Law Enforcement

SACRAMENTO – California Attorney General Edmund G. Brown Jr. today released a detailed forensic analysis showing that DNA collected at arrests –- even for non-violent offenses -- is “cracking cold cases” by providing positive identification of suspects in violent crimes such as rape, murder and robbery.

Proposition 69, which voters passed in 2004, required law enforcement officials to take DNA samples from all adults arrested for felonies in the state. So far it is working: more than 800 crime-scene samples have been matched since the beginning of last year to DNA collected from suspects under arrest.

In its analysis, the Attorney General’s office surveyed 69 DNA matches made over 15 months. The study revealed that in 78 percent of the matches to an unsolved violent crime, DNA was collected from an adult arrested for a non-violent offense such as fraud, drug or property crimes.

“Collecting DNA at the time of arrest is cracking cold cases that might have gone unsolved forever,” Brown said. “It is particularly significant that individuals arrested for non-violent crimes have been linked to the commission of violent crimes such as murder and rape.”

Since the 1990s, California law enforcement officers have collected DNA samples from people convicted of serious felony offenses. In January 2009, as part of changes mandated by Proposition 69, officers began collecting DNA samples from adults arrested for felonies by swabbing the inside of the cheek.

The effort is already yielding results.

For example, DNA collected from Donald Carter, 56, arrested in Sacramento in 2009 on a felony drug charge, was linked to the unsolved 20-year-old murder of Sophie McAllister, 80, in the capital. Although Carter’s drug charge was dismissed, he was later charged with murder and his trial is pending. (There are other examples at the end of this press release.)

In October, the ACLU filed a lawsuit seeking to stop the DNA arrestees program. The Attorney General prevailed in U.S. District Court, and the ACLU has appealed to the Ninth Circuit Court of Appeals. In support of the Attorney General, the California District Attorneys Association filed a brief in March arguing that “the collection of DNA samples from felony arrestees serves an overwhelming interest in the pursuit of justice.” Oral arguments in the case are scheduled for July 13.

In its analysis of 69 DNA matches linking felony arrestees to violent crimes between January 1, 2009, and March 19 of this year, investigators found that 32 percent of the DNA matches were from adults arrested for felony property crimes, 26 percent from adults arrested for drug-related felonies, 10 percent from adults arrested for fraud and 10 percent for other non-violent crimes. Only 22 percent were for violent crimes.

Cases were selected for the analysis from arrests of suspects from whom DNA had never been taken. Here are some of the other findings:

• In 16 percent of the DNA matches involving unsolved rape cases, the new DNA sample came from a person arrested for fraud.
• In 34 percent of the DNA matches involving an unsolved murder case, the new DNA sample came from a person arrested for a drug crime.
• In 36 percent of the DNA matches involving an unsolved robbery case, the new DNA sample came from a person arrested for felony DUI.

A summary of the analysis can be found at http://ag.ca.gov/bfs/pdf/arrestee.pdf

Some cases that illustrate how collecting DNA at arrests helps to nab suspects in crimes that might otherwise remain unsolved:

• In May 2009, Anthony Vega was arrested in Los Angeles County on felony drug charges, which were later reduced to misdemeanors. However, his DNA, collected at the time of arrest, was linked to two separate crimes committed in Orange County, a burglary in 2007 and a 2008 armed home invasion robbery. A preliminary hearing is scheduled for next month.
• Earlier this year, Joshua Graham Packer, 20, was arrested in Santa Barbara on armed robbery charges. His DNA, collected at the arrest, was matched to a sample taken at the site of an unsolved 2009 triple murder in Ventura County. He was arrested for that crime in April and charged with murder.
• In April 2009, Christopher Rogers, 34, was arrested in Sacramento for assault with a deadly weapon, which was ultimately reduced to a misdemeanor. But his DNA, collected at the time of arrest, was matched to DNA taken at the scene of a 2004 murder in Sacramento. In October, Rogers was arrested and charged with murder. He awaits trial.

