Consumer Protection

Brown Impide Que Una Compañia de Tarjetas Telefonicas Aumente Ganacias Cobrando Honorarios Ocultos.

May 8, 2009
Contact: (916) 210-6000, agpressoffice@doj.ca.gov
Los Ángeles- Como parte de una gran campaña federal-estatal en estafas de rescate de ejecución hipotecaria, El Procurador General Edmund G. Brown Jr., en una conferencia de

prensa, anunció hoy la presentación de acción legal contra 21 individuos y 14 compañías

que estafaron a miles de propietarios de casas desesperados por un rescate de ejecución

hipotecaria.

Brown esta exigiendo millones en penas civiles, restitución para las víctimas, y una

orden judicial permanente a las compañías para que los acusados no puedan ofrecer los

servicios de consejero de rescate de ejecución hipotecaria.

"La industria de modificación de préstamos está llena de hombres de confianza y

charlatanes, que estafan a propietarios de casas desesperados frente a una ejecución de

hipoteca,' dijo Brown. 'A pesar de las promesas firmes y garantías de devolución de

dinero, estos estafadores se embolsaron miles de dólares por cada víctima y no

proporcionaron ni una onza de ayuda.'

Brown presentó cinco demandas como parte de la 'Operación de Préstamos Falsos,' una

operación nacional de consejeros fraudulentos de rescate de ejecución hipotecaria, que

dirigió con la Comisión Federal de Comercio, la oficina del Fiscal de los EE.UU., y con

otras 22 agencias federales y estatales. En total, se presentaron 189 demandas y órdenes

de suspensión a negocios en todo el país.

Tras el colapso de la vivienda, cientos de compañías de modificación de préstamo

hipotecario y de rescate de ejecución hipotecaria han surgido, cobrando miles de dólares

en honorarios abiertos y reclamando que ellos pueden reducir los pagos de la hipoteca.
Sin embargo, las modificaciones del préstamo raramente, si acaso, se obtienen. Menos del

uno por ciento de propietarios al nivel nacional han recibido reducciones principales de

cualquier tipo.

Brown ha sido líder en la lucha contra compañías fraudulentas de modificación de

préstamo. El ha buscado órdenes judiciales para cerrar varias compañías, entre ellas

First Gov y Foreclosure Freedom, y ha obtenido cargos criminales y largas sentencias de

prisión para los consultores fraudulentos de modificación de préstamo.

La oficina de Brown, presentó las siguientes demandas en el condado de Orange y en el

Tribunal de Distrito de los EE.UU. para el Distrito Central (Los Ángeles):

- U.S. Homeowners Assistance, basado en Irvine;

- U.S. Foreclosure Relief Corp y su afiliado legal Adrian Pomery, basado en City of

Orange;

- Home Relief Services, LLC, con oficinas en Irvine, Newport Beach y Anaheim, y su

afiliado legal, el Diener Law Firm;

- RMR Group Loss Mitigation, LLC y sus afiliados legales Shippey & Associates y Arthur

Aldridge. RMR Group tiene oficinas en Newport Beach, City of Orange, Huntington Beach,

Corona, y Fresno;

- y

- United First, Inc, y su filial abogado Mitchell Roth, basado en Los Ángeles.

U.S. Homeowners Associates
Brown demando a U.S. Homeowners, el lunes, y sus ejecutivos -- Hakimullah 'Sean' Sarpas

y Zulmai Nazarzai -- por estafar a docenas de propietarios de miles de dólares a cada

uno.

U.S. Homeowners Associates afirmo ser una agencia del gobierno con una tasa de éxito de

98 por ciento en ayudar a los propietarios. En realidad, la compañía no es una agencia

del gobierno y nunca fue certificado como consejero de vivienda aprobado por el

Departamento Estadounidense de Desarrollo Urbano y Vivienda (HUD). Ninguna de las

victimas conocidas de U.S. Homeowners Associates recibió modificación de préstamo a

pesar de pagar honorarios por adelantado de por lo menos $1,200 a $3,500.

Por ejemplo, en enero del 2008, una víctima recibió una carta de su prestamista,

indicando que su pago mensual de la hipoteca aumentaría de $2,300 a $3,500. Días

después, ella recibió una llamada telefónica no solicitada de U.S. Homeowners Associates

prometiéndole una reducción de un 40 por ciento en el principal y una reducción de

$2,000 en su pago mensual. Ella pagó por adelantado $3,500 para los servicios de U.S.

Homeowners Associates.

A fines de abril del 2008, su prestamista le informó que su petición de modificación de

préstamo había sido negada y le envió los documentos que U.S. Homeowners Associates

había presentado en su nombre. Después de revisar esos documentos, ella descubrió que

U.S. Homeowners Associates había falsificado su firma y su información financiera -

inclusive fabricaron un acuerdo de arrendamiento con un arrendatario ficticio.

Cuándo ella enfrentó a U.S. Homeowners Assistance, fue inmediatamente desconectada y no

ha podido comunicarse con la compañía.

La demanda de Brown afirma que U.S. Homeowners Assistance violó:

- La sección 17500 del Código de Negocios y Profesiones de California por declarar

falsamente que era una agencia del gobierno y engañar a propietarios reclamando una tasa

de éxito de 98 por ciento a obtener modificaciones de préstamo;

- La sección 17200 del Código de Negocios y Profesiones de California, al no realizar

los servicios prometidos a cambio de honorarios por adelantado;

- La sección 2945.4 del Código Civil de California por colectar ilegalmente honorarios

por adelantado para servicios de modificación de préstamo;

- La sección 2945.45 del Código Civil de California por no registrarse en la Oficina del

Procurador General de California como consultores de ejecución hipotecaria; y

- El Código Penal de California sección 487 por robo grande (Grand Theft);

Brown le pide a la corte $7.5 millones en penas civiles, restitución completa a las

víctimas, y una orden judicial permanente a la compañía para que los demandados no

puedan ofrecer los servicios de consejero de rescate de ejecución hipotecaria.

US Homeowners Assistance también hizo negocios utilizando diferente aliases como

Statewide Financial Group, Inc., We Beat All Rates, y US Homeowners Preservation Center.

