filed by Attorney General Harris alleges that senior executives at eBay entered into a “no-poach” agreement to restrict their ability to recruit and hire employees of the other company. Intuit is being named a co-conspirator. The agreement prohibited either company from soliciting one another’s employees for employment opportunities and for over a year, prevented eBay from hiring any employees at all from Intuit.

The agreement was enforced at the highest levels of the company. The complaint alleges that emails exchanged between eBay’s chief executive officer and Intuit’s founder and chairman detail their intention not to recruit or hire one another’s employees.

Harris' complaint alleges that the agreement between the companies violated California’s Unfair Competition Law, the Sherman Anti-Trust Act and the Cartwright Act.

The California Justice Department worked closely with the U.S. Department of Justice on this matter. The U.S. Department of Justice also has filed a case against eBay for their “no poach” agreement. The U.S. DOJ already has an injunction in place against Intuit relating to a similar agreement Intuit reached with other companies. Harris' separate lawsuit, however, is significant because it seeks to enforce California laws which contain stronger protections against anti-competitive conduct than federal law.

California seeks to recover damages for each act of unfair competition, as well as injunctive relief to prevent any such agreement from occurring again.  

SAN FRANCISCO -- Attorney General Kamala D. Harris today urged parents, coaches and officials for youth sports to develop protective policies related to minors’ personal information, particularly for information posted online.

Attorney General Harris also announced that after an inquiry from her office, GameChanger, a popular sports statistics website, has updated its privacy policy and practices to better protect minors. The action comes as more and more information about minors is being posted online, often without adult consent.

“Most parents probably do not realize that the simple act of signing a child up for soccer or Little League could put enough information online to put the minor in harm’s way,” said Attorney General Harris. “While the Internet makes tracking games and statistics easier, it is important that parents, coaches, school officials and volunteers all are informed and think carefully about any information that is put online, especially when it pertains to children.”

GameChanger updated its privacy policy and put new protections for minors in place after an inquiry from Attorney General Harris’s Privacy Enforcement & Protection Unit.

The changes include: not allowing anyone under the age of 13 to sign up or post on the site; removing last names of team members under the age of 13; and providing privacy information pertaining to minors to users when teams are added to the website.

The inquiry into GameChanger’s policies came after the Attorney General’s office was contacted by a parent who was concerned about the amount of information being posted on the site. Information included on the site for some teams included the teams’ travel schedule, child’s statistics, full name and nicknames.

“I was disturbed when I realized so much information about my son’s team was being posted without my permission,” said Amanda Biers-Melcher of Burbank. “I appreciate Attorney General’s Harris’s assistance with the company and dedication to helping protect the privacy of our children.”

The Attorney General’s Privacy Unit will work with parents and sports leagues to develop best practices for handling children’s personal information in youth sports programs.

Here are tips for anyone who is involved in youth sports:

Playing It Safe with Children’s Information: Tips for Parents

Youth sports teams provide great opportunities for our children to engage in exercise, while learning valuable lessons about team work, healthy competition and fair play. When signing your children up for such activities, be mindful of the need to protect their personal information.

Ask if the team or league will post any of the child’s personal identifying information – such as name, address, school or photo on a website. Tell them if you do not want your child’s information posted online.

• Ask questions about any request for your child’s Social Security number, health insurance number or birth certificate. Propose alternatives, such as the following: 
  • Instead of turning over a copy of a birth certificate, offer to show a copy of the child’s birth certificate and ask that the birth date be entered in the records and noted as verified.
  • Resist providing the Social Security number. In most cases, the child’s Social Security number should not be necessary.
  • Insist that a health insurance number, if required, be protected with strong security measures, such as locking it in an office file cabinet or encrypting it if in a digital format.   
• Ask if the team or league has a written privacy policy, and ask for a copy. If they don’t have one, encourage them to develop an official policy statement that describes the kinds of personal information they collect, how they use it and how it is shared. (Note: If they collect personal information through a website, they may be required to post a privacy policy on the site.)

SACRAMENTO -- Attorney General Kamala D. Harris today announced that the final parts of the California Homeowner Bill of Rights have been signed into law by Governor Jerry Brown.

"California has been the epicenter of the foreclosure and mortgage crisis," said Attorney General Harris. "The Homeowner Bill of Rights will provide basic fairness and transparency for homeowners, and improve the mortgage process for everyone."

