Consumer Protection

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.

DISTRICT OF COLUMBIA – California Attorney General Edmund G. Brown Jr. today filed a report questioning the effectiveness of the Microsoft consent decree. Brown joined Connecticut, Iowa, Kansas, Minnesota, Massachusetts and the District of Columbia in filing the Report on Remedial Effectiveness concerning the Microsoft Final Judgment.

Attorney General Brown said: “The decree has not lived up to its goal of increasing market competition.”

The report contains descriptions of the Final Judgment’s lack of effectiveness; it does not contain recommendations on how to improve the Judgment. The California Group will be prepared to discuss at the next Joint Status Conference on September 11, 2007, what, if any, changes the Court might consider in this case.

The report is attached.

LOS ANGELES—California Attorney General Edmund G. Brown Jr. today asked consumers to inspect certain car tires manufactured from 2002 to 2006 for possible dangerous damage. The tires were made by Hangzhou Zhongce Rubber Co. Ltd. in China and distributed in the United States under the names: Westlake, Compass, YKS, Vesta, Goodride, Milestone, and Telluride.

In June, tire distributor Foreign Tire Sales, Inc. (FTS) filed a report with the National Highway Traffic Safety Administration (NHTSA) stating that certain tires may not meet minimum specifications and may be unsafe. 450,000 of these tires were imported into the United States and sold by many hundreds of tire dealers, including many dealers in California. As many as 270,000 of these tires may have insufficient or missing “gum strips,” an important part of a tire related to the prevention of thread separation.

“As a measure of good caution, consumers should check their car tires for signs of thread separation or possible damage and standby for a recall in the future,” Attorney General Brown said.

If an inspection indicates that your tire may be unsafe, please contact Attorney General Brown's Public Inquiry Unit at http://ag.ca.gov/contact/complaint_form.php?cmplt=CL . Although at this time, NHTSA has not called for a recall of any of these tires, an official recall of at least some of these tires may occur as early as this month.

Because of the seriousness of tire separation, Attorney General Brown is urging consumers who to have the tires with the following sizes to have them checked by their tire dealer:

LT225/75R-16 CR 861
LT235/75R-15 CR861 CR857
LT235/85-16 CR 860 CR861 CF857
LT245/75R-16 CR860 CR861 CR857
LT265/75R-16 CR860 CR861 CR857
LT310X10.5-15 CR861 CR857

The DOT number, brand name, size, and model are found on the tire sidewall. Affected tires also will contain a tire size starting with 'LT,' as well as a DOT number that starts with '7D' and ends in either '02,' '03,' '04,' or '05.' Further information can be obtained from FTS's web site at www.foreigntire.com.

In the interest of public safety, the Attorney General is asking tire dealers not to charge for such an inspection, but since no recall notice has yet been implemented, dealers are not required to inspect the tires without charge. Consumers should not drive their vehicles for long distances on hot roads until they are checked and it is recommended not to overload vehicles.

Consumers who have accidents as a result of one of these tires, should contact the Attorney General's Public Inquiry Unit and file a report with the NHTSA by calling the Vehicle Safety Hotline Toll-Free: 1-888-327-4236 TTY: 1-800-424-9153.

As part of general tire safety, consumers should review the following tips:

* At least once a month and before every long trip, inspect tires for patterns of uneven wear that could damage tires. Check tire inflation pressure in accordance with manufacturer recommendations.

* Do not overload your vehicle. Excess weight can place extra stress on your tires. Check your tire placard or vehicle owner's manual for the maximum amount of weight your vehicle can safely carry.

* Develop safe driving habits. Observe speed limits and avoid fast stops, starts, and turns. Avoid contact with potholes, object, and curbs when driving or parking your vehicle.

* Keep your vehicle properly maintained. Rotate tires regularly, get wheels balanced, and get a front-end alignment as necessary.

* Use the proper tires for your vehicle. Check the vehicle manufacturer's recommendations before replacing a tire with a different size and/or construction.

* Be aware of how the outside temperature affects your tires. Hot weather can be especially hard on tires, causing them to expand. As the outside temperature drops 10 degrees, tire pressure drops about one or two pounds per square inch.

* Have any tire problems checked out by professionals. If you find that one of your tires is losing pressure, take it to a tire expert for a complete internal inspection.

* Be careful of buying used tires. It is possible that some used tire dealers may try to capitalize on this situation by re-selling tires subject to this inquiry that have been replaced and are supposed to be destroyed. Though unethical and hazardous, it has happened before. Check used tire numbers, and do not buy any that are specified in this inquiry.

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SACRAMENTO - California Attorney General Edmund G. Brown Jr. today began mailing restitution claim forms to approximately 78,000 customers who were 'targets of improper sales practice' after joining a national $325 million lawsuit settlement with Ameriquest. The settlement provides $51 million for eligible California customers of Ameriquest Mortgage Company, Town and County Credit Corporation, and AMC Mortgage Services, Inc., formerly known as Bedford Home Loans.

The settlement resolves allegations that Ameriquest and its affiliates failed to adequately disclose home loan terms, failed to disclose whether loans carried fixed or adjustable rates, refinanced borrowers into inappropriate loans, inflated the appraisals used to qualify borrowers for loans, and charged excessive loan origination fees and prepayment penalties. The company engaged in these unlawful mortgage lending practices from 1999 through 2005.

"Hard-working families trying to buy a home wound up as targets of improper sales practice,' said Attorney General Brown. 'This settlement provides homebuyers with at least some of the restitution they deserve.'

Other parties in the $325 million settlement include the California Department of Corporations, Alameda, Los Angeles, Merced, Monterey, San Francisco, and San Mateo County District Attorneys, Attorneys General and banking and finance regulators from the District of Columbia and every state (except Virginia where Ameriquest did not conduct business).

The forms mailed today indicate the minimum payment that customers can expect to receive. The average restitution payment is $812.15 but the amount could be larger depending upon how many customers choose to participate in the settlement. Consumers who want the restitution payment should mail completed and signed forms to the settlement administrator by September 10, 2007.

Consumers who accept the restitution payment will relinquish their right to file lawsuits against Ameriquest unless their home goes into foreclosure. If a consumer's home goes into foreclosure, the consumer may still file a lawsuit against Ameriquest even if the restitution payment was accepted.

Consumers are encouraged to consult a private attorney or legal services attorney before deciding whether to participate in the settlement. A 'Frequently Asked Questions' pamphlet was mailed with the claim forms to provide additional information about the restitution process for eligible consumers. Consumers can also obtain detailed information about the settlement by contacting the Ameriquest Settlement Administrator at: or by calling 1-800-420-5875 (1-866-494-8274 for deaf or hard of hearing consumers).

The state's complaint against Ameriquest is attached. The court's judgment is attached. A copy of the information letter and 'Frequently Asked Questions' mailed today is also attached.