US Foreclosure Relief Corporation
Brown la semana pasada demandó a US Foreclosure Relief Corporation, H.E. Service

Company, sus ejecutivos -- George Escalante y Cesar López – así como a su afiliado legal

Adrian Pomery por ejecutar una estafa prometiendo a los propietarios la reducción en el

principal y las tasas de interés tan bajo como el 4 por ciento. Brown se unió en esta

demanda con la Comisión Federal de Comercio y el Estado de Missouri.

Utilizando tácticas agresivas de tele venta (telemarketing), los demandados solicitaron

a propietarios desesperados y colectaron honorarios por adelantado de por lo menos

$1,800 a $2,800 por servicios de modificación de préstamo. Durante un período de tan

solo nueve-meses, los consumidores pagaron a los demandados por encima de $4.4 millones.

Sin embargo, en la mayoría de los casos, los acusados no proporcionaron los servicios de

rescate de ejecución hipotecaria. Una vez que los consumidores pagaban el honorario, los

acusados evitaban responder a las indagaciones de los consumidores.

En respuesta a un gran número de quejas de los consumidores, varias agencias

gubernamentales dirigieron a los acusados a detener sus prácticas ilegales. En vez de

eso, ellos cambiaron su nombre del negocio y continuaron sus operaciones - utilizando

seis aliases diferentes del negocio en los últimos ocho meses.

La demanda de Brown alega que las compañías y los individuos violaron:
- El Registro Nacional No Llame (National Do Not Call Registry), 16 C.F.R. sección

310.4 y la sección 17200 del Código de Negocios y Profesiones de California al hacer

tele ventas de sus servicios a personas registradas.

- El Registro Nacional No Llame (National Do Not Call Registry), 16 C.F.R. sección 310.8

y la sección 17200 del Código de Negocios y Profesiones de California al hacer tele

ventas de sus servicios sin pagar la cuota anual obligatoria para el acceso a los

números de teléfono dentro de la zona de códigos incluida en el registro.

- La sección 2945 et seq. del Código Civil de California y la sección 17200 del Código

de Negocios y Profesiones de California al exigir y colectar honorarios por adelantado

antes de realizar cualquier servicio, por no incluir notas reglamentarias en sus

contratos, y por no cumplir con otros requisitos impuestos a los consultores de

ejecución hipotecaria;

- Las secciones 17200 y 17500 del Código de Negocios y Profesiones de California al

representar que ellos podrían obtener modificaciones de préstamo para la vivienda a

consumidores pero fallando de hacerlos en la mayoría de los casos; al representar que

consumidores deben hacer pagos adicionales aunque ellos no hubieran realizado ninguno de

los servicios prometidos; al representar que ellos tienen una tasa alta de éxito y que

ellos pueden obtener modificación de préstamo en no más de 60 días cuando de hecho estas

representaciones eran falsas; y al decirle a los consumidores que evitaran el contacto

con sus prestamistas y que dejaran de hacer los pagos del préstamo causando que algunos

prestamistas iniciaran procedimientos de ejecución de hipoteca y causar daños en el

expediente de crédito de los consumidores.

Las víctimas de este fraude incluyen a un padre de cuatro hijos luchando contra el

cáncer, un dueño de un pequeño negocio, una pareja mayor de edad, un alguacil (sheriff)

cuyos ingresos se redujeron debido a los recortes presupuestarios de la ciudad y a un

veterano de la guerra de Iraq. Ninguna de estas víctimas recibió la modificación de

préstamo prometida.

Brown le pide a la corte penas civiles inespecíficas, restitución completa a las

víctimas, y una orden judicial permanente a la compañía para que los demandados no

puedan ofrecer los servicios de consejero de rescate de ejecución hipotecaria.

Los acusados también hicieron negocios bajo otros nombres incluyendo Lighthouse Services

y California Foreclosure Specialists.

Home Relief Services, LLC
Brown demando a Home Relief Services, LLC, el lunes, y sus ejecutivos Terrance Green Sr.

y Stefano Morrero, el Diner Law Firm y a su abogado principal Christopher L. Diener por

estafar a miles de propietarios de miles de dólares a cada uno.

Home Relief Services cobró a propietarios más de $4,000 en honorarios por adelantado,

prometió bajar las tasas de interés al 4 por ciento, convertir las hipotecas de

tasa-ajustable a préstamos bajos de tipo-fijo y reducir el principal hasta el 50 por

ciento dentro de 30 a 60 días.

En algunos casos, estas compañías también procuraron ser el agente de los prestamistas

en la venta-corta (short-sale) de las casas de sus clientes. Al hacerlo, los acusados

trataron de utilizar la información financiera personal de los clientes para su propio

beneficio.

Home Relief Services y el Diener Law Firm dirigió a los propietarios que pararan el

contacto con sus prestamistas porque los acusados actuarían como su único agente y

negociador.

La demanda de Brown afirma que los acusados violaron:

- La sección 17500 del Código de Negocios y Profesiones de California por declarar una

tasa de éxito de 95 por ciento a obtener modificaciones de préstamo y prometerle a los

consumidores reducciones significativas en el balance principal de sus hipotecas;

- La sección 17200 del Código de Negocios y Profesiones de California, al no realizar

los servicios prometidos a cambio de honorarios por adelantado;

- La sección 2945.4 del Código Civil de California por colectar ilegalmente honorarios

por adelantado para servicios de modificación de préstamo;

- La sección 2945.3 del Código de Negocios y Profesiones de California por no incluir

avisos de cancelación en sus contratos;

- La sección 2945.45 del Código Civil de California por no registrarse en la Oficina del

Procurador General de California como consultores de ejecución hipotecaria; y

- El Código Penal de California sección 487 por robo grande (Grand Theft);

Brown le pide a la corte $10 millones en penas civiles, restitución completa a las

víctimas, y una orden judicial permanente a la compañía para que los demandados no

puedan ofrecer los servicios de consejero de rescate de ejecución hipotecaria.

Otras dos compañías con la misma administración también participaron en el esfuerzo de

engañar a propietarios: Payment Relief Services, Inc. y Golden State Funding, Inc.

RMR Group Loss Mitigation Group
Brown demando a RMR Group Loss Mitigation, el lunes, y sus ejecutivos Michael Scott

Armendáriz de Huntington Beach, Rubén Curiel de Lancaster, y Ricardo Haag de Corona;

Living Water Lending, Inc.; y al abogado Arthur Steven Aldridge de Westlake Village así

como el bufete de abogados de Shippey & Associates y a su abogado principal Karla C.

