Health Care & Reproductive Rights

SACRAMENTO --- Attorney General Kamala D. Harris has signed a friend-of-the court brief in the United States Court of Appeals for the District of Columbia in support of the constitutionality of the Patient Protection and Affordable Care Act.

“Health care reform saves lives, and that is why I am determined to protect this law,” Attorney General Harris said.

The filing comes one week after the United States Court of Appeals for the Sixth Circuit affirmed the constitutionality of the federal health care reform law in Thomas More Law Center v. Obama. It was the first federal appeals court ruling to address the constitutionality of the landmark health care law.

Attorney General Harris and nine other attorneys general argued in the brief that the Constitution grants Congress broad powers to regulate interstate commerce - and that the decision to purchase health insurance has a significant impact on interstate commerce because it allows the formation of risk pools, lowers health care costs nationally and reduces the cost of uncompensated care.

“The law strikes an appropriate, constitutional balance between federal and state authority over the health care system by creating federal requirements, backed by federal funding, to expand access to affordable coverage, while conferring considerable latitude to allow states to decide how best to design a system of federally-supported coverage that works well for their citizens,” the amicus brief states.

The failure of millions of Americans to purchase health insurance has a significant impact on the states. In 2009, more than 7.2 million Californians - nearly one in four people under the age of 65 - lacked insurance for all or part of the year. More than 5.5 million Californians who could not afford private health insurance are enrolled in government-sponsored health plans, which will cost the state a projected $42 billion in the next fiscal year.

The minimum coverage provision of the Affordable Care Act will reduce the need to shift the cost of uncompensated care of the uninsured - and will thus reduce the expenses now absorbed by the states and by individuals with health insurance.

Others joining California in this brief are Connecticut, Delaware, the District of Columbia, Hawaii, Iowa, Maryland, New York, Oregon and Vermont.

In January, the same group of attorneys general - except the District of Columbia - filed an amicus brief in the U.S. Court of Appeals for the Sixth Circuit arguing for the constitutionality of the Affordable Care Act: http://oag.ca.gov/news/press_release?id=2032&p=3.

In March, those attorneys general filed an amicus brief supporting the law’s constitutionality in the U.S. Court of Appeals for the Fourth Circuit: http://oag.ca.gov/news/press_release?id=2047&p=3.

In April, the same states filed an amicus brief with the U.S. Court of Appeals for the Eleventh Circuit supporting the constitutionality of the law: http://www.oag.ca.gov/news/press_release?id=2067

The D.C. case is Seven-Sky v. Holder, No. 11-5047, United States Court of Appeals for the District of Columbia.

SACRAMENTO --- Attorney General Kamala D. Harris and 37 other attorneys general announced a $40.75 million settlement with GlaxoSmithKline, LLC and SB Pharmco Puerto Rico, Inc. for alleged substandard drug manufacturing processes.

The settlement resolves allegations that GlaxoSmithKline and its subsidiary in Puerto Rico engaged in unfair and deceptive practices when they manufactured and distributed certain lots of drugs, which were adulterated because the manufacturing processes used to produce them were substandard.

“Consumers shouldn’t need to wonder if the drugs prescribed by their doctors are safe,” said Attorney General Harris. “This settlement resolves an unacceptable and potentially dangerous practice of GlaxoSmithKline and underscores my commitment to protecting the health and well-being of Californians.”

The drugs include: Kytril, a sterile drug used to prevent nausea and vomiting caused by cancer chemotherapy and radiation therapy; Bactroban, an antibiotic ointment used to treat skin infections; Paxil CR, the controlled release form of Paxil, the popular antidepressant drug; and, Avandamet, a combination Type II diabetes drug.

GlaxoSmithKline and SB Pharmco no longer manufacture drugs at the facility in Puerto Rico, which closed in 2009. Consumers should be aware that there is no current cause for concern regarding the drugs covered by this agreement because the adulterated batches have been recalled for many years and/or the products’ expiration dates have passed. If consumers do have concerns, they should contact their health care provider.

As part of the settlement, GlaxoSmithKline and SB Pharmco agreed not to make false, misleading or deceptive claims regarding the manufacturing of all drugs formerly manufactured at the Puerto Rico facility – regardless of where these drugs are now produced. In addition, the companies must not misrepresent the characteristics of those drugs, or describe them in ways likely to cause confusion or misunderstanding about the way in which they are manufactured.

