Consumer Protection

Los Angeles – Concerned about a “new wave” of foreclosures, Attorney General Edmund G. Brown Jr. today called on ten major banks and loan servicers to detail their plans to assist homeowners facing dramatic monthly payment increases on Pay Option Adjustable Rate Mortgages.

“Homeowners with Pay Option ARMs are sitting on ticking time bombs that the lending industry has the power to defuse,” Brown said. “Unless these banks and loan servicers act quickly, hundreds of thousands of mortgages will reset across the state, creating a new wave of foreclosures.”

In the third quarter of 2009, California accounted for more than 25 percent of the nation’s foreclosure activity, with 250,000 homes receiving foreclosure filings statewide. This is an annual increase of almost 20 percent in foreclosure activity and more foreclosures loom.

California homeowners hold almost 60 percent of the nation’s exotic Pay Option ARMs originated between 2004 and 2008. Approximately one million of these mortgages will reset nationwide in the next four years, resulting in higher payments and a dramatic increase in foreclosures.

Brown believes that the lending industry must be responsive to homeowners and loan modification programs must be expanded.

Brown has made it a top priority to protect homeowners and combat loan modification fraud in California. In October 2008, Brown announced an $8.68 billion settlement with Countrywide Home Loans, once the largest lender in the county, after the company deceived borrowers by misrepresenting loan terms, loan payment increases, and borrowers’ ability to afford loans.

In total, Brown has sought court orders to shut down more than 30 fraudulent foreclosure assistance companies and has brought criminal charges and obtained lengthy prison sentences for dozens of deceptive loan modification consultants.

Homeowners who have been scammed can contact the Attorney General’s office at 1-800-952-5225, or file a complaint online at: www.ag.ca.gov/consumers/general.php

For more information on the Brown’s action against loan modification fraud visit: http://ag.ca.gov/loanmod.

Brown's request was made in a letter sent to: Bank of America Home Loans & Insurance; Wells Fargo & Company; JP Morgan Chase & Co.; Litton Loan Servicing; ResCap, LLC; Ocwen Financial Corporation; OneWest Bank; American Home Mortgage Servicing; Saxon Mortgage Services, Inc.; and Select Portfolio Servicing. Banks and loan servicers are asked to respond by November 23, 2009.

The text of the letter follows. Copies of each letter sent today are attached.

October 29, 2009

The foreclosure crisis continues to plague California homeowners who are trapped in mortgages with exploding monthly payments. While the economy is beginning to improve, homeowners desperate to save their homes have seen little relief. And analysts predict that foreclosures will continue to worsen, particularly as Pay Option ARMs begin to recast.

Economists estimate that about one million Pay Option ARMs will reset in the next four years, resulting in massive payment shock and dramatically worsening the foreclosure crisis. California, with 58 per cent of all Pay Option ARMs originated between 2004 and 2008, will be the epicenter of this crisis. Systemic plans to modify these loans as they recast must be in place, in order to preserve home ownership and avoid a prolonged and painful recession.

Loan modifications can help many of these borrowers save their homes. To be successful, however, current loan modification programs must expand. The Administration’s Home Affordable Modification Program (HAMP) has been slow to get off the ground and will not benefit thousands of Californians threatened by foreclosure, as it does not allow for principal reduction. Yet principal reduction is exactly what borrowers need. Borrowers living in areas with sharp depreciation in housing prices do not have enough equity in their homes to qualify for HAMP. This situation is even more dire for borrowers with Pay Option ARMs, who now owe more on their homes than when they first took out their mortgages.

Poor customer service often is a significant obstacle to effective loan modifications. Homeowners seeking loan modifications continually complain that their lenders and servicers fail to respond to their phone calls; that they are asked to resubmit the same paperwork over and over again; that they are told they will not be considered for a modification unless they are already in default; and that they receive no answer to their request for a loan modification and are left with no option but to short sell their home, go through foreclosure, or file for bankruptcy. Effective customer service systems must be in place to address the next wave of mortgage resets.

The foreclosure crisis and the expected deluge of Pay Option ARM recasts require advance planning on the part of the entire mortgage industry. Given the importance of this issue, we ask that you provide the following information by no later than November 23, 2009:

1. The number of Pay Option ARM loans secured by residential real property
located in California that you are servicing (regardless of whether you own the loans).

