Law Enforcement

Santa Ana, Calif.—Attorney General Edmund G. Brown Jr. today shut down two fraudulent foreclosure-assistance companies and secured a court judgment that prohibits three individuals from working in the real estate industry and provides more than $1 million in restitution for victims left with “false hope” after paying upfront fees for nonexistent loan-modification services.

“George Escalante, Cesar Lopez and Adrian Pomery used their loan-modification companies to sell false hope to hundreds of Californians facing foreclosure,” Brown said. “This judgment shuts their companies down, locks them out of the real estate industry and pays back more than $1 million to the victims.”

On July 7, 2009, Brown filed suit against two affiliated companies based in Orange County, U.S. Foreclosure Relief Corp. and H.E. Servicing, Inc., as well as their executives, George Escalante and Cesar Lopez, and legal representative Adrian Pomery. The suit was filed jointly with the Federal Trade Commission (FTC) and the State of Missouri as part of “Operation Loan Lies,” a massive federal-state crackdown on loan-modification fraud.

The joint investigation, initiated in March 2009, found that the defendants used aggressive telemarketing tactics to convince distressed homeowners to pay $1,800 to $2,800 in upfront fees for loan-modification services that included reductions in principal and lower interest rates. In sales calls, H.E. Servicing, for example, claimed it had successfully negotiated 10,000 loan modifications. However, a full review of internal records found the company opened only 2,960 loan-modification files and completed only 311. It is estimated that California homeowners accounted for 15 to 20 percent of the company’s opened loan-modification files.

Brown’s judgment permanently shuts down U.S. Foreclosure Relief and H.E. Servicing and prohibits the defendants from ever working in the real estate and loan-modification industries again.

Additionally, the judgment will provide more than $1 million in relief to victims paid through frozen company funds and the sale of Escalante’s jewelry, 2007 Mercedes SUV, 2007 Mercedes sedan and 2009 Toyota Tundra. Separately, Lopez declared bankruptcy in June 2009 and relinquished possession of a 2007 Cadillac Escalade SUV and 2008 BMW S Series sedan as part of those proceedings.

Under the judgment, a court-appointed independent receiver will oversee the repayment program. Victims can access more information about this program by visiting the receiver’s website at www.heservicingreceiver.com, by calling: 1-866-243-8101 or by emailing: info@heservicingreceiver.com.

The FTC’s enforcement division will monitor the defendants’ compliance with the judgment, and if they are found to have misrepresented their financial condition and inability to pay, the judgment, in full, will become due immediately. The full judgment requires total payment of $8.6 million from Escalante, US Foreclosure Relief and H.E. Servicing as well as $3.3 million from Lopez and $3.4 million from Pomery.

While in operation, H.E. Servicing spent $70,000 a week on radio and television advertising in 100 media markets nationwide and had plans to spend an additional $10,000 to $30,000 a week with the goal of bringing in an estimated $270,000 a week in new business. A report prepared by an outside accountant found that in the first six months of 2009 alone, the company made $4.5 million in net income.

To learn more about how these companies operated, visit: http://ag.ca.gov/newsalerts/release.php?id=1774&.

The original lawsuit alleged that US Foreclosure Relief, H.E. Servicing and their executives violated:

• FTC Act, 15 U.S.C. § 45(a) for false or unsubstantiated loan modification and success claims;
• TSR, 16 C.F.R. § 310.2(a)(2)(iii) and (a)(4) for making false or misleading statements;
• TSR, 16 C.F.R. § 310.4(b)(l)(iii)(B) for violations of the National Do Not Call Registry;
• TSR, 16 C.F.R. § 310.8 for failure to pay national Registry fees;
• California Business and Professions Code § 17500 for making untrue or misleading statements;
• California Business and Professions Code § 17200 for unfair competition;
• Missouri Merchandising Practices Act § 407.020 for unlawful merchandizing practices; and
• Missouri Merchandising Practices Act § 407.938 and § 407.940 for unlawful foreclosure consulting.

Earlier this month, Brown filed an amended complaint naming Brandon L. Moreno and his law firm, Cresidis Legal, as additional defendants in the case. This comes after investigators found that Moreno served as the legal affiliate for H.E. Servicing after Pomery departed. These defendants are not part of the judgment announced today, and Brown will continue to prosecute the case against them.

