Consumer Protection

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

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

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

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

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

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

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

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

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

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

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

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

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

The lawsuit is attached.

FOR IMMEDIATE RELEASE
January 23, 2009
Contact: Christine Gasparac(916) 324-5500

Attorney General Brown Files Criminal Charges in $52 Million Ponzi Scheme

ORANGE COUNTY – Attorney General Edmund G. Brown Jr. yesterday filed 89 criminal charges against 6 men who “callously conned” more than a thousand people, including retired senior citizens, out of $52 million through sham real estate projects, using the investors’ money to buy planes, expensive cars and lavish vacations.

“These six men callously conned hundreds of people into investing $52 million into a company that they treated as their personal bank account,” Attorney General Brown said. “They fraudulently took investors’ money and spent it on an array of luxury items, relying on a Ponzi scheme to keep investors at bay.”

From 2001 to February 2006, Irvine-based Carolina Development Company peddled $52 million worth of stock to more than a thousand investors. The company claimed the proceeds would be used to buy and develop luxury resorts and upscale communities adjacent to golf courses designed by Arnold Palmer, Jack Nicklaus, and Greg Norman. Investors bought anywhere from $15,000 to $1 million in stock, including senior citizens who invested their retirement funds. The company bought some land, but did nothing to develop it, despite its claim that 85% of the $52 million invested would be used for land acquisition and development.

To persuade investors to buy shares of Carolina Development Company, the defendants claimed that Arnold Palmer had partnered with them. The defendants promised that investors would reap huge dividends and assured those who invested a minimum of $100,000 that their investment would be secured by deeds to specific parcels of land. None of these claims were true.

The defendants diverted more than $24 million for extravagant bonuses, personal medical bills, airplanes, fancy meals, BMWs, concert tickets and luxury vacations. To keep investors at bay, the defendants engaged in a Ponzi scheme, paying some investors “returns” on their investment using money from the new investors.

Department of Justice agents served arrest warrants against the following six defendants, who were charged with grand theft and securities fraud in Orange County Superior Court:

Lambert Vander Tuig, 50, of Santa Margarita, currently held in the Orange County Sheriff’s Department.

Jonathan Carman, 45, of Laguna Hills, currently held in the Orange County Sheriff’s Department.

Mark Sostak, 50, of Ladera Ranch, currently held in the Orange County Sheriff’s Department. Bail is set at $4.5 million.

Scott Yard, 47, of Costa Mesa, remains at large.

Soren Svendsen, 43, of Coto De Caza, is currently being held in the Orange County Sheriff’s Department. Bail is set at $2.2 million.

Robert Waldman, 48, is scheduled to turn himself in to authorities.

On Wednesday, representatives of the Attorney General’s Office obtained arrest warrants from Orange County Superior Court Judge Selim Franklin.

These criminal charges were preceded by civil actions brought by the U.S. Securities and Exchange Commission (SEC). The SEC in 2007 won a $29.2 million judgment against Lambert Vander Tuig, the president of the company, and a $2.1 million judgment against Jonathan Carman, vice president of the company.

If convicted, defendants Vander Tuig and Carman could receive sentences in excess of 10 years in state prison. The remaining defendants would be subject to lesser prison sentences.

The criminal complaint and affidavit are attached.

Sacramento – Attorney General Edmund G. Brown Jr. today urged a federal appeals court to block the court-appointed Receiver from “commandeering $8 billion” from the shrinking California Treasury for extravagant prison construction.

“Federal law does not allow the Receiver to commandeer the finances of the state to spend $8 billion for unaccountable and extravagant prison construction,” Attorney General Brown said. “The court should rein in the Receiver, who is now spending more than $2 billion per year on inmate health care. This is almost $14,000 per inmate and nearly double what it was just three years ago.”

In a reply brief filed today with the United States Court of Appeals for the Ninth Circuit, Attorney General Brown describes the fundamental legal errors that the court-appointed Receiver has made in attempting to force the state to fund his prison construction program against its will.

Brown argues that the Prison Litigation Reform Act, signed into law in 1996, bars federal judges from ordering the construction of new prisons and that any relief must involve the least intrusive means necessary.

A just-released draft of the Receiver’s plan, however, demonstrates the unbridled scope of the Receiver’s plan.

