Consumer Protection

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.

Oakland—With tax season quickly approaching, Attorney General Edmund G. Brown Jr. today urged Californians to avoid high-cost tax-refund-anticipation loans, which force taxpayers to “borrow their own money,” include numerous fees and can carry triple-digit annual interest rates.

According to the National Consumer Law Center (NCLC) and Consumer Federation of America (CFA), refund-anticipation loans cost 8.4 million American taxpayers more than $800 million in 2008.

“As tax season begins, hardworking Californians should avoid tax-refund-anticipation loans and any tax preparer who advertises these loans as early tax refunds,” Brown said. “These loans carry steep interest rates and push taxpayers to borrow their own money instead of collecting their full refunds.”

A refund-anticipation loan is a short-term loan secured by a taxpayer’s anticipated income-tax refund. To obtain a tax-refund loan, taxpayers file electronically with a tax preparer who works directly with a bank to advance the refund as a loan— minus tax-preparation costs, a loan fee and other charges. The Internal Revenue Service (IRS) then sends the taxpayer’s full refund to the bank.

According to NCLC and CFA, loan fees can range from $34 to $130 and other add-ons alternately referred to as application, administrative, e-filing, service bureau, transmission, or processing fees can range from $25 to several hundred dollars.

Tax refunds are available at no charge from the IRS. Taxpayers who file electronically and have their refund directly deposited by the IRS into their bank account will usually have their refunds in 8-15 days.

According to the IRS, refund-anticipation lenders often target low-income taxpayers, especially those who receive the Earned Income Tax Credit. Brown urges taxpayers who are considering tax-refund-anticipation loans to take advantage of the IRS’s support programs. These include:

• The Volunteer Income Tax Assistance Program (VITA) Program, which offers free tax help to low to moderate-income people and members of the armed services; and
• The Tax Counseling for the Elderly (TCE) Program, which provides free tax help to people aged 60 and older.

More information on these programs is available at: www.irs.gov/individuals/article/0,,id=107626,00.html.

Some taxpayers may also qualify for free federal income-tax preparation and electronic filing through the Free File program, a partnership between the IRS and the Free File Alliance LLC, a group of private sector tax software companies. More information is available at: www.irs.gov/efile/article/0,,id=118986,00.html.

Taxpayers can also locate their nearest free tax service by calling the IRS at: 1-800-829-1040.

Over the past year, Brown has taken strong action to stop tax preparers from engaging in deceptive marketing of refund-anticipation loans:

• In June 2009, Brown won a $1.3 million lawsuit against Liberty Tax Service that bars the company from using false or misleading advertising to sell tax-refund loans.
• In January 2009, Brown secured a $4.85 million settlement with H&R Block that prohibits the company from marketing refund-anticipation loans as early tax refunds.

Oakland –Attorney General Edmund G. Brown Jr. today joined sixteen state attorneys general and the United States Department of Justice in approving the Ticketmaster and LiveNation merger after requiring the two companies to agree to several changes that would create “a more competitive market” for concert tickets by allowing two new primary ticketing competitors.

In the settlement, concert-promoter AEG will be able to “self-ticket”and offer ticketing services at other venues, and Ticketmaster will divest its Paciolan ticketing system unit, a proprietary computer system used for ticketing events and contracts.

“Ticketmaster and LiveNation together dominate the market for concert tickets,” Brown said. “Without serious competition, concert-goers will inevitably pay more for concert tickets. With this merger agreement, we’re taking an important step to ensure a more competitive market for concert-ticket sales.”

Ticketmaster Entertainment, based in West Hollywood, provides ticket sales, ticket resale services, and marketing and distribution services. It operates approximately 7,100 retail outlets and 17 worldwide call centers. In 2008, the company sold more than 141 million tickets valued at more than $8.9 billion.

LiveNation, based in Beverly Hills, promotes, markets and sells live concerts. The company operates 140 venues in the United States. Starting in January 2009, LiveNation entered into the ticketing business, putting it in direct competition with Ticketmaster for the first time. After the launch of LiveNation’s ticket system, Ticketmaster lost approximately 17% of its revenue.

In February 2009, Ticketmaster and LiveNation announced that the two companies would merge, creating a dominant force in ticketing and concert-promotion in the United States. The combined entity would control aspects of booking, promotion, “primary ticket sales” (tickets sold at their printed face value), “secondary ticket sales” (ticket sales that occur after the initial sale or “scalped tickets”), merchandising, direct marketing and other artist and venue relationships.

