Cybercrime & Technology

Fresno – Attorney General Edmund G. Brown Jr. announced that agents from his Bureau of Gambling Control, working with the FBI, today arrested Chukchansi Casino’s former General Manager, Jeff Livingston, who “willfully abused his trust” by using a corporate credit card to spend more than $30,000 on down payments for two cars and a Hawaiian golf vacation.

Livingston, 49, of Fresno, was arrested at his residence this morning on two federal counts of theft by an officer or employee of a gaming establishment on Indian lands. If convicted, Livingston faces up to 20 years in prison. Livingston is a former Broward County, Florida Deputy Sheriff.

“Jeff Livingston willfully abused his trust as casino general manager to conceal more than $30,000 in lavish purchases, including a Shelby Mustang and a Hawaiian golf vacation,” Brown said.

Brown’s office launched an investigation into Livingston in February 2008 after the Tribal Gaming Agency of the Chukchansi Gold Resort and Casino discovered questionable charges on the casino’s corporate credit card. Brown’s office asked the FBI to join the investigation because the matter involved an employee of an Indian casino. The Chuckchansi Casino is located 35 miles north of Fresno in Coarsegold, Calif.

The joint investigation revealed that Livingston made unauthorized purchases with the casino’s corporate credit card, including:
• A $20,000 down payment on a new Ford Mustang Shelby;
• A $5,000 down payment on a new Ford Fusion for the casino’s former Vice President of Marketing; and
• A $7,000 Mercedes Benz PGA National Golf Championship package in Maui, Hawaii.

Livingston attempted to conceal the down payments by making it appear as if they were part of a ten car purchase he made for a casino giveaway.

Livingston was indicted yesterday by a federal grand jury on two counts of theft by an officer or employee of gaming establishments on Indian Lands in violation of U.S. Code Section 1168 (Title 18).

The defendant was arraigned earlier this afternoon in Fresno in the U.S. District Court, Eastern District of California.

A copy of the federal indictment, issued July 23, 2009, is attached.

Sacramento -- Attorney General Edmund G. Brown Jr. announced that agents from his office this week raided Internet cafes in Stockton and San Diego that illegally operated “Las Vegas-style games” including video poker, keno and slots.

"Agents from my office shut down Internet cafes in Stockton and San Diego that are a cover for illegal gaming operations,' Brown said. 'These are unregulated and illegal gambling parlors, operating Las Vegas-style games in violation of the law.”

Beginning in early June, undercover agents entered establishments in Stockton and San Diego and played various Las Vegas-style games on computers at these Internet cafes. The agents purchased a card that allowed them 'Internet time' on the café’s computers. If they won, an on-site employee paid them in cash.

In Stockton, law enforcement agents raided the Lucky Déjà Vu Internet Cafe and the Déjà Vu topless bar and seized 98 computer terminals, 2 master computer servers, money machines and business records, plus more than $4,000 in cash.

In San Diego, law enforcement agents raided five locations: Café Hong Hung, ‘08 Wireless, Café 2000, Phnom Penh Video and ‘05 Billiards. In total, agents seized 31 video slot machines and approximately $13,000 in cash.

Additional sites in San Diego and Oceanside are under investigation for similar activity.

Brown’s office is working with the San Diego Police Department in “Operation Jackpot” to identify and close businesses that offer illegal gambling in violation of Penal Code Section 330b, which prohibits individuals from owning and operating slot machines.

Agencies involved include the Attorney General’s Office Bureau of Gambling Control, the San Joaquin Sheriff’s Office, the San Joaquin District Attorney’s Office, the High Tech Crimes Task Force, the Department of Alcoholic Beverage Control, the San Diego Police Department, the San Diego District Attorney’s Office and the Oceanside Police Department.

Sacramento -- Attorney General Edmund G. Brown Jr. announced today that prosecutors from his office have filed grand theft, embezzlement and burglary charges against Maria Elna Flora, 59, of Sacramento, after she “fleeced” retirees out of almost $350,000 to pay for a daily gambling habit.

Flora was arrested yesterday by Yolo County law enforcement officials and is being held in Sacramento County Jail. Bail has been set at $400,000. Flora is scheduled to be arraigned on June 22. If convicted on all charges, she could spend more than 30 years in prison.

The case is a product of an investigation by the California Department of Insurance, with assistance from the Yolo County District Attorney’s office.