The plan calls for the construction of 7 new prisons with 10,000 new beds -- the size of 70 Walmarts. It envisions yoga rooms, regulation basketball courts with electronic bingo boards, music and art therapy, horticultural therapy, and landscaping which shields fences from inmates’ view. While some details have been deleted in a subsequent draft, the fundamental structure and many of the extravagant amenities remain.

Brown argues that to force such an $8 billion plan on California against its will—particularly at a time when the state must make huge budget cuts to programs including health care, infrastructure, and schools—violates federal law and the state’s sovereign immunity under the 11th Amendment to the Constitution.

The appellate court, therefore, should reverse the District Court’s order of a $250 million down-payment toward the $8 billion plan.

The State of California has acknowledged the need to provide health care that meets Constitutional standards, and has taken a series of steps to improve prison health care. This includes increasing the numbers of qualified medical staff at prisons and improving the process by which inmates are assessed and how they are treated.

Under the Receivership, healthcare spending has increased from $7,601 per inmate in 2005-2006 to $13,778 per inmate in 2007-2008. That’s far more than the average citizen in California pays for healthcare coverage.

Background
In August of this year, the court-appointed Receiver filed a motion seeking to compel Governor Arnold Schwarzenegger and Controller John Chiang to allocate $8 billion from the California Treasury over the next 5 years, including $3 billion in this fiscal year, for prison healthcare facility construction. Attorney General Brown has argued that the federal court does not have the authority to mandate state prison construction, nor has the Receiver justified the massive sums called for in his plan.

Sacramento—Attorney General Edmund G. Brown Jr. today reached a $4.85 million settlement with H&R Block, which prohibits the company from marketing refund anticipation loans as early tax refunds.

“This settlement prevents H&R Block from marketing high-cost loans as early tax refunds,” Attorney General Brown said. “This is especially important because often these loans go to those who can least afford them.”

The California Attorney General filed suit against H&R Block in early 2006 regarding its marketing and sale of income tax refund anticipation loans and a related product called refund anticipation checks.

H&R Block continues to deny any wrongdoing. During the course of the investigation, Block has worked with the Attorney General to improve its practices.

A refund anticipation loan is a short-term loan secured by a taxpayer's anticipated income tax refund. The complaint alleged a variety of deceptive practices by H&R Block including:

• Deceptive advertising designed to disguise refund anticipation loans, which carry fees and other costs, as tax refunds, which the IRS provides without charge; and

• Unfair debt collection practices by which customers' refund proceeds were garnished to pay off debts they supposedly owed.

The settlement provides for up to $2.45 million in restitution for consumers who purchased a
“Refund Anticipation Loan” or a “Refund Anticipation Check” through H&R Block between
January 1, 2001 and December 31, 2008. In addition, H&R Block will pay $500,000 in penalties and $1.9 million in fees and costs.

In addition. H&R Block will be prohibited from marketing these loans and related products in a deceptive or misleading manner and will be required to make clear and conspicuous disclosures to consumers prior to their purchase of these products. Terms of the settlement are limited to three years.

A settlement administrator will be contacting eligible consumers directly. Eligible consumers may also write to the Attorney General’s Public Inquiry Unit at P.O. Box 944255, Sacramento, CA 94244-2550, or may send an e-mail at http://ag.ca.gov/contact/.

Attorney General Brown previously settled claims against Jackson Hewitt and recently concluded a trial against Liberty Tax Service, the second and third largest tax preparation companies in the country, respectively. All three lawsuits involved refund anticipation loans and related products.

FOR IMMEDIATE RELEASE
December 18, 2008
Contact: Christine Gasparac (916) 324-5500

Attorney General Brown Reaches Agreement with MillerCoors to Ban Sale of Alcoholic Energy Drinks

SAN FRANCISCO– California Attorney General Edmund G. Brown Jr. today announced that 13 states and the City of San Francisco have forged an agreement with MillerCoors to stop “the growing and widespread use” of caffeine-spiked alcoholic beverages, often marketed to young adults.

“With this agreement, we’re shutting down 90% of the market in caffeine-spiked alcoholic beverages,” said Attorney General Brown. “The growing and widespread use of caffeine mixed with alcohol can distort judgment, weaken inhibitions and encourage risky behavior, especially in young people.” Brown added.

Alcoholic energy drinks mix alcohol with ingredients like caffeine, guarana, taurine or ginseng. The alcoholic content in these drinks range from 6-12% per volume, more than most beers. Together, the stimulating effect of caffeine in the beverage mixed with the alcohol can mask how intoxicated the drinker actually is. A drinker may feel alert, but will still suffer the debilitating effects of alcohol consumption, including diminished reaction times and basic motor skills.

