Consumer Protection

LOS ANGELES—Attorney General Edmund G. Brown Jr. and Insurance Commission Steve Poizner today announced a $7.2 million settlement with American Investors Life Insurance Company, Family First Insurance Services, and Family First Advanced Estate Planning, resolving allegations that the companies sold thousands of annuities with exorbitant fees to vulnerable senior citizens.

“These companies tricked senior citizens into buying annuities that would not pay out for years and had substantial early withdrawal fees—investments that made no sense for elderly people,” Attorney General Brown said. “California took action against these companies and today’s settlement marks the end of their unlawful practices,” Brown added.

“I refuse to tolerate insurance fraud in California,” said Commissioner Poizner. “Targeting our state’s vulnerable seniors to make an extra buck is especially egregious. Today’s settlement is a victory for seniors and all California consumers.”

Today’s multi-million dollar settlement resolves a lawsuit filed in 2006 which alleges that the companies tricked senior citizens into buying annuities—long-term financial vehicles with high penalties for early withdrawal. The annuities offered the possibility of future payments, but only after a lengthy surrender penalty period. Such annuities are generally acquired as long-term investments for future retirement income and not considered wise vehicles for seniors’ savings.

Under the scheme exposed by the attorney general and the insurance commissioner, Family First sent sales representatives, who were not authorized to practice law, to senior citizens’ homes to provide legal advice on estate planning. At no time during the initial solicitation or the home visits did Family First disclose that their ultimate goal was to sell annuities. After preparing the living trust documents the agents returned to the seniors’ homes—under the guise of acting as their financial or estate advisors—and induced the seniors to move their liquid assets into annuities.

The representatives did not disclose that seniors would be unable to withdraw more than the specified amounts while waiting for the investment to mature—sometimes up to 15 years—without incurring substantial penalties. The scheme, known as a Living Trust Mill, is a growing threat to senior citizens who are lured by the free seminars and sales agents who pose as financial or legal experts.

The settlement, filed today in Los Angeles County Superior Court, requires American Investors Life Insurance and the Family First companies to pay $1 million in civil penalties and distribute $5.5 million to consumers who purchased the annuities through Family First and incurred surrender penalties. The judgment also requires the companies to pay $700,000 to reimburse the Office of the Attorney General and Department of Insurance for costs incurred during the investigation and prosecution of this case.

The settlement also requires American Investors Life Insurance to waive surrender penalties when consumers present evidence of a significant financial hardship. The company must let consumers redeem the annuities, without surrender charges, in the form of monthly payments. Consumers who have not already received a credit for 55% or more of future surrender charges will have an opportunity to receive the value of their annuities in monthly payments along with a bonus of either 1% or 1.25% of their principal investment.

The judgment forces Family First Insurance Services and Family First Advanced Estate Planning to permanently cease all business operations. The judgment bars American Investors Life Insurance Services from soliciting seniors without revealing that the consumer will be propositioned by an insurance agent. American Investors is no longer permitted to make false or misleading statements about the terms of any annuity or insurance policy and they must disclose all charges that may be incurred when redeeming an annuity. The defendants are also prohibited from engaging in the unauthorized practice of law.

Scam artists have capitalized on the growing popularity of estate planning and living trusts by establishing schemes, known as Living Trust Mills, which use the estate planning services as a cover to sell annuities. The sales agents lure seniors with free seminars and sometimes pose as estate planners or financial experts to gain trust, allowing them to review personal financial and investment information. Agents running a Living Trust Mill are known to pressure seniors into converting all their investments into annuities by scaring the seniors into believing their original investments are unsafe.

To avoid these scams, consumers should be especially wary if a sales agent exhibits any of the following warning signs:

• The sales agent claims to a trust expert, senior estate planner or paralegal, or to work with an attorney who is an expert in estate planning. These agents are not attorneys and not experts in living trusts. If seniors need assistance with preparing a trust or other estate plan, they should seek out their own attorney whose expertise is in estate planning.
• Offering a free seminar or sales presentation on living trust services.
• Requesting access to personal financial information while setting up or updating an existing living trust. Agents use this ploy to ultimately pitch annuity investments.
• Criticizing existing investments and saying that these investments carry more risk than the annuity.
• Not discussing the drawbacks of a particular investment option.