Illinois Attorney General Lisa Madigan and Oregon Attorney General John Kroger led the investigation into GlaxoSmithKline and SB Pharmco’s manufacturing practices.

States joining California, Illinois, Oregon and the District of Columbia in today’s settlement include Alabama, Alaska, Arizona, Arkansas, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Iowa, Kansas, Kentucky, Maine, Maryland, Massachusetts, Michigan, Missouri, Montana, Nebraska, Nevada, New Jersey, North Carolina, North Dakota, Ohio, Pennsylvania, Rhode Island, South Dakota, Tennessee, Texas, Vermont, Washington, West Virginia and Wisconsin.

Supervising Deputy Attorney General Daniel Olivas and Deputy Attorney General Judith Fiorentini handled the case for Attorney General Harris’ Consumer Law section. California will receive more than $3.3 million from the settlement, the largest share among the states.

Copies of the complaint and settlement are attached to the online version of this release at ag.ca.gov.

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SACRAMENTO --- Attorney General Kamala D. Harris today announced a $241 million settlement - the largest recovery in the history of California's False Claims Act - with Quest Diagnostics, the state's biggest provider of medical laboratory testing, of a lawsuit alleging illegal overcharges to the state's medical program for the poor.

"In a time of shrinking budgets, this historic settlement affirms that Medi-Cal exists to help the state's neediest families rather than to illicitly line private pockets,' said Attorney General Harris. 'Medi-Cal providers and others who try to cheat the state through false claims and illegal kickbacks should know that my office is watching and will prosecute.'

The settlement with Quest is the result of a lawsuit filed under court seal in 2005 by a whistleblower and referred to the Attorney General's office. The lawsuit alleged that Quest systematically overcharged the state's Medi-Cal program for more than 15 years and gave illegal kickbacks in the form of discounted or free testing to doctors, hospitals and clinics that referred Medi-Cal patients and other business to the labs.

California law states that 'no provider shall charge [Medi-Cal] for any service more than would have been charged for the same service to other purchasers of comparable services under comparable circumstance.' Yet, Quest charged Medi-Cal up to six times as much as it charged some other customers for the same tests. For example, Quest charged Medi-Cal $8.59 to perform a complete blood count test, while it charged some of its other customers $1.43.

California law also prohibits Medi-Cal providers from soliciting and receiving 'any kickback, bribe, or rebate, directly or indirectly, overtly or covertly, in cash or in valuable consideration of any kind [in] return for the referral, or promised referral, of any individual for the furnishing of any service' paid for by Medi-Cal.

According to the attorney general’s complaint, Quest systematically offered doctors, hospitals and clinics low prices for lab tests in return for referrals to Quest of patients, including Medi-Cal patients. Quest then allegedly charged Medi-Cal a higher price to make up the difference - resulting in the loss of millions of dollars to the Medi-Cal program.

Under the state's False Claims Act, any person with previously undisclosed information about a fraud, overcharge, or other false claim can file a sealed lawsuit on behalf of California to recover the losses, and is entitled to a share of the recovery in some cases. Such individuals become plaintiffs and are known as 'whistleblowers,' 'qui tam plaintiffs,' or 'relators.'

In this case, the whistleblowers were Chris Riedel and his company Hunter Laboratories. Hunter Laboratories found it could not compete in a significant segment of the marketplace where major medical laboratories such as Quest offered doctors, hospitals and clinics far lower rates than they were charging Medi-Cal. Riedel and Hunter were represented by Niall P. McCarthy of Cotchett, Pitre & McCarthy, LLP.

The Attorney General's Bureau of Medi-Cal Fraud and Elder Abuse conducted an intensive three-year investigation that uncovered widespread abuse of Medi-Cal by medical testing laboratories in California.

Based on allegations in the complaints, the California Department of Health Care Services, which administers the Medi-Cal program, launched an independent statewide audit of medical laboratories. Through reform of industry pricing practices stemming from this case, Medi-Cal is expected to save hundreds of millions of dollars.