“Maria Elna Flora fleeced retirees out of hundreds of thousands of dollars by getting them to shift their life savings into sham real estate investments,” Brown said. “Flora stole thousands from retirees and gambled it away playing the slots at the local casino.”

Flora, a licensed life insurance agent, sold annuities to retirees looking for financial security. After completing legitimate annuity sales, Flora would offer additional investment opportunities, promising returns ranging from 10 to 20 percent. The funds, she said, would be used to make real estate loans to investors willing to pay high interest rates. In reality, none of the funds Flora collected were invested as promised.

From January 2005 through August 2007, Flora convinced at least ten individuals living in Butte, El Dorado, Sacramento, Solano, Stanislaus and Yolo counties to invest between $5,000 and $88,000. Flora encouraged investors, who ranged in age from 67 to 92 years old, to shift savings from life insurance policies, certificates of deposit and savings accounts, to her short term, high return investment. In total, retirees invested almost $350,000 with Flora.

In most of these cases, Flora made a few interest payments to investors and then stopped. When victims asked about the returns, Flora promised to pay at a later date, but never did.

In 2007, the California Department of Insurance initiated an investigation after Flora’s former employer filed a complaint. Earlier this year, the case was turned over to the Yolo County District Attorney’s Office for prosecution. The Yolo County District Attorney’s Office continued the investigation and then referred the case to Brown’s office because there were victims in at least five other California counties.

The investigation found that Flora used investors’ money to fund an expensive gambling habit which included almost daily slot play from January 2005 through August 2007 at Thunder Valley Casino.

Flora’s victims included:
• A 78-year old Placerville resident who invested $88,000;
• A 76-year old retired bookkeeper in Elk Grove who invested $50,000;
• An 85-year old retired education professional in West Sacramento who invested $47,000;
• A 71-year old Modesto resident who invested $45,000;
• An 83-year old Chico resident who invested $42,600;
• A 72-year old Woodland resident who invested $32,000;
• A 92-year old Vacaville resident who invested $20,000;
• An 80-year old retired department store employee in Citrus Heights who invested $10,000;
• A 73-year old Sacramento resident who invested $10,000; and
• A 67-year old West Sacramento resident who invested $5,000.

Yesterday, Brown filed 92 criminal charges against Flora in Sacramento County Superior Court for:
• Grand theft in violation of Section 487 of California’s Penal Code;
• Embezzlement from an elder or dependent adult in violation of Section 368 of California’s Penal Code; and
• Burglary in violation of Section 459 of California’s Penal Code.

Brown is committed to protecting Californians from financial scams. Earlier this month, Brown announced that agents from his office, working with law enforcement in Tennessee and Nevada, arrested two individuals for stealing millions of dollars through phony stock sales and an illegal pyramid scheme. Last month, Brown filed 79 criminal charges against three men who swindled thousands of individuals, including many retirees who lost their life savings, in a $200 million Ponzi scheme.

Copies of the felony complaint and arrest warrant affidavit, filed in Sacramento County Superior Court, are attached.

Riverside – Attorney General Edmund G. Brown Jr. announced that agents from his office, working with law enforcement in Tennessee and Nevada, arrested two individuals earlier this week for stealing millions of dollars through “phony stock sales” and an illegal pyramid scheme.

The defendants -- James A. Sweeney, II, 62, of Afton, TN and Patrick M. Ryan, 34, of Canyon Lake, CA -- were arrested on June 3, 2009 in Afton, TN and Las Vegas, NV, respectively, and are being held until they are extradited to Riverside County. Both face 78 counts of grand theft and securities fraud. Bail has been set at $8.8 million each.

“These two con men stole $8.8 million dollars through phony stock sales and an illegal pyramid scheme,” Brown said. “They stole investors’ money and used it to pay for luxury homes, fancy cars and a $100,000 Las Vegas wedding.”

Brown’s complaint contends that Sweeney and Ryan, co-founders of Riverside-based Big Co-op, Inc., stole $8.8 million from more than 1,000 Californians through an illegal pyramid scheme and phony stock sales.

Big Co-op, also operating as Ez2Win.biz, purported to be an online shopping hub where consumers could go to purchase thousands of goods and services from big name retailers including, Sears, Target and Macy’s, at discounted prices.

Pyramid Scheme

Consumers were informed that if they purchased a Big Co-op membership, they could save money on their own purchases and also earn commissions and rewards by convincing others to shop on the site.