Consumers who believe they been victimized by Family First, another Living Trust Mill or by annuity fraud, should report the crime to their local district attorney or the Department of Insurance at 1-800-927-HELP or visiting www.insurance.ca.gov. They also may file a complaint at the Attorney General's Web site, http://www.ag.ca.gov/consumers/mailform.htm.

LOS ANGELES—California Attorney General Edmund G. Brown Jr. and California Labor Commissioner Angela Bradstreet today sued two janitorial companies for exploiting their employees and committing “flagrant violations” of California’s basic wage and hour laws. The two offices have joined forces to collect these unpaid wages, thereby both helping the workers and sending a strong message that California’s labor laws must be obeyed.

“These janitors toiled for long, hard hours and their paltry compensation was far below the legal minimum,” Attorney General Brown said. “Such flagrant violations of basic labor laws will not be tolerated,” Brown added.

California alleges that the janitorial companies, Excell Cleaning & Building Services and MO Restaurant Cleaning Services, paid below minimum wage, did not pay overtime, denied rest and meal breaks and did not provide itemized wage statements. Both companies conducted business in Counties including Los Angeles, San Diego and Orange. MO Restaurant Cleaning is currently suspended by the Franchise Tax Board and is not authorized to do business in California. Excell employs approximately 300 janitors to clean California chain restaurants and bars.

During an investigation by the Employment Development Department and the Labor Commissioner, officials interviewed approximately twenty Excell employees and found that company’s janitors were working 8 ½ to 10 hour night-shifts without breaks, seven days per week, for a flat sum of $50 per day. Investigators determined that the company owed these workers approximately $585,000 in overtime, minimum wage and compensation for denied rest breaks.

Investigators also discovered that Excell was misclassifying its janitorial workers as “independent contractors,” rather than employees, to avoid $247,000 in payroll tax and mandatory social security and Medical contributions.

The janitors began work between 11:30 p.m. and midnight and were required to work all night until 8:30 a.m. or longer. They were paid a flat rate of $50 regardless of how many hours were actually worked. Some janitors were paid with checks that bounced.

As a result of this payment scheme, janitors were given less than the legal minimum wage and did not get mandatory overtime, including double-time pay. Workers were also not allowed to take rest breaks and meal periods as required by California law.

The labor commissioner and the attorney general bring this lawsuit to recover unpaid wages, get the companies to stop their unlawful practices and get them to pay restitution to the exploited workers. Some of the penalties and denied payments include:

• Failure to pay in excess of $700,000 in wages
• Failure to pay at least $500,000 in minimum wages
• Penalties of at least $100,000 for violating minimum wage laws
• A penalty of at least $100,000 for denying up to $50,000 in overtime including double-time
• Penalties and restitution for denying payment upon termination
• At least $300,000 in penalties for not providing itemized wage statements
• Penalties and back wages for denying meal and rest breaks
• Penalties and back wages for writing paychecks with insufficient funds

In addition to the penalties and restitution for these labor violations, California seeks penalties and restitution for violations of Business and Professions Code 17200 which bars companies from engaging in unlawful, unfair or fraudulent business practices. Courts assess a civil penalty of $2,500 for each violation proved at trial.

The attorney general enforces California laws that require fair business practices in order to protect working men and women and ensure a level playing field where all businesses adhere to the same rules of conduct.

Last month, Attorney General Brown filed an unfair competition lawsuit against Brinas Corporation, a drywall contractor in Los Angeles which was fueling the underground economy by paying workers below minimum wage and off the books. In November, Brown also sued PacifiStaff, a Los Angeles-based company, for teaching construction companies how to avoid providing state mandated workers’ compensation benefits that protect employees who are injured on the job.

Excell is a Delaware corporation with its corporate office located in Houston Texas. The company is registered with the California Secretary of State and its California business address is in Santa Ana. Its CEO is Essam Omar. MO Restaurant, suspended by the Franchise Tax Board in April 2007, has the same Houston address as Excell. In March, Excell agreed to pay $278,483 in back wages to 166 janitors in Houston after a U.S. Department of Labor investigation found that the company failed to pay overtime, in violation of the federal Fair Labor Standards Act.

The Division of Labor Standards Enforcement, led by Labor Commissioner Angela Bradstreet, is authorized to enforce the California Labor Code. The commissioner adjudicates wage claims, investigates discrimination and public works complaints, and enforces state labor law and Industrial Welfare Commission wage orders.