"This agreement sends a strong message that fraud against the state and its Medi-Cal program will not be tolerated,' said Toby Douglas, director of the Department of Health Care Services. 'I commend our department's employees and the Department of Justice for working successfully in pursuit of compensation and justice for the state and its important health care programs.'

Besides providing compensation to the whistleblower under statutory guidelines, the settlement is designed to reimburse the state's Medi-Cal program and the Attorney General for expenses in investigating and prosecuting false claims actions. The total that will flow to the state is $171 million.

The settlement also requires Quest to report information to assist the state in determining Quest's future compliance with Medi-Cal's pricing rules.

Similar cases are still pending against four other defendants, including Laboratory Corporation of America, commonly known as LabCorp, the second largest medical laboratory service provider in California. Trial is scheduled for early next year.

Also assisting in the case was the Office of the Inspector General of the U.S. Department of Health and Human Services.

Among those in the Attorney General's office who were instrumental in this case: Aviva Burmas, Doug Cantrell, Sharon Crotteau, Vincent DiCarlo, Dennis Fenwick, J. Timothy Fives, Brian Frankel, Alissa Gire, Jennifer Gregory, David Guon, Sharon Harris, Brian Keats, Eileen Landon, Linda McCrackin, Larry Menard, Kelli O'Neill, Susan Park, Kim Reed, Marcy Rodriguez, James Shannon, Annette Silva, Jill Spitz, Tom Temmerman, Claude Vanderwold, Kenneth Vo, Lawrence Wold, Mark Zahner, and Gary Zerbey.

A copy of the original complaint can be found at http://oag.ca.gov/news/press_release?id=1705&y=2009.

To report fraud or abuse, call the Bureau of Medi-Cal Fraud and Elder Abuse hotline at (800) 722-0432.

SACRAMENTO – Attorney General Kamala D. Harris encourages Californians to participate in “Prescription Drug Take-Back Day” tomorrow by taking their expired, unwanted and unused prescriptions to an official drop-off center to ensure proper disposal.

National Prescription Drug Take-Back Day provides a safe alternative to fouling our lakes and rivers or creating a risk of prescription drugs falling into the wrong hands. Californians can bring prescription medications and over-the-counter tablets or capsules to any of the nearly 200 collection centers participating across the state. To search a list of drop-off locations, go to www.dea.gov and click on the “Got Drugs?” icon.

Collection centers are open on Saturday from 10:00 a.m. to 2:00 p.m. Many of the sites, which are staffed by law enforcement officials, are at local police stations. The medications will be destroyed following federal and state regulations.

Unused prescription drugs left sitting in a medicine cabinet contribute to drug abuse, especially among teenagers. In 2010, the Centers for Disease Control released a study showing that one out of five high school students in America abuses prescription drugs.

Other recent studies show that prescription drug abuse is soaring. The 2009 National Survey on Drug Use and Health found that there are some 6.2 million non-medical users of prescription drugs in the United States, and there are more Americans abusing prescription drugs than abusing cocaine, hallucinogens and heroin combined.

Approximately 3,000 state and local law enforcement agencies across the country participated in the first National Take-Back Day last year, when more than 121 tons of prescription drugs were collected.

The Attorney General’s office has been at the forefront of efforts to combat prescription drug abuse in California. In addition to costing the state millions of dollars each year, prescription drug abuse can have serious public safety consequences. Many abusers hold down regular jobs, including driving trucks, operating transit vehicles, and working in medical facilities.

Tomorrow’s Take-Back Day is an easy way to properly dispose of expired, unused, and unwanted prescription drugs. Prescription drugs are potentially dangerous if left in the medicine cabinet or thrown away – and should not be flushed down the toilet to end up in our waterways.

SAN FRANCISCO --- Attorney General Kamala D. Harris today announced a settlement with the drug store chain CVS Pharmacy, Inc. for overcharging the state’s Medi-Cal program for prescription drugs.

CVS Pharmacy will reimburse California more than $1.76 million as part of a $17.5 million settlement with the U.S. Department of Justice and nine other states, including Alabama, Florida, Indiana, Massachusetts, Michigan, Minnesota, New Hampshire, Nevada and Rhode Island.

“CVS chose to short-change taxpayers and undermine our healthcare safety net with these actions,” said Attorney General Harris. “We are all better off now that this deception has been uncovered.”

