Consumer Protection

Brown Clamps Down on Companies Luring Californians into Internet Scheme Promising Riches

March 16, 2009
Contact: (916) 210-6000, agpressoffice@doj.ca.gov

Ventura -- Attorney General Edmund G. Brown Jr. and Ventura District Attorney Gregory D. Totten today clamped down on two companies -- Imergent, Inc. and Stores On Line – that “falsely promised” customers that they could earn full-time income by selling merchandise over the Internet.

“These companies falsely promised customers that they could get rich by selling merchandise over the Internet,” Attorney General Brown said. “In reality, many customers were left in deep debt, paying high up-front costs, and never earning a dime from their websites. This agreement allows these customers to get back some of their losses.”

These two companies sell website-based “stores,” in packages of three or six websites, at a cost of between $2,700 and $6,000. They market their products at seminars, which they advertise through postcards and other mailings often sent to senior citizens with limited Internet experience. They often offer seminar attendees a meal and a free gift such as an MP3 player.

The companies made statements such as:

“Are you ready to claim YOUR share of eBay’s annual $3.2 Billion in revenue? By attending our FREE 90-minute ‘eBay Entrepreneur Training’ Conference you will learn how eBay PowerSellers run successful Internet businesses and how an elite few use additional strategies to boost revenues way beyond the average seller. Learn how nearly half-a-million people create full-time incomes using eBay!”

At the seminars, the companies make tantalizing claims regarding the massive profits that can be earned by consumers who purchase their product. Often, however, these profits are never realized and the customer is left in serious debt.

One victim used the inheritance left by her father to purchase six websites, in hopes that they would help supplement her income after retirement. The victim spent over $10,000 in set up costs. Of the six websites the victim bought, only one has been set up, and it continues to cost more than it brings in.

In August of 2006, the California Attorney General’s Office and the Ventura County District Attorney settled a previous case against Imergent, Inc. and Stores On Line. That settlement barred the defendants from engaging in conduct that violated California’s laws governing Seller Assisted Marketing Plans.

The Attorney General’s office continued to monitor the companies’ business practices and discovered that they were violating the 2006 agreement and were continuing to sell Seller Assisted Marketing Plans without registering with the state.

A new action was brought in 2007 to enforce the prior judgment, and to seek penalties, restitution, and an injunction. Today’s agreement resolves the 2007 action.

The companies have agreed to the following terms:

• Pay $147,600 for full restitution to California consumers who have complained to the Attorney General’s Office, the Ventura County District Attorney, or directly with StoresOnLine.
• Pay $202,400 for restitution to California consumers who submit complaints within 90 days.
• Cancel all outstanding financing contracts for consumers who have complained.
• StoresOnLine will also send a letter to all California purchasers who have bought since January 1, 2008, offering them a 15-day period within which to cancel the transaction and receive a refund.
• Register with the state as a seller of Seller Assisted Marketing Plans
• Provide a 15-day right to cancel for purchasers over the age of 65
• Disclose clearly the circumstances under which StoreOnLine will charge consumers a web site hosting fee, and provide consumers the opportunity to opt out of hosting websites with Imergent, Inc. and Stores On Line.
• Provide the Attorney General’s Office with recordings of sales presentations and notify the Attorney General and Ventura County District Attorney’s Office when sales presentations take place in California, so they can be monitored.

These types of schemes are promoted on TV infomercials, on the Internet, by direct mail, at trade shows, at invitation-only seminars, and through ads that may appear in the classified sections of newspapers or magazines. The ads promise big earnings, and promise that no selling or other experience is necessary.

If you believe you are a victim and have not yet made a complaint to the Attorney General’s Office, you may be entitled to restitution if you submit a complaint within 90 days.

To submit a complaint with the Attorney General’s Office, please file a complaint online at http://ag.ca.gov/consumers/general.php or call the Public Inquiry Unit at 1-800-952-5225.

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Brown Warns Homeowners that Scam Artists are Using Forged Letterhead of Lenders to Con Californians

March 12, 2009
Contact: (916) 210-6000, agpressoffice@doj.ca.gov

LOS ANGELES- California Attorney General Edmund G. Brown Jr. today warned that scam artists have “sunk to a new low” and have used the forged letterhead of major lenders to con worried Californians into paying thousands of dollars for non-existent loan modification services.