Janitorial workers perform heavy cleaning duties such as washing walls and glass, cleaning floors, shampooing carpets and emptying trash and rubbish containers. Janitors may perform routine maintenance work and tend to furnaces and boilers. According to the California Employment Development Department, there were approximately 229,900 janitors and cleaners employed in California in 2004.

The state’s lawsuit, filed today in Los Angeles Superior Court is attached.

NEW YORK — Charging the federal government with “subverting a key public safety measure,” California Attorney General Edmund G. Brown Jr. today sued the U.S. Environmental Protection Agency for allowing companies to hide information about toxic chemicals at thousands of facilities around the United States.

Brown joined eleven other states in challenging the EPA’s decision to weaken the Toxic Release Inventory, a program which requires facilities to report annual quantities of toxic chemicals emitted by refineries, chemical plants, and other manufacturing facilities.

Blasting the new disclosure requirements, Attorney General Brown said, “The EPA is subverting a key public safety measure that helps communities protect themselves from toxic chemicals. The federal government should require more--not less--disclosure of the toxic substances that the threaten public health and safety.”

Under the new rules, approximately 5,300 facilities nationally could be permitted to conceal vital safety information from the Environmental Protection Agency about toxic chemical levels and management of toxic waste. The new regulations increase by 10-fold the quantity of chemical waste that a facility can generate without providing detailed reports.

The attorney general is filing the lawsuit to invalidate EPA's revised regulations and return to the former, more stringent, reporting requirements. California asserts that EPA’s adoption of the new rule violates the federal Emergency Planning and Community Right-to-Know Act, a law which requires EPA to collect information on toxic chemicals. The law was passed under Ronald Reagan after a cloud of methyl isocyanate killed thousands of people in Bhopal, India and then a similar chemical release occurred at a sister plant in West Virginia.

Facilities covered by the Right-to-Know Act must disclose their releases of approximately 650 toxic chemicals as well as the quantities of chemicals they recycle, treat, burn, or otherwise dispose of on-site and off-site. The information in the database has been used by citizen groups, state and local governments and labor organizations to protect workers and monitor toxic chemicals.

The database has also been used in California to support Prop 65, a state law that requires companies to warn the public about exposure to chemicals known to the cause cancer or reproductive harm. Since the disclosure requirements were established in 1986, thousands of companies have voluntarily cut their toxic chemical releases by billions of pounds.

The states joining today’s lawsuit against the EPA include: Arizona, Connecticut, Illinois, Maine, Massachusetts, the Minnesota Pollution Control Agency, New Hampshire, New Jersey, New York, the Pennsylvania Department of Environmental Protection and Vermont.

The states’ lawsuit, filed today in United States District Court in Manhattan, is attached.

LOS ANGELES – California Attorney General Edmund G. Brown Jr. today sued PacifiStaff, a Southern California corporation that trained construction companies to violate workers’ compensation laws by the use of “fake corporations with phantom executives.” Today’s lawsuit comes on the heels of an underground economy lawsuit filed last week against Brinas Corp., a Los Angeles drywall company.

Commenting on the lawsuit, Attorney General Brown said, “PacifiStaff developed a sophisticated scheme whereby companies would fire their workers and rehire them in fake corporations with phantom executives. These illegal maneuvers enabled construction companies to avoid state laws which require all employers to provide workers’ compensation insurance.”

The California Department of Justice opened an investigation into PacifiStaff after receiving reports that a growing number of Southern California construction companies were starting to drop workers’ compensation for their construction workforce. These companies improperly labeled their employees as shareholding corporate executives to take advantage of Labor Code Section 3351 which does not require workers’ compensation insurance for such executives.

During the investigation, undercover agents attended PacifiStaff sales meetings where representatives pitched an illegal scheme to help construction companies avoid paying workers’ compensation to their employees. On print advertising, Internet promotions and during these sales pitches, the company falsely stated that their scheme was approved by a government agency.

Undercover investigators found that construction companies were directed, under advice from PacifiStaff, to fire their construction workers and rehire them as corporate officers of a sham corporation. These construction workers were then given executive titles and a single share of worthless stock in the new corporation. This sham corporation then sent the new fake executives back to construction sites—without the required workers’ compensation insurance.