Shippey de Yorba Linda por estafar a más de 500 victimas de casi $1 millón de dólares.

La compañía solicitó a propietarios a través de llamadas telefónicas y visitas a casa en

persona. Los empleados declaraban una tasa de éxito de 98 por ciento a obtener

modificaciones de préstamo y garantía de devolución de dinero. Ninguna de las víctimas

conocidas recibió ningún reembolso o modificación de préstamo, con la asistencia de los

acusados.

Por ejemplo, en julio del 2008, una víctima de 71 años de edad, se dio cuenta que su

pago mensual de la hipoteca aumentaría de $ 2,4700 a $ 3,295. El pagó $2,995 y aún no a

recibido una modificación de préstamo ni reembolso.

Además, RMR insistió en que los propietarios se abstengan de contactar a sus

prestamistas, porque los acusados actuarían como sus agentes.

La demanda de Brown afirma que los acusados violaron:

- La sección 17500 del Código de Negocios y Profesiones de California por declarar una

tasa de éxito de 98 por ciento a obtener modificaciones de préstamo y prometerle a los

consumidores reducciones significativas en el balance principal de sus hipotecas;

- La sección 17200 del Código de Negocios y Profesiones de California, al no realizar

los servicios prometidos a cambio de honorarios por adelantado;

- La sección 2945.4 del Código Civil de California por colectar ilegalmente honorarios

por adelantado para servicios de modificación de préstamo;

- La sección 2945.3 del Código de Negocios y Profesiones de California por no incluir

avisos de cancelación en sus contratos;

- La sección 2945.45 del Código Civil de California por no registrarse en la Oficina del

Procurador General de California como consultores de ejecución hipotecaria; y

- El Código Penal de California sección 487 por robo grande (Grand Theft);

Brown le pide a la corte $7.5 millones en penas civiles, restitución completa a las

víctimas, y una orden judicial permanente a la compañía para que los demandados no

puedan ofrecer los servicios de consejero de rescate de ejecución hipotecaria.

United First, Inc.
El 6 de julio, del 2009, Brown demando a un consejero de rescate de ejecución

hipotecaria y un abogado – Paul Noe, Jr., y Mitchell Roth – los cuales defraudaron a

2,000 propietarios, desesperados por evitar la ejecución hipotecaria (foreclosure) de

sus casas, cobrando honorarios exorbitantes por “demandas falsas.”

Las demandas fueron archivadas en las cortes y luego abandonadas después de haber

cobrado a los propietarios un promedio de $1,800 para iniciar los casos con pagos

mensuales de por lo menos $1,200 y honorarios contingentes (condicionales) de hasta el

80 porciento del valor de sus casas.

Noe convenció a más de 2,000 propietarios que firmaran “acuerdos de negocio conjunto con

participación de riesgos” (joint venture) con su compañía, United First, y empleó a Roth

para archivar las demandas en las cortes reclamando que los préstamos no eran válidos

porque las compañías hipotecarias habían vendido las hipotecas en el Wall Street tantas

veces que las compañías hipotecarias no podían demostrar quienes eras los dueños de las

hipotecas. En otros estados con demandas similares, el resultado nunca es la

eliminación de la deuda del préstamo hipotecario.

Después de archivar las demandas en la corte, Roth prácticamente no hacia nada por

avanzar los casos. Varias veces no cumplió con los requisitos de la corte, no archivó

documentos exigidos por las cortes, no respondió a peticiones legales, no cumplió con

fechas de límite de la corte, ni se presentaba ante la corte. En cambio, la oficina de

Roth simplemente prolongaba los casos lo más posible para poder cobrar honorarios

adicionales mensualmente.

United First cobraba a los propietarios aproximadamente $1,800 dólares en honorarios

para iniciar el caso, y por lo menos $1,200 dólares adicionales por mes. Si se llegaba

a un acuerdo en el caso, los propietarios tenían que pagar un 50 porciento del valor del

arreglo. Por ejemplo, si United First obtuvo una reducción de $100,000 dólares de la

deuda hipotecaria, el propietario tenía que pagar honorarios de $50,000 dólares a United

First. Si United First eliminaba completamente la deuda, el propietario tenía que pagar

a la empresa el 80 porciento del valor de la casa.

La demanda de Brown afirma que Noe, Roth y United First:

- Violaron las leyes de asesoramiento de crédito y las leyes de consejero de ejecución

hipotecaria de California, secciones 1789 y 2945 del Código Civil;

- Introdujeron términos injustos en los contratos;

- Se dedicaban a acciones ilegales; es decir que Roth se asoció ilegalmente con United

First, Inc., y Noe, los cuales no eran abogados, para generar negocio a su despacho de

abogados violando el Código 6150 de Negocios y Profesiones de California; y

- Violó el Código 17500 de Negocios y Profesiones de California.

La oficina de Brown pide a la corte $2 millones de dólares en penas civiles, restitución

completa a las victimas, y una orden judicial permanente a la compañía y los demandados

para que no hagan negocio en los servicios de consejero de rescate de ejecución

hipotecaria.

Consejos a Propietarios

NO le pague a personas que prometen negociar con su prestamista para modificar su

préstamo. Es ilegal que consejeros de rescate de ejecución hipotecaria cobren antes de

(1) darle un contrato por escrito detallando los servicios que promete proporcionar y

(2) realizan todos los servicios descritos en el contrato; por ejemplo la negociación de

nuevos pagos mensuales o un nuevo préstamo de hipoteca. Sin embargo, un abogado puede

cobrar por adelantado, o un corredor de bienes raíces (real estate bróker; no un agente)

el cual ha sometido el acuerdo de honorarios por adelantado al Departamento de Bienes

Inmuebles para ser revisado por el departamento.

Llame a su prestamista usted mismo. Su prestamista quiere hablar con usted y

probablemente estará más dispuesto a trabajar directamente con usted que con un

consejero de rescate de ejecución hipotecaria.

NO ignore las cartas (o correspondencia) de su prestamista. Considere ponerse en

contacto con su prestamista usted mismo, muchos prestamistas están dispuestos a trabajar

con los propietarios que están atrasados con sus pagos.