“Scam artists have sunk to a new low and are using the forged letterhead of lenders to con worried Californians into handing over their hard-earned money,” Attorney General Brown said. “Californians should be deeply skeptical of anyone who demands money up front and makes extravagant promises that they can save their home.”

Attorney General Brown also advised consumers about seven steps they can take to protect themselves from loan modification fraud. (See below).

Today’s warning comes on the heels of the arrest Wednesday of Anna Santos, 22, of North Hills – a key player in a loan modification scam using forged letterhead – on charges of money-laundering, conspiracy, and four-counts of grand theft.

Ms. Santos joined with members of the defunct First Gov loan modification ring in a separate criminal enterprise with a disturbing twist. They used forged mail and envelopes that appeared to be from victims’ lenders.

Ms. Santos obtained a fictitious business permit through the City of Los Angeles for “Payment Processing Department.” She opened several bank accounts and two post office boxes under that name. She and other members of the ring mailed flyers that appeared to be from victims’ lenders or a government entity. The flyer used a large, bold header that read “Final Notice” and advised homeowners that they qualified for a special program to save their home from foreclosure.

After providing their mortgage information, homeowners received what appeared to be “confirmation” that the lender had been notified about the loan modification. Many victims also received loan modification documents that appeared to be from the victim’s lender. The documents were of course forgeries.

The victims were informed they had been placed in a “probationary” program and their mortgage payments should be submitted to “Payment Processing Department” and sent to a given post office box address. None of the payments were credited to the victims’ home loans.

Payments sent to the post office box were retrieved by Ms. Santos and deposited into the bank accounts she had opened. The money was then transferred to bank accounts held by other members of the ring.

Many victims paid over $6,000 to this loan modification scam.

Here’s what homeowners can do to avoid becoming a victim:

• DON'T pay money to people who promise to work with your lender to modify your loan. It is unlawful for foreclosure consultants to collect money before (1) they give you a written contract describing the services they promise to provide and (2) they actually perform all the services described in the contract, such as negotiating new monthly payments or a new mortgage loan. However, an advance fee may be charged by an attorney, or by a real estate broker who has submitted the advance fee agreement to the Department of Real Estate, new window, for review.

• DO call your lender yourself. Your lender wants to hear from you, and will likely be much more willing to work directly with you than with a foreclosure consultant.

• DON’T transfer titled or sell your house to the foreclosure rescuer. Fraudulent foreclosure consultants often promise that if the homeowners transfer title, they may stay in the home as renters and buy their home back later. The foreclosure consultants claim that transfer is necessary so that someone with a better credit rating can obtain a new loan to prevent foreclosure. BEWARE! This is a common scheme so-called “rescuers” use to evict homeowners and steal all or most of the home’s equity.

• DON’T pay money upfront to people who promise to work with your lender to modify your loan. It is unlawful for foreclosure consultants to collect before 1) they give you a written contract describing the services they promise to proved and 2) they actually perform all the services described in the contract, such as negotiating new monthly payments or a new mortgage loan.

• DON’T pay your mortgage payments to someone other than your lender or loan servicer, even if he or she promises to pass the payment on. Fradulent foreclosure consultants often keep the money for themselves.

• DON’T sign any documents without reading them first. Many homeowners think that they are signing documents for a new loan to pay off the mortgage they are behind on. Later, they discover that they actually transferred ownership to the “rescuer.”

• DON’T ignore letters from your lender. Consider contacting your lender yourself, many lenders are willing to work with homeowners who are behind on their payments.

• DO contact housing counselor approved by the U.S. Department of Housing and Urban Development (HUD), who may be able to help you for free. For a referral to a housing counselor near you, contact HUD at 1-800-569-4287 (TTY: 1-800-877-8339) or www.hud.gov.

IF YOU TRANSFERRED YOUR PROPERTY OR PAID SOMEONE TO “RESCUE” YOU FROM FORECLOSURE, YOU MAY BE A VICTIM OF A CRIME.

