Consumer Protection

Sacramento—Attorney General Edmund G. Brown Jr. today announced that last year, his office recovered more than $209 million in “hard-earned taxpayer dollars” and secured 139 criminal convictions by aggressively investigating and prosecuting Medi-Cal fraud cases.

Brown also reported that in 2009, his Bureau of Medi-Cal Fraud and Elder Abuse returned more than $12 million to victims of elder abuse and secured 47 criminal convictions in elder abuse cases.

“In these tough budget times, the state can’t afford to lose millions in hard-earned taxpayer dollars from people who try to cheat and steal from the system,” Brown said. “Thanks to the tireless work of DOJ investigators, we protected our most vulnerable citizens and recovered critical public health dollars.”

Brown’s Bureau of Medi-Cal Fraud and Elder Abuse (BMFEA) investigates and prosecutes those who cheat taxpayers out of millions of dollars each year and divert scarce healthcare resources from the needy. The Bureau also protects patients in nursing homes and other long-term care facilities from abuse and neglect.

Combined, Brown recovered more than $221 million in Medi-Cal fraud and elder abuse cases. The amount recovered last year is more than six times the BMFEA’s $33.1 million operating budget. This represents a recovery of $36 for every $1 expended from the state's general funds.

The recoveries stem from restitution obtained in Medi-Cal fraud, elder abuse, and patient fund cases. Patient fund cases occur when a disabled person's finances are being controlled by a trustee who steals from the patient's trust account. Annually, the BMFEA conducts more than 1,500 investigations.

Medi-Cal Fraud

Last year’s $209 million recovery stemmed from civil lawsuits Brown’s office filed against companies and individuals that billed the state’s Medi-Cal fund for unnecessary services or for services that were never performed.

In one such case filed in October 2009, Brown’s office arrested the former manager of a Mount Shasta-based medical clinic after she billed Medi-Cal $2.2 million for services never performed. Denise Fairhurst, 57, of Redding, filed false Medi-Cal claims with the state to help cover the medical clinic’s operations and management costs. In addition, she used $33,492 of the funds to pay personal credit card bills. Fairhurst is scheduled to be sentenced on March 24 in Siskiyou County Superior Court.

Some of the fraud is perpetrated by criminal fraud rings. In May 2009, Brown filed criminal charges against six individuals who paid healthy seniors to be admitted into a hospice for the terminally ill and then billed state healthcare programs more than $1 million for procedures never performed. Some of the individuals used the proceeds of the scheme to purchase expensive cars, designer clothing, and luxury homes. Four of the defendants have pled guilty, and the state has recovered the $1 million.

A number of Medi-Cal fraud cases are institutional. In December 2009, Brown reached a $21.3 million settlement with pharmaceutical giant Schering-Plough Corporation, resolving allegations the company deliberately inflated the price of Albuterol and other drugs, overcharging Medi-Cal millions of dollars in pharmacy reimbursement.

Most of the funds recovered go back into the state’s Medi-Cal fund, which provides medical payments for nearly 20 percent of California’s children, lower income individuals and families, the elderly and disabled.

Elder Abuse

Although elder abuse can take many forms, the majority of cases involve abuses at California’s skilled nursing facilities. Brown’s office uses its civil, administrative and criminal enforcement powers to bring poorly performing care facilities into compliance with federal and state laws.

A few elder abuse cases Brown’s office prosecuted include:
• Mary Louise Wilson, who was sentenced to nineteen years and four months in prison for setting multiple fires at Southern California nursing homes, including the beds of elderly patients who were unable to get out of bed without assistance;
• Pamela Ott, who was charged with eight felony counts of elder abuse in September 2009 for allowing staff to forcibly administer psychotropic medications to patients for their own convenience, rather than for their patients' therapeutic interests; and,
• Leander Jackson, who was sentenced to three years, eight months in prison for identity theft and grand theft for operating several unlicensed skilled nursing facilities and neglecting to provide the proper care to the residents. Jackson used the identities of the patients to obtain cash loans and car leases.

A copy of the BMFEA Annual Report is attached.