Due to the large number of California venues affected by the merger, Brown’s office began an investigation into the impact of the merger on the concert-ticket market and found that LiveNation was the company best positioned to compete with Ticketmaster. The investigation found that the two companies together would hold a virtual monopoly position in the ticket distribution market, with little to no competition in primary ticketing for live music concerts.

The settlement seeks to allow for competition in the market by giving concert-promoter AEG the ability to ticket its own concert venues, as well as offer ticketing services at other venues. The agreement also spins off Paciolan, the ticketing unit controlled by Ticketmaster, into an independent ticketing company able to compete in the concert-ticket market.

Other states participating in the merger agreement include Arizona, Arkansas, Florida, Iowa, Illinois, Louisiana, Massachusetts, Nebraska, Nevada, Ohio, Oregon, Pennsylvania, Rhode Island, Tennessee, Texas and Wisconsin.

A Proposed Final Judgment and a list of California's largest concert venues affected by the agreement are attached.

Oakland - Attorney General Edmund G. Brown Jr. today announced a $1.8 million settlement preventing Maurice Irving Glad, owner of 22 Midas auto shops throughout California, from owning or operating an auto repair shop in the state, after the franchisee “deceptively lured” customers with cheap brake specials and then charged hundreds of dollars for unnecessary repairs.

As part of the settlement, Midas International Corporation is acquiring all of Glad’s shops, which therefore will continue to operate without interruption.

“For years, Glad ran a bait-and-switch scam, in which he deceptively lured customers into his Midas shops with cheap brake specials, then charged them hundreds of dollars more for unnecessary repairs,” Brown said. “Our settlement makes sure that Glad will never own or operate an auto repair shop in California again.”

After a four-year undercover investigation by the California Bureau of Automotive Repair, Brown filed suit against Glad in June 2009. The investigation revealed that Glad regularly advertised $79 to $99 brake specials at his Midas shops to draw in customers and then often charged another $110 to $130 for unnecessary brake-rotor resurfacing. In some cases, customers were charged hundreds of dollars more for repairs that were not needed or never performed.

The settlement requires Glad to pay $1.8 million in damages, investigative costs and attorney fees, plus permanently prevents the franchisee from:

• Applying for or holding any license or registration issued by the California Bureau of Automotive Repair or any successor agency; and
• Engaging in any business that requires any type of license or registration issued by the California Bureau of Automotive Repair or any successor agency.

In addition to acquiring Glad’s 22 shops, Midas International Corporation has agreed to honor any and all guarantees or warranties previously made or given to customers.

In 1989, the state attorney general sued Glad for similar violations, which resulted in an injunction prohibiting his shops from performing unnecessary repairs, charging for services not performed, or using scare tactics to convince customers to purchase unnecessary parts and services. The California Bureau of Automotive Repair initiated its recent investigation into Glad’s Midas shops to monitor compliance with the injunction.

Undercover agents, posing as customers, conducted approximately 30 sting operations at Glad’s shops. In total, there were more than 35 incidents, involving 105 violations, in which shop managers, mechanics and employees made false or misleading statements to pressure customers into purchasing unnecessary parts and services. On average, the shops charged undercover agents almost $300 in unnecessary brake-rotor resurfacings, brake-drum repairs, brake adjustments, brake-cleaning services and other services.

“Overselling of services has become an increasing problem,” said California Bureau of Automotive Repair Chief Sherry Mehl. “It amounts to fraud and seriously harms the consumer. That’s why we aggressively work to find and shut down these shops.”

Brown’s lawsuit was filed jointly with Alameda County District Attorney Tom Orloff (then) and Fresno County District Attorney Elizabeth A. Egan, due to the large number of shops operating in Alameda and Fresno Counties. Glad’s 22 Midas shops are located in Campbell, Clovis, Concord, Dublin, Fremont, Fresno, Hayward, Manteca, Merced, Modesto, San Jose, San Leandro, Turlock and Walnut Creek.