NO pase el título o venda su casa al rescatador de ejecución hipotecaria. Consejeros

fraudulentos de rescate de ejecución hipotecaria a menudo prometen a los propietarios

que si transfieren el título de su casa, pueden quedarse en su casa como arrendatarios y

después comprar su casa otra vez. Los consejeros de rescate de ejecución hipotecaria

dicen que es necesario pasar el título para que una persona con mejor crédito pueda

obtener un nuevo préstamo para prevenir la ejecución hipotecaria. TENGA CUIDADO! Esto es

un fraude muy común, 'rescatadores de ejecución hipotecaria' suelen desalojar a los

propietarios y robar todo o la mayor parte de la equidad (equity) de su casa

NO le dé sus pagos de hipoteca a otra persona que no sea su prestamista, aunque esa

persona prometa entregar los pagos al prestamista. Consejeros fraudulentos de rescate

de ejecución hipotecaria a menudo se quedan con su dinero.

NO firme ningún documento sin antes leerlo. Muchos propietarios creen que firman

documentos para un nuevo préstamo para pagar una hipoteca con pagos atrasados. Después

descubren que en realidad transfirieron el título de su propiedad 'al consejero.'
CONSIDERE ponerse en contacto con un consejero de viviendas aprobado por el Departamento

Estadounidense de Desarrollo Urbano y Vivienda (U.S. Department of Housing and Urban

Development - HUD) el cual puede ser que le ayude sin costo alguno. Para obtener

información de un consejero de vivienda cerca de usted, favor de llamar a HUD al

800-569-4287 (TTY: 800-877-8339) o diríjase a la página de Internet www.hud.gov

Si usted cree que ha sido víctima de un fraude por consultantes de rescate de ejecución

hipotecaria en California, por favor contacte a la Procuraduría General el Departamento

de Indagaciones Públicos al http://ag.ca.gov/contact/index_espanol.php

Brown Prevents Calling Card Company from Boosting Profits by Charging Hidden Fees

May 8, 2009
Contact: (916) 210-6000, agpressoffice@doj.ca.gov

Los Angeles -- Attorney General Edmund G. Brown Jr. today obtained a court order preventing Los Angeles-based Total Call International, Inc. from charging “hidden and deceptive” fees for its pre-paid calling cards.

“Total Call International has raked in profits by advertising bargain basement prices then charging exorbitant fees when their cards were used.” Brown said. “Today’s agreement safeguards California’s consumers by forcing this company to fully disclose hidden and deceptive calling card fees.”

Total Call International advertised low per-minute base rates on its calling cards and then charged consumers steep, undisclosed add-on fees and surcharges when consumers used their cards, Brown said. This significantly reduced the amount of calling time available.

Brown and the California Public Utilities Commission launched an investigation and prepared a lawsuit contending that Total Call International violated a California law that specifically requires disclosure of pre-paid calling card fees, as well as California’s false advertising and unfair competition laws.

Brown and the utilities commission today filed a complaint and a stipulated judgment resolving the case. The stipulated judgment requires Total Call International to:

• Disclose all fees, add-ons, and surcharges in a clear and conspicuous manner and include those charges in the marketing of its per-minute rate.

• Maintain records and allow the Attorney General’s office to monitor its activities to determine if Total Call International is in compliance with the settlement and California Law.

• Pay civil penalties of $300,000.

During the course of the investigation, Total Call International agreed to stop charging a “real-time rate surcharges,” costing the company $1.5 million in profits. Total Call International did not admit any wrongdoing.

Calling cards, often sold at newsstands and grocery stores, are meant to be a convenient, affordable tool for users that make frequent international calls and may not have regular access to telephone service.

Calling card users should take the following steps to protect themselves:

1. Make sure you’re getting what you pay for- buy a card for a small denomination first to test out the service.
2. Check with family and friends to find out their experience with calling cards.
3. Ask the retailer if they stand behind the card if the telephone service is unsatisfactory. It’s important to remember that the store where the card is purchased from doesn’t control the quality of the service.
4. Remember that very low rates, particularly for international calls, may indicate poor customer service, or a sign that hidden fees and surcharges apply.
5. Always look for disclosures about surcharges, monthly fees, per-call access, in addition to advertised rate-per-minute.
6. Check the expiration date. Some cards expire after a certain amount of time.
7. Make sure the card comes in a sealed envelope or has a sticker covering the PIN. Otherwise, anyone who copies the PIN can use the phone time you’ve already paid for.

This is the second case that Brown has filed forcing the disclosure of fees. In 2007, Brown forced San Francisco-based Devine Communications, Inc. to disclose all hidden fees. Florida and New Jersey have also been actively prosecuting similar cases.

Today’s settlement, filed in San Francisco Superior Court is attached.

Brown Sends Mastermind of $20 Million Real Estate Scheme to Prison

May 7, 2009
Contact: (916) 210-6000, agpressoffice@doj.ca.gov

NEVADA COUNTY -Attorney General Edmund G. Brown Jr. announced that the man behind an “elaborate real estate scam,' Thomas Hastert, pled guilty today to 59 felony counts of embezzlement, securities fraud, and selling unregistered securities.

“For three years, Hastert pulled off an elaborate real-estate scam, squeezing millions out of investors,” Brown said. “Hastert’s days of swindling are at an end, and he will spend the next 5 years in prison.”

Brown filed criminal charges against Hastert in the Nevada County Superior Court in February 2009 for embezzlement, securities fraud, selling unregistered securities, 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.

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.

- The loans that Hastert brokered were required by law to be placed into a special trust account overseen by a third-party escrow firm to ensure the project was being built. Hastert never did. Hastert used the money to pay his office expenses and other development projects. There was no oversight.

- 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.

Hastert will be formally sentenced on June 25 in Nevada County Superior Court. He is expected to receive 5 years in prison.