Overall, the state’s DNA Data Bank is the fourth largest such program in the world. It has aided more than 12,000 criminal investigations.

For more information about Prop. 69, see the California Department of Justice website: http://ag.ca.gov/bfs/prop69.php.

SACRAMENTO - Attorney General Edmund G. Brown Jr. today announced the arrests of five members of a suspected loan-sharking syndicate, headed by a reputed Chinese mobster, that trapped casino gamblers in a “never-ending loop of debt and fear” by loaning them hundreds of thousands of dollars at exorbitant interest rates.

Working inside tribal casinos in the Sacramento area – including Red Hawk and Thunder Valley -- over the last 18 months, the suspects often preyed on Asian gamblers. Once the gamblers accepted loans, the amount they owed began to skyrocket. Some were charged 5 percent interest a week. Because of high interest rates and other charges, one gambler’s $100,000 loan mushroomed to $400,000 in five months.

“Loan shark enterprises like this one terrorize people through spiraling financial obligations and threats of violence,” Brown said. “Victims are trapped in a never-ending loop of debt and fear.”

Authorities said there were about 40 victims.

The charges against the five suspects include felony assault, extortion and conspiracy. Other suspects are being sought.

Among those arrested was the leader of the enterprise, Weixiong Kuang, 44, a suspected member of an organized crime syndicate called the Big Circle Boys, a violent gang out of China.

Working with a staff of armed collectors, lenders and bodyguards for more than 18 months, Kuang met his potential victims by visiting high-limit tables at casinos in the Sacramento area. He would befriend gamblers who suffered losses and offer to loan them money. If repayments were slow, Kuang would threaten the borrowers or threaten to hurt family members living in China. He is suspected of assaulting two gamblers who did not pay their debts, including one woman who was hospitalized for her injuries.

Kuang was arrested on two counts of felony assault, three counts of extortion, and felony conspiracy. Jian Liu, 43, Zhi Huang, 23, Yezhi Lei, 46, and Zi Zhen, 35, were arrested for felony conspiracy. All were booked into the El Dorado County Jail.

During searches of several residences in Sacramento, law enforcement agents found an assault rifle, large amounts of cash and some drugs.

Initiated in October 2009, the investigation was prompted by reports from citizens in the Sacramento region. The Department of Justice’s Bureau of Gambling Control worked with the Federal Bureau of Investigation, the Sacramento Police Department, tribal gaming authorities, as well as the Red Hawk Casino and the Thunder Valley Casino.

For more information about the Bureau of Gambling Control, please see http://ag.ca.gov/gambling/.

LOS ANGELES — In a continuing probe into a defunct Southern California mortgage brokerage, Attorney General Edmund G. Brown Jr. today announced the arrests of president and co-owner Sean McConville and two associates who used “deceptive promises and forged documents” to steal almost $1 million from homeowners falsely guaranteed attractive home loan refinancing packages.

“These criminals employed a classic bait-and-switch in their refinance scheme,” Brown said. “With deceptive promises and forged documents, they maliciously cheated homeowners who trusted them and just wanted a fair deal.”

Brown’s office initiated its investigation in October 2008 in response to more than 70 complaints against the defendants and their mortgage brokerage business, ALG Capital, Inc. The brokerage operated out of Calabasas from early 2006 until late 2007 and then moved to Mission Hills until it shut its doors in 2008.

Brown’s investigation found that from April 2007 to October 2008, the owners and their associates lured dozens of borrowers into refinancing home loans by falsely promising low interest rates, minimal broker fees and other attractive terms. The brokerage then negotiated different terms with lenders.

When homeowners were presented with closing documents, they bore the terms promised, but which the lenders never approved. After homeowners signed the closing documents, key pages were removed and replaced with pages bearing the terms that the lender had actually agreed to. The homeowners’ signatures were then forged on the replacement pages, and ALG forwarded the forged documents to the escrow company.

