Cybercrime & Technology

Brown Files $60 Million Lawsuit Against Fraudulent Forensic Audit Loan Modification Scam

October 6, 2010
Contact: (916) 210-6000, agpressoffice@doj.ca.gov

SACRAMENTO -- Attorney General Edmund G. Brown Jr. today filed a $60 million lawsuit against a pair of Sacramento companies that lured desperate homeowners with a deceptive marketing scheme that promised to obtain mortgage modifications through the use of computer-generated “forensic loan audits.”

“These defendants dangled the term 'forensic loan audit’ as a sure-fire remedy for the mortgage problems of homeowners in distress,” Brown said. “In fact, it was no remedy at all, and hundreds of desperate California homeowners took the bait and lost their money -- and sometimes their homes.”

Brown filed the $60 million lawsuit against US Loan Auditors, My US Legal Services, and five individuals, including two attorneys, who operate a fraudulent mortgage audit scheme that preys on desperate homeowners anxious to save their homes. The suit demands civil penalties, restitution for victims, and permanent injunctions to keep the companies and other defendants from fraudulently marketing forensic loan audits and legal services of little value.

The companies, based in Rancho Cordova, work together to market and sell “forensic loan audits” to homeowners, who pay thousands of dollars in up-front fees for a dubious computer-generated review of their mortgages. The audits purport to show violations of law by lenders, which sales agents cite to convince homeowners they have a strong legal case. Sales agents use these findings to encourage homeowners to stop making their mortgage payments and instead pay additional fees to bring “predatory lending” lawsuits against their lenders.

Both companies deceive homeowners by assuring them that filing these lawsuits will give them “legal leverage” to obtain a loan modification and prevent lenders from foreclosing or collecting monthly mortgage payments. Homeowners who filed these lawsuits have lost thousands of dollars and placed themselves in greater danger of losing their homes.

My US Legal Services bilks clients for months, filing cookie-cutter complaints with little or no merit, billing unjustified monthly fees, and then dodging clients’ phone calls or stringing them along with false assurances that a settlement is in progress.

Hundreds of California homeowners, many of them facing possible loss of their homes, have been duped into paying thousands of dollars to the two companies -- one homeowner paid more than $55,000 -– but received little or no relief.

Meanwhile, the litigation mill run by My US Legal Services has littered courts with hundreds of lawsuits that have scant chance of success. Two federal judges have expressed concern about the legitimacy of these lawsuits and have several times sanctioned attorneys involved.

In addition to the companies, Brown is suing the three owners: attorney and real estate broker James Sandison, Jeffrey Pulvino, and Shane Barker, as well as two California attorneys, Sharon L. Lapin and Jonathan G. Stein.

The State Bar filed disciplinary charges yesterday against Sandison for alleged misappropriation of clients’ funds and aiding the unauthorized practice of law.

The Attorney General’s investigation, assisted by the State Bar and the Department of Real Estate, located victims throughout California cities hit hard by the foreclosure crisis: Corning, Fresno, Hayward, Irvine, Manteca, Richmond, Sacramento, Salinas, Sanger, Santa Ana, Stockton, Tracy, Vacaville and West Sacramento.

In February, Brown, along with the Bar and the Department of Real Estate, issued an alert (http://ag.ca.gov/newsalerts/release.php?id=1862&) warning consumers to be wary of forensic loan audits that require homeowners to pay up-front fees. There is no evidence or statistical data to support claims that forensic loan audits of a lenders’ mortgage practices – even if performed by a licensed mortgage professional or a lawyer -- help homeowners obtain loan modifications or any other foreclosure relief.

Brown has led the fight against fraudulent mortgage rescue and loan modification companies. He has obtained court orders to shut down several companies and has brought criminal charges against deceptive loan modification consultants. For more information on Brown’s actions against loan-modification fraud, see: http://ag.ca.gov/loanmod.

If you are a homeowner who has been scammed, you can file a complaint online with the Attorney General’s office at: www.ag.ca.gov/consumers/general.php. You can learn more about avoiding scams and obtain a complaint form by visiting the Department of Real Estate’s website at: www.dre.ca.gov.

If you have a complaint against Sandison, Lapin, Stein or any other lawyer involved in a loan modification or foreclosure relief service, contact the State Bar Complaint Hotline at 1-800-843-9053. Complaint forms and an explanation of the attorney discipline system are available online at: www.calbar.ca.gov.