Sparks currently has 90% of the market share for alcoholic energy drinks. Last June, Attorney General Brown and other attorneys general announced that Anheuser-Busch had signed an agreement to stop producing its alcoholic energy drinks. With today’s agreement, most of the alcoholic energy drinks that were available in the beginning of the year will now be taken off the market. California and the other states will continue to investigate the smaller companies that continue to sell alcoholic energy drinks.

Young people are most vulnerable to the effects of alcoholic energy drinks like Sparks because they are prone to engage in risky behaviors such as binge-drinking and are less experienced in gauging the debilitating effects of alcohol. They are also more at risk of acute alcohol problems, including traffic crashes, violence, sexual assault, and suicide.

A study by researchers at the Wake Forest University School of Medicine found that students who consumed alcoholic energy beverages were twice as likely to be involved in alcohol-related accidents and injuries. They were also more likely to be involved in sexual assaults or drunk driving.

After an investigation into the product, Attorney General Brown and the participating attorneys general alleged that Sparks was unsafe, MillerCoors was making false or misleading health-related statements about Sparks’ energizing effects, and much of the marketing was directed toward youth, a violation of California laws on marketing tobacco or alcoholic products to minors.

Under today’s settlement agreement, MillerCoors will:

• Cease manufacturing and marketing all caffeinated alcoholic beverages, including Sparks,

• Reformulate Sparks so that it does not contain stimulants, including caffeine, guarana, taurine or ginseng, and eliminate the use of images that suggest an energizing effect,

• Not promote the mixing of caffeinated products with alcoholic beverages,

• Inform distributors and retailers that reformulated Sparks contains alcohol, but no caffeine, and Sparks should be displayed separate from non-alcoholic energy drinks. The company will also immediately discontinue its current Sparks website without directing visitors to a new site.

California was joined in this settlement by Arizona, Connecticut, Idaho, Illinois, Iowa, Maine, Maryland, Mississippi, New Mexico, New York, Ohio, Oklahoma, and the City and County of San Francisco.

The agreement is attached.

SACRAMENTO – California Attorney General Edmund G. Brown Jr. today joined with 32 other state attorneys general in announcing a landmark $7 million settlement with Airborne, Inc. that forces the company to stop advertisements that “dramatically misrepresented” its dietary supplements as cold remedies.

“Airborne dramatically misrepresented its products as cold remedies without any scientific evidence to back up its claims,” Attorney General Brown said. “Under this agreement, the company will stop advertisements that suggest that its products are a cure for the common cold.”

Airborne began selling its products as a cold remedy on the Internet around July 2000 and on television in 2004. In its advertisements, Airborne featured people suffering from cold and flu symptoms and made unsupported statements suggesting its products were a cure for the common cold. This included:

• “Airborne Cold Remedy”
• “A Miracle Cold Buster!”
• “Sick of Catching Colds?”
• “Take at the first sign of a cold symptom.”

The company also requested that retailers sell Airborne products in the cold/cough aisle.

To substantiate their claims, Airborne relied upon studies that claimed the major ingredients in their products -- Vitamin C, Vitamin E, Selenium, and Zinc -- prevent colds. However, subsequent definitive studies found that these ingredients do not have any discernable effect to prevent colds. Despite the information, Airborne continued to market its products as cold remedies.

Investigators also raised concerns about the levels of Vitamin A in Airborne products. In older formulations, Airborne contained 5,000 International Units of Vitamin A. If the product was taken as instructed, consumers would ingest up to 15,000 International Units of Vitamin A daily.

This amount of Vitamin A poses potential health risks to vulnerable populations, including children and pregnant women. During the negotiation process, Airborne reformulated its product to contain only 2,000 International Units of Vitamin A.

Under today’s agreement, Airborne Inc. agreed:
• Not to make any claim concerning the health benefit, performance, efficacy or safety of its dietary supplements.
• Not to make any claims that imply that Airborne can diagnose, mitigate, prevent, treat, or cure colds, coughs, the flu, an upper respiratory infection or allergies.
• Not to require, demand, or otherwise influence where a retailer places Airborne, Inc. products, such as in the cold and cough aisle.
• Not to market any product that contains directions for use that would, if followed, result in an individual ingesting 15,000 International Units of Vitamin A per day.
• Pay a total of $7 million to 33 states.