2. Of the number of Pay Option ARM loans identified above, the number that have negatively amortized, and the average dollar amount of that negative amortization.

3. A detailed explanation of all efforts you have taken to handle customer service concerns of borrowers with Pay Option ARM loans, including any increased staffing and a description of any notices you send or are planning to send to borrowers whose loans are about to reset. For advance notices sent to borrowers, please specify how far in advance of the reset date you send, or plan to send, those notices.

4. A detailed explanation of the loan modification plans you have developed for Pay Option ARM loans. Please state the circumstances under which your plans allow for the reduction of principal, and the possible amounts of principal reduction. If you are not willing to consider principal reduction as part of your plan, please explain why. Please also specify whether you have already implemented your modification plans for Pay Option ARMs or, if not, the time frame within which you expect to do so.

5. To the extent your approach for considering whether and how to modify Pay Option ARM loans has changed since the beginning of the foreclosure crisis, please explain the changes and the reasons for those changes.

We look forward to receiving the requested information and to productive discussions on how to minimize the impact of Pay Option ARM recasts on California’s residents and economy.

Sincerely,

BENJAMIN DIEHL
Deputy Attorney General

For EDMUND G. BROWN JR.
Attorney General

El Cajon—Attorney General Edmund G. Brown Jr. and 11 other state Attorneys General today forced Student Loan Xpress, Inc. to provide $112.7 million in debt relief to students facing a “mountain of debt” for helicopter flight instruction they never received.

Of the $112.7 million, approximately $25.5 million in debt relief will go to California residents who did not receive the training they paid for.

“These students did not obtain the helicopter instruction they were promised, yet Student Loan Xpress insisted that they pay off the full cost of their tuition,” Brown said. “Without this agreement, Silver State flight school students would face a mountain of debt for training they never received.”

Silver State Helicopters was founded near Las Vegas in 2002, and the company quickly grew. At its height, the school comprised 34 campuses in 17 states, and included 2,700 students who paid approximately $69,900 each. In California, Silver State Helicopters operated flight schools in Sacramento, Chino and El Cajon.

In August 2005, Student Loan Xpress became the preferred student loan provider for Silver State Helicopters, lending or servicing some $180 million in student loans.

Yet, even before it made its first loan, Student Loan Xpress had reason to believe that the school was in serious financial difficulty. Students complained of a shortage of instructors, flight simulators and helicopters. Only 10 percent of Silver State students graduated. Ultimately, the school filed for bankruptcy in February 2008.

Many students paid thousands of dollars of tuition, but did not receive the flight training they were promised in return. Regardless of the bankruptcy, Student Loan Express demanded that borrowers repay the full cost of the loans.

Consequently, several state Attorneys General launched an investigation, which determined that the two companies had a close business relationship, and that that Student Loan Xpress had failed to comply with the duty to provide required notices to borrowers. Under the settlement, Student Loan Xpress denied any wrongdoing.

After several months of negotiations, the attorneys general and Student Loan Xpress reached a settlement agreement. The settlement, in tandem with the resolution of a private class action, calls for Student Loan Xpress to restructure approximately $174 million of student debt, based on the number of Federal Aviation Administration (FAA) certifications each student obtained. The fewer certificates obtained, the larger the amount forgiven. The average debt relief for students under this settlement is $46,016.

The company also agreed to:
• Forgive an additional 2.5 percent of the student loan if the adjusted loan is repaid within five years;
• Refrain from providing negative information to credit reporting agencies with respect to any loan restructured; and
• Forgive interest between the dates Silver State Helicopters filed for bankruptcy and approximately the end of 2009.

Student Loan Xpress will also pay $125,000 in legal expenses to the states. The states joining California in today’s settlement are: Florida, Georgia, Idaho, Illinois, Missouri, Montana, Nevada, Oklahoma, Oregon, Utah, and Washington.

The $112.7 in debt forgiveness included in this settlement includes the total relief provided in both the states’ settlement with Student Loan Xpress, and the proposed settlement in a private, nationwide class-action called Holman et al v. Student Loan Xpress, Inc. That class action was filed in federal court in Florida.

Student Loan Xpress borrowers with questions about the settlement are asked to contact the settlement administrator in this matter by e-mail, at settlementquestions@gmail.com.