Attached are a copy of the complaint and a sample of the fraudulent advertising mailers sent by the companies.

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PDF icon US Loan Auditors Complaint6.49 MB

Brown Announces Arrest of Central Valley Bank Manager on Charges of Embezzling Nearly $700,000 From Customers

September 20, 2010
Contact: (916) 210-6000, agpressoffice@doj.ca.gov

FRESNO -- Attorney General Edmund G. Brown Jr. announced the arrest today of bank manger Jeri Sell, who two years ago was named Tulare Woman of the Year, on felony charges of embezzling $679,000 from customers of the Tulare branch of Citizens Business Bank, some of whom were friends of hers. An investigation showed she had a serious gambling problem.

Sell, 55, was arrested at her home this morning by Tulare police. She was charged in a complaint filed by Brown’s attorneys with five felony counts of embezzlement.

“This inside job is a painful case of violated trust,” Brown said. “A person who was an honored and respected pillar of the community apparently took money for her own use that had been deposited, in full confidence that it would remain safe, by people she knew.”

The complaint alleged that Sell withdrew funds from several customers’ accounts from 2005 to 2009 and used her position as manager to conceal her thefts from both the customers and the bank.

One couple lost $203,110.27. In reviewing a long list of unauthorized withdrawals, the wife demonstrated that it was impossible she had made them. For example, a withdrawal for $4,000 on March 17, 2006, she could not have made because she was out of town at a pistachio convention. Another withdrawal was made at the same moment she was getting a body wrap treatment.

Another customer lost $298,000. A bank employee said Sell requested $50,000 in cash for the customer, then took the funds from the vault and placed the money in a zippered bag.

Sell was able to hide her theft from bank customers by placing mail holds on their accounts so they would not have access to their banks statements. When the unauthorized transactions were discovered, Sell claimed the cause was computer error and, in one case, alleged that a customer had been the victim of identity theft.

When the scheme was starting to unravel because of an internal bank audit, Sell left a voicemail for one customer who lost $84,575, saying, “I want to apologize, I’ve done some things on your account that I’m not proud of. I’m thinking of killing myself. Please call me back.”

Sell’s bank accounts showed unexplained deposits of more than $500,000, and the investigation revealed Sell had made ATM withdrawals at the Tachi Palace Resort and Casino in Lemoore of more than $379,000. Investigators concluded that Sell had a gambling issue and was losing money.

Sell had been a respected member of the Tulare community for more than three decades. Besides being named the Tulare Chamber of Commerce’s Woman of the Year in 2008, Sell was also a grand marshal of the Tulare County Fair Parade and was active in raising money for local bond drives.

Copies of the complaint and arrest warrant are attached.

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PDF icon Complaint and Arrest Warrant3.15 MB

Brown Sues to Recover Bell Officials' Excessive Salaries and Cut Their Pensions, and Announces Other Steps on Public Pay and Benefits

September 15, 2010
Contact: (916) 210-6000, agpressoffice@doj.ca.gov

LOS ANGELES -- Attorney General Edmund G. Brown Jr., charging fraud, civil conspiracy, waste of public funds and breach of fiduciary duty, sued eight top Bell officials and council members today, and demanded they return hundreds of thousands of dollars in unwarranted salaries.

Brown’s lawsuit also called for a reduction of pension benefits for the officials.

“We are filing our lawsuit on behalf of the public to recover the excess salaries that Bell officials awarded themselves and to ensure their future pensions are reduced to a reasonable amount,” Brown said.

Brown also said he is widening his statewide probe of public salaries and benefits, and called for specific legislative action to reform salary and pension practices.

As part of the broadened investigation, he is serving a subpoena on the city of Vernon to obtain compensation records for city officials and employees. News articles have reported that one city official there received an annual salary of $785,000, and another received compensation totaling $1.6 million in a single year. Vernon, an industrial city near Bell, has a population of less than 100.

Brown’s statewide probe will focus on the many local and other government agencies that are paying annual salaries in excess of $300,000 and on the dozens of public pensioners who are receiving annual pensions in excess of $200,000. Examples include:

• An annual pension for a former city manager that is over half a million dollars.

• Annual compensation for the chief administrator of a public hospital that is over $800,000.