Please file a complaint with the Attorney General’s Office at the following address: Office of the Attorney General - Public Inquiry Unit, P.O. Box 944255, Sacramento, CA. 94244, or online at www.ag.ca.gov/consumers/general.php.

Attorney General Brown Sends Perpetrators of Loan Modification Fraud to Prison

March 9, 2009
Contact: (916) 210-6000, agpressoffice@doj.ca.gov

SAN BERNARDINO -- Attorney General Edmund G. Brown Jr. announced that three individuals have pled guilty to loan modification fraud against hundreds of 'desperate California homeowners' and were sentenced to as much as 6 years of prison.

“While doing nothing to help and pocketing all the money, these individuals ripped off desperate California homeowners who paid thousands of dollars to stop the foreclosure of their homes,” Attorney General Brown said.

The defendants sentenced were part of a foreclosure scam engineered by the First Gov company, which was based in San Bernardino, Calif.

• Rosa Conrado, 51, of San Bernardino, was sentenced today to six years, four months of prison for 6 counts of grand theft.

• Alejandrina Maldonado, 33, of St. Lucie, Fla., was sentenced on February 26, 2009, to a three year prison term for one count of grand theft.

• Martin Jesus Flores, 33, of Baldwin Park, was given three years of probation today based on his limited participation in the scheme.

• David Giron, 44, of Ontario, and Saul Amador, 23, of West Covina are scheduled for a preliminary hearing on March 19, 2009, for theft, money laundering, and conspiracy.

• Three other members of the ring -- Juan Jose Perez, 48, of Grand Terrace, Isuara Hernandez, 33, of La Habra, and Antonia Gonzalez, 66, of San Bernardino – are believed to have fled the jurisdiction and may be out of the country.

In November 2008, Attorney General Brown announced the break up of the First Gov scam ring. First Gov, -- which also operated under such misleading names such as Foreclosure Prevention Services; Resolution Department; Reinstatement Department; and Reinstatement Processing -- solicited hundreds of homeowners, offering to help them stop the foreclosure of their homes.

Ring members promised victims they would renegotiate their mortgages and reduce monthly payments. They demanded an up-front fee, ranging from $1,500 to $5,000, to participate in the loan-modification program.

Victims were told to stop making mortgage payments and communicating with their lender because this would interfere with the loan modification process. After collecting their fee, ring members pocketed the money and did nothing to help victims.

The action today is part of Attorney General Brown's campaign to fight predatory lending and loan modification scams.

• In March 2008, the Attorney General’s office arrested members of Lifetime Financial Corporation for perpetrating a similar mortgage-modification scam that cheated hundreds of California homeowners out of hundreds of thousands of dollars.

• In October 2008, the Attorney General secured $8.6 billion in loan relief for eligible homeowners in a landmark settlement with Countrywide Financial Corporation for engaging in deceptive and predatory lending practices.

The Attorney General has also issued a Consumer Alert regarding foreclosure scam rings and tax reassessment scams. Homeowners should be on high alert when approached by companies offering ways to save your home or lower your property taxes.

The press release announcing the First Gov arrests in November can be found at: http://ag.ca.gov/newsalerts/release.php?id=1627

Brown Announces Arrest of Fugitive who Masterminded $20 Million Real Estate Fraud Scheme

February 27, 2009
Contact: (916) 210-6000, agpressoffice@doj.ca.gov

FOR IMMEDIATE RELEASE
February 27, 2009
Contact: Christine Gasparac (916) 324-5500

Brown Announces Arrest of Fugitive who Masterminded $20 Million Real Estate Fraud Scheme

NEVADA COUNTY —Attorney General Edmund G. Brown Jr. and the Nevada County District Attorney announced that the man behind a $20 million “fraudulent real estate scheme,” Thomas Hastert, was taken into custody and arrested Thursday in Santa Cruz.

“Thomas Hastert’s days of swindling millions from investors and borrowers are at an end,” Attorney General Brown said. “Now the case moves to the courtroom, and Mr. Hastert can be held accountable for his fraudulent real estate scheme.”

A warrant was issued for Hastert’s arrest last Friday. Santa Cruz investigators, working with the Nevada County District Attorney’s Office, arrested him yesterday morning at his daughter’s house. Bail was set at $540,000.