Homeowners only discovered they had been defrauded when they received the final loan documents with the true terms and their signatures forged on closing cost disclosures, Truth-in-Lending disclosures, loan applications and other documents.

Additionally, ALG collected almost $1 million in undisclosed fees, charging homeowners up to $57,000 in broker fees. In total, dozens of homeowners were locked into almost $30 million in loans with terms they did not agree to.

As a result of this scheme, many homeowners were forced to sell their homes, come out of retirement, or tap retirement savings. Others paid significant prepayment penalties, including over $21,000 in one case. Borrowers also rarely received the large cash-outs they were promised as part of the refinance.

Sean McConville, 30, of Austin, Texas, president and co-owner of the brokerage, was arrested early yesterday morning at his residence. He is being held at the Travis County Jail in Texas pending extradition. He was previously convicted of robbery in November 1997.

Matthew Bourgo, 27, of Thousand Oaks, who posed as a licensed notary for the brokerage, was arrested yesterday afternoon at his residence. He is being held in Ventura County Jail and will be transferred to Los Angeles County.

Joseph Nguyen, 37, of Woodland Hills, a former loan officer for the brokerage, was also arrested yesterday afternoon at his business, where he worked as a chiropractor. He is being held by authorities in Los Angeles County.

The suspects are each being held on $29.5 million bail.

In September 2009, Brown’s office arrested three others involved in the bait-and-switch scam, including Michael McConville, 32, of Simi Valley, Sean’s brother and co-owner of the brokerage, Alan Ruiz, 29, of Huntington Beach, a former loan officer and Garrett Holdridge, 24, of Palmdale, who was convicted of seven felonies in March for his involvement in the scam.

Investigators located victims in dozens of California cities, including: Auburn, Altadena, Arroyo Grande, Azusa, Bakersfield, Berkeley, Burbank, Calabasas, Castro Valley, Chino, Compton, Corona, Fairfield, Fontana, Fremont, Fresno, Garden Grove, Glendale, Hemet, Highland, Huntington Beach, La Habra, La Mesa, La Mirada, La Quinta, Lancaster, Livermore , Los Angeles, Long Beach, Manteca, Martinez, Monterey, Murrieta, Nice, Northridge, Oakland, Ontario, Palmdale, Pasadena, Perris, Petaluma, Pomona, Quartz Hill, Rancho Cucamonga, Redlands, Reedley, Rialto, Sacramento, San Clemente, San Diego, San Jose, Santa Rosa, Sierra Madre, Spring Valley, Stanton, Temecula, Whittier, and Winnetka.

The complaint, filed in Los Angeles County Superior Court, includes the following charges: 38 counts of grand theft, 19 counts of forgery, three counts of elder abuse, and one count of conspiracy to commit grand theft.

Brown also filed suit against the McConville brothers in May 2009 for running a property tax reassessment scam which targeted Californians looking to lower their property taxes. The brothers billed tens of thousands of homeowners throughout California nearly $200 each for property tax reassessment services that were almost never performed and are available free of charge from local tax assessors.

LOS ANGELES – The California Department of Justice asks the public for any information about Kevin Lee Francois, 44, who was arrested recently on charges related to an unsolved 2003 rape in Arizona and is a possible suspect in other sex crimes throughout the country.

Authorities believe Francois, who worked as a painter, may have other victims. He resided and worked in Orange and Los Angeles counties, but traveled extensively.

Police believe Francois primarily targeted college-age women who lived in residential areas near colleges. At times, he is suspected of breaking into homes and returning at a later date to assault a resident. He attended major sporting events around the world, including the Olympics, the Final Four College Basketball Tournament and the Super Bowl.