Starting in late 2002 and continuing through 2010, CVS submitted prescription drug claims to Medi-Cal for individuals who were covered by both Medi-Cal and a third-party insurance plan. The pharmacy should have first billed the primary insurer – and sought Medi-Cal reimbursement only for the remaining amount, typically the co-pay.

In 2008, a CVS pharmacist in Minnesota stepped forward to alert the authorities of the overbilling.

A multi-state investigation, in which billing and payment information was analyzed and cross-referenced to private insurance payment, found that CVS billed more than the amount allowed for so-called dual-eligible claims.

Investigating the case and negotiating the settlement with CVS were the California Attorney General’s Bureau of Medi-Cal Fraud and Elder Abuse, along with the U.S. Department of Justice, the U.S. Attorney’s Office for the Western District of Wisconsin, the U.S. Department of Health and Human Services - Office of Inspector General, and the attorneys general of the other settling states.

As part of the agreement, CVS will train its employees in accurate billing procedures. CVS has started working with individual states to make sure it bills correctly for dual-eligible beneficiaries. Pharmacy payments will also be audited on a regular basis by an independent review organization.

The funds recovered for California will be paid to the Department of Health Care Services to reimburse the state’s Medi-Cal program.

The California investigation and settlement negotiations were overseen by Supervising Deputy Attorney General Nicholas Paul and Deputy Attorneys General Erika Hiramatsu, Matt Kilman and Eliseo Sisneros.

A copy of the settlement agreement is available at ag.ca.gov.

SACRAMENTO – Attorney General Kamala D. Harris has signed a friend-of-the-court brief in the U.S. Court of Appeals for the Eleventh Circuit strongly defending the constitutionality of federal health care reform and urging the court to uphold the law.

“Not only is the minimum coverage provision necessary to carry out Congress’ goals of lowering the costs of medical care and expanding insurance coverage, it is a proper exercise of federal authority that does not alter the essential attributes of state sovereignty,” the amicus brief states. “The Affordable Care Act continues a longstanding and necessary partnership between the states and the federal government in the healthcare policy arena.”

In January, a federal judge in Florida ruled that the law’s minimum coverage requirement, which mandates that individuals maintain health insurance or pay a fine, is unconstitutional because it regulates “inactivity” – or the decision to forgo coverage.

Attorney General Harris, joined by nine other attorneys general, rejected that view in the amicus brief filed yesterday in the U.S. Court of Appeals for the Eleventh Circuit, which is based in Atlanta. They argued that the Constitution gives Congress broad powers to regulate interstate commerce – and that an individual’s decision to purchase health insurance has a significant impact on interstate commerce because it allows formation of risk pools, lowers healthcare costs nationally and reduces the cost of uncompensated care.

The failure of millions of Americans to purchase health insurance has a significant impact on the states. In 2009, more than 7.2 million Californians – nearly one in four people under the age of 65 – lacked insurance for all or part of the year. More than 5.5 million Californians who could not afford private health insurance are enrolled in government-sponsored health plans, which will cost the state a projected $42 billion in the next fiscal year. According to the amicus brief, $27.1 billion of those funds comes from the General Fund, which faces a $25 billion deficit.

The minimum coverage provision of the Affordable Care Act will reduce the need to shift the cost of uncompensated care of the uninsured – and will thus reduce the expenses now absorbed by the states and by individuals with health insurance.

Others joining California in this brief are Connecticut, Delaware, the District of Columbia, Hawaii, Iowa, Maryland, New York, Oregon and Vermont.

In January, the same group of attorneys general – except the District of Columbia – filed an amicus brief in the U.S. Court of Appeals for the Sixth Circuit arguing for the constitutionality of the Affordable Care Act: http://oag.ca.gov/news/press_release?id=2032&p=3.

In March, those attorneys general filed an amicus brief supporting the law’s constitutionality in the U.S. Court of Appeals for the Fourth Circuit: http://oag.ca.gov/news/press_release?id=2047&p=3.

SAN FRANCISCO – Attorney General Kamala D. Harris hosted a Smart on Crime Policy Summit today with a veteran, bi-partisan group of leaders from across the state. Ten work groups – focusing on topics ranging from policing to victims’ rights – prepared briefing papers for Attorney General Harris. The papers, dealing with critical issues facing California, were the focus of the summit at U.C. Hastings College of the Law.