In reality, consumers never received rebates or rewards. Instead, profits were based on recruiting others to purchase memberships, and having those purchasers recruit others to purchase memberships (and so on).

Members earned $100 commissions for every six members recruited. Those recruited then paid Big Co-op from $19.95 to $99.95 in ongoing monthly membership fees.

According to the complaint, from 2005 to 2007, Big Co-op generated $1.3 million in revenues through this pyramid scheme.

Phony Stock Sale

In addition to the pyramid scheme, the two sold phony stock in Big Co-op as a stand-alone investment and as part of certain membership plans.

At seminars and meetings across California, Sweeney and Ryan pitched Big Co-op as the future of online commerce, compared it to Google and EBay, and falsely informed investors the company was already turning huge profits. Investors were also told that an initial public offering (IPO) was imminent, and that when the company went public, the shares could climb to well over $100 per share.

In reality, Big Co-op was never profitable, there was not an impending IPO, and the only significant revenue generated was a result of the sale of phony stock and membership fees for the pyramid scheme.

Shares in the company were sold for $0.50 to $5.00, with two-for-one deals offered to investors willing to pay cash. From 2005 to 2007, Big Co-op took in $7.5 million from this scheme.

With investor cash, Sweeney and Ryan bought luxury homes, country club memberships, five Mercedes, paid for a $100,000 Las Vegas wedding and ran up $30,000 to $50,000 in monthly credit card bills.

After receiving numerous complaints, the California Department of Corporations issued two “Desist and Refrain Orders” against Sweeney, Ryan and other associates: the first, on October 23, 2006, directed them to cease selling stock in the company and the second, on May 2, 2007, directed them to cease selling memberships in the company. Following the second order, the case was referred to Brown’s office for prosecution.

On May 29, 2009, Brown filed 78 criminal charges in Riverside County Superior Court against both Sweeney and Ryan for:
• Grand theft, in violation of California Penal Code section 487(a);
• Sale of unqualified securities in violation of California Corporations Code section 25110;
• Fraud in the offer of securities in violation of California Corporations Code sections 25540/25401;
• Operation of a fraudulent securities scheme in violation of California Corporations Code sections 25540/25541; and
• Operation of an endless chain scheme in violation of California Penal Code section 327.

If convicted on all charges, each could face more than 25 years in prison.

These arrests build on Brown’s commitment to protect Californians from the get-rich-quick schemes that proliferate in a down economy. In the past few months, Brown has entered into settlements enforcing tough restrictions on three companies – YTB International, Imergent, Inc. and Stores On Line - that falsely promised customers that they could earn full-time income by selling merchandise and travel over the Internet.

A copy of the felony complaint is attached.

Redding – Attorney General Edmund G. Brown Jr. last night filed 79 criminal charges against three men who “callously swindled” thousands of individuals, including many retirees who lost their life savings, in a $200 million Ponzi scheme.

The defendants -- James Stanley Koenig, 57, of Redding; Gary T. Armitage, 59, of Healdsburg; and Jeffery A. Guidi, 54, of Santa Rosa -- were arrested late last night and are now in custody. Bail has been set at $5 million each.

“These three men callously swindled thousands of individuals out of $200 million to bankroll their extravagant lifestyles,” Brown said. “They took investors money and used it to pay for an 80-acre castle estate, a Lear jet, luxury homes and fancy cars. The Ponzi scheme ultimately collapsed under its own weight, causing hardship to thousands, many of whom were retirees who lost their life savings.”

The charges, filed in Shasta County Superior Court, mark the culmination of a year-long investigation, which found that Koenig, Armitage and Guidi created a network of more than 55 business ventures over a period of 10 years to enrich themselves and keep their Ponzi scheme afloat.

Brown’s investigation revealed that in 1997, the three men began peddling construction and real estate projects across California. This included: “Quail Hollow,” a residential subdivision in Susanville; Lake College, a for-profit vocational school in Redding; Mountain House Golf Course near Tracy; a light industrial distribution center in Brentwood; and dozens of other so-called “investment opportunities.” Victims were promised that these were safe, secure, low risk investments with double digit returns, averaging 12 percent.

In recruiting their victims, Armitage organized “investment planning seminars,” many of which targeted retirees, in the Bay Area and throughout California. Based on advice from these seminars, Californians invested sums ranging from $50,000 to more than $1 million. Some turned over their entire retirement portfolios and savings accounts.