A copy of the Assurance of Voluntary Compliance is attached.

SACRAMENTO – Seeking to recover more than $200 million in illegal overcharges and penalties, Attorney General Edmund G. Brown Jr. today announced that he has filed suit against State Street Bank and Trust -- one of the world’s leading providers of financial services to institutional investors -- for committing “unconscionable fraud” against California’s two largest pension funds -- CalPERS and CalSTRS.

The suit, which was unsealed today by a Sacramento Superior Court judge, contends that Boston-based State Street illegally overcharged CalPERS and CalSTRS for the costs of executing foreign currency trades since 2001.

"Over a period of eight years, State Street bankers committed unconscionable fraud by misappropriating millions of dollars that rightfully belonged to California’s public pension funds,' Brown said. 'This is just the latest example of how clever financial traders violate laws and rip off the public trust.'

The case was originally filed under seal by whistleblowers – “Associates Against FX Insider Trading,” who alleged that State Street added a secret and substantial mark-up to the price of interbank foreign currency trades. The interbank rate is the price at which major banks buy and sell foreign currency.

Subsequently, Brown launched an independent investigation into the allegations.

Brown’s investigation revealed that State Street was indeed overcharging the two funds. Despite being contractually obligated to charge the interbank rate at the precise time of the trade, State Street consistently charged at or near the highest rate of the day, even if the interbank rate was lower at the time of trade.

Additionally, State Street concealed the fraud by deliberately failing to include time stamp data in its reports, so that the pension funds could not determine the true execution costs by verifying when State Street actually executed the trades. Commenting on this deception, one State Street senior vice president said to another executive that “…if providing execution costs will give [CalPERS] any insight into how much we make off of FX transactions, I will be shocked if [State Street] or anyone would agree to reveal the information.”

Brown’s office estimates that the pension funds were overcharged by more than $56.6 million over eight years. The lawsuit asks for relief in the amount of triple California's damages, civil penalties of $10,000 for each false claim; and recovery of costs, attorneys' fees and expenses. It is estimated that damages and penalties could exceed more than $200 million.

Under California's False Claims Act, anyone who has previously undisclosed information about a fraud, overcharge, or other false claim against the state, can file a sealed lawsuit on behalf of California to recover the losses. They must notify the Attorney General as well.

Such a case is called a 'qui tam' case. If there is a monetary recovery, the law provides that the whistleblower “qui tam plaintiff” receives a share of the amount recovered if the requirements of the statute are met.

A copy of the complaint is attached.

Sacramento – Attorney General Edmund G. Brown Jr. today issued a consumer alert warning California homeowners to avoid individuals and businesses that charge up up-front fees for foreclosure relief services in light of a just-enacted state law that makes this “abusive practice” subject to prosecution.

“Over the past two years, unscrupulous attorneys and real estate brokers have abused their trusted roles and exploited desperate homeowners seeking to avoid foreclosure,” Brown said. “The loophole that allowed this abusive practice to continue has now been closed, and homeowners should avoid any person charging up-front fees for foreclosure relief services.”

Earlier this week, Governor Schwarzenegger signed into law Senate Bill 94, which immediately makes it unlawful for any licensed attorney or real estate agent “who negotiates, attempts to negotiate, arranges, attempts to arrange, or otherwise offers to perform a mortgage loan modification or other form of mortgage loan forbearance for a fee or other compensation paid by the borrower…to claim, demand, charge, collect, or receive any compensation until after the [attorney or agent] has fully performed each and every service the licensee contracted to perform or represented that he, she, or it would perform.”

Until now, licensed attorneys and real estate brokers could charge advance fees under certain limited circumstances. Foreclosure scam artists often sought to exploit this exception. The new law closes this loophole.

Brown has made it a top priority to protect homeowners and combat loan modification fraud in California. In August, threatening possible criminal and civil prosecution, he ordered 386 mortgage foreclosure consultants to register with his office and post $100,000 bond. Brown also ordered more than two dozen foreclosure assistance companies to substantiate suspect claims made on the internet and in direct mail advertising.

This action followed a nationwide sweep in July that led to lawsuits against 21 individuals and 14 companies who ripped off thousands of homeowners seeking mortgage relief. In total, Brown has sought court orders to shut down more than 30 companies and has brought criminal charges and obtained lengthy prison sentences for dozens of deceptive loan modification consultants.