Today’s settlement covers all Airborne products including:
• Airborne- Original
• Airborne- Pink Grapefruit
• Airborne- Lemon Lime
• Airborne- Nighttime
• Airborne- Jr. On-The-Go
• Airborne- Seasonal Relief
• Airborne- Sore Throat Gummi Lozenges
• Airborne- Soothing Throat Gummi Lozenges
• Airborne- Power Pixies

The states involved in today’s settlement include Alaska, Arkansas, Connecticut, Delaware, The District of Columbia, Florida, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Maine, Maryland, Michigan, Mississippi, Missouri, Montana, Nebraska, Nevada, New Jersey, New Mexico, Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Vermont, Washington, and Wisconsin.

California will receive $460,000 under the settlement.

SACRAMENTO – California Attorney General Edmund G. Brown Jr. and Los Angeles City Attorney Rocky Delgadillo have reached a settlement with Mattel, Inc. – and several other toy makers – that will “safeguard California’s children” from lead-contaminated toys this Christmas.

Even though a new federal law ratcheting down standards for lead in toys won’t go into effect until February 10, 2009, Mattel and its subsidiary Fisher-Price, RC2 (which makes Thomas the Tank Engine toys), A&A Global Industries, Cranium Inc., Eveready Battery Company, Marvel Entertainment, Toy Investments, Kids II, and Amscan, have agreed to adopt the tough new federal standards immediately. By this agreement, the companies have pledged not to sell any toys they know contain lead, and in addition will pay $550,000 for lead testing and improved consumer notification.

“These consumer protection agreements will safeguard California’s children from lead-contaminated toys this Christmas,” Attorney General Brown said.
“Putting these agreements into effect immediately is absolutely critical because so many toys are sold between Thanksgiving and Christmas, months before new federal standards go into effect.”

In the wake of disturbing revelations about lead-contaminated toys imported from China over the past two years, Attorney General Brown and City Attorney Delgadillo filed suit against 17 toy manufacturers and retailers on November 19, 2007. Nine months later, Congress passed landmark consumer product safety legislation, the Consumer Product Safety Improvement Act.

The federal legislation:
• Lowers the standard for lead in paint and surface coatings from 600 parts per million currently to 90 parts per million after August 14, 2009.
• Establishes increasingly tight restrictions for lead in other materials used in toys – such as plastics, metals and fabrics. These restrictions are phased in over time.

February 10, 2009 – 600 parts per million
August 14, 2009 – 300 parts per million
August 14, 2011 – 100 parts per million

By the terms of the settlement agreement announced today, the companies will:
• Implement the federal lead standards on December 1, 2008, instead of February 10, 2009.
• Meet the 90 parts per million lead in paint standard by December 1, 2008, instead of by August 14, 2009, except for Kids II and Amscan, which will adhere to the federal timeline.

• Meet the 300 parts per million standard for lead in plastics, metals, and fabrics by December 1, 2008, instead of August 14, 2009, except for Kids II and Amscan, which will adhere to the federal timeline.
• If the companies find toys in excess of the lead standard, they will stop selling and distributing those toys, regardless of when the toy was made. This will be in effect this holiday season.
• Pay into a $550,000 fund to test toys for lead and improve outreach about future recalls. They will pay another $460,000 for the Attorney General’s and Los Angeles City Attorney’s Proposition 65 enforcement activities and $548,500 in civil penalties.
• Implement a Quality Assurance System that is designed to identify and to segregate toys with lead during and after the manufacturing process.
• Send direct notice of a recall to consumers of the product for whom they possess address or email contact information.

If the companies violate the lead standard in the future, the Attorney General can obtain penalties through an expedited enforcement process.

This agreement settles a lawsuit filed by the State of California and the LA City Attorney in November 2007, after receiving notices of violation from the Center for Environmental Health, As you Sow, and the Environmental Law Foundation.

The lawsuit alleges that Mattel and 16 other companies knowingly exposed individuals to lead—a chemical known to the State of California to cause cancer and reproductive harm—and failed to provide any warning about this risk.

Other defendants not part of this settlement are: Costco, KB Toys, Kmart, Michaels, Sears, Target, Toys ‘R’ Us, and Wal-Mart.

Background on Proposition 65

During the last year and a half, there have been frequent recalls of toys imported from China due to lead in the paint. Subsequently, the Attorney General’s Office began an investigation under Proposition 65, which ensures that businesses cannot expose individuals to hazardous chemicals without posting a clear and reasonable warning.