Investigations revealed that PacifiStaff brushed off questions about what might happen if a construction worker were actually injured on the job. Investigators also found that staff representatives engaged in the unauthorized practice of law by offering legal advice without a license.

State law requires employers to provide workers with the no-fault protection of workers' compensation insurance. Workers' compensation provides benefits such as medical care for work-related injuries, disability payments while injured, and death benefits for the families of employees. Companies who evade workers’ compensation costs gain an unfair advantage over competitors who protect their workers by following the law.

According to the California Department of Industrial Relations, there were nearly 49,000 nonfatal injuries and illnesses among California construction workers in 2006. 30,000 of these cases resulted in missed days at work, transfers, or restrictions of duty. In 2005, there were 102 construction industry fatalities due to transportation accidents, falls, or exposure to harmful substances. There were approximately 935,000 Californians employed in the construction industry in 2006.

“Construction work can be extremely dangerous and those workers injured on the job deserve and depend upon the benefits afforded by California law,” Attorney General Brown said. “Today’s lawsuit sends a strong message that employers who try to short-circuit the system will be prosecuted to the full extent of the law,” Brown added.

PacifiStaff, using the trade name “Workforce Solutions,” has billed itself as the “Antidote to Workers’ Compensation.” PacifiStaff continues to market its services to its prospective clients through trade shows, print advertising and over the Internet at: www.theworkforcesolutions.com. PacifiStaff also conducts direct sales meetings with prospective client employers. PacifiStaff maintains an office at 2125 E. Katella Avenue, Suite 330, in Anaheim, California.

The lawsuit against PacifiStaff was brought under Business & Professions Code, Section 17200, which expressly prohibits unlawful or unfair business practices.

The state’s lawsuit is attached.

LOS ANGELES—Citing the threat of a “shadowy, underground economy,” California Attorney General Edmund G. Brown Jr. today sued the Brinas Corporation, a Los Angeles drywall contractor that unlawfully forced its employees to work without the benefit of legally mandated conditions.

“The company exploited employees, engaged in unfair business practices and violated worker protections. Today’s lawsuit will send a strong message—California demands that workers be treated fairly and not be exploited in a shadowy, underground economy,” Attorney General Brown said.

In August, the Attorney General launched an investigation into the employment, payroll and record-keeping practices of the Brinas Corporation and its predecessor; B. Wallco, Inc. Officials investigated construction sites, interviewed witnesses and reviewed records.

Investigators founds that the company engaged in flagrantly unlawful business practices to slash labor costs and underbid competition. Brinas participated in a variety of schemes to deny employee rights including:

• Failure to pay minimum wage
• Failure to pay overtime pay
• Failure to provide paid rest breaks
• Failure to provide a lunch break
• Failure to provide the tools necessary to perform the work
• Failure to provide pay check subs
• Failure to provide accurate wages information to the Employment Development Department
• Failure to provide accurate information to the State Compensation Insurance Fund

Workers who labored for the drywall company suffered substantial monetary losses and are entitled to restitution. In this particular case, the attorney general brings a lawsuit to halt the company’s illegal practices and get restitution for the workers who lost wages during the last four years.

The attorney general enforces California laws that require fair business practices in order to protect working men and women and ensure a level playing field where all businesses adhere to the same rules of conduct. Brown sued Brinas under Business & Professions Code, section 17200, which expressly prohibits unlawful or unfair business practices.

Brinas Corporation was incorporated in Nevada in June 2003. It obtained a California contractors license on March 4, 2005 and recorded Jose Andres Garcia Brinas as its CEO. In 2004, the company’s predecessor B. Wallco was sued by a private plaintiff, Drywall Committee, for many of the same violations cited in today’s complaint. As part of a 2005 settlement, the company agreed to obey all laws and provide the Committee with information on all work in Southern California.

Brinas is currently known to be engaged in drywall installation at constructions including Triana at Warner Center in Woodland Hills, Archstone Warner Apartment Complex in Canoga Park, Broadstone Beaudry Apartments in the City of Los Angeles, and Reserve 4S Ranch in north San Diego County.

The state’s lawsuit is attached.

LOS ANGELES -- California Attorney General Edmund G. Brown Jr. today announced that the Department of Justice is prepared to investigate and prosecute businesses that attempt to “wrongfully profit” from the devastating fires that have swept Southern California.

“It is illegal to exploit the state of emergency for personal gain,” said Brown.