• Annual compensation for a county administrator that is over $420,000.

• Annual compensation in a single year of over $438,000, including payments for unused sick leave and vacation, for a city manager of a city of 36,000.

“These high salaries and pensions demand prompt and comprehensive reform,” Brown said. “Accordingly, I am calling for legislative action to:

• Establish a Compensation Commission to cap public salaries at reasonable levels,
• Eliminate loopholes that allow exceptions to the limits on pension benefits,
• Require a full and complete public posting of all public employee salaries, and
• Amend the state Constitution to require charter cities to comply with salary and pension laws.”

Brown’s lawsuit was filed against former city manager, Robert Rizzo; former assistant city manager, Angela Spaccia; former police chief, Randy Adams; council members Oscar Hernandez, Teresa Jacobo, and George Mirabel; and former council members Victor Bello and George Cole. The suit’s charges include fraud, civil conspiracy, waste of public funds, and breach of fiduciary duty. It also alleges that the defendants deliberately misled the public about the true amount of their compensation.

The suit demands the defendants return all excessive compensation and asks the court to establish appropriate salary levels for pension purposes. Rizzo’s last annual base salary was $787,638, Adams’ $457,000, and Spaccia’s $336,000. Bell city council members were paid $96,000 a year before they took a recent cut. Cities of similar size pay their council members $4,800 a year.

Since 1993, the Bell city council raised Rizzo’s salary 16 times, with an average increase of 14 percent a year. In 2005 alone, the city council raised his salary by 47 percent. Since 2003, council members also awarded themselves salary increases of 16 percent a year.

In 2008, Rizzo had a phony memorandum prepared for public distribution that showed council members were paid $673 per month and Rizzo was paid $15,478 per month, Brown charged. In fact, council members were actually paid $7,666 per month, and Rizzo was paid $52,325 per month.

“I’m going to continue to do everything in my power to go after corrupt officials who, rather than doing the public’s business, scheme behind closed doors to line their own pockets,” Brown said. “These officials must be forced to give up their ill-gotten gains, and we must enact strict reforms to prevent these kinds of abuses in the future.”

CalPERS, the state’s public employee retirement system, applauded the Attorney General’s efforts.

“We welcome the support and involvement of the Attorney General in helping to scrutinize extraordinarily high compensation,” said Anne Stausboll, Chief Executive Officer of CalPERS. “I'm confident that CalPERS’ own efforts and those of the Attorney General will help protect our members and employers, and restore public confidence in pensions and their value in public service.”

Copies of the complaint and subpoena served in Vernon are attached.

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PDF icon Vernon Subpoena453.93 KB
PDF icon Complaint3.81 MB

Movie Producer Arraigned on 89 Felony Counts in $9 Million Ponzi Scheme

August 25, 2010
Contact: (916) 210-6000, agpressoffice@doj.ca.gov

LOS ANGELES – Attorney General Edmund G. Brown Jr. today announced that a Laguna Niguel movie producer has been charged with 89 felony counts for orchestrating a “cold and calculated” $9 million Ponzi scheme in which he promised investors up to 35% returns for making loans to his B-movie production company.

“This con artist sold securities under the guise of a loan to fool investors and try to avoid following the rules,” Brown said. “He ran a cold and calculated scam, making promises he never intended to keep and using the funds of new victims to pay off the earlier ones.”

Mahmoud Karkehabadi (aka Mike Karkeh), 53, owner of Alliance Group Entertainment, was arraigned late Tuesday on the 89 felony counts, including securities fraud and grand theft. Bail has been set at $11 million. If convicted of all charges, Karkehabadi faces more than 25 years in prison.

More than 150 individuals from across the country made “movie production loans” to Alliance Group Entertainment, which has produced four B-movie flops since 2005, including “Confessions of a Pit Fighter” (2005) starring rapper Flavor Flav and “Hotel California” (2008).

Karkehabadi and his agents told investors they would get their money back within a year, regardless of a project’s success, with returns of 18 to 35%. When the year was up, Karkehabadi convinced investors to roll their “loans” over into the latest movie project or agree to extensions on the date for repayment.

A review of Alliance Group Entertainment bank records showed the majority of funds deposited into the company’s accounts were from investors – and their money was the source of most of the principal and interest payments made to earlier investors. The accounts showed deposits of more than $11 million from investors – and just $535,000 in revenue from the movies produced by the company.