Brown Obtains Guilty Plea from Woman Who Operated Sophisticated Loan Scam

May 1, 2009
Contact: (916) 210-6000, agpressoffice@doj.ca.gov
LOS ANGELES- Continuing his crackdown on mortgage fraud, Attorney General Edmund G. Brown Jr. late Thursday won a guilty plea from 22-year old Anna Santos, who conned thousands of dollars from homeowners in a “cruel and sophisticated” loan scam. Santos will be formally sentenced on May 20 in Los Angeles Superior Court. She is expected to receive 2 years in prison. “Santos conned thousands of dollars from homeowners trying to save their homes through a cruel and sophisticated scam,” Brown said. “She held out hope, but in reality did not provide an ounce of loan modification, leaving her victims unprotected and in far worse straits.” Santos was arrested on March 12, 2009 after she used forged documents to convince victims to hand over thousands of dollars for non-existent loan modification services. 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 mailed flyers to vulnerable homeowners that appeared to be from victims' lenders or a government agency. 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 signing up for “loan modification services,” homeowners then received what appeared to be 'confirmation' that their lender had been notified. Many victims also received loan modification documents that appeared to be from their lender. These documents were all 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. Santos targeted seniors and homeowners on the verge of foreclosure. It is believed that she scammed more than 100 victims. On average, victims lost approximately $3,000, at a time when they could not afford their mortgage, let alone additional fraudulent expenses. Since taking office, Attorney General Brown has shut down loan modification and foreclosure rescue scams and fought companies that have misled vulnerable borrowers:
  • In March 2009, Brown shut down Foreclosure Freedom, a fraudulent loan modification company that continued to collect fees and mortgage payments from dozens of homeowners without ever providing any loan modification services.
  • In November 2008, Brown arrested three members of First Gov after the company demanded an up-front fee, ranging from $1,500 to $5,000, to participate in a loan-modification program and never renegotiated the loans.
  • In October 2008, Brown announced an $8.68 billion settlement with Countrywide Home Loans after the company deceived borrowers by misrepresenting loan terms, loan payment increases, and borrowers’ ability to afford loans.
  • In May 2008, Brown shut down a team of scam artists that acquired deeds to hundreds of homes in foreclosure by convincing desperate consumers to pay $10,000 to place their property in a land grant, a phony and worthless real estate document, and then tricked homeowners into signing over the deed to their home and paying the company rent.
  • In March 2008, Brown shut down Lifetime Financial, Nations Mortgage, Greenleaf Lending, Virtual Escrow, Olympic Escrow and Direct Credit Solutions after the companies ran a complex predatory lending scheme using bait and switch tactics to victimize thousands of homeowners, many of whom lost their homes.

Brown Sues Wells Fargo Affiliates to Recover $1.5 Billion for Defrauded California Investors

April 23, 2009
Contact: (916) 210-6000, agpressoffice@doj.ca.gov

San Francisco -- Attorney General Edmund G. Brown Jr. today filed suit against three Wells Fargo affiliates to recover $1.5 billion for California investors who purchased auction-rate securities based on “false and deceptive” advice that these financial instruments were “as safe and liquid as cash.”

“Wells Fargo’s affiliates promised investors auction-rate securities were as safe and liquid as cash, when in fact they were not, and now investors are unable to get their money when they need it,” Attorney General Brown said. “This lawsuit seeks to recover $1.5 billion for Californians and holds these companies accountable for giving investors false and deceptive advice.”

Auction-rate securities are investments with long-term maturity dates (e.g., bonds) that Wells Fargo and other banks marketed as short-term investments equivalent to cash. These investments paid a slightly better rate of return than a bank account. And, investors could sell the securities at regular weekly or monthly auctions which provided the promise of liquidity.

In February 2008, these auctions froze up nationwide, and investors were no longer able to redeem their securities for cash, as promised. This left approximately 2,400 Californians who had invested with Wells Fargo without access to more than $1.5 billion. More than 40% of Wells Fargo’s auction-rate security investors were Californians.

In total, 5,687 investors purchased $2.9 billion worth of auction-rate securities from these companies nationwide.

By August 2008, major financial institutions including UBS, Citigroup, Wachovia, and Merrill Lynch met their obligations to investors and restored the cash value of these securities. The three Wells Fargo affiliates, however, have refused to do so.

Consequently, Attorney General Brown filed his complaint in San Francisco Superior Court today to restore the cash value of these securities, force the companies to disgorge any subsequent profits tied to the securities, and obtain civil penalties of $25,000 per violation. This could amount to hundreds of millions in civil penalties.

The suit contends that three Wells Fargo’s affiliates – Wells Fargo Investments, LLC, Wells Fargo Brokerage Services, LLC, and Wells Fargo Institutional Securities, LLC – violated California’s Securities Law by:

• Routinely misrepresenting, marketing and selling auction-rate securities as safe, liquid and cash-like investments similar to certificates of deposit or money-market accounts and omitting material facts in violation of California Corporations Code 25401;

• Offering and selling, as a broker-dealer, securities by means of a manipulative, deceptive or other fraudulent scheme, device, or contrivance in violation of California Corporations Code 25216(a);

• Marketing and selling auction-rate securities to investors for whom these investments were unsuitable in violation of California Corporations Code 25216(c) and California Code of Regulations, title 10, section 260.218.2; and

• Failing to supervise and adequately train sales agents pushing these investments in violation of California Corporations Code 25216(c) and California Code of Regulations, title 10, section 260.218.4.

In marketing and selling these investments, Wells Fargo’s affiliates ignored clear industry and internal warning about risk and previous auction failure:

• In March 2005, the Securities and Exchange Commission (SEC), the “Big 4” accounting firms, and the Financial Accounting Standards Board all determined that auction-rate securities should not be considered “cash equivalents.”

Despite these warnings, Wells Fargo’s affiliates continued to aggressively sell and falsely market auction-rate securities as safe, liquid, cash-like investments until the nationwide auction markets froze in February 2008.

In marketing and selling these investments, Wells Fargo’s affiliates failed to inform investors about how auction-rate securities or the auction process worked and the risks and consequences of auction failure.

Following the collapse of these auctions, Wells Fargo’s affiliates took advantage of the situation and offered loan programs to those who needed immediate access to the money tied up in these investments.

Investments ranged from $25,000 to millions, and investors included small businesses and small business owners, retirees, married couples, and other hard working Californians. These investors were led to believe they were putting their savings and assets into a safe and accessible place, but instead, they were left without access to their cash, leading to serious hardship. For example:

• A Southern California woman suffering from lung cancer and needing extra funds to help treat her illness sold her home and put the money into a Wells Fargo savings account. A Wells Fargo agent later recommended she put the money into an account with a higher interest rate. When the woman told the agent she needed to access the money and could not afford to lose any of it, she was reassured that her money would be safe like cash. Without disclosing the nature of the investment, the agent invested the funds in auction-rate securities and when the auctions failed, the woman could not access her money.