Brown pointed out that California’s anti-price gouging statute, Penal Code Section 396, became immediately effective after the state of emergency was declared on Sunday, October 21, 2007. Brown issued a warning to those who might try to illegally raise prices for goods, services, or hotels.

“Fires have ravaged communities across Southern California,” Attorney General Brown said, “and the state’s anti-price gouging law is now in full force. Anyone who tries to wrongfully profit from the suffering of others will be investigated by the California Department of Justice.”

Penal Code Section 396 prohibits charging a price that exceeds, by more than 10%, the price of an item before the declaration of emergency. This law applies to those who sell food, emergency supplies, medical supplies, building materials, and gasoline. The law also applies to repair or reconstruction services, emergency cleanup services, transportation, freight and storage services, and housing and hotel accommodations.

Violations of the price-gouging statute are subject to criminal prosecutions which can result in one year imprisonment in county jail or a fine of up to $10,000. Violators are also subject to civil enforcement actions including civil penalties, injunctive relief and mandatory restitution.

The attorney general will coordinate any prosecutions with local district attorneys’ offices when violators should be prosecuted locally.

Consumers who believe they have been victimized by price gouging should immediately file a written complaint with the Attorney General's Public Inquiry Unit: http://ag.ca.gov/contact/complaint_form.php?cmplt=CL or by calling (800) 952-5225.

LOS ANGELES – California Attorney General Edmund G. Brown Jr. today announced the arrest of four suspects involved in a $1.5 million “fake healthcare clinic” scam. The suspects created a health clinic and recruited people to undergo unnecessary medical tests, with the sole purpose of filing false claims with Medi-Cal and Medicare.

Commenting on the arrests, Attorney General Brown said, “The suspects create a fake healthcare clinic to line their own pockets rather than help the sick and elderly. These arrests send a strong message that this kind of rip-off will not be tolerated.”

The 4 defendants, arrested yesterday morning at various locations in Los Angeles County, are: Richard Melkonyan, Akop Melkonian, Lilit Baghdasaryan, and Dr. Rito Castanon-Hill. Dr. Neil Hollander has agreed to surrender next week. David James Garrison remains at large.

The suspects operated Scott Medical Center in Burbank and hired two physicians, Dr. Hollander and Dr. Castanon-Hill, to create a front for a physician assistant who falsified records and billed for procedures not actually performed. The suspects recruited patients to undergo unnecessary exams and then the clinic operators and medical supply company billed Medi-Cal and Medicare.

Baghdasaryan supplied false information to the Franchise Tax Board to conceal stolen funds in 2003 and 2004. Garrison under-reported and failed to report to the Franchise Tax Board monies he was paid by Dr. Hollander, Dr. Rito Castanon-Hill, United Management Group, Inc., and S.M.C. Group, Inc., violations of Revenue and Taxation code Section 19706, Tax Evasion.

All of the defendants are charged with Penal Code Section 550, Submission of False Insurance claims; Penal Code Section 487, Grand Theft; Welfare & Institutions Code Section 14107, submission of False Medi-Cal Claims: and Penal Code Section 186.10 (a) (1), Money Laundering.

Agencies involved in the investigation include the California Department of Justice Bureau of Medi-Cal Fraud and Elder Abuse, Los Angeles Health Authority Law Enforcement Task Force, United States Office of Inspector General Health and Human Services, the Department of Health Services and Glendale Police Department. During the investigation, agents executed search warrants in Tujunga, Chatsworth, Glendale and the LAX area, seized 4 guns, and approximately $150,000 in cash.

Medi-Cal is a state managed program that pays for essential medical services, medical equipment, and medication for qualifying disabled, indigent and elderly California residents. It is funded by the state and federal governments and administered by the California Department of Health Services.

The Department of Justice Bureau of Medi-Cal Fraud and Elder Abuse investigates and prosecutes those who file fraudulent claims for medical services, medical equipment and drugs.

During the 2005/2006 Fiscal Year, the Bureau of Medi-Cal Fraud and Elder Abuse recovered $267,854,037 in Medi-Cal fraud and $6,525,097 in criminal prosecutions.