The Governor signed:

• Senate Bill 1474 by Senator Loni Hancock, D-Berkeley, which gives the Attorney General’s office the ability to use a statewide grand jury to investigate and indict the perpetrators of financial crimes involving victims in multiple counties.
• Assembly Bill 1950, by Assemblymember Mike Davis, D-Los Angeles, which extends the statute of limitations for prosecuting mortgage related crimes from one year to three years, giving the Department of Justice and local District Attorneys the time needed to investigate and prosecute complex mortgage fraud crimes.
• Assembly Bill 2610 by Assemblymember Nancy Skinner, D-Berkeley, which requires purchasers of foreclosed homes to give tenants at least 90 days before starting eviction proceedings. If the tenant has a fixed-term lease, the new owner must honor the lease unless the owner demonstrates that certain exceptions intended to prevent fraudulent leases apply.

Previously signed into law were three other components of the Homeowner Bill of Rights. Assembly Bill 2314, by Assemblymember Wilmer Carter, D-Rialto, provides additional tools to local governments and receivers to fight blight caused by multiple vacant homes in neighborhoods.

Two additional bills, which came out of a two-house conference committee, provide protections for borrowers and struggling homeowners, including a restriction on dual-track foreclosures, where a lender forecloses on a borrower despite being in discussions over a loan modification to save the home. The bills also guarantee struggling homeowners a single point of contact at their lender with knowledge of their loan and direct access to decision makers.

All aspects of the California Homeowner Bill of Rights will take effect on January 1, 2013.

SACRAMENTO -- Attorney General Kamala D. Harris today announced that claim forms will be sent to approximately 432,584 California borrowers who lost their homes to foreclosure between January 1, 2008 and December 31, 2011 and may be eligible for a settlement payment under the $25 billion national mortgage foreclosure settlement.

Borrowers receiving the claim forms had mortgages serviced by Ally/GMAC, Bank of America, Citi, JPMorgan Chase and Wells Fargo, the servicers that agreed to the settlement with the federal government and attorneys general of 49 states and the District of Columbia.

The settlement, which was signed by the Court in April 2012, earmarked approximately $1.5 billion in payments for 2 million borrowers nationwide. The actual payment amount will depend upon the total number of borrowers who decide to participate. Payment checks are expected to be mailed in mid-2013.

Last week, the national settlement administrator mailed notification postcards to eligible borrowers across the nation. In California, packets containing a letter from the California Department of Justice, a claim form and answers to frequently asked questions are being mailed to eligible borrowers starting this week and continuing through October 12.

Eligible California borrowers should complete the claim form and return it as soon as possible in the envelope provided, or file the claim form online at www.nationalmortgagesettlement.com. The deadline for all claims is January 18, 2013.

The one-page claim forms are simple to complete. Borrowers who have questions or need help filing a claim should contact the settlement administrator, toll-free, at 866-430-8358, or send questions by email to administrator@nationalmortgagesettlement.com. The information line is staffed Monday through Friday from 5 a.m. to 5 p.m. PST.

Eligible borrowers do not need to prove financial harm to receive a payment, nor do they give up their rights to pursue a lawsuit against their mortgage servicer or to participate in the Independent Foreclosure Review Process being conducted by federal bank regulators. More information about that program is available at www.independentforeclosurereview.com.

Eligible borrowers may receive payment from this settlement even if they participate in another foreclosure claims process. However, any payment received may reduce payments that a borrower may be eligible to receive in any other foreclosure claim process or legal proceeding.

Borrowers who believe they may qualify for a payment, but did not receive a notice because they have moved, should contact the settlement administrator, toll-free, at 866-430-8358, or send an updated address by email to administrator@nationalmortgagesettlement.com. The line is staffed Monday through Friday from 5 a.m. to 5 p.m. PST.

Attorney General Harris also is warning all homeowners to be aware of settlement-related scams. Do not provide personal information or pay money to anyone who calls or emails and claims to provide settlement-related assistance. The official claim form does not ask for personal financial information. If you believe someone is conducting a settlement-related scam, please file an online complaint with the Attorney General’s Public Inquiry Unit at http://oag.ca.gov/consumers/general.

The national settlement followed state and federal investigations, which alleged that the five mortgage servicers routinely signed foreclosure-related documents outside the presence of a notary public and without personal knowledge that the facts contained in the documents were correct. This civil law enforcement action also alleged that the servicers committed widespread errors and abuses in their foreclosure processes.