By law, all individuals and businesses offering mortgage-foreclosure consulting, 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 and businesses 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.

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 deceptive loan-modification consultants.

For more information on Brown’s action against loan-modification fraud visit: http://ag.ca.gov/loanmod.

A copy of the court-approved stipulated judgment, filed in U.S. District Court for the Central District of California, is attached.

Riverside, Calif.—Following three “brazen attempts to kill” police officers in the past several weeks, Attorney General Edmund G. Brown Jr. today joined Riverside County District Attorney Rod Pacheco, Riverside County Sheriff Stanley Sniff, Hemet Police Chief Richard Dana and Riverside County Supervisor Jeff Stone to urge the public to come forward with any information on these incidents.

There is currently a $200,000 reward for information leading to the arrest and conviction of the person or persons responsible for these attacks.

“These brazen attempts to kill police officers in the line of duty are an outrage, and even a form of urban terrorism. Our brave men and women in uniform put their lives on the line every day to keep our streets safe,” Brown said. “We urge anyone with information on the attacks to come forward immediately.”

Today’s plea follows three separate potentially deadly attacks targeting members of the Hemet Gang Task Force, including:

• On Dec. 31, 2009, criminals targeted the unmarked Hemet Gang Task Force headquarters, redirecting the natural gas line on the roof into the building to fill the office with potentially deadly gas. With the flip of a light switch or an electrical spark, the building could have exploded, leveling an entire city block.

• On Feb. 23, 2010, criminals targeted officers at the same Hemet Gang Task Force headquarters, carefully hiding and attaching a homemade zip gun to a security gate outside of the building. As a task force member opened the gate, the weapon fired, missing the officer’s head by inches.

• On March 5, 2010, criminals targeted a task force member who had parked an unmarked police car in front of a convenience store in Hemet. When the officer returned to the car, he found what appeared to be a homemade pipe bomb hidden underneath the vehicle. Had the device detonated, it could have killed the officer and others nearby.

“These obvious attempts to murder law enforcement officers - who each day put their lives on the line to rid our communities of violent gang members - are indicators of the callousness of these domestic terrorists,” said District Attorney Rod Pacheco. “These criminals are willing to put the lives of the residents of this county in extreme jeopardy while targeting those who have chosen to protect those same residents.”

Anyone with information about these attacks is asked to call the Hemet Police Department Tip Line at: 951-765-3897.

The $200,000 reward for information leading to the arrest and conviction of the person or persons responsible for these attacks includes $100,000 from the Riverside County Board of Supervisors, $50,000 from the Governor’s Office, $20,000 from the Federal Bureau of Investigation, $10,000 from the Bureau of Alcohol, Tobacco, Firearms and Explosives, $10,000 from the City of Hemet and $10,000 from the Riverside County District Attorney’s Office.

Brown’s office is assisting local officials with the investigation into these attacks.

Los Angeles—In an ongoing crackdown on prescription-drug fraud and abuse, Attorney General Edmund G. Brown Jr. today announced that his office is investigating an “illegal and massive prescription-drug ring” linked to the actor Corey Haim.

An unauthorized prescription under the former child star’s name was found during an ongoing investigation of fraudulent prescription-drug pads ordered from a vendor in San Diego.

“Corey Haim’s death is yet another tragedy linked to the growing problem of prescription-drug abuse,” Attorney General Brown said. “This problem is increasingly linked to criminal organizations, like the illegal and massive prescription-drug ring under investigation. It’s a serious public health problem.”

The prescription-drug ring under investigation operates by ordering prescription-drug pads from authorized vendors using stolen doctor identities. 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 doctor whose name is printed on the form is usually unaware that his or her identity has been stolen for this purpose.

The investigation has thus far uncovered more than 4,500 to 5,000 fraudulent prescriptions linked to the fraud ring in Southern California.

The San Diego Regional Pharmaceutical Narcotic Enforcement Team (RxNET) is conducting the investigation. RxNET is a cooperative effort of the California Department of Justice, Bureau of Narcotic Enforcement; Department of Health Care Services and Immigration and Customs Enforcement. RxNET also works in conjunction with other state, federal and local law enforcement agencies.