Seventy-three criminal counts were filed against Thomas Hastert in the Nevada County Superior Court last Friday for embezzlement, securities fraud, and filing false documents.

Hastert brokered over 270 hard-money loans in Nevada, Sacramento, Sutter, Butte, Placer, and Yolo Counties between September 2004 and September 2007 for real estate development projects. Hard-money loans typically provide high returns for private investors and are secured through collateral such as real estate.

In this case, Hastert secured $20 million from several investors, using the funds to broker hard-money loans to borrowers seeking to develop homes on real estate.

In the criminal complaint, Hastert is alleged to have:

Misled investors. Hastert told investors that borrowers had excellent credit scores and were capable of repaying the loans. This proved to be untrue. Many borrowers had poor credit scores, did not make regular payments on the loans, and held properties that were in foreclosure.

o The loans that Hastert brokered were required by law to be placed into a special trust account overseen by a third-party escrow firm. The firm had to verify whether funds being withdrawn by borrowers were being used for construction projects. Despite telling investors he had established such a trust account, Hastert never did, and the money was regularly withdrawn and misused by borrowers with no oversight.

o Hastert told investors he would personally oversee the development of the land. In one instance, he was asked by investors to drive them to a particular property that was supposedly under development. Hastert could not locate the property.

• Set up fake investors, known as “straw men,” to keep concerned investors at bay. Hastert filed documents with a county recorder’s office saying that his secretary owned a majority interest in the investment, despite the fact that she had never invested a single dollar. If a legitimate investor tried to initiate foreclosure proceedings, Hastert would contend that the supposed majority owner opposed the action.

• Embezzled fees. Hastert was entitled to collect a 3% fee on loans he brokered. However, he took all his fees up-front as if the loan were fully funded. In fact, some loans never fully funded, and others took more than a year to fully fund.

If convicted, Hastert could face up to 11 years and 4 months in prison. Bail was set at $540,000. A warrant was issued for his arrest today.

To view the press release about his charges, please follow this link:

http://ag.ca.gov/newsalerts/release.php?id=1683

# # #

Attorney General Brown Sues to Block Fraudulent Workers' Comp. Scheme

February 25, 2009
Contact: (916) 210-6000, agpressoffice@doj.ca.gov

San Diego -- Attorney General Edmund G. Brown Jr. today filed a lawsuit to stop the Contractors Asset Protection Association, Inc. from engaging in a “sophisticated and fraudulent scheme” to cheat the state workers compensation system.

“This company falsely promised its clients that if they gave their employees empty titles and worthless shares of stock they could avoid tens of thousands of dollars in workers compensation premiums,” Attorney General Brown said. “But you can’t simply call a security guard a vice president and avoid complying with the law through a sophisticated and fraudulent scheme.”

This lawsuit seeks a permanent injunction barring Contractors Asset Protection Association, Inc. (ConAPA) and its founder-president, Eugene Magre from engaging in unfair and deceptive business practices in violation of sections 17200 and 17500 of the California code. The lawsuit also seeks restitution and civil penalties of no less than $300,000.

The lawsuit alleges that ConAPA sought to cynically exploit a legal exception to the workers compensation law, where directors of a corporation who are also the sole shareholders can exempt themselves from workers’ compensation coverage.

Under this scheme, ConAPA marketed and advertised an unlawful business plan urging employers to misclassify rank-and-file employees as “corporate officers” and issue them nominal shares of company stock so as to avoid paying workers’ compensation insurance premiums. For example, housekeepers, cooks, security guards, maintenance men, roofers, and construction laborers were named as “vice-presidents” and issued worthless shares of non-negotiable stock.

Despite the titles, many workers were not assigned any managerial or administrative duties and performed the same rank-and-file duties for the same pay that they performed prior to their “promotion.”

ConAPA ensured that its clients were able to prevent their new “officer-shareholders” from gaining control over the business. Employees were also required to sell their shares back to the company if they left the company.

Some ConAPA clients created “dummy” corporations populated by rank-and-file “officer-shareholders” that held no real assets, and existed solely for the purpose of offering their officers back to the original client company as rank-and-file workers who were ostensibly exempt from workers’ compensation.