The settlement resulted in broad reform of the mortgage servicing process, as well as financial relief for borrowers who are still in their homes via direct loan modification relief, including principal reduction.

SACRAMENTO -- Attorney General Kamala D. Harris today announced that the final parts of the California Homeowner Bill of Rights have passed out of both legislative houses and have been sent to the Governor’s desk.

“The entire Homeowner Bill of Rights legislative package will ensure fair lending and borrowing practices for California homeowners,” said Attorney General Harris. “California has been the epicenter of the foreclosure crisis and this package of legislation will help affected homeowners, tenants and neighborhoods.”

Senate Bill 1474 by Senator Loni Hancock, D-Berkeley, gives the Attorney General’s office the ability to use a statewide grand jury to investigate and indict the perpetrators of financial crimes involving victims in multiple counties.

Assembly Bill 1950, by Assemblymember Mike Davis, D-Los Angeles, extends the statute of limitations for prosecuting mortgage related crimes from one year to three years, giving the Department of Justice the ability to investigate and prosecute complex mortgage fraud crimes.

On Governor Brown’s desk is Assembly Bill 2610 by Assemblymember Nancy Skinner, D-Berkeley, which will require purchasers of foreclosed homes to give tenants at least 90 days before starting eviction proceedings. If the tenant has a fixed-term lease, the new owner must honor the lease unless the owner demonstrates that certain exceptions intended to prevent fraudulent leases apply.

Already signed into law is Assembly Bill 2314 Assemblymember Wilmer Carter, D-Rialto, which provide additional tools to local governments and receivers to fight blight caused by multiple vacant homes in neighborhoods.

In June, two key parts of the Homeowner Bill of Rights passed out of both houses of the Legislature and were signed by Governor Jerry Brown. Those bills, which came out of a two-house conference committee, provide protections for borrowers and struggling homeowners, including a restriction on dual-track foreclosures, where a lender forecloses on a borrower despite being in discussions over a loan modification to save the home. The bills also guarantee struggling homeowners a single point of contact at their lender with knowledge of their loan and direct access to decision makers.

All aspects of the California Homeowner Bill of Rights will take effect on January 1, 2013 once signed into law.

SACRAMENTO -- Attorney General Kamala D. Harris today announced a $323.67 million settlement with a Los Angeles-based health maintenance organization over excess Medi-Cal and Medicare payments.

The settlement with SCAN Health Plan, Senior Care Action Network, and Scan Group (collectively known as SCAN), which provides health care and support services in Southern California to the elderly and disabled, constitutes the largest Medi-Cal recovery in the state’s history.

“Californians have lost millions of dollars that should have been going toward the health care of our most vulnerable citizens,” said Attorney General Harris. “This settlement will bring a significant amount of those funds back to the state when it is dearly needed, and I commend all of those involved in this action.”

The matter was initially investigated by the State Controller's Office.  The state Attorney General’s Bureau

of Medi-Cal Fraud and Elder Abuse then commenced its own investigation in cooperation with the United

States Attorney’s Office in Los Angeles. The investigation was conducted with the assistance of the California Department of Health Care Services (DHCS), which administers the Medi-Cal program.

A small component of the settlement resolves certain federal Medicare allegations brought by James M. Swoben in a lawsuit filed in July 2009 in federal court in the Central District of California. Mr. Swoben is a former employee of SCAN.  The lawsuit was filed pursuant to the federal and state False Claims Acts, which provide that any person with information about a false claim can file a sealed lawsuit on behalf of the government to recover the government’s losses.

The federal government will be receiving $3.82 million for the Medicare portion of the settlement. For the Medi-Cal portion of the settlement, $319.85 million will be split between the federal government and California, with the federal government receiving $129.38 million and the state $190.47 million. 

The settlement resolves the state’s allegations that SCAN failed to provide contractually required financial information to DHCS, thereby impairing the department from revising capitation rates for SCAN.

“This settlement is a victory for the Medi-Cal beneficiaries we serve,” said DHCS Director Toby Douglas.

“Using the scarce resources available in the most efficient way possible is a top priority for the state. We will continue our ongoing efforts to strengthen programs that protect the integrity of Medi-Cal.”

A copy of the Third Amended Complaint and copies of the settlement agreement; Joint Notice of Election to Intervene in Part; and the Notice of Dismissal and Order Thereon are attached to the online version of this release at www.oag.ca.gov.