Oakland—In an ongoing crackdown on companies that take advantage of workers, Attorney General Edmund G. Brown Jr. today filed a lawsuit against Livermore-based Country Builders, Inc. after the company “cheated workers out of wages,” falsified the company’s payroll records to hide underpayments, deliberately misclassified workers to reduce the company’s workers’ compensation premiums and violated state prevailing wage laws.

The company has won several public works contracts that required it to pay the prevailing wage.

“Country Builders cheated its workers out of wages and falsified payroll records,” Brown said. “This is an outrageous case about a company that took public money and then cooked its books to shortchange the state’s workers’ compensation fund.”

In late 2008, Brown’s office launched an investigation into Country Builders to determine why some workers reported receiving a lower rate of pay than what was shown on their paystubs. The investigation found that the company inflated the pay rate of some workers to lower its workers’ compensation premiums, while paying others below the $32 to $34 an hour, the rate required under the prevailing wage laws of California.

The state’s prevailing wage laws require workers on public work projects to be paid at rates equal to the wage and benefit rates established by the Department of Labor Standards Enforcement. The public works projects covered by law are construction projects performed by priviate contractors for state or local governments to further a public purpose.

Some of Country Builders’ public works contracts included:

• The Fairways multi-family apartments in San Jose
• Classics at Keystone in San Jose
• Pioneer Heights student housing for California State University, East Bay
• University Village student housing for University of California at Berkeley
• Giant Road Family Apartments in San Pablo
• Jubilee Senior Housing in Berkeley
• Seven Directions Apartments in Oakland

Despite its collective bargaining agreement with workers that set the prevailing wage, the company hired workers to work on the public projects for significantly less per hour than the union rate. Between 2005 and 2008, timesheets reveal that 124 employees received less than the hourly rate on at least one occasion. Some employees were regularly paid less than the prevailing wage.

Brown’s investigation further revealed that Country Builders, Inc.’s officers falsified company payroll records to various public entities to cover up the underpayments.

Brown’s office estimates that in 2007 and 2008, Country Builders was able to save approximately $1 million in wages by failing to pay workers the prevailing wage and the pay rate set forth in the collective bargaining agreement. In 2007, the company’s gross revenues were $21 million.

In addition, Country Builders, Inc. intentionally misclassified lower-wage workers as higher-wage workers to its insurance carrier, the State Compensation Insurance Fund.

The hourly pay rate is used as a basis to calculate workers’ compensation insurance premiums for businesses. By falsifying payroll records and inflating the hourly rate of pay of its workers, Country Builders, Inc. illegally lowered its insurance premiums.

The investigation found that Country Builders, Inc. underpaid its premiums to the State Compensation Insurance Fund by at least $136,000. Premium fraud is the most costly type of workers’ compensation fraud.

Brown’s office filed the civil lawsuit in Alameda Superior Court alleging violations of labor laws and citing unfair business practices. The lawsuit seeks a permanent injunction against the company, restitution for the workers and the State Compensation Insurance Fund, and civil penalties.

A copy of the lawsuit is attached.

Los Angeles—Attorney General Edmund G. Brown Jr. today announced that his office has secured an agreement with Santa Fe Natural Tobacco Company, Inc., the manufacturer of American Spirit tobacco products, that requires the company to clearly disclose that its organic tobacco is “no safer or healthier” than other tobacco products.

Attorneys general from 32 other states and the District of Columbia signed onto today’s agreement.

“Stamping an organic label on tobacco products is ultimately a distinction without a difference—organic or not, cigarettes are bad for your health,” Brown said. “Today’s settlement with Santa Fe Natural Tobacco Company ensures that all future advertisements make it clear that organic tobacco is no safer or healthier.”

Today’s agreement follows Brown’s contention that Santa Fe Natural Tobacco Company may have misled consumers in advertising its “organic” or “100% organic” Natural American Spirit cigarettes and roll-your-own tobacco and pouches, leading consumers to believe these products were less harmful than other tobacco products. There is currently no competent or reliable scientific evidence to support this conclusion.

Under the terms of the agreement, all advertisements will clearly and prominently feature the following warnings:

• For Natural American Spirit organic cigarettes: “Organic tobacco does NOT mean safer cigarettes.”
• For Natural American Spirit organic roll-your-own or pouch tobacco: “Organic tobacco does NOT mean safer tobacco.”