In January 2010, Newport Beach police arrested Francois, who was loitering around an apartment complex. His DNA sample, taken when he was booked on a felony charge of resisting an officer, matched DNA from a 2003 burglary and rape in Tempe, Arizona. As of Jan. 1, 2009, a DNA sample is taken from adults in California arrested for a felony.

Working with Arizona law enforcement officials, special agents with the California Department of Justice obtained a search warrant for Francois’ Fullerton residence. There, the agents found evidence indicating that Francois may be responsible for other burglaries and assaults throughout the United States over decades. Among the items found were more than 300 school and government photo identifications, hundreds of photos of unknown females, and worn women’s underwear.

Francois remains in custody at the Orange County Sheriff’s Department while awaiting extradition to Arizona.

A photograph of Francois is attached. Anyone with information about Francois is encouraged to call (323) 869-3400 and ask to speak to any special agent at the department’s Bureau of Investigation and Intelligence’s Major Crimes Team.

YUBA CITY — Attorney General Edmund G. Brown Jr. announced today that narcotics agents of the Department of Justice and local law enforcement officials arrested 59 gang members, including one who bootstrapped his way from foot soldier to local commander by committing or ordering murders.

In sweeps today, agents arrested 33 gang members and seized 24 firearms in five Northern California counties as part of “Operation Crimson Tide.” The operation was conducted by more than 300 law enforcement agents in Sacramento, Sutter, Yuba, Colusa and Stanislaus Counties and involved more than 30 search warrants.

“Tragically, those arrested today chose to join dangerous gangs that deal in meth and murder,” Brown said. “By removing them from society, we are disrupting their criminal activities and making the people of Northern California safer.”

In January, agents from the California Department of Justice’s Bureau of Narcotic Enforcement and a task force of local law enforcement officials initiated Operation Crimson Tide by targeting gangs in and around Yuba and Sutter Counties.

After extensive investigative work, DOJ agents and task force members uncovered a well-organized methamphetamine distribution network, involving large amounts of methamphetamine smuggled into the United States from Mexico. The investigation also helped solve four homicides of Surenos gang members and resulted in the arrests of 26 Nortenos gang members and several associates.

Last month, agents arrested Robert Juan Salazar, 24, for the March 2004 murder of a Surenos gang leader as he sat in his car with his six-year-old nephew. In the view of law enforcement, that began Salazar’s climb up the organizational ladder of the local Nortenos gang, which included ordering murders of rival gang members in April and December 2004 and July 2005. Salazar is being held without bail in Sutter County Jail on murder charges.

Over the course of the operation, DOJ agents and task force members were able to prevent one murder, two stabbings, two shootings, as well as arrest two wanted fugitive gang members and two gang members on murder charges. Prior to today’s enforcement action, Operation Crimson Tide led to the seizure of more than 17 pounds of methamphetamine, two handguns and two sawed-off shotguns. An additional 24 weapons and more than 11 pounds of illegal drugs were seized today.

All 59 arrestees (including the 33 arrested today) will be prosecuted by the Sacramento County District Attorney’s Office in one comprehensive gang prosecution case. All 30 search warrants were issued by the Sacramento County Superior Court. The cold-case homicide cases are being prosecuted by the Sutter County District Attorney’s Office.

Charges include distribution and conspiracy to distribute methamphetamine, firearms violations and murder.

The California Department of Justice Bureau of Narcotic Enforcement and the Yuba/Sutter Narcotic and Gang Enforcement Team led today’s operation. Participating agencies include:

Butte County Sheriff’s Department
California Department of Corrections and Rehabilitation
California Highway Patrol
Colusa County Sheriff’s Department
Marysville Police Department
Modesto Police Department
Nevada County Sheriff’s Department
Sacramento County Sheriff’s Department
Sacramento Police Department
Sutter County Probation Department
Sutter County Sheriff’s Department
Yuba City Police Department
Yuba County Probation Department
Yuba County Sheriff’s Department

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

**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.

*** Brown will hold a news conference today at 1 p.m. at 1300 I Street in Sacramento to discuss the lawsuit. ***

LOS ANGELES – Attorney General Edmund G. Brown Jr. today announced that his office has filed a civil suit against former California Public Employees Retirement System (CalPERS) Board Member Alfred Villalobos, his company ARVCO Capital, and former CalPERS CEO Federico “Fred” Buenrostro, charging them with fraud.