The Department of Corporations referred the case to Brown’s office in 2007 after receiving complaints from victims. Brown’s office launched an investigation in 2008, searching bank records and conducting interviews with investors across the country.

In 2003, the Attorney General’s office secured a $5 million judgment against Karkehabadi for deceptively marketing credit cards that could not be used in stores and violating the state’s false advertising and unfair business practices laws. Karkehabadi subsequently filed for bankruptcy. He did not disclose either of these facts to investors in Alliance Group Entertainment.

Two California-based agents who sold securities to victims of the Alliance Group Entertainment scheme are also being charged. Timothy Cho (aka Hin-Kong Cho), 54, of Newport Beach remains at-large, while Deanna Salazar, 53, of Yucca Valley, has agreed to surrender.

Brown’s Special Crimes Unit is prosecuting the case. Karkehabadi is seeking a reduced bail, and a bail hearing is set for September 3 in Orange County Superior Court.

A copy of the complaint, filed in the Orange County Superior Court, is attached.

Brown Seeks $34 Million From TV's Tax Lady Roni Deutch For Victimizing Thousands Who Sought Her Aid in Dealing With the IRS

August 23, 2010
Contact: (916) 210-6000, agpressoffice@doj.ca.gov

SACRAMENTO – Attorney General Edmund G. Brown Jr. today filed a $34 million lawsuit against television’s “Tax Lady Roni Deutch” for orchestrating a “heartless scheme” that swindled thousands of people facing serious and expensive tax collection problems with the IRS.

“Tax Lady Roni Deutch is engaged in a heartless scheme that swindled people with tax problems,” Brown said. “She promises to significantly reduce their IRS tax debts, but instead preys on their vulnerability, taking large up-front payments but providing little or no help in lowering their tax bills.”

Deutch manufactures credibility by boasting that her tax resolution law firm, which has annual revenues of at least $25 million, is the largest of its kind in the nation. She spends $3 million a year on advertising, much of it on late-night cable TV, and frequently offers tax advice on NBC’s Today Show, CNN, and CNBC.

Desperate debtors turn to Deutch based on her misleading ads that feature fictional testimonials claiming she secured large reductions in the featured clients’ federal tax debts.

For example, her ad entitled “It’s Your Turn” features three clients whom Deutch claims to have “saved” from having to pay thousands of dollars to the IRS. In fact, those clients still owe the IRS the full amount of their taxes, plus interest and penalties.

When potential clients call Deutch’s boiler room, sales agents employ high-pressure sales tactics plus a series of misrepresentations and false promises to persuade them to retain her firm. The sales agents claim Deutch’s success rate in dealing with the IRS is as high as 99 percent. But the percentage of clients whose tax bills Deutch actually reduces is a mere 10 percent.

Rather than cut clients’ debts, Deutch often escalates them. She places clients in an endless loop of requests for duplicate documents that increases her fees and, due to further delays in payments to the IRS, increases clients’ IRS fines and penalties.

One woman from Pico Rivera, who owed the IRS $13,000, turned to Deutch after seeing a TV ad. She paid Deutch a $1,900 retainer, but by the time the Deutch firm ended its representation, she owed the IRS hundreds of dollars more in interest and penalties, and the IRS had placed a levy against her Social Security benefits. Despite failing to take any effective action on her behalf, Deutch refused to refund the woman’s retainer by falsely billing her for time the firm did not spend on her case. Deutch regularly uses false billing statements to deny her clients’ refund requests.

Hundreds of clients have filed complaints with the Attorney General and other government agencies, describing Deutch’s failure to reduce their IRS debts as she advertised and her refusal to refund retainers of as much as $4,700.

Brown’s lawsuit says thousands of consumers in California and around the country have fallen victim to Deutch’s unlawful scam, losing millions of dollars that could have been used to pay their IRS tax liabilities. The lawsuit charges that Deutch operates a deceptive tax resolution scheme that employs “a bevy of false promises and misrepresentations.”

Brown’s action seeks to permanently prevent Deutch from engaging in such unfair business practices and false advertising, and force her to pay victims restitution of at least $33.9 million plus civil penalties.