Suspects charged include:

• Richard Melkonyan (DOB 12/11/1970) was arrested at his home in Glendale, California.
• Akop Melkonian (DOB 10/28/1972) was arrested at his home in Chatsworth, California.
• Lilit Baghdasaryan (DOB 06/12/1980) was arrested at her home in Tujunga, California.
• David James Garrison (DOB 06/16/1961) resides in Los Angeles, California, is currently at large.
• Neil Hollander, M.D. (DOB 07/28/1940) resides in Huntington Beach, California, has agreed to surrender to authorities next week.
• Rito Castanon-Hill, M.D. (DOB 08/19/1971) arrested at his home in Los Angeles, California.

SAN FRANCISCO -- California Attorney General Edmund G. Brown Jr. today issued an opinion granting the San Francisco City Attorney’s request to bring a civil action in quo warranto to remove Supervisor Ed Jew from office. Brown’s opinion takes no position on the merits of the case but acknowledges that substantial questions of fact and law warrant review by a court.

In today’s opinion Attorney General Brown asserts that, “We find that it would be in the public interest, particularly for the Board and the residents and voters of District Four, to have a prompt judicial resolution of whether Defendant has fulfilled the eligibility requirements for the public office he now occupies.”

In June, 2007, San Francisco City Attorney Dennis Herrera asked the attorney general for permission to sue Ed Jew in quo warranto, alleging that Jew had not resided at all times in the district in which he was elected.

Quo warranto actions are typically filed to remove a person from public office. The attorney general must approve all quo warranto actions to protect public officials from frivolous lawsuits. The attorney general reviews written pleadings filed by both parties and issues an opinion either granting or denying the application to sue.

As the chief law officer of the state, the California Attorney General provides legal opinions to public officials and government agencies on issues arising in the course of their duties. Legal opinions of the Attorney General issued since 1986 may be viewed on the attorney general’s Website: http://www.ag.ca.gov/opinions/

The opinion is attached.

SAN FRANCISCO -- California Attorney General Edmund G. Brown Jr. today announced a “groundbreaking settlement” with AT&T Mobility (formerly Cingular) that will prohibit the cell phone carrier from charging customers for any calls made after their phones are lost or stolen. Brown alleged that the company violated California law, including Public Utilities Code section 2890, which bars phone companies from charging customers for unauthorized services.

“No cell phone company should profit from calls made by thieves or unauthorized users,” Brown said.

The agreement, a stipulated judgment filed today with the San Francisco Superior Court, requires the company to credit a customer’s bill or immediately investigate customer reports that the calls were made after the phone was lost or stolen. The company may only charge a customer if an investigation determines that the customer actually authorized the charges.

The judgment requires AT&T Mobility to inform each of their customers of their legal rights regarding lost or stolen phones. Under the agreement, AT&T must either credit the disputed charges or inform customers of their legal rights which include:

• The right to have the case investigated within 30 days
• The right to provide information showing a customer did not authorize the calls
• The right not to pay disputed charges during the investigation
• The right to appeal the outcome of an investigation to the California Public Utilities Commission

AT&T must notify customers--in writing--of these new requirements and assist customers to obtain credit for amounts already paid on lost or stolen phones, back to year 2003. AT&T will also pay the Attorney General's Office $500,000 for costs of the investigation and for the Unfair Competition Law Fund, administered by the California District Attorneys Association.

“This groundbreaking settlement makes AT&T the first cell phone company that has agreed to protect its customers from cell phone rip-offs and other unauthorized uses,” Brown said. “It is now time for the rest of the cell phone industry to step forward and follow AT&T’s example,” Brown added.

The Attorney General’s Office began the investigation in 2006 after several consumers complained they were being charged thousands of dollars for calls made on cell phones that were stolen. In one case, calls originated from Mexico, a country the customer had never visited. Although customers could fully document that the calls were unauthorized, AT&T refused to credit the accounts.

The law for cell phones is similar to that for credit cards: customers have a right to dispute unauthorized charges and request an investigation. Customers should not be held responsible for charges until the investigation concludes.

By entering into the agreement, AT&T does not admit it violated any laws or engaged in any wrongdoing. The state’s complaint and the agreement are attached.

SAN FRANCISCO – California Attorney General Edmund G. Brown Jr. today announced that ConocoPhillips has agreed to an “unprecedented global warming reduction plan” to off-set greenhouse gases caused by the expansion of its Northern California oil refinery.

Brown said that the oil company has agreed to offset greenhouse gas emission increases until the carbon-cutting regulations of AB 32 take effect in 2012.