Proposition 65 is enforced through lawsuits brought by the Attorney General, district attorneys and city attorneys in cities with a population exceeding 750,000. Lawsuits may also be brought by private parties, but only after these parties notify the Attorney General of the alleged violation. Businesses that violate Proposition 65 are subject to civil penalties of up to $2,500 per day for each violation.

Proposition 65 requires the Governor to publish a list of chemicals that are known to the State of California to cause cancer, birth defects or other reproductive harm. Lead has been listed since 1987 as a chemical that can cause reproductive harm and birth defects, and has been on the list of chemicals known to cause cancer since 1992.

For more information about Prop 65 and to view the private party notices please visit: http://ag.ca.gov/prop65/index.php.

SAN DIEGO—California Attorney General Edmund G. Brown Jr. and San Diego District Attorney Bonnie Dumanis today announced a settlement with Wal-Mart Stores, Inc. that will “help consumers as the holiday season approaches” by giving customers $3 back at the cash register for price-scanning errors.

“We found price-scanning errors in Wal-Mart stores across California,” Attorney General Brown said. “Consumers saw one price in the aisles, but were charged a higher price at the cash register. With this agreement, Wal-Mart will give customers $3 back when pricing mistakes are found at the cash register. In these tough times, this will help consumers as the holiday season approaches.”

In December 2005, the California Attorney General’s Office began an investigation into allegations that Wal-Mart stores in California were scanning items at a higher price than the prices advertised on store shelves and signs. Through random price-checking, county Departments of Weights and Measures across the state found that 164 Wal-Mart Stores in 30 counties had made scanning errors. On average, customers who were overcharged paid an extra $8.40 at the checkout.

Examples of price-scanning errors include:

• From late August to November 2006, customers were overcharged $1.00 on sports bras in Ventura, San Diego, Los Angeles, San Bernardino, Stanislaus, Siskiyou and Tuolumne Counties.
• In January and February 2007, customers were overcharged $2.00 for woven shirts in San Diego, Sacramento, Ventura, Los Angeles and San Bernardino Counties.
• In December 2007, customers were overcharged $2.00 on S/S Polo in San Diego County.
• In November 2003, customers were overcharged $5.16 on a Journey CD in Ventura and Los Angeles Counties.
• From December 2004 to February 2005, customers were overcharged $5.02 on Hanes underwear in Los Angeles County.
• In October and November 2006, customers were overcharged $2.00 on a pair of men’s pants in San Diego and Tuolumne Counties.
• In March and April 2006, customers were overcharged $1.00 on Kellogg’s Special K cereal in Los Angeles and Santa Clara Counties.
• Also in March and April 2006, customers were overcharged $.46 on Kellogg’s Rice Krispies cereal in Madera, King and Ventura Counties.

In the settlement agreement, Wal-Mart agreed to implement a pricing accuracy program in California for at least four years. The program will include:

• A designated person (or group of people) who will receive and address customer complaints from Wal-Mart stores in California.

• An employee (or group of employees) in every Wal-Mart Store who will scan items on a weekly basis and confirm price accuracy.

• An automatic refund program. Whenever an employee becomes aware that a customer has been or is being charged a price higher than the lowest price currently listed, Wal-Mart will give the customer a $3.00 reduction on the item. If the item is less than $3.00, the customer will receive that item for free.

• A sign, in English and Spanish, will be posted at every check-out stand in every Wal-Mart Store clearly outlining the new store refund policy.

In settlement of the case, Wal-Mart has agreed to pay $1.4 million in restitution, civil penalties and reimbursement for investigative costs, and $50,000 to the State Consumer Protection Prosecution Trust Fund.

The case is People vs. Wal-Mart, Inc, San Diego Superior Court case number 37200800096757-CU-BT-CTL. A copy of the Complaint and Settlement Agreement are attached.

LOS ANGELES—In an ongoing crackdown on worker abuses at California’s two busiest ports, California Attorney General Edmund G. Brown Jr. today sued three trucking companies operating at the Ports of Long Beach and Los Angeles that deny their workers benefits and protections entitled to them under state workers’ compensation and disability laws.

“These companies take advantage of their workers by failing to provide them with state-mandated protections and benefits,” Attorney General Brown said. “Truck drivers at the ports work long hours under tough conditions. By unlawfully classifying workers as ‘independent contractors,’ these companies deny their employees important worker protections.”