Brown's lawsuit follows the consumer alert he issued on March 30, 2010, warning consumers to be wary about tax debt scams. It is also one of a series of actions he has taken to protect consumers who suffered during the financial crisis and resulting economic downturn, including his 2008 lawsuit against Countrywide Home Loans that resulted in an $8.68 billion settlement, as well as recent enforcement actions against scams in the foreclosure consultant, loan modification, and property tax reassessment industries.

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PDF icon Preliminary Injunction1.4 MB
PDF icon Complaint1.51 MB

California's Violent Crime Rate Falls for Third Consecutive Year

June 25, 2010
Contact: (916) 210-6000, agpressoffice@doj.ca.gov

LOS ANGELES – Praising the “dedicated and courageous efforts” of local law enforcement officials, Attorney General Edmund G. Brown Jr. today released the California Department of Justice’s annual crime report for 2009, which continued the promising trend of declining crime rates in California, including a 6.6% reduction in the state’s violent crime rate.

“This latest drop in crime,” Brown said, “is good news for Californians and reflects well on the dedicated and courageous efforts of peace officers throughout the state. Yet it is no cause for complacency. Crime remains a serious problem in California, and law enforcement officials at every level must redouble their efforts to ensure public safety.”

“Crime in California 2009 - Advance Release” is compiled by the California Department of Justice based on data reported by police and sheriff’s departments in all of California’s 58 counties.

The 2009 figures, drawn from crime reports, show that crime rates have declined in every category of offense measured, from homicide (-8.9%) and robbery (-8.6%) to motor vehicle theft (-15.8%) and arson (-14.3%).

In fact, last year’s drop marked the third consecutive year in which violent crime (-6.6%), property crime
(-10.1%), and larceny and theft (-6.5%) rates have all declined. Almost 20,000 fewer violent crimes were committed in 2009 than in 2006.

Overall, since statewide crime peaked in 1992, crime rates in all three categories have been cut in half – the rates have tumbled -58.9% for violent crime, -51.7% for property crime, and -48.5% for larceny and theft. In total, more than 1.4 million arrests were made in California in 2009, down from more than 1.9 million 20 years ago.

Driving the downward trend were California’s five largest counties, all of which recorded significant crime rate declines from 2008 to 2009:

• Los Angeles: violent crime (-9%), property crime (-11%), and larceny and theft (-3.3%)
• San Diego: violent crime (-2.2%), property crime (-22.5%), and larceny and theft (-14.2%)
• Orange: violent crime (-3.6%), property crime (-10.5%), and larceny and theft (-3.7%)
• Riverside: violent crime (-13.4%), property crime (-12.4%), and larceny and theft (-11%)
• San Bernardino: violent crime (-4.5%), property crime (-11%), and larceny and theft (-8.7%)

For more detailed crime statistics and local data, please see the attached report and data tables.

Brown Announces $173 Million Anti-Trust Settlement with Computer Chip Makers

June 24, 2010
Contact: (916) 210-6000, agpressoffice@doj.ca.gov

LOS ANGELES – Attorney General Edmund G. Brown Jr. today announced a $173 million settlement with six manufacturers of Dynamic Random Access Memory (DRAM) computer chips who “conspired in an illegal global scheme to fix prices.”

DRAM is a common form of memory chip that stores information temporarily for quick access. It is found in desktop computers, laptops, servers, printers and networking equipment such as routers and hubs. DRAM sales to major electronic manufacturers, including Dell, IBM, and Hewlett-Packard, exceed $5 billion a year in the United States and $17 billion worldwide.

“These companies conspired in an illegal global scheme to fix prices on chips used in computer equipment sold to consumers, schools and government offices,” Brown said. “The large price tag of this settlement should serve as a warning that we will crack down on any manufacturers around the world that choose to gouge consumers through illegal price-fixing schemes.”

Brown and 32 other state attorneys general participated in the settlement. In July 2006, the multi-state group, led by California, filed a complaint in federal district court alleging that California’s consumers, state agencies, universities and local governments were forced to pay illegally inflated prices for products containing DRAM chips.

The DRAM manufacturers named in the lawsuit include the American companies Micron Technology, Inc. and NEC Electronics America, Inc., as well as foreign companies Infineon Technologies A.G. in Germany; Hynix Semiconductor, Inc. in South Korea; Elpida Memory Inc. in Japan; Mosel-Vitelic Corp. in Taiwan; and their American subsidiaries.