Prescription-drug abuse is a growing problem. Brown’s office has investigated and filed charges in more than 200 cases—against both physicians who have abused their trust and patients who go from doctor to doctor in search of drugs.

In February 2009, Brown filed charges against Dr. Lisa Barden of Rancho Cucamonga, who stole the identities of her patients to obtain highly addictive painkillers. The San Bernardino County District Attorney is prosecuting the case.

In April 2009, Brown’s office arrested five college-age individuals who conspired to fraudulently obtain thousands of prescription drugs. The San Diego County District Attorney is now prosecuting the case.

In addition to costing the state millions of dollars each year, prescription-drug abuse can have serious public safety consequences, as many of the top abusers hold down regular jobs including truck drivers, transit operators and medical practitioners.

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 in investigating these types of crimes.

For more information on the California Department of Justice Bureau of Narcotic Enforcement and California’s prescription-drug monitoring system visit: http://ag.ca.gov/bne/CURES.php.

For doctors and other authorized healthcare and prescription-drug providers, visit www.ag.ca.gov for more information on CURES.

San Francisco—On the heels of troubling allegations of evidence tampering against a former San Francisco Police Department Crime Lab technician, Attorney General Edmund G. Brown Jr. today announced that his office will provide a team of specialists to assist in a thorough independent audit of the laboratory.

“My office will assist San Francisco police to get to the bottom of these serious evidence-tampering allegations,” Brown said. “It’s critical that we act immediately to get the San Francisco crime lab back in service and restore the public’s trust in our criminal justice system.”

At the request of San Francisco Police Chief George Gascon, crime lab specialists from Brown’s office will assist San Francisco authorities in re-testing of evidence, improving internal controls and taking whatever steps are necessary to return the lab to full operation.

Today’s announcement follows allegations that Deborah Madden, 60, a former San Francisco Police Department Lab technician, jeopardized numerous criminal cases by tampering with police evidence.

The San Francisco Police Department will continue to lead the criminal investigation into Ms. Madden's conduct.

Los Angeles--Attorney General Edmund G. Brown Jr. announced today that the California Supreme Court has granted the state's petition to review the Second Appellate District Court of Appeal’s ruling in the Saleem case, a decision last year that threw out a law banning convicted felons from possessing body armor. For more than ten years, the law served as a deterrent and arguably saved many lives. The Attorney General urges the Supreme Court to override the lower court’s ruling and restore this vital tool to the men and women who bravely protect our communities.

"This is a clear victory for police officers everywhere. Allowing criminals and gang members to arm themselves with body armor makes no sense, and I'm confident the Supreme Court will reverse this wrong-headed decision,' Brown said.

Brown filed a petition to the California Supreme Court on January 22, 2010 after the Second Appellate District Court of Appeal struck down the statute, ruling that the law was too vague.

Brown’s petition argued that the Court of Appeal’s Opinion:

• Failed to follow the test for determining whether a statute is vague;
• Contradicted the Legislature’s intent in enacting a body armor statute; and
• Needlessly abrogated the entire body armor statute.

In 1998, the California Legislature enacted the James Guelff Body Armor Act to prohibit felons convicted of a violent crime from possessing body armor.

Yuba County, Calif.–Attorney General Edmund G. Brown Jr. today announced that agents from the Bureau of Narcotic Enforcement Task Force, Yuba-Sutter Narcotic Enforcement Team (NET-5) arrested three men for heroin trafficking in the Yuba-Sutter area and seized 3.5 pounds of heroin, $32,887 in cash and six weapons.

Agents also arrested three other people who were sub-dealers or otherwise involved in the area’s heroin trade. All six suspects are Mexican nationals and have been placed on immigration hold.

"This is the largest heroin seizure ever made in this community,' Attorney General Brown said. 'Yesterday’s arrests will significantly impact the availability of hard drugs in the Yuba-Sutter area.'

Bureau of Narcotic Enforcement Task Force agents began the investigation in January 2010 and served three separate search warrants over a three-month period. The warrants were served in the 600 block of North Township Road, Yuba City and the 600 block of King Avenue, Yuba City.

The investigation revealed that Juan Carlos Lopez, Joseph Valdez and Hugo Roberto Rios Martinez were “full time” heroin dealers. Seven days a week from morning to night, the three traffickers sold the heroin, which was produced in either Mexico or South America and delivered to the area through Stockton.