“Working as a placement agent for ARVCO, Villalobos spent tens of thousands of dollars to lavishly entertain key senior executives at CalPERS, who then influenced the Board to authorize investments that generated over $40 million in commissions to Villalobos,” explained Brown. “None of these actions were disclosed as required by law, as state pension holders and taxpayers have every right to expect.”

According to the complaint, Villalobos influenced these CalPERS officials by, among other things, taking two of them on an around-the-world trip, taking another on a private jet trip to New York, and giving Buenrostro a $300,000 job and a condo when he left the pension fund.

Brown also obtained a court order to freeze Villalobos’ assets and place them in receivership to recover the more than $40 million in commissions that Villalobos earned during the period alleged in the complaint. Brown explained that the freeze order, granted yesterday, was necessary because Villalobos has transferred real estate suspiciously, has lost tens millions of dollars in high-stakes gambling, and maintains over 20 bank accounts. Among the assets placed under receivership are two Bentleys, two BMWs, a Hummer H2, art work worth more than $2.7 million, $6 million in yet-to-be-paid placement-agent commissions, and 14 pieces of real property in California, Nevada and Hawaii.

Specific charges allege that:

• Villalobos and ARVCO falsely represented that they had the required securities licenses and complied with all laws;

• Defendants gave, accepted, and failed to disclose gifts;

• Villalobos and ARVCO submitted bogus disclosure forms.

In addition to a permanent order preventing the defendants from violating state securities and unfair competition laws, and the imposition of civil penalties, Brown seeks to recover the more than $40 million in placement agent commissions that Villalobos and ARVCO collected. The receiver appointed by the court will be charged with recovering the money.

Brown's Office acknowledges the full support and assistance of CalPERS and its special review headed by Philip Khinda, Esq., of the Steptoe and Johnson law firm.

SACRAMENTO – Attorney General Edmund G. Brown Jr. announced today that special agents with the Department of Justice, working closely with the Department of Resources Recycling and Recovery (CalRecycle), have shut down three beverage-container recycling fraud rings in which rogue entrepreneurs trucked millions of cans and bottles from Arizona and Nevada to illegally claim California Redemption Value (CRV) refunds.

In total, the fraud rings robbed the state of more than $3.5 million used to operate the state’s recycling program as well as to promote recycling throughout California. Thirty-one individuals have been arrested in connection with these fraudulent activities.

“These bands of thieves have been caught red-handed running tons of cans and bottles from across the state’s border and fraudulently collecting money through the California Redemption Value program,” Attorney General Brown said. “Defrauding the state’s recycling program is not a way to make easy money. We are looking for you and you will be caught.”

Conviction of redemption fraud and the importation of recyclable materials is a felony if the redemption amount is over $400.

In one case originating in Nevada, a ring imported to California 1.6 million pounds of cans and bottles – enough, if not compacted, to fill 464 18-wheelers.

In another case, cans were not only hauled from the Phoenix area to Moreno Valley for the CRV deposit, they were filled with sand to add weight for an increased deposit return.

In a third case, agents looking for one recycling fraud suspect along Interstate 8 observed yet another truck carrying thousands of cans. That observation spurred a two-month investigation, resulting in the arrest of the owner of a recycling center and three other suspects.

California is one of 11 states with a bottle and can redemption program. Among its neighbors, Oregon has a program, but Nevada and Arizona do not. When a person purchases a bottle or can in California, the CRV is paid at the checkout stand. When the container is redeemed at one of the state’s 2,000 recycling facilities, the CRV is returned to the consumer. For beverage containers weighing less than 24 ounces, the CRV is 5 cents; for containers 24 ounces and greater, the CRV is 10 cents. For aluminum, the CRV equals $1.57 per pound.