Many of the construction and real estate projects, however, were poorly managed and were not financially viable, resulting in huge losses. Some projects were left unfinished or ended up in foreclosure.

Rather than inform investors about the failures, Koenig, Armitage and Guidi sought to attract new investors, whose funds could be used to offset losses and pay returns to earlier investors. In doing so, the defendants withheld vital information that impacted investment decisions, including past business failures and Koenig’s 1986 federal fraud conviction.

With double-digit returns and no knowledge of the investment failures, most investors kept their money in place and many invested in new projects. This Ponzi scheme continued for more than 10 years.

Beginning in 2001, Koenig, Armitage and Guidi redirected investors’ millions into the purchase of more than 20 senior housing and residential care facilities. This included: Alterra Clare Ridge in Fresno; Sterling House in Bakersfield; Clare Bridge Cottage in Bakersfield; Seasons in Modesto, Northridge, and Vacaville; Oakdale Heights West in Redding; Oakdale Heights in Bakersfield, Fresno, San Leandro, Beverly Hills, Santa Clarita, Roseville, Laguna Beach, and La Mesa; Senior Oaks Senior Living in Redding; and other facilities in Pennsylvania, Oregon, Nevada, North Carolina, and Virginia.

Under this scheme, the defendants’ company would purchase an assisted living facility and sell it to one of their affiliate companies. The affiliate would then sell ownership shares in the property as an “investment opportunity” at an even higher price to new investors. Meanwhile, an additional affiliated company would manage the property to maximize revenue.

Revenues, however, were not reinvested into the facilities, but were pooled and used to pay interest to investors and keep investors at bay.

In April 2007, the Ponzi scheme began to collapse under a mountain of debt, and the defendants were unable to pay interest to investors. Nevertheless, they continued to solicit new investors in the vain hope that they could keep the operation alive, raising $23 million from 91 new investors.

The defendant’s businesses finally closed their doors in June 2008.

During the course of its investigation, Brown’s office identified more than 1,000 victims with losses totaling $200 million.

Over the 10 years, Koenig, Armitage and Guidi siphoned fees, revenues and profits from their business ventures for their personal benefit, using the funds to purchase an 80-acre castle estate, a Lear jet, luxury vehicles, lavish vacations and expensive wine and art.

Last night, the defendants were charged with selling securities by means of false statements or material omissions in violation of Corporations Code Section 25401/25540 and residential burglary in violation of Section 459 of the Penal Code:

• Koenig was charged with 40 counts of securities fraud and 37 counts of residential burglary.
• Armitage was charged with 42 counts of securities fraud and 37 counts of residential burglary.
• Guidi was charged with 39 counts of securities fraud and 33 counts of residential burglary.

If convicted on all counts, each could face more than 100 years in prison.

If you believe you have been a victim of this scheme, please contact the Attorney General’s office at 1-800-952-5225.

Copies of the arrest warrant and criminal complaint are available upon request.

“By taking steps to eliminate its so-called erotic services section, Craigslist has struck a blow against the exploitation of vulnerable teenagers.

But this action must be followed up with smart enforcement and the assurance that the site does not again become a cyber hub for teenage prostitution.”

Brown was part of a multi-state task force to ensure that Craigslist took action to stop exploitation on its site. His office will participate in monitoring Craigslist compliance with the terms announced today.

San Diego –Attorney General Edmund G. Brown Jr. and San Diego District Attorney Bonnie Dumanis have filed 347 felony charges against dozens of members and associates of a San Diego street gang for stealing more than $500,000 from the Navy Federal Credit Union, using forged checks and an Indian Casino cash machine.

After obtaining personal account information and PIN numbers from paid-off credit union members, Lincoln Park Street Gang members would deposit counterfeit checks into the cooperating credit union member’s bank accounts, and then withdraw thousands of dollars from a cash machine at the Barona Casino, east of San Diego.

The filing of these charges is the culmination of a months-long investigation by the Attorney General, San Diego District Attorney, United States Secret Service Regional Fraud Task Force, and the San Diego Police Department Gangs Unit. Charges were filed against 60 individuals.

“Street thugs, operating like white collar criminals, devised an ingenious scam to bilk the Navy Federal Credit Union out of $500,000,” Brown said. “They recruited and paid off willing credit union members and manipulated financial rules to feed their criminal enterprise.”