Santa Fe Natural Tobacco Company has until April 1, 2010 to meet these requirements in the placement of future advertising. All tobacco retailers selling these products must be contacted and instructed to dispose of old advertisements that do not feature these disclosures once updated advertisements and point of sale materials are received.

Organic tobacco is certified under the U.S. Department of Agriculture’s National Organic Program. To receive organic certification, tobacco farmers have to follow a strict, labor-intensive growing regimen. Certified organic tobacco is grown without the use of pesticides and fertilizers prohibited under the program.

Thirty-two other attorneys general signed onto Brown’s agreement today from the following states: Arizona, Arkansas, Colorado, Connecticut, Delaware, Georgia, Hawaii, Idaho, Illinois, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Montana, Nebraska, Nevada, New Jersey, New Mexico, New York, North Carolina, Ohio, Oregon, Pennsylvania, Tennessee, South Dakota, Vermont, Washington, West Virginia and Wisconsin. Additionally, the attorney general of the District of Columbia signed onto the agreement.

Brown’s agreement with Santa Fe Natural Tobacco Company, Inc. is attached.

Los Angeles—Attorney General Edmund G. Brown Jr. today announced that his office has reached an agreement with Toyota Motor Sales USA, Inc. to provide California Toyota owners with at-home pickup and vehicle return and cost-free alternative transportation while their recalled vehicles are being repaired.

“This agreement goes a long way towards easing the burden caused by Toyota’s massive recall,” Brown said. “It will now be much easier for Toyota owners to get to work and take their kids to school while critical safety repairs are made on their cars.”

Under the terms of today’s agreement, Toyota will provide owners of recalled vehicles the following services:
• Pick-up and return of vehicles by the dealership;
• Transportation to the dealership and/or to the owner’s place of work;
• Alternative transportation, such as a rental car, loaner vehicle or taxi reimbursement for a reasonable period that the customer is unable or unwilling to use his or her car; and
• Expedited scheduling for repair services.

These services will be provided by Toyota through the dealers at no cost to either the owners or the dealer.

The following Toyota vehicle recalls are covered by today’s agreement:
• September 29, 2009 for floormat entrapment;
• January 21, 2010 for sticking accelerator pedals;
• February 8, 2010 for anti-lock brake system issues; and
• February 12, 2010 for drive-shaft failure.

The following vehicles are involved in the recent Toyota and Lexus vehicle recalls: 2005-2010 Avalon, 2007-2010 Camry, 2009-2010 Corolla, 2007-2010 ES 350, 2008-2010 Highlander, 2006-2010 IS 250 and IS350, 2009-2010 Matrix, 2004-2009 Prius, 2010 Prius, 2009-2010 RAV4, 2008-2010 Sequoia, 2005-2010 Tacoma, 2007-2010 Tundra, 2009-2010 VENZA, and 2010 HS 250h.

More information on the specific vehicles affected by the recalls can be found at www.nhtsa.dot.gov and www.toyota.com/recall.

Californians are encouraged to contact their local Toyota and Lexus dealers if they believe they are eligible for these accommodations. Consumers can also contact Toyota’s customer service center at 1-800-331-4331 or Lexus at 1-800-255-3987.

This agreement will remain in place until all Toyota vehicles subject to the recall have been repaired. If additional safety recalls arise, an extension of this agreement or other appropriate provisions will be pursued.

Toyota Motor Sales USA, Inc. is based in Torrance, CA.

A copy of Toyota's letter to Brown is attached.

Los Angeles—Attorney General Edmund G. Brown Jr., who has an ongoing investigation into possibly illegal practices by some California health insurers, today subpoenaed financial records and other documents from California’s seven largest health insurance companies.

“We have been looking at these companies for a number of months and are very concerned that some of them are unjustly raising premiums and denying payment of legitimate claims,” Brown said. “Not only are the rate increases devastating to Californians strapped by the economy, but in some cases, they are possibly illegal.”

“Our best attorneys are going to get to the bottom of this, and where we find violations of California’s unfair business laws, we intend to stop them,” Brown added.

Brown subpoenaed records from Aetna Health, Anthem Blue Cross, CIGNA, Health Net, Blue Shield of California, Kaiser Permanente and PacifiCare. Today’s subpoenas cover pay-for-service health plans, which are health plans that reimburse doctors and hospitals for services performed instead of a health maintenance organization (HMO) approach. Brown revealed that his office served subpoenas to those same companies last month regarding their managed care plans, known as HMOs.