When an out-of-state can or bottle is fraudulently redeemed in California, the program loses money because money is paid out for a container for which the CRV was never paid. This robs the CRV program, which relies on unclaimed CRV to administer the program and support a variety of activities that promote recycling across the state.

"Recycling fraud is a crime against California consumers and we take it very seriously,' said CalRecycle Director Margo Reid Brown. 'Our inspectors work closely with state and local law enforcement to root out and prosecute criminals who steal the money used to repay Californians and support our state's recycling programs. These arrests are evidence that recycling fraud will not be tolerated.'

California’s program began in 1987, following legislation passed in 1986. Today, about 80 percent of bottles and 84 percent of aluminum cans purchased in the state are returned for recycling.

“Californians are doing a great job recycling their bottles and cans,” added Attorney General Brown. “We don’t want people intent on committing recycling fraud to harm a program that is working well.”

To combat recycling fraud, CalRecycle staff visits major recycling processors to inspect loads of beverage containers delivered for CRV reimbursement. In 2009, the department removed 25 recycling centers from the state program for submitting fraudulent claims. CalRecycle refers recycling fraud cases to the Department of Justice for criminal investigation and prosecution.

Here’s how the three recycling fraud rings were broken up in April by the Department of Justice:

1. Department of Justice special agents observed Mariano Dejesus-Solis collecting and storing recyclable materials at his Las Vegas residence, as well as at several storage facilities in North Las Vegas. Twice a week, Dejesus-Solis and his accomplices drove 16-foot and 24-foot rental trucks filled with approximately 5,000 pounds of aluminum cans and bottles to a storage facility in Montclair (San Bernardino County) where the loads were parceled out to accomplices who would take them to recycling centers. The group defrauded the CRV program an estimated $2.5 million by illegally importing more than 1.6 million pounds of cans and bottles. On April 8, 15 suspects were arrested in Riverside and San Bernardino counties, with assistance from local law enforcement.

2. In the Phoenix area, a group collected used beverage containers from consumers and purchased some from recycling centers at a reduced rate and then transported them to a residence in Moreno Valley (Riverside County). Daily, members of this group took multiple smaller loads to the Perris Valley Recycling Center (Riverside County) to redeem the CRV refund, defrauding the CRV fund an estimated $1 million. On April 20, a search warrant resulted in the seizure of 50,000 pounds of bottles and cans, with an estimated CRV value of $100,000. Many cans contained sand to add weight. Twelve people were arrested.

3. On Interstate 8 near Winterhaven, Calif. and Yuma, Ariz. agents with the Imperial County and San Diego Major Crimes Teams were looking for a CRV fraud suspect when they encountered another suspected CRV fraud ring -- two men transporting a large quantity of aluminum cans in a truck. This observation launched a two-month investigation, with assistance from CalRecycle, which resulted in the April 23 arrests of four people, including Michael Barshak, the owner and operator of ACE Recycler, a recycling center in San Diego. Agents have initially estimated that the ring’s operation, which spanned four months, transported 40,000 pounds of cans with an approximate value of $135,000.

These investigations were conducted by the Attorney General’s Division of Law Enforcement/Bureau of Investigation and Intelligence (DLE-BII) Major Crimes Team and CalRecycle, with assistance from many other law enforcement agencies including the offices of the San Bernardino and Riverside County Sheriffs, the Riverside County District Attorney’s Office, the California Highway Patrol, Immigration and Customs Enforcement, the United States Marshals Service and other Dept. of Justice enforcement teams.

To learn more about CalRecycle and the California Beverage Container Recycling Program, visit http://www.calrecycle.ca.gov/. CalRecycle contact: Mark Oldfield (916) 319-9942 or mark.oldfield@CalRecycle.ca.gov.