ConAPA told its clients that this business model was legal, and implied that the program had been scrutinized and approved by several state authorities, which it had not.

The company has approximately 40 active clients, and has had as many as 200 clients in the past that employed their business model.

A copy of the complaint is attached.

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Brown Announces Victory Against Weak Bush-Era Air Pollution Standards

February 24, 2009
Contact: (916) 210-6000, agpressoffice@doj.ca.gov

Sacramento–Attorney General Edmund G. Brown today announced that a coalition of 18 states and cities have won reversal of controversial Bush-era pollution standards “justified by nothing more than junk science” and which threatened to undermine public health.

"This dangerous air pollution causes thousands of premature deaths each year. Yet the Bush Administration callously ignored the facts and put forward a standard justified by nothing more than junk science,” Attorney General Brown said. “Today, the DC Circuit Court cleared the way for the Obama Administration to right this wrong.”

Fine soot pollution (also known as fine particulate matter pollution or “PM 2.5”) comes from diesel vehicles, power plants and other sources, and is prevalent in urban areas. Because fine soot can lodge deep in the lungs, it can cause numerous harmful health effects, including premature death, chronic respiratory illness, decreased lung function, cardiovascular disease and asthma. Children, senior citizens, and people with existing lung and heart diseases are especially susceptible to harm from fine soot pollution.

That is why EPA’s scientists and scientific advisory committee recommended strict new standards for fine soot in 2005. However, the Bush Administration rejected their advice and chose a weaker, less protective standard. Today’s decision clears the path for the Obama Administration to issue new, stronger standards.

Today’s decision, issued by the federal Court of Appeals for the D.C. Circuit, agreed with the coalition that the Bush EPA had acted illegally in issuing weak air pollution standards for fine soot, acting against the advice of EPA professional staff and EPA’s own scientific advisory committee. The court found that the Bush EPA had also erred by not taking into account the special sensitivity to air pollution of children, elderly people and other vulnerable populations. The Court remanded the standards to the new Obama EPA to issue new, more protective air pollution standards for fine soot that will better protect public health.

The states, cities and other state agencies joining in the challenge that led to today’s victory are: California, Connecticut, Delaware, Illinois, Maine, New Hampshire, New Jersey, New Mexico, New York, Oregon, the Pennsylvania Department of Environmental Protection, Rhode Island, Vermont, the District of Columbia and the South Coast Air Quality Management District. The States of Arizona, Maryland and Massachusetts also joined as friends of the court.

Brown Files Criminal Charges Against Broker who Masterminded Elaborate Real Estate Scheme

February 20, 2009
Contact: (916) 210-6000, agpressoffice@doj.ca.gov

FOR IMMEDIATE RELEASE
February 20, 2009
Contact: Christine Gasparac (916) 324-5500

Brown Files Criminal Charges Against Broker who Masterminded Elaborate Real Estate Scheme

NEVADA COUNTY – Attorney General Edmund G. Brown Jr. and Nevada County District Attorney Cliff Newell today announced that criminal charges were filed against a hard-money real estate broker who “brazenly deceived” investors and borrowers, embezzled fees, and filed false paperwork.

“This man brazenly deceived investors and borrowers, promising high returns and easy loans, ripping off his customers for his own personal enrichment,” Attorney General Brown said. “Ultimately, this criminal scheme collapsed when many of these loans failed, costing hundreds of people more than $20 million.”

Seventy-three criminal counts were filed against Thomas Hastert in the Nevada County Superior Court this morning for embezzlement, securities fraud, and filing false documents.

Hastert brokered over 270 hard-money loans in Nevada, Sacramento, Sutter, Butte, Placer, and Yolo Counties between September 2004 and September 2007 for real estate development projects. Hard-money loans typically provide high returns for private investors and are secured through collateral such as real estate.

In this case, Hastert secured $20 million from several investors, using the funds to broker hard-money loans to borrowers seeking to develop homes on real estate.