Brown said the insurance companies have 30 days to hand over their financial and other records.

Brown began an official inquiry last September into HMO practices of reviewing and paying insurance claims submitted by doctors, hospitals and other medical providers. The investigation was prompted by reports that California’s five largest health insurance providers were denying insurance claims at rates of up to 39.6 percent.

Recently, Anthem Blue Cross announced to its members that it planned to hike premium rates by as much as 39 percent. Brown’s investigation will probe whether the other health plans are planning similar rate hikes and will consider whether Anthem’s steep rate increases for individual California consumers are fair under California law.

The investigation will include an examination of how much the plans are spending on health care versus non-healthcare costs such as marketing, administration and profits. The plans have been asked to provide detailed information on how they spend policy-holders’ premiums and how they review claims and decide whether and how much to pay the doctor or hospital for the service.

The investigation also will examine:
• Member and medical provider complaints against the health plans describing payment delays, reduced payments and denials of payment claims, and the health plans responses to those complaints;
• How health plans determine doctor and hospital rankings and whether those rankings mislead customers on quality;
• Whether the health plans intend to raise premiums, and, if so, whether the plans disclosed the amount and frequency of the premium increases at the time of enrollment;
• Whether the health plans offer alternative policies to members when they increase premiums and whether the plans may deny enrollment in the alternative policies based on preexisting conditions.

Brown’s investigation will look for violations of law, including California’s Unfair Competition Law (Business & Professions Code section 17200) and False Advertising Law (Business & Professions Code section 17500.) These laws prohibit “any unlawful, unfair or fraudulent business act or practice” and the use of “false or misleading statements” to the public.

The attorney general is authorized to prosecute violations of the Unfair Competition Law criminally or file a civil law enforcement action to obtain an injunction forcing the company to stop the business practices, restitution of money to affected consumers and civil penalties beyond those available to private parties.

Los Angeles—Attorney General Edmund G. Brown Jr. today joined the California Department of Real Estate (DRE) and the State Bar of California in warning Californians to avoid forensic loan audits, the loan-modification industry’s latest “phony foreclosure-relief service,” in which homeowners pay up-front fees for a forensic review of their lender’s practices, but are provided no actual foreclosure relief.

“Forensic loan audits are yet another phony foreclosure-relief service hawked by loan-modification consultants trying to cash in on the desperation of homeowners facing foreclosure,” Brown said. “The foreclosure-relief industry continues to be long on promises, but short on results.”

Individuals and businesses who offer forensic loan audits use inflated and misleading claims to convince homeowners to pay up-front fees for services that produce no actual foreclosure relief. Homeowners are encouraged to pay for an audit of their mortgage loan file to determine their lender’s compliance with state and federal mortgage-lending laws. This audit is pitched to homeowners as a tool they can use to gain leverage and speed up the loan-modification process.

In truth, there is no evidence or statistical data to support claims that forensic loan audits—even if performed by a licensed, legitimate and trained auditor, mortgage professional or lawyer—will help homeowners obtain loan modifications or provide any other foreclosure relief.

“The State Bar is committed to dealing with all aspects of loan foreclosure fraud involving attorneys,” said State Bar President Howard Miller. “We will continue to work with all the other government agencies to prevent fraud and to move for disciplinary sanctions against attorneys who violate their obligations to their clients.”

By law, all individuals and businesses offering mortgage-foreclosure consulting, loan-modification and foreclosure-assistance services must register with Brown’s office and post a $100,000 bond. It is also illegal for loan-modification consultants and businesses to charge up-front fees for their services.

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

In 2009, the DRE investigated more than 2,000 complaints involving loan-modification scams. Nearly 350 individuals and companies received a Desist and Refrain Order to stop illegal activity.

“The DRE has aggressively pursued loan-modification scammers who prey on vulnerable and financially stressed homeowners, and those peddling false hope by promising mortgage relief with a forensic audit will be scrutinized,” stated Real Estate Commissioner Jeff Davi. “With consumer education efforts and warnings, we hope to keep consumers from falling victim in the first place.”