Photos and a list of arrestees are attached.

HOLLISTER - Attorney General Edmund G. Brown Jr. today announced that a former CVS pharmacy technician and her husband have been charged with 15 felony counts after the woman embezzled tens of thousands of highly addictive prescription pills worth $400,000 from her employer to supply to her drug-dealing husband.

Aimee and Alfred Riaski, both 41 and from Hollister, were arrested after an investigation by Brown’s Bureau of Narcotic Enforcement led to the recovery of more than 1,500 prescription tablets at the couple’s residence. If convicted, Aimee Riaski faces a maximum of 13 years, 8 months in jail and Alfred Riaski faces a maximum of 8 years, 4 months in jail.

“The Riaskis crafted a crude scheme to embezzle highly addictive pain pills from a neighborhood pharmacy and sell them at a profit on the streets,” Brown said. “Today’s criminal charges send a clear reminder to pill pushers that selling prescription drugs can lead to serious time behind bars.”

Brown’s Bureau of Narcotic Enforcement initiated its investigation into Aimee Riaski in February after an internal pharmacy audit at a Gilroy CVS revealed tens of thousands of missing prescription-drug tablets.

As a CVS pharmacy technician, Aimee Riaski was responsible for tracking the delivery of various prescription drugs. In this role, Riaski admitted to a CVS loss-prevention officer that she stole some 40,000 Vicodin (Hydrocodone) tablets over a 10-month period beginning in early 2009.

On February 19, Brown’s office served a search warrant at the Riaski residence in Hollister and recovered prescription drugs worth almost $17,000, including:
• 1,134 Vicodin tablets
• 305 Diazepam tablets
• 212 Darvon tablets
• 62 Ativan tablets
• 9 Lidocaine patches

The complaint, filed today by the San Benito District Attorney, alleges that the Riaskis embezzled, possessed, transported, and planned to sell thousands of highly addictive prescription drugs on the streets.

Aimee Riaski was charged with ten felony counts including: five counts of possession for sale of a controlled substance (H&S 11351(a) and H&S 11375(b)(1)); four counts of transporting a controlled substance (H&S 11352(a)); and one count of embezzlement (PC 504).

Alfred Riaski was charged with five felony counts of possession for sale of a controlled substance (H&S 11351(a) and H&S 11375(b)(1)) and one misdemeanor count of receiving stolen property (PC 496 (a)).

Aimee and Alfred Riaski, who were originally arrested in February, posted $30,000 and $20,000 bail, respectively. Both defendants pleaded not-guilty in court today.

Brown has made combating prescription-drug abuse a top priority by investigating and filing charges in more than 200 cases against physicians who have abused their trust, prescription-drug dealers who have peddled highly addictive pills and patients who have attained drugs by “doctor shopping” from doctor to doctor.

Last month, for example, Brown announced the arrest of a San Diego-based doctor, Mohammed Kady, who regularly prescribed pain medication, including Vicodin and codeine cough syrups to drug addicts and pill pushers without any justifiable medical purpose.

Brown’s office is also currently investigating a Southern California prescription-drug ring that operates by ordering prescription-drug pads from authorized vendors and using identities stolen from doctors. The pads are then either sold on the street to prescription-drug addicts or to individuals who are paid to fill the prescription and then sell the drugs on the underground market. The investigation has thus far linked 4,500 to 5,000 fraudulent prescriptions to the fraud ring and has led to one arrest.

California is at the forefront of technology that makes it more difficult for criminals to operate prescription- drug rings. Brown’s office has introduced significant technology upgrades to the state’s prescription- monitoring program, known as CURES, by creating an accessible, online database. The database is a critical tool in assisting law enforcement investigations. For more information on CURES visit: http://ag.ca.gov/bne/CURES.php.

The criminal complaints, filed today in San Benito County Superior Court, are attached.