Brown’s investigation revealed that from 1998 to 2002, the salespeople and upper management of all the companies held frequent meetings, made telephone calls and initiated other contacts in which they exchanged confidential information and agreed to charge customers illegally inflated prices on DRAM chips.

The result of this collusion was to keep DRAM prices artificially high instead of letting market forces operate freely through competition.

The U.S. Justice Department called the scheme “one of the largest cartels ever discovered.” As a result of a federal investigation, four companies ¬-- Samsung, Hynix, Infineon, and Elpida – and 12 individuals have pleaded guilty to criminal price-fixing.

In October 2008, Brown filed a second lawsuit in state court in San Francisco on behalf of 96 local California government entities, including cities, counties, school districts, special districts, and the University of California, all of which had purchased computer equipment containing DRAM chips.

The settlement announced today requires the companies to refrain from illegal price-fixing and to conduct extensive employee-compliance training. The settlement must be approved by the court.

The defendants agreed to resolve both lawsuits, as well as lawsuits by private plaintiffs, by paying $173 million over two years plus interest to the affected consumers, schools and government offices. Samsung and another company, Winbond, reached settlement for $113 million in 2007.

“The settlement money is welcome,” Brown said, “but the illegal overcharging never should have happened in the first place. Especially when times are tight, schools and government agencies can’t afford to be ripped off by companies that violate our anti-trust laws to keep profits high.”

The other states participating in the settlement are Arizona, Arkansas, Colorado, Florida, Hawaii, Idaho, Illinois, Iowa, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Nebraska, Nevada, New Mexico, New York, North Carolina, North Dakota, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Utah, Virginia, Washington, West Virginia, and Wisconsin.

Copies of the complaints are attached.

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PDF icon n1939_dram_fed.pdf1.03 MB
PDF icon n1939_dram_state.pdf1.96 MB

Investors Recover $1.4 Billion Under Settlement Forged by Attorney General Brown

June 23, 2010
Contact: (916) 210-6000, agpressoffice@doj.ca.gov

SAN FRANCISCO – Attorney General Edmund G. Brown announced today that 3,500 investors, whose holdings in auction rate securities were frozen in the financial crisis of 2008, have recovered $1.4 billion through a settlement the Attorney General hammered out with Wells Fargo affiliates.

“We went to bat for people who believed their investments were like cash,” Brown said, “but discovered after the financial meltdown that they couldn’t get their hands on even a dime of their money for two long years. Now, because of the settlement, they have all of their money back.”

The investors, big and small, included retirees, working families, small businessmen, and charities. Nearly half are Californians, who received $695 million through buybacks of their securities by Wells Fargo.

Many invested in the securities because of assurances they were “like cash” -- safe and liquid. The securities turned out to be neither. Unable to sell the securities, investors were stuck.

More than 90 percent of the owners of the securities elected to take the Wells Fargo buyback offer under the settlement.

“Getting this money back takes a lot of pressure off me,” said Johanna Markley of Newport Beach, who suffers from cancer. “I wondered who would fight for us.”

“I’m retired and over 70 years old,” said William O’Brien of El Dorado County. “It was frustrating to have that money just sitting there for over two years and being unable to access it when we needed it.”

“Getting the investment back has helped save jobs in our company,” said Boris Levine, a San Francisco businessman.

Brown said Wells Fargo was co-operative throughout the repayment process and did what it said it would do.

In November, the Attorney General reached a settlement with Wells Fargo Investments, LLC; Wells Fargo Brokerage Services, LLC; and Wells Fargo Institutional Investors, LLC. The buybacks were made pursuant to that agreement.

Auction rate securities are long-term bonds whose interest rates are adjusted frequently at auction. If there are no takers for the bonds, they can become frozen and effectively worthless.

The Attorney General’s Office has submitted a request for dismissal of its action against Wells Fargo in San Francisco Superior Court, signaling the successful completion of the repayments.

Brown Denies San Francisco Sheriff's Request to Opt Out of Secure Communities Program

May 25, 2010
Contact: (916) 210-6000, agpressoffice@doj.ca.gov

SAN FRANCISCO - In a letter sent today, Attorney General Edmund G. Brown Jr. declined San Francisco Sheriff Michael Hennessey's request to allow San Francisco to opt out of participating in Secure Communities, a national program that links the fingerprints of arrestees to a federal database maintained by Immigration and Customs Enforcement (ICE) that checks whether an arrestee is in this country illegally and has previously committed crimes.