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 could also be part of a fraudulent bankruptcy filing. Either way, a scammer can then evict you and take your 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 their delinquent mortgage. Later, they discover that they actually transferred ownership of their home to someone who is now trying to evict them.

Non-profit housing counselors certified by the U.S. Department of Housing and Urban Development provide free help to homeowners. To find a counselor in your area, call 1-800-569-4287.

If you are a homeowner who has been scammed, you can contact Brown’s office at 1-800-952-5225 or file a complaint online at: www.ag.ca.gov/consumers/general.php. You can also learn more about avoiding scams and obtain a complaint form by visiting the DRE’s web site at: www.dre.ca.gov.

If you have a complaint against a lawyer, contact the State Bar Complaint Hotline at 1-800-843-9053. Complaint forms and an explanation of the attorney discipline system are available online at: www.calbar.ca.gov.

In 2009, California accounted for 22 percent of the nation’s foreclosure activity, with 632,573 homes in foreclosure statewide. This is an annual increase of more than 20 percent in foreclosure activity from 2008 and a 150 percent increase from 2007.

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

San Bernardino, Calif.—Attorney General Edmund G. Brown Jr. and San Bernardino County District Attorney Michael A. Ramos today announced the filing of criminal charges against former Chairman of the San Bernardino County Board of Supervisors William Postmus and James Erwin, former Chief of Staff to Supervisor Neil Derry, on “conspiracy, corruption and bribery” charges related to a $102 million land-development settlement paid by San Bernardino County.

The complaint alleges that Erwin took $100,000 for inducing the Board of Supervisors to pay $102 million of taxpayer’s money to Colonies, a development company, in a fraudulent settlement and that Postmus took a $100,000 bribe for his vote to approve it. If convicted of all charges, Erwin faces a maximum of twelve years in state prison, and Postmus faces a maximum of eight years in state prison.

“These individuals engaged in conspiracy, corruption and bribery that cost San Bernardino taxpayers more than $100 million,” Brown said. “This is one of the most appalling corruption cases ever seen in California, and we will aggressively pursue this conspiracy until all of the facts are exposed.”

In January 2007, Erwin was appointed Assistant Assessor of San Bernardino County, a job he held until he resigned in November that year. In September 2008, he was named Chief of Staff to San Bernardino County Supervisor Neil Derry.

Postmus served as a member of the San Bernardino County Board of Supervisors from 2000 until January 2007, when he took office as San Bernardino County Assessor. He resigned in February 2009.

In 2002, Colonies filed a lawsuit against the County seeking to recover $23.5 million it had spent on flood-control improvements and challenging the County’s easement rights that it claimed deprived Colonies of the ability to develop its property.

On November 28, 2006, the San Bernardino Board of Supervisors voted 3 to 2 to approve a settlement of $102 million with the Colonies, an amount based on an unsubstantiated demand and against the advice of County Counsel and private attorneys.

The complaint alleges those votes were obtained as part of a broad conspiracy which involved extortion and bribery, culminating in acts of public corruption that cost San Bernardino taxpayers tens of millions of dollars. The investigation uncovered four bribes totalling $400,000 paid by the Colonies to secure the settlement.

Colonies gave Erwin $100,000, which was deposited into the Committee for Effective Government PAC he controlled, for his role as an intermediary between Colonies and the supervisors to achieve the settlement. The complaint alleges that Erwin created political mailers depicting Postmus as a drug addict and homosexual in order to blackmail him into voting for the settlement. Erwin also created negative mailers against another supervisor prior to the vote.

In addition to the $100,000 bribe, Erwin accepted other gifts for his role as intermediary, including a private jet trip to New York, meals, lodging, entertainment, prostitutes and a watch. Erwin is facing charges of perjury in connection with failing to report those gifts after he became a county officer.

At the time of the vote to approve the settlement, Postmus was the Chairman of the Board of Supervisors and led the effort to approve the settlement. The complaint alleges that he received $100,000 from Colonies, which he funneled into two Political Action Committees (PACs) that Postmus set up specifically to receive the money. Postmus controlled both PACs, the Inland Empire PAC and “Conservatives for a Republican Majority,” but attempted to conceal his connection to them.

Postmus then transferred $50,000 from the Inland Empire PAC into his campaign account and used some of the funds for personal meals and entertainment.