Loan modification consultants continue to exploit homeowners desperate for relief. This year, Brown’s office has received more than 2,500 complaints against loan modification consultants and their businesses. This is a dramatic jump from 2008, when less than 200 complaints were filed.

As part of today’s consumer alert, Brown offered the following tips to homeowners:

Don't pay up-front fees. Foreclosure consultants are prohibited by law from collecting money before services are performed.

Don't ignore letters from your lender or loan servicer. Responding to those letters is your best bet for saving your house.

Don't transfer title or sell your house to a “foreclosure rescuer.” Beware! This is a scam to convince homeowners they can stay in the home as renters and buy their home back later. It might also be part of a fraudulent bankruptcy filing. Either way, a scammer can then evict the victim and take the home.

Don't pay your mortgage payments to anyone other than your lender or loan servicer. Mortgage consultants often keep the money for themselves.

Never sign any documents without reading them first. Many homeowners think that they are signing documents for a loan modification or for a new loan to pay off the mortgage they are behind on. Later, they discover that they actually transferred ownership of their home to someone who is now trying to evict them.

If someone demands an upfront fee for foreclosure assistance services, you can report them to the Attorney General’s office at 1-800-952-5225, or file a complaint online at: www.ag.ca.gov/consumers/general.php

For more information on the Brown’s action against loan modification fraud visit: http://ag.ca.gov/loanmod.

The text of Senate Bill 94 can be found at: http://www.leginfo.ca.gov/pub/09-10/bill/sen/sb_0051-0100/sb_94_bill_200...

Siskiyou County – Attorney General Edmund G. Brown Jr. announced that he has filed criminal charges against the former manager of a Mount Shasta-based medical clinic who filed “bogus claims” under Medi-Cal for medical services that were never performed.

Denise Fairhurst, 57, of Redding, was arrested Wednesday on five criminal counts of grand theft, insurance fraud and submitting false claims to the government. She is being held in Siskiyou County Jail on $1 million dollar bail. Arraignment is set for today in Siskiyou Superior Court at 3:00 p.m.

“Fairhurst ran a health clinic that was losing money and in danger of closing because of widespread financial mismanagement,” Brown said. “To keep her operation afloat, she submitted bogus claims to Medi-Cal and in the process violated California law.”

Brown’s criminal complaint, filed in Siskiyou Superior Court, contends that between January 2004 and December 2007, Fairhurst, the former manager of Alpine Healthcare Clinic, billed Medi-Cal $2.2 million for services not rendered to beneficiaries to help pay Alpine’s operations and management. In addition, Fairhurst used $33,492 of the funds to pay personal credit card bills.

The clinic’s financial problems stemmed from Fairhurst’s inability to set appropriate compensation rates for employees and physicians. For instance, a member of the maintenance staff was paid $1000 a month to work one hour a week. Other medical clinics in town lost employees to Alpine because they could not compete with its pay structure. The clinic also lost income because of an agreement she made with doctors to provide care to patients when they were admitted to a hospital.

With costs rising, Fairhurst submitted false claims to Medi-Cal. She forged Medi-Cal forms, claiming that patients had received care at the clinic, even though some patients had not been to it in years. It is estimated that two-thirds of the claims she submitted were fraudulent.

The scheme unraveled when a member of the clinic’s board of directors discovered that payment claims had been submitted for patients who had not been seen at the clinic. The board of directors hired an accounting firm to conduct an audit of the clinic’s finances. Fairhurst refused to provide any information to the firm and resigned in June 2008.

The audit uncovered further evidence of Fairhurst’s activities, including the use of a personal credit card that was linked to the clinic’s bank account. The clinic’s board of directors referred its findings to the Attorney General’s Bureau of Medi-Cal Fraud and Elder Abuse for prosecution earlier this year.

If convicted, Fairhurst faces up to five years in prison.

To report fraud or abuse, call the Bureau of Medi-Cal Fraud and Elder Abuse's hotline at (800) 722-0432.

San Diego – Continuing his fight against “rip-off artists” operating in California, Attorney General Edmund G. Brown Jr. filed suit today against eight individuals and six businesses that operated scams targeting small business owners. The lawsuits, filed today in San Diego Superior Court, seek to recover more than $3 million.