"The size, scope and sophistication of this operation show us that criminal street gangs in San Diego are expanding their criminal enterprise into white collar crime,' San Diego County District Attorney Bonnie M. Dumanis said. 'As gangs move from street corner drug dealing to complex fraud, it's more important than ever that law enforcement from all levels continue to work together.'

Tuesday morning in the pre-dawn hours, more than 100 law enforcement officers fanned out across San Diego to take the defendants into custody as part of a multi-agency operation called “Bank Gig.”

The operation included agents from the U.S. Secret Service, San Diego Police Department gang detectives, San Diego District Attorney Investigators, the Economic Crimes Task Force, U.S. Postal Inspection Service, Navy Criminal Investigative Service, and Navy Federal Credit Union. Additionally, the Barona Tribal Government fully cooperated with the investigation.

Charges include: conspiracy, grand theft, money laundering, recruiting to commit a felony for a gang, forgery, unlawful sale of access card information, burglary, and gang enhancements.

The defendants are scheduled to be arraigned in San Diego Superior Court Dept. 11 on May 14 at 10:30 a.m. and 2:30 p.m. (220 W. Broadway). Some of the defendants could face up to 13 years in prison if convicted of all charges.

The Scheme
In 2005, Navy Federal Credit Union noticed a significant increase in fraud reports from young members reporting that their bank information and their PINs had been stolen. Credit Union officials reported the emerging pattern to the U.S. Secret Service, which launched an investigation.

The investigation uncovered that young credit union members were approached by a street gang member or associate and asked if they would like to make easy money. The credit union members would hand over their account information and PIN numbers.

The gang members would then deposit thousands of dollars of forged and counterfeit checks into the credit union member’s account and then immediately withdraw funds through a point-of-sale machine (similar to an ATM machine, but without low withdrawal limits) at the Barona casino. The account holder would file a police report and affidavit with the credit union in the hope that they would not be held responsible for the loss on their account.

FOR IMMEDIATE RELEASE
Contact: Gareth Lacy (916) 324-5500

Brown Sues To Topple Online Pyramid Scheme

LOS ANGELES--California Attorney General Edmund G. Brown Jr. today announced a lawsuit against YourTravelBiz.com for operating a 'gigantic pyramid scheme' that recruited tens of thousands of members with deceptive claims that members could earn huge sums of money through its online travel agencies.

“YourTravelBiz.com operates a gigantic pyramid scheme that is immensely profitable to a few individuals on top and a complete rip-off for most everyone else,” Attorney General Brown said. “Today’s lawsuit seeks to shut down the company’s unlawful operation before more people are exploited by the scam.”

YourTravelBiz.com and its affiliates operate an illegal pyramid scheme that only benefits members if and when they find enough new members to join the scam. Once enrolled, members who join the pyramid scheme earn compensation for each new person they enlist, regardless of whether they sell any travel. The company lures new members by offering huge income opportunities through online travel agencies yet the typical person actually makes nothing selling travel.

According to company records there were over 200,000 members in 2007 who typically pay more than $1,000 per year--$449.95 to set up an “online travel agency” with a monthly fee of $49.95. In 2007, only 38 percent of the company’s members made any travel commissions. For the minority of members who made any travel commission in 2007, the median income was $39.00--less than one month’s cost to keep the Website. There are at least 139,000 of the company’s travel Websites, all virtually identical, on the Internet.

YourTravelBiz’s extensive marketing materials include videos of people driving Porsches and other luxury cars, holding ten-thousand dollar checks, and claiming to be raking in millions of dollars in profits. The company advertises through its Website www.ytb.com, and at conventions, workshops and nationwide sales meetings which have been held in California locations such as Los Angeles, Sacramento, San Francisco and San Diego.

Brown charges the company, its affiliates, and the company’s founders J. Lloyd Tomer, J. Scott Tomer, J. Kim Sorensen and Andrew Cauthen with operating an “endless chain scheme,” an unlawful pyramid in which a person pays money for the chance to receive money by recruiting new members to join the pyramid. Brown also charges the company with unfair business practices and false advertising practices including:

* Deceptive claims that members can earn millions of dollars with the company
* Operating without filing legally mandated documents with the attorney general and the Department of Corporations
* Selling an illegal travel discount program

Under California’s unfair business practices statue, the company is liable for $2,500 per violation of law. Attorney General Brown is suing YourTravelBiz.com to get a court order that:

* Bars the company from making false or misleading statements
* Assesses a civil penalty of at least $15,000,000 and at least $10,000,000 in restitution for Californians who were ripped off by the company.