From Lopez’s residence, agents seized 6.64 grams of heroin, 1.5 grams of cocaine, adulterant, packaging material, scales, a .38-caliber handgun, a 12-gauge shotgun, a rifle, and $6,199.00 in drug proceeds. From the Valdez residence, agents seized 34.27 grams of heroin, packaging material, 35 Hydrocodone pills, and $1,311.00 in drug proceeds. From the Martinez residence, agents seized 1,554.55 grams of heroin, adulterant, packaging material, scales, 2 handguns, a rifle, and $24,377 in drug proceeds.

The Valdez’s 16 year-old daughter, who was at school during the service of the search warrant, was taken into protective custody by Sutter County Child Protective Services. A 10 year-old child was removed from the Martinez home and taken into protective custody.

The Bureau of Narcotic Enforcement Task Force determined the street value of the heroin to be $250,000.

All individuals were booked into the Sutter County Jail for possession for sale of heroin. Martinez and the Valdezes were also charged with child endangerment. None of the six suspects have any known prior criminal record in California.

Located in the Attorney General's office, the Bureau of Narcotic Enforcement is the oldest narcotic enforcement bureau in the United States.

Questions regarding this investigation can be directed to Special Agent Supervisor Mike Hudson at (530) 674-2725. Photographs of the seizure and four individuals arrested are attached.

Los Angeles—Attorney General Edmund G. Brown Jr. today announced that his office has secured an agreement with Santa Fe Natural Tobacco Company, Inc., the manufacturer of American Spirit tobacco products, that requires the company to clearly disclose that its organic tobacco is “no safer or healthier” than other tobacco products.

Attorneys general from 32 other states and the District of Columbia signed onto today’s agreement.

“Stamping an organic label on tobacco products is ultimately a distinction without a difference—organic or not, cigarettes are bad for your health,” Brown said. “Today’s settlement with Santa Fe Natural Tobacco Company ensures that all future advertisements make it clear that organic tobacco is no safer or healthier.”

Today’s agreement follows Brown’s contention that Santa Fe Natural Tobacco Company may have misled consumers in advertising its “organic” or “100% organic” Natural American Spirit cigarettes and roll-your-own tobacco and pouches, leading consumers to believe these products were less harmful than other tobacco products. There is currently no competent or reliable scientific evidence to support this conclusion.

Under the terms of the agreement, all advertisements will clearly and prominently feature the following warnings:

• For Natural American Spirit organic cigarettes: “Organic tobacco does NOT mean safer cigarettes.”
• For Natural American Spirit organic roll-your-own or pouch tobacco: “Organic tobacco does NOT mean safer tobacco.”

Santa Fe Natural Tobacco Company has until April 1, 2010 to meet these requirements in the placement of future advertising. All tobacco retailers selling these products must be contacted and instructed to dispose of old advertisements that do not feature these disclosures once updated advertisements and point of sale materials are received.

Organic tobacco is certified under the U.S. Department of Agriculture’s National Organic Program. To receive organic certification, tobacco farmers have to follow a strict, labor-intensive growing regimen. Certified organic tobacco is grown without the use of pesticides and fertilizers prohibited under the program.

Thirty-two other attorneys general signed onto Brown’s agreement today from the following states: Arizona, Arkansas, Colorado, Connecticut, Delaware, Georgia, Hawaii, Idaho, Illinois, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Montana, Nebraska, Nevada, New Jersey, New Mexico, New York, North Carolina, Ohio, Oregon, Pennsylvania, Tennessee, South Dakota, Vermont, Washington, West Virginia and Wisconsin. Additionally, the attorney general of the District of Columbia signed onto the agreement.

Brown’s agreement with Santa Fe Natural Tobacco Company, Inc. is attached.

Sacramento—Attorney General Edmund G. Brown Jr. today sent a law-enforcement bulletin to California’s district attorneys and sheriffs in which he asserted his position that California Penal Code Section 4019, the new law that reduces jail time for prisoners in local facilities, applies prospectively.

The Attorney General has begun filing briefs in a series of court cases advancing his position that Penal Code 4019 provides enhanced good-time and work credits to prisoners during the time spent in prison after January 25, but not before.