• A Bay Area company invested $400,000 in a money market account until it was solicited by phone to invest in what was described to them as a liquid, money market-like-account. They were told the only difference was the amount of notice needed to pull the funds (one week vs. one day). The funds were intended to help the business expand, but after the auctions failed, employees were instead laid off. The company was never informed that they were investing in auction-rate securities or that there were substantial risks tied to the investment.

A copy of the complaint is attached.

AttachmentSize
PDF icon n1719_wellsfargoaffiliates.pdf1.98 MB

Brown Arrests Owner of 'Big Bad Student Travel' for Pocketing Thousands for Spring Break Trip

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

LOS ANGELES -- Attorney General Edmund G. Brown Jr. announced that special agents from the California Department of Justice today arrested Abel Moses Somilleda, the owner of a vacation travel agency, who “ripped off” $55,000 from high school and college students whose 2006 trip to Cancun, Mexico was cancelled.

“Dozens of high school and college students paid hundreds of dollars for a spring break trip to Cancun, but instead of a week of vacation, these students were ripped off by the owner of Big Bad Student Travel,” Brown said. “Abel Moses Somilleda promised a vacation to Mexico, but when the trip was cancelled, he pocketed the students’ money instead of providing refunds.”

Abel Moses Somilleda, 35, of Hawthorne, Calif., was arrested in Hawthorne by California Department of Justice Special Agents. He is charged with:

• Nine counts of grand theft in violation of Penal Code section 487(a);
• One count of failure to return moneys in violation of Business and Professions Code section 17550.14; and
• Nine counts of failure to deliver on ticket or voucher in violation of Business and Professions Code section 17550.17(b).

Somilleda opened Big Bad Student Travel in 2004 after working for ten years in the student travel business and coordinating several trips of his own.

In 2006, Somilleda organized a spring break trip to Cancun, Mexico, for dozens of high school and college students. Students paid approximately $700 for the flight, hotel room, and expenses.

Three months before the trip, however, Somilleda learned that it would be cancelled. But instead of immediately informing those who had signed up, Somilleda continued to accept payment for the trip. It was only two or three days before the trip was scheduled to take place when Somilleda notified students that it had been cancelled.

Somilleda promised the students that they would receive a refund within several days. The students, however, never received refunds.

In total, Somilleda pocketed some $55,000. A search warrant uncovered that Somilleda had spent most of the money on his own personal expenses -- including rent, dinners, groceries, and utilities.

If convicted of all charges, Somilleda faces eight years in prison.

California requires all sellers of travel to register with the California Attorney General’s Office and display their registration number on all advertising. To check the registration of a Seller of Travel visit the Attorney General’s website at http://www.ag.ca.gov/travel/

To help prevent becoming a victim of travel fraud, the Attorney General’s Office has offered a few tips and warning signs.

GET IT IN WRITING AND READ IT CAREFULLY
Before you pay any money, read all the terms and conditions relating to your travel services including cancellation conditions, fees and other restrictions.
PAY BY CREDIT CARD
You have a right in certain circumstances to have credit card charges reversed if you do not receive what you paid for. Check with your credit card company for details. This protection is not available when you make a payment with a check, money order, or cash.

KNOW BEFORE YOU GO
Check beforehand with your local Better Business Bureau or California Department of Consumer Affairs ( http://www.dca.ca.gov/ ), which may tell you how long the seller of travel has been in business, whether there have been any law enforcement actions brought against it in the past, and the nature of consumer complaints it has received, if any.
CONFIRM TRAVEL PLANS DIRECTLY
It is a good practice to confirm all of your travel arrangements directly with the businesses providing the transportation, hotel, or car rental.
BEWARE OF “FREE” TRIPS
While there are legitimate businesses that offer free trips, there are others that offer “free” trips to entice consumers into buying their products or services, which include hidden costs.
INTERNET SCAMS
There are many legitimate sellers of travel that provide great deals on the Internet, but if an offer seems too good to be true, it probably is.
USE ONLY A REGISTERED TRAVEL COMPANY OR AGENT
Sellers of travel must register every year with the Attorney General's office in order to do business or market in California. They must clearly display their registration number in all advertising materials. Do not deal with unregistered travel companies. While registration does not mean that the seller is reputable, you should avoid any seller who has not adopted the safeguards required by law to protect your payments.

IF YOU HAVE BEEN SCAMMED
Taking money without delivering goods or services that are promised can be a crime. If you believe you have been a victim of a crime, call your local police agency. If your travel seller’s main place of business is in California, and under certain other circumstances, you may be entitled to make a claim for restitution from the Travel Consumer Restitution Fund. For more information about how to file a claim, please go to http://ag.ca.gov/travel/consumer.php.

AttachmentSize
PDF icon n1707_bbst_awa.pdf52.52 KB
PDF icon n1707_bbst_complaint.pdf23.9 KB

Brown and Contractors State License Board Stop Massive Statewide Home Repair Scheme

March 23, 2009
Contact: (916) 210-6000, agpressoffice@doj.ca.gov

SAN DIEGO – Attorney General Edmund G. Brown Jr. and the Contractors State License Board (CSLB) have finalized an agreement that will stop a massive service and repair scheme that unfairly overcharged thousands of Californians for “shoddy and woefully inadequate” home repair work.

“This massive scheme defrauded thousands of California homeowners who were charged exorbitant fees for shoddy and woefully inadequate home repair work by unlicensed and unskilled contractors,” Attorney General Brown said. “The agreement stops the illegal practices and gives homeowners a chance to recover some of their losses.”

A months-long investigation by the Attorney General’s Office and the Contractors State License Board found that SRVS Charge Inc. and its affiliated companies had been cheating some 6,000 customers each year for overpriced and substandard home repair work since 1989.

To stop the companies’ illegal practices and provide restitution to those who were victimized, Brown and the CSLB reached a settlement with:

• SRVS Charge Inc. and its affiliates,
• Principal owner, Sarkis Terabelian, 43, of Burbank;
• General manager, Zohrab “Rob” Mkhitarian, 40, of Burbank; and
• Associates Marine Metspakyan, 33, Avetik Avo Gyandzhyan, 38, Lilit Lusparyan, 28, Alisa Oganyan, 35, Estine Akopyan, 28, and Vardui Terabelian, 45.