From August 6 through 10, thousands of members are preparing to travel to St. Louis for a national convention to learn new techniques to recruit more victims into the illegal pyramid scheme. Last year at least 10,000 people attended a similar national conference. For more details on the company’s plan to perpetuate its scheme visit: http://www.yourtravelbiz.com/bizRep/BizReports/BIZREPORT_07-18-08.htm

For more information on pyramid schemes visit: http://ag.ca.gov/consumers/general/pyramid_schemes.php

Consumers who believe they have been bilked by YTB should send a written complaint with copies of any supporting documentation to:

Office of the Attorney General
Public Inquiry Unit, P.O. Box 944255
Sacramento, CA 94244-2550

Or through an on-line complaint form: http://ag.ca.gov/contact/complaint_form.php?cmplt=CL.

Today’s lawsuit against YourTravelBiz.com, filed yesterady in Los Angeles Superior Court, also names affiliates which include YTB Travel Network, Inc., YTB Travel Network of Illinois, Inc., as well as the company’s founders J. Lloyd Tomer, J. Scott Tomer, J. Kim Sorensen and Andrew Cauthen. For a copy of the lawsuit please contact the attorney general's press office: (916) 324-5500.

SAN DIEGO--California Attorney General Edmund G. Brown Jr. today announced that Theodore Swain, 60, was sentenced this morning to 24 years in state prison for running a $7 million Ponzi scheme that ripped off 100 investors in Southern California.

“This is the fourth time Swain has been caught ripping people off with his worthless investment schemes,” Attorney General Brown said. “Most recently, he convinced 99 consumers, including a doctor, lawyer and aerospace engineer, to invest tens of thousands of dollars in property which does not exist.'

Today, the Honorable Judge Charles Gill sentenced Theodore Swain to 24 years in state prison and ordered him to pay $6.7 million in victim restitution.

Swain used professional looking mass-mailings, directed at tens of thousands of people in southern California, to entice investors into conducting business with First Fidelity Assurance Corporation, based in San Diego.

Swain successfully tricked 99 consumers, between 2003 and 2006, into investing between $1,000 and $100,000 in mortgage certificates for properties which did not exist. Swain produced an elaborate and flashy looking investment prospectus, which promised 10% returns on real-estate projects requiring quick financing during the housing boom.

“This was a very convincing Ponzi scheme,” said Deputy Attorney General Tawnya Boulan who prosecuted the case jointly with the California Department of Corporations. “Swain was very persuasive and ripped off sophisticated investors by maintaining an appearance of success.”

Swain used cash from new investors to pay dividends to old investors, thereby perpetrating his fraud for several years. Swain never disclosed to investors that he had been convicted of grand theft three times and had previously filed for bankruptcy. Under California law, individuals selling investments must disclose any information which might factor into a consumer's decision on whether or not to invest.

Swain’s only source of revenue for the scheme was new investment capital from new investors. He strung people along for nearly three years, ripping off a total of $7 million. About $300,000 was occasionally returned to some investors as a way to convince them to stay involved in the fraudulent scheme and lend an air of legitimacy to the operation.

In 2006, Swain was arrested in New Mexico following an investigation by the California Department of Corporations. During the investigation, the attorney general obtained a court order to freeze $2 million in Swain’s assets and property, money which will be used as restitution for victims of the fraud.

In 2008, after a five-week trial, a San Diego jury found Swain guilty of 15 counts of fraud, 6 counts of grand theft, 3 counts of grand theft of an elder, and 6 counts of running a fraudulent securities scheme. The jury also imposed an excessive taking and white collar crime enhancements of $2.5 million.

“It is devastating when the financial well-being of California citizens falls into the hands of a con man that uses trickery and deceit,” said Sean Rooney, Senior Trial Counsel for the California Department of Corporations. “Today’s sentencing sends a message that swindlers like Theodore Swain will be thoroughly investigated and prosecuted under California law.”

The trial was jointly prosecuted by Deputy Attorney General Tawnya Boulan and Sean Rooney, Department of Corporations Counsel.

For more information on today’s sentencing please contact the California Department of Corporations at (916) 322-7180.

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.