Brown’s lawsuit contended that Glad and his shops:

• Used false and misleading advertising in violation of Business and Professions Code 17500;
• Employed unlawful, unfair and fraudulent business practices in violation of Business and Professions Code 17200; and
• Disobeyed the 1989 Alameda County Superior Court injunction in violation of Business and Professions Code 17535.5 and 17207.

“The Department of Consumer Affairs has zero tolerance for consumer fraud,” said California Department of Consumer Affairs Director Brian Stiger. “We are very pleased that, in partnership with the Attorney General’s office, we have been able to stop a bad player from further harming both consumers and the hard-working, law-abiding players in the auto repair industry.”

Consumers who believe they have been overcharged by an auto-repair facility can file a complaint with the California Department of Consumer Affairs, Bureau of Automotive Repair online at: www.autorepair.ca.gov or by calling 1-800-952-5210.

The settlement is attached.

Oakland - Attorney General Edmund G. Brown Jr. today is encouraging Californians to make charitable donations for victims of the devastating earthquake in Haiti, but warns citizens to avoid “scam artists” who may prey on the goodwill of California donors.

“After every tragedy, a wave of scam artists take advantage of generous individuals who want to help the victims of a tragedy,” Brown said. “It’s important to thoroughly research charitable organizations before you write a check.”

The Attorney General’s Office regulates charities and professional fundraisers in order to prevent the misapplication of charitable donations made by Californians. Brown offers the following tips on how to give wisely in order to assure that donations will be used for the intended purpose:

1. Carefully review disaster-relief appeals before giving. In times of disaster, many “sound-alike” organizations and sham operations solicit donations.

2. Know the charity before you donate. Review the charity’s website and written material to assure the program is one you want to support. Check the organization’s financial filings to see how it spends its assets, how long it has been operating and what program services it offers.

3. Make sure the charity is registered in the Attorney General’s Registry of Charitable Trusts. Registration does not guarantee that a charity is effective, but it is an important indicator. A searchable database is available at http://ag.ca.gov/charities.php.

4. Beware of organizations that don’t have a track record. Only give to established charities, not organizations that seem to spring up overnight. Again, check the Registry database to confirm this information.

5. Take action on your own rather than responding to solicitations. Seek out known organizations and give directly, either by calling the organization, using the organization’s official web site, or mailing a check to the address listed on the organization’s website.

6. Listen closely to the name of the group and beware of 'copycat' names that sound like reputable charities.

7. Avoid donating through email solicitations. Clicking on an email may lead you to a website that looks authentic, but is established by identity thieves seeking to obtain money or personal information.

8. Do not give cash. Write checks to the charitable organization, not a solicitor.

9. Do not be pressured into giving. Even in times of emergency, reputable organizations do not expect you to contribute immediately if you are unfamiliar with their services. Be wary of appeals that are long on emotion, but short on details about how the charity will help disaster victims.

10. If you are contacted by a solicitor, ask what percentage of your donations will be used for charitable activities that help victims and how much will be used to pay for administrative and fundraising costs. State law requires solicitors to provide such information if requested by donors. Be wary of fundraisers who balk at answering.

11. Find out what the charity intends to do with any excess contributions remaining after victims' needs are met.

12. There are many forms of giving. Alternative forms of giving include charitable gift annuities, in-kind contributions, and endowments.

For additional tips on charitable giving, go to http://ag.ca.gov/charities/charit_giving.php. Information on national charities is available from the Better Business Bureau's Wise Giving Alliance at 800-575-4483 or www.give.org.

Californians who believe they or others have been victimized by fraudulent charitable solicitation can file a complaint online with the Attorney General's Registrar of Charitable Trusts at http://ag.ca.gov/charities.php.

Oakland—Attorney General Edmund G. Brown Jr. today sued Florida-based electronic-cigarette retailer Smoking Everywhere to prevent the company from targeting minors and making “misleading and irresponsible” claims that electronic cigarettes are a safe alternative to smoking.

“Smoking Everywhere launched a misleading and irresponsible advertising campaign targeting minors and claiming that electronic cigarettes do not contain harmful chemicals,” Brown said. “We are asking the Court to take these cigarettes off the market until the company has proven the products are safe.”

Electronic cigarettes, or e-cigarettes, are battery-operated devices with nicotine cartridges designed to look and feel like conventional cigarettes. Instead of actual smoke, e-cigarettes produce a vapor from the nicotine cartridge that is inhaled by the user. Smoking Everywhere, one of the largest e-cigarette retailers in the United States, claims in its advertisements that the e-cigarettes have no carcinogens, no tar, no second-hand smoke, and are therefore safe and healthy.