In the criminal complaint, Hastert is alleged to have:

• Misled investors. Hastert told investors that borrowers had excellent credit scores and were capable of repaying the loans. This proved to be untrue. Many borrowers had poor credit scores, did not make regular payments on the loans, and held properties that were in foreclosure.

o The loans that Hastert brokered were required by law to be placed into a special trust account overseen by a third-party escrow firm. The firm had to verify whether funds being withdrawn by borrowers were being used for construction projects. Despite telling investors he had established such a trust account, Hastert never did, and the money was regularly withdrawn and misused by borrowers with no oversight.

o Hastert told investors he would personally oversee the development of the land. In one instance, he was asked by investors to drive them to a particular property that was supposedly under development. Hastert could not locate the property.

• Set up fake investors, known as “straw men,” to keep concerned investors at bay. Hastert filed documents with a county recorder’s office saying that his secretary owned a majority interest in the investment, despite the fact that she had never invested a single dollar. If a legitimate investor tried to initiate foreclosure proceedings, Hastert would contend that the supposed majority owner opposed the action.

• Embezzled fees. Hastert was entitled to collect a 3% fee on loans he brokered. However, he took all his fees up-front as if the loan were fully funded. In fact, some loans never fully funded, and others took more than a year to fully fund.

If convicted, he could face up to 11 years and 4 months in prison. Bail was set at $540,000. A warrant was issued for his arrest today.

The complaint and declaration are attached.

Attorney General Brown: Homeowners Should be on High Alert for Property Tax Scams

February 12, 2009
Contact: (916) 210-6000, agpressoffice@doj.ca.gov

Sacramento—Attorney General Edmund G. Brown Jr. today issued a Consumer Alert to California homeowners about a “blatant and costly scam” targeting homeowners with declining property values.

“This blatant and costly scam holds out hope to homeowners that their property taxes will be reduced if they pay hundreds of dollars to a middleman to have their property re-evaluated,” Attorney General Brown said. “In point of fact, homeowners can seek relief directly from their county assessor free of charge. Homeowners should be on high alert.”

Companies are sending deceptive mailers to homeowners offering help in reducing property tax assessments, if the homeowner pays the company hundreds of dollars in fees. The companies use official-sounding names such as “Tax Adjusters,” “Tax Readjustment” or “Tax Review” to make victims believe the company is a government agency.

Property tax reassessment is a free service provided by county tax assessors. If homeowners believe their property value has declined and they are paying too much in property taxes, the local tax assessor will review the property value for free for a possible downward assessment.

To avoid becoming a victim, homeowners should:

  • Never pay money for something they did not ask for.
  • Avoid a middleman—they should contact their local tax assessor’s office for property value reassessment.

Homeowners who believe they are a victim of this scam should contact the Attorney General’s Office by either calling 1-800-952-5225 or by writing to P.O. Box 944255 Sacramento, CA 94244.

Attorney General Brown Announces Charges Against Physician Accused of Prescription Drug Fraud

February 2, 2009
Contact: (916) 210-6000, agpressoffice@doj.ca.gov

RANCHO CUCUMONGA— Attorney General Edmund G. Brown Jr. today announced that charges were filed against Dr. Lisa Barden of Rancho Cucumonga, who broke the law and “wrecked havoc” on the lives of patients whose identities she stole to obtain highly addictive pain killers.

“This physician wrecked havoc on the lives of dozens of patients, violating her oath and abusing her position as a doctor,” Attorney General Brown said.

In November 2007, the California Department of Justice’s Bureau of Narcotic Enforcement began an investigation of Dr. Barden, who illegally obtained prescription drugs on 131 separate occasions from more than 43 different pharmacies. Barden obtained more than 30,000 tablets of prescription painkillers, including hydrocodone (Vicodin) and oxycodone (Oxycotin). Dr. Barden was arrested on Thursday, January 29.

The Riverside District Attorney’s Office filed 276 felony counts including: commercial burglary, forgery, obtaining a controlled substance by fraud, possession of a controlled substance, insurance fraud and identity theft. Agents recovered from her home multiple prescription pads for 12 different doctors, as well as the personal information of 93 people who are alleged victims of identity theft.

The investigation was led by the Riverside Regional Pharmaceutical Narcotic Enforcement Team, which is a cooperative effort with the California Department of Insurance, Fraud Division and the U.S. Drug Enforcement Administration.