Today’s three lawsuits follow two similar lawsuits filed in September and are part of the Attorney General’s ongoing crackdown on trucking companies operating at California’s ports that deliberately misclassify workers to gain an unfair competitive advantage. Moreno Trucking, owned by Noel A. Moreno and his wife Emma R. Moreno, Guasimal Trucking, and Edmund Jose Lira, are accused of employing cost-cutting schemes to avoid California taxes.

The three trucking companies misrepresent their workers as independent contractors to avoid paying state-mandated workers’ compensation and other disability benefits. Under their working conditions, the employees should have employee status and its legal protections and benefits. The companies control all aspects of the drivers’ work and own and maintain the trucks that the workers drive. Drivers are paid by the hour and often forced to work 60 hours or more a week.

Beginning in February 2008, the Attorney General authorized a task force to investigate trucking companies at Long Beach and Los Angeles Ports. The investigation uncovered numerous state labor law violations committed by several trucking companies operating at the ports.

Today’s lawsuits allege that the trucking companies named in the suits have an unfair advantage over their competitors in violation of California Business and Professions Code 17200 by depriving employees of benefits and protections entitled to them under California law. These companies are also cheating the State of California out of thousands of dollars in state payroll taxes.

The three complaints are attached.

LOS ANGELES –Attorney General Edmund G. Brown Jr., announced today that the State of California and several local agencies, including the Los Angeles Unified School District and Los Angeles County, won a refund of $160 million for “illegal and unjustified overcharges” that the Los Angeles Department of Water and Power charged during a 10 year period between 1997 and 2007.

“The Los Angeles Department of Water and Power had been imposing illegal and unjustified overcharges on their governmental customers for several years,” said Attorney General Brown. “The L.A. school district and the other governmental agencies desperately need every available dollar in these hard economic times.”

The agreement stems from a case filed in San Bernardino County in 2000, State of California et al. v. Los Angeles Department of Water and Power, et. al, in which the Los Angeles Department of Water and Power knowingly overcharged State and local governmental agencies for electricity.

According to state law, municipal power authorities can only charge governmental customers a percentage of what it took to build the power generator and the grid based on the amount of power the governmental customer consumed. For instance, if a governmental customer used 5% of the electricity generated by a power facility, then it should be charged, over a period of time, 5% of what it took to build that facility. The state alleged that the Los Angeles Department of Water illegally charged its governmental customers a percentage far in excess of what they actually used.

At trial, the court found that the Department of Water and Power overcharged the State and the local governmental agencies and buried the charges in its monthly bills dating back to 1997, in violation of California law and the state Constitution.

Since 1997, the Department overcharged local and county agencies, including the County of Los Angeles, the Los Angeles County Metropolitan Transportation Authority, the Los Angeles Unified School District and the Los Angeles Community College District. Several state agencies were also overcharged by the utility, including UCLA, Cal State Los Angeles, Cal State Northridge, Caltrans, the California Highway Patrol, the Department of Corrections, Department of Motor Vehicles, Employee Development Department, the State Teachers Retirement System, Department of Parks and Recreation and the Department of General Services.

The agreement includes a cash award to state agencies of more than $6 million, plus more than $1.7 million in electricity rate credits and $11.8 million to fund projects that will reduce electricity consumption in state buildings. The remainder of the $160 million settlement will go to local governmental agencies in Los Angeles. The money they receive will be used in part to fund projects that will reduce electricity consumption at their facilities.

The money from the agreement will be distributed to the agencies as follows:

• $25.3 million to the Los Angeles Unified School District.
• $11 million to the Los Angeles County Metropolitan Transit Authority.
• $12.4 million to Los Angeles County.
• $1.3 million to the Los Angeles Community College District.
• $6.1 million to the State of California.

In addition to the aforementioned cash award, the Department of Water and Power will also deposit the following amounts into accounts setup by the state and local agencies to fund projects that will reduce energy consumption.

• $28 million to the Los Angeles Unified School District.
• $11 million to the Los Angeles County Metropolitan Transit Authority.
• $13 million to Los Angeles County
• $4 million to the Los Angeles Community College District
• $11.8 million to the State of California

After the case was filed by a whistle-blower under California’s False Claims Act, the Attorney General intervened and pursued several claims against the utility. The False Claims Act authorizes the Attorney General to prosecute an entity for knowingly submitting fraudulent claims for state funds.