"I think this program serves both public safety and the interests of justice,' Brown said. 'ICE's program advances an important law enforcement function by identifying those individuals who are in the country illegally and who have a history of serious crimes or who have previously been deported.'

California law designates the California Department of Justice to maintain the state fingerprint database for law enforcement purposes. When someone is arrested, the county forwards the fingerprints to the DOJ to identify the person, determine his or her criminal history and to discover any outstanding warrants. As in every other state, the DOJ then forwards those fingerprints to the FBI to check for any history of criminal activity outside of the state. Under the Secure Communities program, the FBI also forwards fingerprints collected at arrest to ICE. Before the inception of Secure Communities allowing fingerprint identification, if a county suspected an arrestee was in the country illegally, the county submitted the person's name to ICE for a background check.

Brown's letter is below:

Sheriff Michael Hennessey
City and County of San Francisco
Room 456, City Hall
Dr. Carlton B. Goodlett Place
San Francisco, CA 94102

RE: Secure Communities

Dear Sheriff Hennessey:

I am writing in response to your letter regarding the Secure Communities program developed by U.S. Immigration and Customs Enforcement (ICE). The program is scheduled to be rolled out in San Francisco next month. You requested that the California Department of Justice (DOJ) block ICE from running checks on the fingerprints collected in San Francisco. The Secure Communities program is up and running in 169 counties in 20 states, including 17 counties in California. Because I think this program serves both public safety and the interest of justice, I am declining your request.

The DOJ Bureau of Criminal Identification and Investigative Services is the entity designated by California law to maintain a database of fingerprints used in the state for law enforcement purposes. When someone is arrested, the county forwards the fingerprints to the DOJ to identify the person, determine his or her criminal history and to discover any outstanding warrants. As in every other state, the DOJ forwards those fingerprints to the FBI to check for a history of criminal activity outside of the state. Under the Secure Communities program, the FBI forwards fingerprints collected at arrest to ICE. If ICE finds a match to prints in its database, ICE notifies the county. ICE's stated intent and practice is to place holds on those individuals who are in the country illegally and who have a history of serious crimes or who have been previously deported.

Prior to the Secure Communities program, the name, but not the fingerprint, provided by an individual on arrest was run through ICE's database of people known by ICE to be in the country illegally. Often, individuals with a criminal history were released before their immigration status was discovered. Using fingerprints is faster, race neutral and results in accurate information and identification.

In these matters, statewide uniformity makes sense. This is not simply a local issue. Many of the people booked in local jails end up in state prison or go on to commit crimes in other counties or states.

I appreciate your concern. But I believe that working with the federal government in this matter advances important and legitimate law enforcement objectives.

Sincerely,

EDMUND G. BROWN JR.
Attorney General

Four Arrested, Five Wanted for Fleecing Hundreds of Homeowners Seeking Foreclosure Relief

May 20, 2010
Contact: (916) 210-6000, agpressoffice@doj.ca.gov

**NOTE: Contact information for victims willing to speak with the press is available upon request**

LOS ANGELES — Attorney General Edmund G. Brown Jr. today announced that nine men engaged in a Southern California boiler room, tricked out in high-roller style with a roulette wheel and other casino equipment, have been charged with 97 criminal counts for stealing at least $2.3 million from more than 1,500 desperate homeowners who were promised loan modifications but received no relief.

Arrested Tuesday and Wednesday night were Gregg Scott Quinn, 37, of Camarillo and Juan Pierre Washington, 40, of Winnetka, who worked as company sales managers and supervisors. They are being held at Los Angeles County Jail.

Gary Arnold Eisenberg, 71, of Westwood, a top telemarketer with the company, and Ira Itskowitz, 58, a sales manager, each spent more than five years in federal prison for previous fraud convictions and are already in federal custody for violating parole in connection with their participation in the scheme.

The four principal owners of the business, Niv Iskin, 30, of Reseda, Reviv Karpman, 38, of Tarzana, Tomer Kogman, 29, of Receda and Avraham Yechizkia, 34, of Encino; and a sales manager, Barel Iskin, 23, of Woodland Hills, are still being pursued by law enforcement.

“This company was just a boiler room, long on promises and upfront fees but short on foreclosure relief,” Brown said. “Its operators cruelly defrauded citizens trying valiantly to hang on to their homes.”