The 10 groups drew insights from best practices of other attorneys general, law enforcement leaders, universities, foundations, think tanks and others at the forefront of research, ideas and innovation. More information about the work groups, and the briefing papers, can be found at: www.smartoncrimepolicy.org.

The honorary co-chairs are William Bratton, former Los Angeles Chief of Police; Warren Christopher, former U.S. Secretary of State; Dolores Huerta, co-founder of the United Farm Workers; State Sen. Mark Leno (D-San Francisco); Constance L. Rice, co-director of The Advancement Project; George Shultz, former U.S. Secretary of State; and Kathleen Sullivan, professor and former dean of Stanford Law School.

The following is a list of topic areas and chairs of the 10 work groups:

Civil Rights Enforcement
Bill Lann Lee, Shareholder, Lewis, Feinberg, Lee, Renaker & Jackson, P.C.

Education & Truancy
Carlos Garcia, Superintendent, San Francisco Unified School District
Laurene Powell, Co-founder & President of the Board, College Track

Environmental Enforcement
Rick Frank, Director, California Environmental Law & Policy Center, U.C. Davis School of Law
John Poyner, District Attorney, Colusa County

Organized Crime, Gangs and Gun Crime
Lee Baca, Sheriff, Los Angeles County
Charlie Beck, Chief of Police, Los Angeles Police Department
Rev. Jeff Carr, Chief of Staff, Mayor Antonio R. Villaraigosa, City of Los Angeles
Gilbert Otero, District Attorney, Imperial County
Mike Ramos, District Attorney, San Bernardino County
Jack Weiss, Managing Director & Head of Los Angeles Office, Kroll

Health
Paul Gallegos, District Attorney, Humboldt County
Jane Garcia, CEO, La Clincia de La Raza
Dr. Mitch Katz, Director, Los Angeles Public Health Department
Dr. Bob Ross, President & CEO, The California Endowment

Mortgage Fraud and Consumer Protection
Kelly Dermody, Partner, Lieff Cabraser Heimann & Bernstein
Dan Grunfeld, Co-Chair, Litigation Department, Kaye Scholer
Greg Totten, District Attorney, Ventura Country

Policing
Tony Batts, Chief of Police, Oakland Police Department
Ron Davis, Chief of Police, East Palo Alto Police Department
George Gascon, District Attorney, San Francisco
Bill Landsdowne, Chief of Police, San Diego Police Department

Reentry & Recidivism Reduction
Lee Baca, Sheriff, Los Angeles County
Bonnie Dumanis, District Attorney, San Diego County
Larry Morse, District Attorney, Merced County
Tim Silard, President, Rosenberg Foundation
Mimi Silbert, President & CEO, Delancey Street Foundation

Technology
Ed Berberian, District Attorney, Marin County
Jack Christin, Jr., Associate General Counsel, eBay/PayPal
David Drummond, Senior Vice President & Chief Legal Officer, Google
Fred Humphries, Managing Director, Microsoft
Bruce Ives, Vice President & Deputy General Counsel, Hewlett-Packard
Scott Forstall, Senior Vice President, iPhone Software, Apple
Mitchell Kapor, Founder, Lotus Development Corporation
Sheryl Sandberg, Chief Operating Officer, Facebook

Victims' Rights
Gary Lieberstein, District Attorney, Napa County
Nancy O’Malley, District Attorney, Alameda County
Esta Soler, Founder & President, Family Violence Prevention Fund

For additional information, please call the Attorney General’s press office at 510.622.4500.

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SACRAMENTO – California Attorney General Kamala D. Harris and 37 other attorneys general today announced a $68.5 million settlement with AstraZeneca Pharmaceuticals for unfair and deceptive practices in its marketing of the antipsychotic drug Seroquel.

Today’s settlement is the largest multi-state settlement with a pharmaceutical company in history. California will receive more than $5.2 million, the largest share among the states in the consumer protection settlement.

“The health and well-being of patients should drive drug prescriptions in California, not the profits of a pharmaceutical company,” said Attorney General Harris. “This settlement puts an end to unscrupulous marketing practices and protects consumers from misguided, and potentially dangerous, treatment with Seroquel for uses the FDA has not approved.”