The Chief of Staff for Supervisor Ovitt secretly controlled the Alliance for Ethical Government PAC, which received $100,000 from Colonies. The Chief of Staff received payments for campaign consulting from the PAC.

Colonies also gave $100,000 to the San Bernardino County Young Republicans PAC that was secretly controlled by a member of the board of supervisors who voted in favor of the settlement, and whom Erwin had threatened with the exposure of damaging information. Funds from the PAC were used to pay the supervisor’s campaign expenses and fund his campaign account.

The investigation is ongoing and may lead to additional arrests.

San Bernardino County District Attorney Michael A. Ramos stated, “The assistance of the Attorney General’s Office has been, and will continue to be, invaluable in our investigation. I would like to thank Attorney General Brown for providing the excellent assistance of Deputy Attorney General Melissa Mandel who has been working directly with our team and Senior Assistant Attorney General Gary Schons for his advice and direction over the past months. It is critical that confidence in their government be restored to the residents of San Bernardino County. This is just one more step in achieving that goal.”

In the Attorney General’s complaint filed today, Erwin was charged with nine felony counts, including:

• Conspiracy to Commit a Crime (Penal Code Section 182)
• Two counts of Corrupt Influencing (Penal Code Section 85)
• Two counts of Offering a Bribe to a Supervisor (Penal Code Section 165)
• Two counts of Extortion to Obtain an Official Act (Penal Code Section 518)
• Misappropriation of Public Funds (Penal Code Section 424)
• Forgery (Penal Code Section 470)

Postmus was charged with five felony counts, including:

• Conspiracy to Commit a Crime (Penal Code Section 182)
• Accepting a Bribe (Penal Code Section 86)
• Supervisor Accepting a Bribe (Penal Code Section 165)
• Conflict of Interest (Government Code Section 1090)
• Misappropriation of Public Funds (Penal Code Section 424)

The complaint is attached.

San Diego—Attorney General Edmund G. Brown Jr. today announced that Mary Louise Wilson, 54, of San Diego, has been sentenced to 19 years and 4 months in prison for attempting to “kill or seriously injure” nursing home residents by setting fires in the homes.

Today’s sentence marks the longest prison term that anyone convicted by the Attorney General’s Office has received in an elder abuse case.

“These fires were no accident. This woman meant to kill or seriously injure dozens of disabled people,” Brown said. “Residents of nursing homes are particularly vulnerable, so today’s sentence is an important victory in our fight against elder abuse in California communities.”

Brown’s Bureau of Medi-Cal Fraud and Elder Abuse (BMFEA) was created in 1978 to uncover Medi-Cal fraud and to combat the abuse and neglect of patients in nursing homes and other long-term care facilities. Since Brown took office, BMFEA has secured 217 criminal convictions and has collected more than $1.1 million in restitution and reimbursement.

In August 2009, Brown’s office, along with the National City Fire Department and the El Cajon Police Department, began an investigation into a series of fires set in nursing homes in the San Diego area.

The first incident occurred in January 2009 at El Dorado Care Center in El Cajon. Wilson, a resident of the facility, had been placed in a room with two other women. Neither of her two roommates was able to get in or out of bed without nursing assistance, and one of the women was attached to an oxygen tank.

In the middle of the night, Wilson set fire to the bed of one of her roommates while she was sleeping. A nurse heard the smoke alarm and used a fire extinguisher to put out the fire before anyone was hurt.

Four months later, Wilson, who was able to manage in a more independent environment, was transferred to Golden Paradise Senior Living, an assisted living center in National City.

Soon after being transferred, Wilson set fires in the second-floor trash chute, the first-floor dumpster and the second-floor library. She also threw burning materials down the trash chute. National City Fire Department firefighters and the building’s sprinkler system put out the fires before anyone was hurt.

Investigators from Brown’s office identified Wilson as a suspect by linking the fires at the two facilities. In October, she was charged with the crimes and pled guilty on January 5, 2010 to:

• Two counts of attempted murder;
• Three counts of arson;
• Two counts of attempted arson;
• One count of assault with a deadly weapon for threatening a resident with a knife; and
• One count of making a criminal threat with a deadly or dangerous weapon.