SAN FRANCISCO --- Attorney General Kamala D. Harris today warned Californians about potential scams targeting young immigrants seeking to participate in the federal government’s recently launched Consideration of Deferred Action for Childhood Arrivals program.

Beginning today, certain young immigrants who were brought to United States as children and meet several key guidelines may request consideration of deferred action for a period of two years, subject to renewal, and, as a result, may be eligible for work authorization. To learn more about the Consideration of Deferred Action for Childhood Arrivals program, please visit the U.S. Citizenship and Immigration Services’ website: http://www.uscis.gov.

While the California Attorney General’s Office has not yet received any citizen complaints of scams directly related to this new program, immigrants are often the target of consumer scams and should be vigilant in seeking assistance related to the Consideration of Deferred Action for Childhood Arrivals program.

To combat the threat of scams, Attorney General Harris has provided the following information and tips as eligible immigrants begin to apply for consideration:

If you are seeking help from an attorney:

• Is the person offering legal services a lawyer licensed by the State Bar of California? You can check out an attorney online at http://www.calbar.ca.gov/ or by calling 1-800-843-9053.

• If you cannot afford a private attorney, the Board of Immigration Appeals provides a list of attorneys who provide immigration services either for free or for very little cost. This list is available online at http://www.justice.gov/eoir/probono/states.htm. You can also contact your local legal aid office. For a referral, visit www.lsc.gov and click on the Find Legal Assistance tab.

If you are seeking help from an immigration consultant:

• Immigration consultants are required to register with the California Secretary of State’s Office, and to post a $50,000 bond. You can check out an Immigration Consultant online at http://www.sos.ca.gov/business/sf/bond_search/ or by calling 1-916-653-3984.

• It is against the law for an immigration consultant to give legal advice. An immigration consultant can only give you non-legal help, such as translating your answers to questions on U.S. Citizenship and Immigration Services forms.

• Get a written contract signed and dated by the immigration consultant. Make sure the contract lists the full name and contact information for the immigration consultant, the services you were promised and how much you have agreed to pay. The contract must be written in both English and your language. You have the right to cancel the contract within 72 hours of signing the contract. You must cancel the contract in writing. Give only copies of original documents to the immigration consultant; keep your originals in a safe place.

If you have a complaint against an Immigration Consultant, please contact the California Attorney General’s Office. You can file a complaint online at https://oag.ca.gov/contact/consumer-complaint-against-business-or-company or by mailing your complaint to Office of the Attorney General, Public Inquiry Unit, P.O. Box 944255, Sacramento, CA 94244-2550.

RIVERSIDE -- Attorney General Kamala D. Harris yesterday filed a civil lawsuit seeking the removal of officers and directors of Help Hospitalized Veterans, a California charity. The complaint alleges that those running the organization engaged in self-dealing, paid excessive executive compensation and engaged in fraudulent fundraising and other unlawful activities.

The lawsuit also seeks to recover more than $4.3 million in funds improperly diverted from Help Hospitalized Veterans. Those funds were meant to support several programs serving veterans and active-duty military, including providing arts and craft kits to hospitalized veterans. Instead, they were used to enrich the organization’s officers and fundraisers.

“The officers of Help Hospitalized Veterans improperly diverted money that hard-working and patriotic Americans donated to support injured vets,” said Attorney General Kamala D. Harris.  “We must protect veterans, active-duty military and donors from scam artists who see them as little more than prey for their financial frauds.”

The lawsuit alleges that the directors and officers of Help Hospitalized Veterans breached their fiduciary duty by wasting its charitable assets on such things as golf memberships and a condominium (for use by officers), and authorizing excessive executive compensation to the group’s former President (Roger Chapin) and its current President (Michael Lynch). 

The suit alleges Chapin received more than $2.3 million in excessive compensation during the final seven years of his tenure and excessive compensation to Lynch totaled over $900,000.  Chapin is additionally charged with self-dealing as a result of substantial diversions of the charity’s funds to entities in which he had a financial interest. Those diversions include loans Help Hospitalized Veterans made to a firm called American Target Advertising, which was making substantial payments to Chapin. American Target Advertising is a for-profit business (founded by Chapin’s close friend Richard Viguerie) that directs Help Hospitalized Veterans’ vast direct-mail fundraising operation.