The complaint, filed today with the proposed judgment, alleges that AstraZeneca promoted Seroquel for unapproved uses, failed to adequately disclose potential side effects to health care providers, and withheld scientific studies that called into question the drug’s safety and efficacy.

Seroquel is an antipsychotic medication used to treat schizophrenia and bipolar disorder. It was approved by the Food and Drug Administration (FDA) for treatment of these conditions in adults, but AstraZeneca promoted the drug for children and the elderly to treat a variety of medical conditions, including anxiety, depression, post traumatic stress disorder, Alzheimer’s disease and dementia.

Doctors may prescribe medications for unapproved or “off-label” uses, but drug makers are prohibited from promoting drugs for treatment of medical conditions not approved by the FDA.

A three-year investigation, led by the attorneys general of Florida and Illinois, revealed that AstraZeneca also failed to adequately disclose side effects associated with Seroquel, including weight gain, hyperglycemia, diabetes and cardiovascular complications.

As part of today’s settlement, AstraZeneca agreed to not promote Seroquel in a false, misleading or deceptive manner, including for “off-label” uses. AstraZeneca is required to provide accurate and scientifically balanced responses to requests about off-label usage. The drug maker is also required to enact policies to ensure financial incentives are not given to salespeople for off-label marketing and post payments made to physicians on a website.

States joining California and the District of Columbia in today’s settlement include Arizona, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois, Iowa, Kansas, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Nebraska, Nevada, New Hampshire, New Jersey, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Dakota, Tennessee, Texas, Vermont, Washington, West Virginia and Wisconsin.

Copies of the related documents are attached to the online version of this release at ag.ca.gov.

The following is a statement from eight attorneys general who joined together in signing an amicus brief filed in the United States Court of Appeals for the Sixth Circuit on January 21, 2011 regarding the constitutionality of the Affordable Care Act.

Feb. 4, 2011

The Affordable Care Act is making a difference in the lives of millions of people in our states and it is poised to help even more as it continues to be implemented. Under the federal health reform law, millions of Americans now have access to free preventive care. People with pre-existing medical conditions who have struggled to find health insurance coverage will have to struggle no more. Insurers are required to cover them. Parents are now able to keep their children on their health insurance plans up to the age of 26. Senior citizens are receiving help to buy the prescription drugs they need. Small businesses are eligible for health insurance tax credits so that they can provide insurance to their employees. The list goes on. Whether people agree about all aspects of health care reform, we should be able to agree that for a lot of people, life has gotten better since the law was enacted and millions more will continue to benefit from the Affordable Care Act as it is fully implemented.

Of course, comprehensive health care reform is complex and people are still debating its implications. The legal challenges to the requirement that Americans buy health insurance are still in their initial stages. Twelve federal judges have already dismissed challenges to the constitutionality of the Affordable Care Act and two federal judges have ruled that the law is fully constitutional. Although a judge in Florida recently ruled that one provision of the federal health care law is unconstitutional, we believe the judge's ruling is incorrect and we applaud the decision by the U.S. Department of Justice to appeal it. We are confident that the constitutionality of the entire law will be upheld on appeal and ultimately by the United States Supreme Court. In the meantime, the numerous health care reforms provided in the federal health reform law will continue to be implemented to the benefit of all Americans.

KAMALA D. HARRIS
California Attorney General

GEORGE C. JEPSEN
Connecticut Attorney General

TOM MILLER
Iowa Attorney General

DOUGLAS F. GANSLER
Maryland Attorney General

ERIC T. SCHNEIDERMAN
New York Attorney General

JOSEPH R. "BEAU" BIDEN, III
Delaware Attorney General

WILLIAM H. SORRELL
Vermont Attorney General

DAVID M. LOUIE
Hawaii Attorney General

SACRAMENTO – Attorney General Edmund G. Brown Jr. announced today that special agents with the state Department of Justice, working closely with the U.S. Attorney’s office, the Bureau of Alcohol, Tobacco, Firearms and Explosives, and the state Board of Equalization, have charged 15 individuals with tobacco smuggling and tax evasion schemes that diverted some $34 million from state and county health care programs and the state’s general fund.