Brown’s office initiated its investigation in March 2009 in response to numerous consumer complaints against the defendants’ Canoga Park-based loan modification business, which operated as Mason Capital Group, LLC and Gretchen Fox and Associates.

When agents executed a search warrant at the office, they found a Las Vegas casino-themed sales floor complete with craps, poker and black jack tables fashioned as workstations, and a roulette wheel that top-selling telemarketers spun for cash bonuses (see photos attached).

Between January 2008 and June 2009, the four owners took in at least $2.3 million in up-front fees, which ranged from $1,000 to $5,000, from more than 1,500 homeowners throughout the country. In almost every case, no loan modifications were completed, as promised. Financial records indicate that the four owners spent hundreds of thousands on private school tuition, travel, entertainment, shopping and other personal expenses while running Mason Capital Group, LLC and Gretchen Fox and Associates.

To corral sales, the four owners used a telemarketing operation that targeted homeowners facing mortgage payment increases or foreclosure. During an initial call, the telemarketers touted the company’s team of “attorneys, forensic accounting personnel, and loan negotiators” available to negotiate reductions in interest rates, monthly payments and principal balances; their supposed 90% to 100% loan modification success rate and refund guarantee. The telemarketers then collected financial information from homeowners to determine if they “qualified” for the company’s services.

Soon after the initial call, homeowners received a follow-up call to inform them that their case had been “reviewed” and “approved.” Telemarketers closed sales by insisting the approval would expire unless homeowners acted quickly, while reminding them about the refund guarantee if promised results were not achieved.

In fact, the company completed very few loan modifications, rarely contacted lenders, failed to honor the refund guarantee, employed unlicensed “loan processors” and had no legal staff negotiating with lenders.

While homeowners waited, they were told their loan modifications, or refunds, would be voided if they tried independently to contact their lender. Many lost their homes to foreclosure as a result.

To skirt the state’s foreclosure laws, avoid paying refunds and conceal profits, the owners changed company names, claimed bankruptcy and shifted loan modification files to another business they created called, American Financial Group, LLC.

Investigators located victims in dozens of California cities, including: American Canyon, Anaheim, Antioch, Artesia, Atwater, Bakersfield, Ceres, Chico, Cotati, Cloverdale, Crestline, Delano, Elk Grove, Encino, Fountain Valley, Fremont, Fresno, Guerneville, Hanford, Hayward, Hercules, Hood, Indio, La Jolla, Lancaster, Laguna Hills, Lodi, Long Beach, Los Angeles, Manteca, Modesto, Montclair, N. Hollywood, Newhall, Newman, North Highlands, Oakdale, Oakland, Ontario, Palmdale, Pittsburg, Pleasanton, Poplar, Porterville, Redding, Richmond, Riverbank, Rodeo, Sacramento, San Jose, San Pablo, Santa Clara, Santa Rosa, Sebastopol, Stanton, Stockton, Tracy, Tulare, Turlock, Union City, Upland, Valley Village, Van Nuys, Visalia, W. Sacramento and Yuba City.

Brown’s office will seek restitution for victims of this scam.

By law, all individuals and businesses offering mortgage foreclosure consulting or loan modification and foreclosure assistance services must register with Brown’s office and post a $100,000 bond. It is also illegal for loan modification consultants to charge up-front fees for their services.

Non-profit housing counselors certified by the U.S. Department of Housing and Urban Development provide free help to homeowners. To find a counselor in your area, call 1-800-569-4287.

If you are a homeowner who has been scammed, contact Brown’s office at 1-800-952-5225 or file a complaint online at: www.ag.ca.gov/consumers/general.php.

Brown has sought court orders to shut down more than 30 fraudulent foreclosure relief companies and has brought criminal charges and obtained lengthy prison sentences for dozens of other deceptive loan modification consultants. For more information on Brown’s action against loan modification fraud visit: http://ag.ca.gov/loanmod.

The 97 criminal counts filed against the nine defendants, include 63 counts of grand theft, 26 counts of unlawful foreclosure consulting, 7 counts of tax evasion and 1 count of conspiracy.

The United States Postal Inspection Service assisted in the investigation.

Copies of the complaint, filed in Los Angeles County Superior Court, and the Arrest Warrant are attached.