The defendants operated various service and repair companies that employed electricians, plumbers, and heating and air-conditioning technicians in Southern California, the San Francisco Bay Area, and the Sacramento region. These companies routinely targeted elderly Californians.

Exorbitant customer fees enabled Sarkis Terabelian, Mkhitarian, and his associates to purchase two helicopters, a Mercedes-Benz, and real property valued in excess of $1 million. Title to these vehicles and real property were seized by the Attorney General’s Office last year and will be released as a result of the settlement.

SRVS Charge Inc.’s scheme worked like this:

• The company placed millions of dollars in telephone directory advertising, including many full-page ads. The ads, which listed different company names, claimed a 100% satisfaction guarantee and senior discounts. When customers called the numbers listed in any of the ads, they would be directed to a central call center.

• Many times repairmen would be dispatched from a different company than the customer called.

• Often, these workers had not undergone the criminal background check required of all contractors and Home Improvement Salespeople licensed by the Contractors State License Board since January 1, 2005.

• Customers were charged high prices for emergency home service and repair, often unrelated to the actual home repair work. Much of the work was poorly done or never completed.

• If a customer refused to pay, the company would file a lien against the home to force payment.

Because the company used multiple business names, it was difficult, if not impossible, for customers to seek recourse for incompetent workmanship, incomplete work, or any other issue that arose on their project. Customers were often denied refunds, despite the existence of the “100% satisfaction guarantee” promised in the ads.

Over several years, the Attorney General and the CSLB shut down affiliates of SRVS Charge, Inc. But instead of ending their scheme, the defendants continued to run their company under a labyrinth of business names and fraudulent contractor license numbers that were interchangeable. When CSLB either revoked a license or received an excessive number of complaints, the company would establish a new corporate identity and business would continue without interruption.

As part of its investigation, CSLB conducted undercover stings against service technicians suspected of using these fraudulent licenses and referred instances of the illegal activity to the San Diego, Los Angeles, Santa Clara, and Sacramento County district attorney’s offices. In one instance, the San Diego District Attorney’s Office found that a service technician had also committed burglary and theft and is now being prosecuted for his crimes.

Attorney General Brown entered into a final agreement with the defendants in San Diego Superior Court on March 12, 2009, and the agreement was made public today. The settlement provides for the following.

• A permanent injunction against the defendants’ prior illegal activities. This includes:
o CSLB monitoring of the defendants’ operations for one year;
o Mandatory registration of all company service technicians with CSLB. This requires technicians to undergo a criminal background check;
o Capping the number of business licenses that the defendants can use to a maximum of five;
o Preventing the defendants from charging exorbitant fees or fees that have nothing to do with the actual work that is performed;
o Fully disclosing to CSLB the names of the directors, officers, and employees of their company; and
o Mandatory customer complaint tracking with proper complaint investigation and reasonable efforts to resolve them.
o Prohibiting the defendants from engaging in false advertising.

• $3 million in penalties and restitution to be distributed as follows:
o $1.3 million to be used for consumer restitution;
o $450,000 to be assessed in penalties for state Business and Professions Code violations; and
o The remainder to be used to reimburse CSLB for investigative costs, legal costs, and costs of monitoring future compliance with the judgment.

“This settlement is a victory for California consumers and legitimate contractors, and brings resolution to thousands of hours of investigative work,” said CSLB Registrar Steve Sands. “Victims will now be able to regain some of their money, and CSLB will be able to watch this company closely so others aren’t harmed.”

If the terms of the settlement are violated, the defendants could face jail time.

The following companies are affiliated with the defendants and are included in the settlement:

• American Electric (CSLB #834398)
• American Home Repairs, Inc. (CSLB #834206)
• 59 Minute Service (CSLB #837697)
• Cal Repair Services, Inc., dba Pick Red Plumbing (CSLB #797241)
• Answering Resources, Inc., dba Thrifty Electric (CSLB #723375)
• Orbell Enterprises, Inc., dba Plumbing One (CSLB #713006)
• USA Services, Inc. (CSLB #775863)
• Love My Home, Inc. (CSLB #811361)
• Electric Avenue, formerly A Plus Electric Company (CSLB #569322)
• American Electric 911 Fast Inc. (CSLB #826916)
• Pro Electric Co. (CSLB #670171)
• RG Electric (CSLB #516892)
• Pacific West Heating & Air Conditioning (CSLB #604150)

If you think you have been the victim of fraud by this company and its affiliates, please contact the Contractors State License Board at 1-800-321-CSLB (2752) and press 7.

The original complaint and settlement terms are attached.

Brown Sues to Recover Hundreds of Millions of Dollars Illegally Diverted from Medi-Cal

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

FOR IMMEDIATE RELEASE
Friday, March 20, 2009
Contact: Office of the Attorney General - Christine Gasparac (916) 324-5500
Cotchett, Pitre & McCarthy - Niall McCarthy (650) 697-6000

Brown Sues to Recover Hundreds of Millions of Dollars Illegally Diverted from Medi-Cal

LOS ANGELES – Responding to a whistleblower’s allegation of “massive Medi-Cal fraud and kickbacks,” Attorney General Edmund G. Brown Jr. joined legal action against seven private laboratories to recover hundreds of millions of dollars in illegal overcharges to the state’s medical program for the poor.

“In the face of declining state revenues, these medical laboratories have siphoned off hundreds of millions of dollars from programs intended for the most vulnerable California families.” Attorney General Brown said. “Such a pattern of massive Medi-Cal fraud and kickbacks cannot be tolerated, and I will take every action the law allows to recover what is owed,” Brown added.

According to whistleblower Chris Riedel, the CEO of Hunter Laboratories, “I confirmed with the California Department of Health Care Services that these practices were illegal. We then had a choice--either join the other labs in violating the law or be unable to compete for business. We choose to suffer the financial consequence, and follow the law.”

The lawsuit, which is pending in San Mateo Superior Court, contends that the 7 medical labs systematically overcharged the Medi-Cal program over the past 15 years.