This initiative is part of the Attorney General’s plan to address prescription drug abuse in the state and make it easier for doctors to keep track of prescription drug records.

Prescription drug abuse can have serious public safety consequences, as many abusers hold down critical jobs including truck drivers, transit operators and medical practitioners. The Attorney General has been working in cooperation with the Troy and Alana Pack Foundation, founded by Bob Pack, whose 7 and 10-year old children were killed by a driver who was under the influence of prescription drugs obtained from multiple doctors, to make tracking prescription drug records easier.

Last year, Attorney General Brown unveiled a plan to provide doctors and pharmacies with real-time Internet access to patient prescription drug histories. Under Brown’s proposal, health professionals will have computer access to the drug histories of patients, replacing the current outdated system that required mailing or faxing written requests for information. Each year, more than 60,000 such requests are made to the California Department of Justice.

The state’s database, known as the Controlled Substance Utilization Review and Evaluation System (CURES), contains 86 million entries for prescription drugs dispensed in California, giving healthcare professionals the technology they need to fight the prescription drug abuse currently burdening California’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.

Brown Sues Drug Makers that Conspired to Keep Generic Testosterone Supplements off Shelves

February 2, 2009
Contact: (916) 210-6000, agpressoffice@doj.ca.gov

FOR IMMEDIATE RELEASE
Wednesday, February 2, 2009
Contact: Christine Gasparac (916) 324-5500

Brown Sues Drug Makers that Conspired to
Keep Generic Testosterone Supplements off Shelves

LOS ANGELES – California Attorney General Edmund G. Brown Jr. and the Federal Trade Commission today filed an antitrust lawsuit against four pharmaceutical companies that conspired to monopolize the sale of a testosterone supplement in a “predatory move” to reap huge profits at the expense of consumers.

“The companies plotted to keep cheap generic drugs off the market, costing consumers millions,” Attorney General Brown said. “This was a predatory move pure and simple, increasing drug company profits at the expense of critically ill patients.”

Testosterone supplements like AndroGel can prevent muscle loss, fatigue or erectile dysfunction in critically ill patients suffering from HIV/AIDS, diabetes, and advanced age.

The lawsuit contends that Solvay Pharmaceuticals illegally colluded with three other pharmaceutical companies -- Watson, Par and Paddock Laboratories -- to keep the three companies from producing generic alternatives to its testosterone supplement.

In return, Solvay agreed to pay Watson and the other drug manufacturers millions of dollars over several years. With this agreement, the drug companies sought to protect the monopoly position of AndroGel, forcing consumers to pay artificially high prices for the drug while the companies shared the extraordinary profits. Solvay Pharmaceuticals manufactures and distributes a testosterone supplement called AndroGel with annual sales exceeding $400 million in 2007.

Background
In 2003, Watson Pharmaceuticals and Par Pharmaceutical Companies, Solvay’s competitors, sought approval from the Food and Drug Administration to make and sell generic versions of AndroGel. These companies received final approval from the FDA. If they had begun to sell generic alternatives, Solvay would have seen a significant reduction in its profits from AndroGel sales. Typically, when generic alternatives are introduced in the market, the prices of brand name drugs are reduced by 50% to 80%. The price for AndroGel is $225.01 for a box of 150 individual units.

Without generics on the market, consumers and health insurance programs must pay more for branded medications. Pharmaceutical monopolies cost the state, its citizens and private insurers millions of dollars each year.

Attorney General Brown and the Federal Trade Commission filed a lawsuit in the U.S. District Court for the Central District of California in Los Angeles against the following pharmaceutical companies:

• Solvay Pharmaceuticals, Inc.
• Paddock Laboratories, Inc.
• Par Pharmaceutical Companies, Inc.
• Watson Pharmaceuticals, Inc.

Today’s lawsuit alleges that Solvay and the three pharmaceutical companies violated U.S. and California antitrust laws and laws banning unfair competition. The lawsuit seeks to:

• Declare the agreements between Solvay, Paddock, Par and Watson illegal and void.
• Permanently enjoin the defendants from similar and related conduct in the future.
• Fine the defendants $2500 for each prescription and user of AndroGel in California under the California Unfair Competition Act.

The lawsuit is attached.

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