Schedule note: Brown is in San Diego this morning and is available to speak about these cases at approximately 10:30 -- at the Hilton Bayfront Hotel - downtown (Indigo A Room,
1 Park Blvd in San Diego 92101.

“These cases will send a powerful signal that small business owners must be on the alert,” Brown said. “These rip-off artists sent official-looking documents through the mail for the sole purpose of duping small business owners into paying them money – for no value in return.”

The three cases are separate scams, each following a similar theme. The defendants mailed to small businesses solicitations that appeared to be government documents featuring an official-looking seal, an official-sounding name, citations to the Corporations Code and a “reply by” date. The forms claimed that the business was in danger of losing its corporate or limited liability status if payment was not made within a short period of time.

In the first case, Anthony Williams operated Compliance Annual Minutes Board that mailed to California businesses official-looking forms demanding that the recipient complete the form and return it with payment of an “Annual Fee” of $150 or risk loss of corporate status. Williams claimed that in exchange for payment, he would provide corporate minutes. Instead, he prepared generic fictitious minutes for the business owners who paid his fee.

The next case involved George Alan Miller, Rebecca Miller, Arghisti Keshishyan and Kristina Keshishyan who together operated two corporations and one limited liability company: Annual Review Board, Inc., Business Filings Division and Corpfilers.com, LLC. Miller and his co-conspirators mailed solicitations to California limited liability companies and corporations, demanding that the recipients complete the form and return it with payment or risk penalties, fines and suspension. The payment amounts varied from $195 to $239, but all mailers were designed to be official-looking government documents that misled the recipients into sending money.

In the third case, Maria Jones operated Corporate Filings Division and Corporate Compliance Filings, Inc., which mailed official-looking forms entitled “Annual Minutes Disclosure Statement” to California businesses, implying that the recipient business was required to complete the form and return it with payment of an “Annual Fee” of $175 or risk loss of corporate status. In exchange for payment, Jones agreed to provide corporate minutes. The information she solicited, however, was inadequate for legitimate corporate minutes, and she instead provided fictitious minutes.

All defendants are accused of violating:

• Business and Professions Code section 17533.6 (Deceptive Solicitation Statute)
• Civil Code section 1716 (Phony Billing Statute)
• Business and Professions Code section 17500 (False Advertising Statute)
• Unfair business practices within the meaning of Business and Professions Code section 17200.

In all three cases, the Attorney General’s Office seeks civil penalties, injunction and other equitable remedies and costs.

Since 2004, the Attorney General’s Office has received more than 5,000 complaints against a growing number of individuals who mailed solicitations made to look like governmental forms to small businesses in California. Today’s announcement adds to the five cases the office has already successfully handled since these scams were brought to the office’s attention.

The three complaints and the mailers are attached.

LOS ANGELES -- Attorney General Edmund G. Brown Jr. today sued Todd Swick and Michael Sardo, owners of Los Angeles based Executive Financial Credit Services, for ignoring “repeated warnings” to register with his office and post a $100,000 bond with the Secretary of State.

“Swick and Sardo violated California law by refusing to register their credit repair business with the Attorney General’s office and post a $100,000 bond, even after repeated warnings,” Brown said. “So today, attorneys from my office are filing suit, sending a clear signal to credit repair firms operating in California that they must register with the Attorney General’s office and follow the law.”

Executive Financial Credit Services offers to help repair their customers’ credit by challenging negative or inaccurate items on credit reports directly with the three credit report bureaus—Experian, TransUnion, and Equifax. Under California’s 1984 Credit Services Act, companies providing credit repair services in California are required to register with the Attorney General’s office and post a $100,000 surety bond with the Secretary of State.

In late 2008, Brown’s office sent a letter directing the business to register and provided information to assist in the process. The business did not respond. Despite repeated warnings, Executive Financial Credit Services did not register and obtain a bond.

Later Swick claimed the business was no longer conducting credit repair services and didn’t need to register. Brown’s office, however, discovered the business was continuing to operate as a credit repair firm. In early 2009, Sardo informed Brown’s office that the business was moving from California to Arizona and would not complete the registration process. Brown’s office informed Sardo that if the business continued offering credit repair services in California, it was bound by California law to register.