The three-year investigation has uncovered “rampant fraud” among tobacco distributors with estimated tax losses totaling more than $80 million, including today’s case. More than $20 million in tobacco, property and cash has been seized.

“This is rampant fraud where fake invoices are used to disguise contraband tobacco, and often get passed from distributor to wholesaler to the mom-and-pop store,” said Brown. “We’re following every phony paper trail to ensure that the state collects every penny it’s owed in tobacco product taxes.”

The 15 individuals were arrested last week and released on bonds ranging from $50,000 to $250,000. The charges, which include mail fraud, conspiracy to commit mail fraud and trafficking in contraband tobacco, were filed in Sacramento and Los Angeles U.S. District Courts. The defendants charged in Los Angeles have been arraigned there, and the Sacramento defendants will be arraigned later this month.

The taxes evaded in these cases were for “other tobacco products,” such as cigars, chewing tobacco and leaf tobacco.

Under California law, distributors of these “other tobacco products” are required to collect an excise tax of more than 45% from the wholesaler and submit monthly reports to the Board of Equalization. To evade these taxes, distributors set up their businesses in Nevada or Arizona and report that they are exporting the tobacco and thus owe no excise taxes. The products are then smuggled into California, where actual sales are concealed by the use of shell companies to receive the products, false documents that understate the amount of tobacco, and the use of untraceable cash sales to wholesalers.

“This investigation has exposed systematic and widespread tax evasion in the distribution of tobacco products in California,” said U.S. Attorney Benjamin B. Wagner. “Participants in that industry who might be tempted to short-change the State of California should take note of the indictments announced today, and should understand that our investigations are not over.”

In 2008, the task force issued a search warrant against Ideal Tobacco, a large Nevada distributor. Using information seized from Ideal Tobacco, agents tracked down Ideal’s largest customers who were buying tobacco from Ideal and selling it in California, but failing to pay state’s tobacco tax.

The individuals and charges include:

• Galiom Mansour, president and CEO, and Naeim Hanno, CFO, of South Bay Wholesale, Inc. in Carson, are charged with 39 counts of mail fraud. Estimated losses to the state are $519,000 in unpaid tobacco products tax.
• Adib Sirope and Rimoun Mansour, partners in Pay-Less Wholesale in North Hollywood, are charged with 39 counts of mail fraud. Estimated losses to the state are $2.5 million in unpaid tobacco products tax.
• Atif Henan, Atef Shehata, Samy Girgis and Soheir Girgis, partners in Classic Wholesale (and later House of Tobacco) in Los Angeles, are charged with 17 counts of mail fraud. Estimated losses to the state are $1.5 million in unpaid tobacco products tax.
• Jack Haroun, president and CEO of Wholesale Palace in Burbank, is charged with 37 counts of mail fraud. Estimated losses to the state are $554,000 in unpaid tobacco products tax.
• Mohammed Halaweh, using the names CTC Distribution and T&T Tobacco for unlicensed companies in Los Angeles, is charged with 13 counts of mail fraud and eight counts of trafficking in contraband tobacco. Estimated losses to the state are $5.3 million in unpaid tobacco products tax.
• Mehdi Mohammed Humkar, using the name M&D Tobacco for an unlicensed company in Los Angeles, is charged with 15 counts of mail fraud and seven counts of trafficking in contraband tobacco. Estimated losses to the state are $528,000 in unpaid tobacco products tax.
• Rajnish Makkad, Charanjit Singh, and Amrit Singh, principals in Arctic Inc., a Nevada corporation not licensed to distribute OTP, and IIG Inc. in Los Angeles, are charged with 19 counts of mail fraud and 16 counts of trafficking in contraband tobacco. Estimated losses to the state are $13.8 million in unpaid tobacco products tax.
• Abdurrahman Yousuf, owner and operator of A to Z Cash and Carry in Los Angeles, is charged with 17 counts of mail fraud and 13 counts of trafficking in contraband tobacco. Estimated losses to the state are $2.3 million in unpaid tobacco products tax.

While sentencing varies, the maximum penalty for each count of mail fraud is 20 years in prison, a $250,000 fine, and a three-year term of supervised release. The maximum penalty for each count of trafficking in contraband tobacco and each count of conspiracy is five years in prison, a $250,000 fine, and a three-year term of supervised release.