“This agreement is a groundbreaking step in California’s battle to combat global warming and gives the state an early edge in meeting the greenhouse gas reduction goals of AB 32,” Brown told a news conference with ConocoPhillips at the Attorney General’s Office in San Francisco.

ConocoPhillips has proposed an oil refinery expansion at its Rodeo facility in Contra Costa County, including a hydrogen plant to make cleaner-burning gasoline and diesel fuels from the heavy portion of crude oil. Brown appealed to the Contra Costa County Board of Supervisors, challenging the environmental documentation for the project and the failure to mitigate the increased greenhouse gas emissions resulting from the operation of the hydrogen plant.

The Attorney General said he would now withdraw the state’s appeal based on the significant greenhouse gas emission offsets agreed to by ConocoPhillips.

Brown added, “Under this unprecedented global warming reduction plan, ConocoPhillips becomes the first oil company in America to off-set greenhouse gas emissions from a refinery expansion project. This is a breakthrough.”

The hydrogen project will initially emit approximately 500,000 metric tons of CO2 per year. ConocoPhillips will take the following actions as part of its efforts to offset these emissions:

• Auditing all its California refineries and identifying all greenhouse gas emission sources and reduction opportunities.

• Conducting an energy efficiency audit at Rodeo to identify feasible energy efficiency measures.

• Funding a $7 million offset program that the Bay Area Air Quality Management District will use to support offset projects in the Bay Area.

• Funding $2.8 million for reforestation efforts in California, with an estimated sequestration of 1.5 million metric tons of greenhouse gases over the life of the reforestation projects.

• Funding $200,000 for restoration of the San Pablo wetlands.

• Surrendering the operating permit for the calciner at the Santa Maria facility, which ConocoPhillips estimates emitted 70,000 metric tons of greenhouse gases annually.

• If ConocoPhillips reduces its greenhouse gas emissions at the Rodeo facility, it will get credit towards its contribution to the Bay Area Air Quality Management District offset fund.

ConocoPhillips also agrees to offset any CO2 emissions in excess of 500,000 metric tons per year from the hydrogen unit if it increases its use of hydrogen. The company may apply to receive offsets credits for reductions achieved through the projects and activities funded through this agreement, under AB 32, or any equivalent state or federal law or regulation.

In 2005, ConocoPhillips proposed a project, known as the Clean Fuels Expansion Project, designed to make cleaner-burning gasoline and diesel fuels from the heavy gas oil already produced at the refinery. The expansion included a hydrogen plant to produce steam and electricity for these refinery processes. ConocoPhillips estimated that the project would increase the supply of cleaner burning fuels by approximately one million gallons per day in California.

Under the California Environmental Quality Act (CEQA), Contra Costa County prepared an Environmental Impact Report on the project and accepted public comments. After the concluding that the report adequately addressed greenhouse gas emissions and climate change, the County Planning Commission certified the report. Attorney General Brown appealed to the Contra Costa County Board of Supervisors in May 2007 on grounds that the impact report did not adequately address the greenhouse gas emissions and the associated climate change impacts of the project.

Scientists throughout the world overwhelming agree that global warming is real, is here now, and will get worse. At current emissions levels, temperatures in California will increase by 4 to 10 degrees during this century. In 2006 Governor Arnold Schwarzenegger signed AB 32, landmark global warming legislation that commits the state to reduce greenhouse gas emissions to 1990 levels by 2020—a 25% reduction. But AB 32 regulations do not take effect until 2012 and there are no current limits on greenhouse gas emissions.

Today’s agreement with ConocoPhillips comes on the heels of a landmark agreement with San Bernardino County to reduce greenhouse gas emissions at the county level. These actions join a growing movement at the local level to combat climate change. As of June 2007, over 540 mayors from 50 states have signed the U.S. Mayors Climate Protection Agreement, a pledge to reduce global warming pollution in cities 7% below 1990 levels by the year 2012.

In California, the League of California Cities and the California State Association of Counties have partnered with the Institute for Local Government to launch a California Climate Action Network. The network proposes a variety of actions—from conserving energy to using lower carbon fuels—that can be taken by local jurisdictions to cut greenhouse gas emissions. For more information visit: http://www.ca-ilg.org/climatechange/

The attorney general’s global warming agreement with ConocoPhillips is attached.