Nevertheless, Executive Financial Credit Services still has not registered. So today, Brown filed suit in San Diego Superior Court, contending that the business violated:

• California Civil Code section 1789.18 for not posting a $100,000 surety bond with the Secretary of State’s office;
• California Civil Code section 1789.25 for conducting a business without first obtaining a certificate of registration from the Attorney General’s Office; and
• California Civil Code section 1789.13(a) for charging consumers money before completely performing the services they promised.

The suit seeks a permanent injunction to keep Executive Financial Credit Services and its principals from operating illegally, civil penalties of not less than $200,000 and restitution for victims.

Brown has taken recent action against credit fraud. Last week, Brown arrested a con artist who stole more than $300,000 from over 600 victims through a credit card and credit repair scam. Ralph Adam Rendon offered victims credit lines of up to $100,000 without any credit checks and offered credit repair counseling. Victims paid an upfront fee of $500 but never received the credit card or any credit repair services.

San Francisco – Launching an investigation into credit rating agencies’ role in fueling the financial crisis, Attorney General Edmund G. Brown Jr. today issued subpoenas to Standard & Poor’s, Moody’s and Fitch to determine whether the firms violated California law when they recklessly gave “stellar ratings to shaky assets.”

“Standard & Poor’s, Moody’s and Fitch put their seal of approval on high risk mortgage-backed securities, recklessly giving stellar ratings to shaky assets that proved toxic to the entire financial system,” Brown said. “This investigation is meant to determine how these agencies could get it so wrong and whether they violated California law in the process.”

Moody’s Investors Service, Standard & Poor’s, and Fitch Ratings grade the creditworthiness of corporations and municipalities and the financial instruments (e.g., bonds and securities) they issue. Investors depend on these ratings to gauge risk and make investment decisions.

At the peak of the housing boom, these agencies gave their highest ratings to complicated financial instruments – including securities backed by subprime mortgages –making them appear as safe as government-issued Treasury bonds.

In rating these securities, the agencies worked behind the scenes with the same Wall Street firms that created them. For their work, the firms earned billions of dollars in revenue, at a rate nearly double what they earned for rating other financial products.

Banks, pension funds and other investors relied on these ratings when they purchased trillions of dollars of securities backed by subprime mortgages because of the high returns and apparent low-risk. Those purchases helped fuel the housing bubble by providing funding for lenders to issue ever-riskier subprime and other toxic mortgages. When the bubble burst, however, those risky mortgages defaulted in record numbers and investors were left holding worthless securities, unable to sell them.

Subsequently, the agencies downgraded the credit ratings of $1.9 trillion in residential mortgage backed securities, a tacit acknowledgement of their failure to adequately assess the risks of the debt they rated. The rating agencies either ignored or did not understand the risks of the debt they rated.

Given the role the rating agencies’ played, Brown is directing the agencies to provide by October 19, 2009 information that will help answer the following questions:

• Whether the rating agencies failed to conduct adequate due diligence in the rating process;
• Whether the rating agencies gave high ratings to particular securities when they knew or had reason to know that high ratings were not warranted;
• Whether the rating agencies failed to comply with their own codes of conduct in rating certain securities;
• Whether the rating agencies profited from giving inaccurate ratings to particular securities;
• Whether the rating agencies made fraudulent representations concerning the quality or independence of their ratings;
• Whether the rating agencies compromised their standards and safeguards for profits;
• Whether the rating agencies' statistical models captured the risk inherent in subprime and other risky assets and, if not, what was the rating agencies' response; and
• Whether the rating agencies conspired with the companies whose products they rated to the detriment of investors.

Brown’s investigation of the rating agencies is one of many actions by his office to address financial practices relating to the mortgage meltdown, including his 2008 lawsuit against Countrywide and recent crackdown on foreclosure consultants and loan modification scams.

LOS ANGELES – Continuing his effort to curb prescription-drug abuse, Attorney General Edmund G. Brown Jr. today unveiled a new internet-based prescription-monitoring database that provides physicians, pharmacists and law enforcement officers a powerful technology to stop 'drug seekers' from obtaining prescription drugs.

"The recent deaths of Anna Nicole Smith and Michael Jackson have made clear to the whole world just how dangerous prescription drug abuse can be,” said Brown. “Today, my office is inaugurating a high-tech monitoring system that will enable doctors and law enforcement to identify and stop prescription-drug seekers from doctor-shopping and abusing prescription drugs.'