In addition to today’s court victory, BMFEA has investigated and prosecuted several other notable elder abuse cases in the past year. Late last year in Sacramento, Maria Elna Flora pleaded guilty to 12 counts of grand theft and burglary for stealing $435,100 from retirees to fund a daily gambling habit.

In September 2009, Brown filed charges against Pamela Ott, a Kern Valley Hospital administrator, for allowing staff to forcibly administer psychotropic medications to patients to sedate them for the staff’s convenience. The case is pending in Kern County Superior Court.

Wilson’s booking photo and a copy of the complaint are attached.

Sacramento—Attorney General Edmund G. Brown Jr. today called on the nation’s two largest public pension funds—the California Public Employees’ Retirement System (CalPERS) and the California State Teachers’ Retirement System (CalSTRS)—to “honor the state law” that requires them to divest from companies doing business in Iran.

“CalPERS and CalSTRS need to honor the state law requiring them to divest from companies doing business in Iran,” Brown said. “It’s time for our public pension funds to show some leadership and stop supporting companies that do business with a tyrannical regime.”

The California Public Divest from Iran Act was signed into law in October 2007 after the state Senate and Assembly passed the bill by unanimous vote. The law requires CalPERS and CalSTRS to annually report holdings in companies doing business in the defense, nuclear, petroleum, and natural gas industries in Iran and to divest from any company that fails to take substantial action to cease or limit operations in Iran.

Although CalPERS and CalSTRS both filed annual reports at the end of 2009, these reports fail to:

• Explain whether investments in companies with ties to Iran have been reduced;
• Describe when the funds anticipate fully divesting from these companies;
• Summarize investments transferred to funds that exclude these companies; and
• Calculate divestment costs or losses.

The full text of the California Public Divest from Iran Act can be read at: http://leginfo.ca.gov/pub/07-08/bill/asm/ab_0201-0250/ab_221_bill_200710...

According to the U.S. Department of State’s “Country Reports on Terrorism 2008,” Iran remains “the most significant state sponsor of terrorism.”

CalPERS is the largest public pension fund in the nation with more than 1.6 million members and more than $200 billion in assets. CalSTRS is the largest teachers’ retirement fund in the country with 833,000 members and more than $130 billion in assets.

Brown’s letters, sent today to CalPERS and CalSTRS, are copied below:

Anne Stausboll
Chief Executive Officer
California Public Employees’ Retirement System
Lincoln Plaza East
400 Q Street, Suite E4800
Sacramento, CA 95811

Re: Violations of Iran Act

Dear Ms. Stausboll:

We have reviewed the December 31, 2009 Iran Related Investments – Second Legislative Report issued by the California Public Employees’ Retirement System (CalPERS). Unfortunately, in violation of state law, the report fails to explain why CalPERS continues to invest in companies that do business in Iran.

In 2007, the Legislature enacted the California Public Divest from Iran Act, declaring it “unconscionable for this state to invest in foreign companies with business activities benefiting foreign states such as Iran that commit egregious violations of human rights and sponsor terrorism.” This law, commonly called the Iran Act, requires CalPERS to report annually on its holdings in companies that are doing business in the defense, nuclear, petroleum, and natural gas industries in Iran, and to divest from any company that fails to take substantial action to cease or limit its Iranian operations.

Although CalPERS has filed annual reports, these reports lack enough detail to enable the public and CalPERS members to know whether CalPERS is complying with the Iran Act. On page 3 of its most recent report, CalPERS declares that it decided “to not divest shares . . . as specified in the Iran Act.” Apparently, this decision was based on a conclusion made by the Board almost a year ago that divestment would violate CalPERS’ fiduciary duty to its members. But the report utterly fails to explain how and why this is the case.

In addition, the report fails to include many of the Iran Act’s specific reporting requirements. The report merely lists 24 CalPERS holdings that do business in Iran (up four from the last report) and states—without analysis or elaboration—that “substantial progress has been made through the engagement process, in the curtailment and cessation of business operations in Iran.” Nothing in these general comments complies with the Iran Act’s requirements for CalPERS to explain whether it has reduced its investments in these companies, to describe when it anticipates fully divesting in these companies (or to explain the reasons for not divesting), to summarize investments transferred to funds that exclude these companies, or to calculate divestment costs or losses.