The defendants include:
• Quest Diagnostics, Inc., based in Madison, NJ; its affiliate Specialty Laboratories, Inc., based in Valencia, CA; and 4 other Quest affiliates.
• Health Line Clinical Laboratories, Inc., now known as Taurus West, Inc., based in Burbank, CA.
• Westcliff Medical Laboratories, Inc., based in Santa Ana, CA.
• Physicians Immunodiagnostic Laboratory, Inc., based in Burbank, CA.
• Whitefield Medical Laboratory, Inc., based in Pomona, CA.
• Seacliff Diagnostics Medical Group, based in Monterey Park, CA.
• Laboratory Corporation of America, based in Burlington, NC.

California law states that 'no provider shall charge [Medi-Cal] for any service…more than would have been charged for the same service…to other purchasers of comparable services…under comparable circumstances.' Yet, these medical laboratories charged Medi-Cal up to six times as much as they charged some of their other customers for the very same tests. For instance,

• Quest Diagnostics, Inc. charged Medi-Cal $8.59 to perform a complete blood count test (CBC), while it charged some of its other customers $1.43 for the exact same test. This is one of the most frequently requested blood tests.

• Laboratory Corporation of America charged Medi-Cal $30.09 to perform a Hepatitis C Antibody screening, while it charged some of its other customers only $6.44 for the test.

• Health Line Clinical Laboratories charged Medi-Cal $12.65 to perform an HIV Antibody screening, while charging some of its other customers $1.75 for the test.

These are not isolated examples. They are part of a pattern of fraudulent overcharging and kickbacks that developed over the past decade. Here’s how it worked:

• The defendant labs provided deep discounts when they were being paid directly by doctors, patients, or hospitals. Prices were often below the lab’s cost and sometimes free.

• In exchange for these steep discounts, the defendants expected its customers to refer all of their other patients (where the lab was paid by an insurance company, Medicare, and Medi-Cal) to its lab. Under California law, this amounted to providing an illegal kickback.

• These sharply reduced prices, however, were not made available to Medi-Cal. Instead of charging the discounted prices, the defendants charged Medi-Cal up to 6 times more than the defendant charged others for the same tests. In effect, defendants shifted the costs of doing business from the private sector to Medi-Cal.

• Additionally, defendants offered their clients who paid them directly (not through Medi-Cal or other insurance) deeper and deeper discounts in order to get a larger share of the lab testing business. This created an unfair playing field, and laboratories that followed the law could not effectively compete. These law-abiding companies were sometimes forced to sell or go out of business completely.

The case was filed under seal in San Mateo Superior Court under California's False Claims Act by a whistleblower and qui tam plaintiff Hunter Laboratories, which processes blood tests. Hunter Laboratories had found that it could not compete in a significant segment of the marketplace where many of the major players were offering referring doctors, hospitals, and clinics far lower rates than they were charging Medi-Cal.

After the whistleblowers filed the complaint, the Attorney General’s Bureau of Medi-Cal Fraud and Elder Abuse investigated the allegations and Attorney General Brown intervened under seal. The case became public this week.

Hunter Laboratories' attorney, Niall P. McCarthy of Cotchett, Pitre & McCarthy, commented that “At a time when California is laying off teachers and firefighters and is in a massive budget crisis, it is unconscionable that these defendants would bilk the system to the tune of hundreds of millions of dollars.”

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

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

The lawsuit asks for relief in the amount of triple the amount of California’s damages, civil penalties of $10,000 for each false claim; and recovery of costs, attorneys’ fees and expenses. It is estimated that damages could amount to hundreds of millions of dollars.

The clinical testing field is a $50 billion industry nationwide. The defendants named in the lawsuit include some of the largest clinical laboratories in the country.

Quest Diagnostics is the leading provider of diagnostic testing, information and services in the United States, with more than 500 patient service centers in California.

Laboratory Corporation of America performs more than one million tests on approximately 400,000 samples each day and has more than a dozen patient centers in Los Angeles.

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

AttachmentSize
PDF icon n1705_complaint_asfiled.pdf114.39 KB

Brown Announces Arrest of Two Scam Artists Who Committed Loan Modification Fraud

March 19, 2009
Contact: (916) 210-6000, agpressoffice@doj.ca.gov

ORANGE COUNTY- Attorney General Edmund G. Brown Jr. today announced the arrest of two scam artists -- Mary Alice Yraceburu and Marianne Curtis -- who “coldly and heartlessly” conned over one hundred and sixty victims out of thousands of dollars for non-existent loan modification services.

“These scam artists coldly and heartlessly preyed on Californians desperate for help in saving their homes,” Attorney General Brown said. “Homeowners in financial trouble have to be on guard against loan modification fraud, so they don’t make a bad situation worse.”

Attorney General Brown today filed 49 felony charges Orange County Superior Court against Mary Alice Yraceburu, 45, of Riverdale and Marianne Curtis, 67, of Costa Mesa.

Yraceburu was arrested today in Fresno County and Curtis was arrested today in Orange County on the following charges:

• 24-counts of grand theft;
• 25-counts of violations of California’s foreclosure consultant statutes;
• One special allegation that the total value of theft was over $65,000;
• One special allegation that the total value of theft was over $100,000;

Both women are convicted felons who have served time in state and federal prisons.

The two women operated a company called Foreclosure Freedom, which sent hundreds of fliers to Californians promising help in stopping the foreclosure of their homes. The fliers read: “FINAL NOTICE – Respond only to this notice immediately.” This is similar to First Gov scam, which the Attorney General stopped late last year.

When homeowners called the number on the flyer, they were told their mortgages could be renegotiated to a lower monthly payment. Victims, however, were required to pay thousands of dollars in up-front fees and were instructed not to contact their lenders.

Victims were assured the company had “private lenders and specialists exclusive to their company who are very experienced in the options and methods used to renegotiate home loans,” yet neither of the women who operated the company had real estate licenses, legal training, or any experience in the home mortgage market.

Investigators found no evidence of any successful loan modifications and most of the victims were either forced into bankruptcy or lost their homes to foreclosure.

Assets seized through search warrants served at Foreclosure Freedom and the bank accounts held by Mary Alice Yraceburu and Marianne Curtis totaled over $10,000.

If convicted of all charges, Yraceburu and Curtis face 21 years in prison.

Copies of the complaint and arrest warrant affidavits are attached.

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.

AttachmentSize
PDF icon n1701_stores_on_line_judgment.pdf1.1 MB