The lawsuit further alleges that the nonprofit used increasingly-common accounting gimmicks to inflate the amount of income purportedly spent on providing veterans’ services while artificially minimizing the amount reportedly spent on fundraising. For example, Help Hospitalized Veterans’ use of one of these gimmicks resulted in decreasing its reported fundraising costs from 65 percent of total costs to less than 30 percent. As a result, the filings to both the IRS and the Attorney General’s office were substantially false. Donors and charity watchdog groups rely on both of those reported expenditure categories in evaluating a charity’s efficiency. 

Controversy around the performance of veteran’s charities like Help Hospitalized Veterans was brought to the public’s attention in 2007 by Rep. Henry A. Waxman who, as Chairman of the House Oversight and Government Reform Committee Hearings, held hearings into their fundraising practices and overhead.   

The lawsuit seeks general and punitive damages, restitution, civil penalties and the removal of those officers and directors named in the lawsuit.

Named defendants in the lawsuit include: Help Hospitalized Veterans; its former president Roger Chapin (California); former employee Elizabeth Chapin (California); current president Michael Lynch (California); the following officers or directors of the charity: Robert Beckley, Jr. (Arizona), Thomas Arnold (Florida), Leonard Rogers (Florida), and Gorham Black (Florida); accountant Robert Frank and the company Frank & Company, PC (Virginia); and direct-mail professional fundraiser Creative Direct Response, Inc. (Maryland).

The Complaint alleges seven causes of action:  (1) breach of fiduciary duty (against Help Hospitalized Veterans directors and officers); (2) aiding and abetting a breach of fiduciary duty (against Frank and Frank & Co.); (3) engaging in self-dealing transactions in violation of Corporations Code section 5233 (against Chapin); (4) excessive executive compensation in violation of Corporations Code section 5235 (against Chapin and Lynch); (5) wrongful acquisition of property/unjust enrichment (against Chapin and his wife Elizabeth); (6) misrepresentations in solicitations to donors in violation of Government Code section 12599.6 (against Help Hospitalized Veterans, its directors and officers, and Creative Direct Response); and (7) unfair business practices (against all defendants other than Elizabeth Chapin and Creative Direct Response).

More than 2 million of the nation’s 22 million veterans live in California, the highest number for any state. Protecting these veterans, and active-duty military, from financial scams has been a priority for Attorney General Harris. This focus resulted from a survey of veterans who work in the Department of Justice that was undertaken to inform Department efforts on the matter.  Attorney General Harris and Holly Petraeus of the Consumer Financial Protection Bureau recently spoke at Travis Air Force Base to warn of financial scams that target military members.

LOS ANGELES -- Attorney General Kamala D. Harris today announced defendants who ran a national loan modification scam were ordered to pay more than $4 million in penalties and restitution, including $2 million to consumers who were falsely promised modifications of their mortgage loans.

More than 1,000 customers paid more than $2 million for loan modification services to Statewide Financial Group, Inc., which did business as US Homeowners Assistance and Webeatallrates.com, and was based in Orange County. In July 2009, the Attorney General’s office shut down the business, which had been in operation since January 2008.

“These defendants took advantage of vulnerable people in extremely difficult circumstances, including many who faced imminent loss of their homes,” said Attorney General Harris. “The significant financial penalties imposed by the court let scammers know that severe consequences will flow to those who defraud California consumers.”

The Orange County Superior Court ordered that every US Homeowners Assistance loan modification customer should receive a full refund upon request.  The defendants were also permanently enjoined from engaging in the conduct that led to the lawsuit and were ordered to pay $2 million in civil penalties.  It is unclear, however, how much money will be recovered and available to pay refunds or penalties.

The prosecution of this action took nearly three years, culminating in a multi-week bench trial in March 2012. The business’ owners, Zulmai Nazarzai and Hakimullah Sarpas and Fasela Sheren (who went by the name Sharon Fasela), were all found liable for violating California’s Unfair Competition Law and False Advertising Law.

In a separate proceeding in late 2010, Attorney General Harris successfully prosecuted Nazarzai for contempt of court for his refusal to turn over $360,000 unlawfully taken by defendants as ordered by the court. He has been incarcerated in the Orange County jail since December 2010 because of his continued refusal to comply with the court’s order.

Attorney General Harris formed the Mortgage Fraud Strike Force in May 2011 to investigate and prosecute crimes and wrong-doing related to mortgages, foreclosures, and real estate. The prosecution of this action is part of Attorney General Harris’ ongoing efforts to protect homeowners, which also includes the national mortgage settlement and the California Homeowner Bill of Rights.

Copies of the court’s judgment and statement of decision are attached to the online version of this release at www.oag.ca.gov.