The state's secure database, known as the Controlled Substance Utilization Review and Evaluation System (CURES), contains more than 100 million entries representing controlled substances (Schedule II, III and IV) dispensed in California. Controlled substances are classified under federal guidelines based on potential for abuse and accepted medical use in treatment in the United States and international treaties.

Prescription Drug-Monitoring Database

Today’s launch of the online CURES database is part of Brown’s effort to curb prescription-drug abuse in the state and make it easier for doctors to track their patients’ prescription-drug history. The database gives health professionals (doctors, pharmacists, midwives, and registered nurses), law enforcement agencies and medical profession regulatory boards instant computer access to patients’ controlled-substance records. This replaces the state’s previous system that required mailing or faxing written requests for information. Each year, more than 60,000 such requests are made to the Attorney General’s office.

Each database record contains a patient’s dispensed drug record, including:

• Drug Name
• Date Filled
• Quantity, Strength and Number of Refills
• Pharmacy Name and License Number
• Doctor’s Name and DEA Number
• Prescription Number

Under the new system, a pain-management physician examining a new patient complaining of chronic back pain would be able to instantly look up the patient’s controlled-substance history to determine whether the patient legitimately needs medication or is a “doctor shopper.” “Doctor shoppers” are prescription-drug addicts who visit dozens of doctors to obtain multiple prescriptions for drugs. In the past, the doctor’s request could take several days for a response. Now with CURES instant access, doctors can identify doctor shoppers and other prescription-drug abusers before they write them another prescription. Law enforcement can also flag a person in the database to alert physicians to potential abusers.

Last year, the Attorney General’s office provided more than 64,000 Patient Activity Reports to authorized subscribers.

Growing Problem of Prescription-Drug Abuse

With 7,500 pharmacies and 158,000 prescribers reporting prescription information annually, CURES is the largest online prescription-drug monitoring database in the United States. Its goal is to reduce drug trafficking and abuse of dangerous prescription medications, lower the number of emergency room visits due to prescription-drug overdose and misuse, and reduce the costs to healthcare providers related to prescription-drug abuse.

Prescription-drug abuse costs the state and health insurers millions of dollars each year. The National Survey on Drug Use and Health estimates that 20 to 30 percent of California’s drug abusers primarily use prescription drugs. In addition, a 2005 survey by the Drug Abuse Warning Network estimates that non-medical use of pharmaceuticals accounted for more than 500,000 emergency room visits in California, an enormous drain on the state's healthcare system.

According to the latest Department of Justice 'Drug Trends' report, Valium, Vicodin, and Oxycontin are the most prevalent pharmaceutical drugs obtained fraudulently. Vicodin and Oxycontin are the two most abused pharmaceutical drugs in the United States.

CURES Success Stories

Prescription-drug abuse can have serious consequences for both abusers and the public. Each year, hundreds of people die from prescription-drug overdose in California. Dozens more are injured or killed by prescription-drug abusers who are driving under the influence of medication. The problem is on the rise; recent studies have found that teens are increasingly more likely to have abused prescription drugs than most illicit drugs.

Last year, Brown and the CURES team targeted the top 50 doctor shoppers in the state, who averaged more than 100 doctor and pharmacy visits to collect massive quantities of addictive drugs like Valium, Vicodin, and Oxycontin. The crackdown led to the arrest of dozens of suspects, including Frankie Greer, 53, who visited 183 doctors and 47 pharmacies to feed a prescription-drug habit that included some of the most dangerous painkillers in lethal combinations. In a one-year period, Greer sought out multiple doctors at hospital emergency rooms to prescribe her more than 4,830 hydrocodone tablets, 2,210 oxycodone tablets and 156 Oxycotin pills, along with a variety of additional addictive painkillers.

In May 2009, the CURES team worked with the Ventura County Sheriff’s Office to provide detectives with the prescribing history of Dr. Bernard Bass, a Burbank doctor accused of writing hundreds of fraudulent prescriptions to feed his patients’ drug addictions. Seven of his patients died from prescription-drug overdoses. Following an investigation that included the CURES report of the prescriptions he had written, Dr. Bass faced criminal charges, lost his medical license and surrendered his license to prescribe controlled substances.