Please let us know as soon as possible what specific actions you plan to take to comply with the provisions of the Iran Act.

Sincerely,

EDMUND G. BROWN JR.

--------

Jack Ehnes
Chief Executive Officer
California State Teachers’ Retirement System
100 Waterfront Place
Post Office Box 15275
Sacramento, CA 95851-0275

RE: Violation of Iran Act

Dear Mr. Ehnes:

We have reviewed the December 31, 2009 Response to Iran Risk Report issued by the California State Teachers Retirement System (CalSTRS). Unfortunately, in violation of state law, the report fails to explain why CalSTRS continues to invest in companies that do business in Iran.

In 2007, the Legislature enacted the California Public Divest from Iran Act, declaring it “unconscionable for this state to invest in foreign companies with business activities benefiting foreign states such as Iran that commit egregious violations of human rights and sponsor terrorism.” This law, commonly called the Iran Act, requires CalSTRS to report annually on its holdings in companies that are doing business in the defense, nuclear, petroleum, and natural gas industries in Iran, and to divest from any company that fails to take substantial action to cease or limit its Iranian operations.

Although CalSTRS has filed annual reports, these reports lack enough detail to enable the public and CalSTRS members to know whether CalSTRS is complying with the Iran Act. The most recent report refers to several lists of companies with varying degrees of ties to Iran. The report neither identifies all of the companies nor states which ones are actually held by CalSTRS.

Nothing in the report complies with the Iran Act’s requirements for CalSTRS to explain whether it has reduced its investments in companies with ties to Iran, to describe when it anticipates fully divesting in these companies (or to explain the reasons for not divesting), to summarize investments transferred to funds that exclude these companies, or to calculate divestment costs or losses.

Please let us know as soon as possible what specific actions you plan to take to comply with the provisions of the Iran Act.

Sincerely,

EDMUND G. BROWN JR.

Los Angeles—In an ongoing investigation of the state’s underground economy, Attorney General Edmund G. Brown Jr. today announced a fifth legal judgment against trucking companies operating at California ports that deny workers “the Social Security, Medicare and workers’ compensation benefits to which they are entitled under state law.”

Last month, the Los Angeles Superior Court found that Pacifica Trucks, a Southern California fleet operator, misclassified its drivers as independent contractors. The company failed to pay state employment-related taxes, contribute to Social Security and Medicare and provide W-2 forms to its employees.

“We’re sending a clear message that if you cheat your workers, we’re coming after you,” Brown said. “Pacifica Trucks claimed that its workers were independent contractors in order to avoid paying the Social Security, Medicare and workers’ compensation benefits to which they are entitled under state law. This judgment validates our continuing effort to ensure that all employees are protected.”

In 2008, Brown filed a lawsuit against Pacifica Trucks for unlawfully classifying its workers as 'independent contractors,' circumventing state employment taxes and ignoring labor laws that guarantee workers’ compensation and disability benefits.

In the lawsuit, Brown argued that Pacifica Trucks had exclusive authority over its drivers and provided all of the trucks, equipment, gas, repairs, and other business-related expenses used by employees. Under these conditions, the drivers should have been classified as employees with legally mandated protections and benefits.

Brown also argued that, in violation of California Business and Professions Code 17200, Pacifica Trucks had an unfair advantage over its competitors through the cost savings achieved by misclassifying its workers.

The judgment requires Pacifica Trucks to permanently refrain from misclassifying truck drivers as independent contractors and to pay a penalty.

Brown previously won lawsuits against the following trucking companies for similar violations:

• Guasimal Trucking
• Jose Maria Lira Trucking
• Esdmundo Lira Trucking
• Noel and Emma Moreno Trucking

Brown’s office has pursued several other companies suspected of operating underground economy schemes and violating worker’s rights. Recently, Brown filed a lawsuit against Auto Spa Express Car Wash in Los Angeles for forcing its employees to work nearly 60-hour weeks without overtime, ignoring minimum-wage laws and denying workers' compensation benefits to injured employees.

Last year, Brown also filed a lawsuit against Charles Evleth Construction in Bakersfield to recover $4.3 million in lost wages and benefits for the company’s employees.

Copies of the complaint and judgment against Pacifica Trucks are attached.