However, the U.S. Food and Drug Administration (FDA) has determined that electronic cigarettes contain a variety of dangerous chemicals, including nicotine, carcinogens such as nitrosamines and, in at least one case, diethylene glycol, commonly known as antifreeze.

Today’s lawsuit seeks to prevent the company from selling its products until there is evidence to substantiate its claims that they are safe. The lawsuit will also require the products to display the state-mandated Proposition 65 warnings of ingredients known to cause cancer or reproductive harm and seeks to prevent the company from making false and misleading claims and promoting the products to minors.

In one advertisement targeted to minors, Smoking Everywhere featured a video with radio show host Howard Stern claiming, “kids love ‘em.” The products feature flavors that appeal to youth, including strawberry, chocolate, mint, banana and cookies-and-cream.

Other ads claim that electronic cigarettes can help people quit smoking. To be advertised as a smoking-cessation device, a product must be approved by the FDA for that purpose. In fact, none of Smoking Everywhere’s products have been approved by the FDA.

The American Cancer Society, the American Heart Association, the American Lung Association, the Campaign for Tobacco Free Kids and other groups have expressed serious concerns about the safety of electronic cigarettes and urged that they be removed from the market until proof of their safety has been established.

A copy of the complaint is attached.

Oakland—Attorney General Edmund G. Brown Jr. and 23 other state attorneys general today announced a $22.5 million settlement with pharmaceutical giants Abbott and Fournier after the companies “illegally blocked” cheaper generic substitutes for the cholesterol-reducing drug Tricor.

The settlement is the result of one of the country’s first legal actions challenging pharmaceutical companies for 'product hopping,' a strategy to block generic competition by making slight changes to the formulation of a drug.

“Abbott and Fournier devised a complex scheme that illegally blocked cheaper generic drugs from entering the market,” Brown said. “They used minor reformulations of the drug to delay competition and filed frivolous patent lawsuits. This scheme cost California and other states millions of dollars.”

Beginning in 1998, Abbott and Fournier, two of the nation’s largest pharamaceutical companies, partnered to manufacture and distribute Tricor, a cholesterol-reducing drug. Tricor’s annual sales were in excess of $750 million.

By 2002, as Tricor’s patents were set to expire, several drug companies sought approval from the Food and Drug Administration (FDA) to market a generic drug equivalent to Tricor. To be approved by the FDA, the generic-drug manufacturer must prove that its drug has the same active ingredients and the same labeling as the brand-name drug, in addition to being a therapeutic equivalent of the brand-name product.

Once a generic drug is approved for market, the market share for a brand-name drug like Tricor can decrease by up to 80 percent. Most states and group health plans require pharmacists to substitute the generic drug for a brand-name drug to get the cost benefit of the cheaper generic version.

Knowing generic manufacturers were attempting to enter the market, the lawsuit alleged that Abbott and Fournier devised a complex scheme to delay and prevent the approval and marketing of generic versions of Tricor. The companies made minor changes in the form and dosage strength of Tricor that did not provide any significant health benefits over previous Tricor formulations. These minor changes interfered with and delayed any FDA approval of the generics.

To further delay the process, Abbott and Fournier also filed more than a dozen lawsuits against generic drug manufacturers Teva Pharmaceuticals and Impax Laboratories because the law prohibits the FDA from approving a generic drug for 30 months after patent-infringement lawsuits have been filed. After the 30-month automatic stays expired, all of the suits were eventually dismissed.

As a result of the scheme, Abbott and Fournier recorded Tricor sales exceeding $1 billion at the expense of consumers and state governments.

Today’s settlement agreement requires the companies to cease illegal efforts to block generic competition to Tricor and to pay the states approximately $22.5 million dollars. In California, the Department of General Services, Medi-Cal and the Department of Corrections will be reimbursed for overcharges.

States joining California in today’s lawsuit include: Arizona, Arkansas, Connecticut, District of Columbia, Florida, Iowa, Kansas, Maine, Maryland, Minnesota, Missouri, Nevada, New York, Oregon, Pennsylvania, South Carolina, Washington, and West Virginia.

A copy of the agreement is attached.