CURES can also alert law enforcement and licensed medical professionals to signs of illegal drug diversions. Last fall, Brown’s office teamed up with the Simi Valley Police Department to investigate Ricky Washington, known to police for his violent history, street gang-affiliation and previous drug-trafficking arrests. The 12-month investigation revealed a criminal conspiracy in which Ricky Washington and associates had stolen the identities of eight doctors, which they used to illegally write prescriptions. The drug-trafficking group also stole the identities of dozens of innocent citizens, designating them as 'patients' in order to fill the fraudulent prescriptions. The drug ring obtained more than 11,000 pills of highly addictive drugs like Oxycontin and Vicodin.

For more information on the California Department of Justice Bureau of Narcotic Enforcement and California's current prescription drug monitoring system visit: http://ag.ca.gov/bne/cures.php.

For doctors and other authorized healthcare and prescription-drug providers, visit ag.ca.gov for more information on CURES and how to register.

San Fernando Valley – On Thursday, September 10, 2009 at approximately 3:30 p.m., Attorney General Edmund G. Brown Jr. will be the guest speaker at a consumer protection townhall in Sylmar, where he will warn Southern California residents about the proliferation of “devious mortgage schemes” and offer tips to avoid them. Since 2007, Sylmar has experienced the highest number of foreclosures in the City of Los Angeles.

“Following the housing collapse, scammers and rip off artists have come up with dozens of devious mortgage schemes to take advantage of desperate homeowners,” Brown said. “Homeowners must arm themselves with information and be wary of loan consultants who charge thousands of dollars in upfront fees and deliver nothing in return.”

Brown will be a guest speaker at a community hearing on foreclosure prevention organized by Los Angeles City Council Jobs and Business Development Committee Chairman Richard Alarcon. The townhall is free and open to the public.

WHAT: Town hall hearing on consumer protection. Topics include: mortgage fraud, foreclosure prevention, false advertising, student loans and credit card issues.

WHO: Attorney General Jerry Brown as guest speaker, and
Los Angeles City Council Jobs and Business Development Committee Chairman Richard Alarcon.

WHEN: Thursday, September 10th
3:00 PM- 5:00 PM

WHERE: Los Angeles Mission College
Campus Center
13356 Eldridge Ave. Sylmar, CA. 91342

BROWN’S RECENT ACTIONS TO STOP MORTGAGE FRAUD:

• Brown partnered with the California Department of Real Estate and the State Bar of California to combat loan modification and foreclosure fraud across the state.

• Brown has sent letters directing 386 mortgage foreclosure consultants to register with his office and post $100,000 bond, or demonstrate why they are not required to. If the consultants are required to register and have failed to do so, they are subject to criminal penalties of up to a year in jail and fines ranging from $1,000 to $25,000 per violation.

• Brown sent letters demanding that 27 loan consultants substantiate suspect claims made on the internet and in direct mail advertising.

• As part of a nationwide sweep last month, Brown filed suits against 21 individuals and 14 companies who ripped off thousands of homeowners seeking mortgage relief. In total, Brown has sought court orders to shut down 32 companies and has brought criminal charges and obtained lengthy prison sentences for deceptive loan modification consultants.

• Brown unveiled a new website ( http://ag.ca.gov/loanmod) that provides homeowners tips to avoid loan modification fraud, allows them to determine if a company is registered with his office and makes it easier to file complaints.

5 Tips to Avoid Being Scammed
1. Don't pay up-front fees. Foreclosure consultants are prohibited by law from collecting money before services are performed.

2. Don't ignore letters from your lender or loan servicer. Responding to those letters is your best bet for saving your house.

3. Don't transfer title or sell your house to a 'foreclosure rescuer.' Beware! This is a scam to convince homeowners they can stay in the home as renters and buy their home back later. It might also be part of a fraudulent bankruptcy filing. Either way, a scammer can then evict the victim and take the home.

4. Don't pay your mortgage payments to anyone other than your lender or loan servicer. Mortgage consultants often keep the money for themselves.

5. Never sign any documents without reading them first. Many homeowners think that they are signing documents for a loan modification or for a new loan to pay off the mortgage they are behind on. Later, they discover that they actually transferred ownership of their home to someone who is now trying to evict them.