“In response to numerous inquiries, this bulletin states the position of the Department of Justice,” Brown said. “After analyzing the code section, it seems reasonably clear that the law should apply prospectively.”

The bulletin, distributed today throughout the state, is below:

BULLETIN TO ALL CALIFORNIA LAW ENFORCEMENT AGENCIES

Re: CALIFORNIA PENAL CODE SECTION 4019

Effective January 25, 2010, Penal Code section 4019 was amended to change the calculation of good-time and work credits earned by prisoners not guilty of sex or violent crimes while they are confined in local facilities. The amendment states that these prisoners will earn one day credit for every day they are confined so long as they comply with applicable rules and do not refuse to perform labor. Before this section was amended, these prisoners generally earned one day credit for two days they were confined.

District Attorneys and county counsel have differing views on whether the amendment is retroactive (i.e., applies to the time prisoners were confined before January 25) or prospective (i.e., applies only to the time prisoners are confined after January 25). These differences are understandable since the Legislature was silent on the issue when it enacted the amendment.

Ultimately, the courts will have to decide whether the amendment is retroactive or prospective, and it is not normally the role of the Attorney General to resolve differences in possible interpretations of criminal statutes affecting local law-enforcement matters. But in light of numerous questions that have arisen, this Law Enforcement Bulletin summarizes the position that the Attorney General set forth in a brief filed last week, and will continue to advance in briefs that will be filed today and in subsequent weeks, in cases before the state courts of appeal. That position is that Penal Code section 4019 should be deemed prospective because there is no clear evidence that the Legislature intended it to be retroactive.

“[I]n the absence of an express retroactivity provision, a statute will not be applied retroactively unless it is very clear from extrinsic sources that the Legislature . . . intended a retroactive application.” (Evangelatos v. Superior Court (1988) 44 Cal.3d 1188, 1209) (citing Penal Code section 3).) Here, there are no clear extrinsic sources demonstrating that the Legislature intended a retroactive application.
Rather than simply reducing sentences, the amendment is designed to encourage good behavior on the part of prisoners by increasing the amount of work and good-time credits that they can earn. In concluding that a similar amendment was prospective, the appellate court in In re Stinnette noted that the public purpose behind such laws “is the desirable and legitimate purpose of motivating good conduct among prisoners so as to maintain discipline and minimize threats to prison security. Reason dictates that it is impossible to influence behavior after it has occurred.” (In re Stinnette (1979) 94 Cal.App.3d 800, 806.) Although People v. Doganiere (1978) 86 Cal.App.3d 237, found that an amendment to the calculation of conduct credits could be imposed retroactively, the holding is unpersuasive because the court failed to address the point that conduct credits are intended by their nature to influence future behavior.

If the Legislature had intended to lower incarceration costs by reducing prison sentences retroactively, it could easily have done so through a more direct means, such as increasing credits in a manner unrelated to prisoner conduct. The fact that it declined to do so, combined with its failure to expressly address retroactivity, supports our position that the amendment should be applied prospectively.

Los Angeles – Attorney General Edmund G. Brown Jr. today announced a $94 million settlement with Western Union Financial Services, Inc., that resolves a decade-long investigation into illicit money transfers that “have flowed freely” in the Southwest border region.

The settlement includes $50 million in funding for the “Southwest Border Anti-Money Laundering Alliance,” a four-state coalition against money laundering that includes the attorneys general of Arizona, California, New Mexico and Texas.

“For years, billions of dollars in smuggling profits have flowed freely between the United States and Mexico,” Brown said. “Today’s agreement with Western Union gives our region the resources and cooperation we need to stem the flow of illicit cash across our borders.”

The settlement follows a decade-long investigation by the Office of the Arizona Attorney General into illegal money-laundering activity in the Southwest border region. The investigation found that hundreds of millions of dollars are being channeled to drug, weapon and human traffickers through Western Union money transfers.

To resolve Arizona’s investigation and more effectively address illegal money laundering, Western Union has agreed to:

• Provide $50 million to establish and fund the Southwest Border Anti-Money Laundering Alliance;
• Invest $19 million over the next several years into upgrades to its anti-money-laundering program;
• Provide $4 million to support an independent monitoring program established to ensure anti-money-laundering measures are implemented; and
• Pay $21 million to the State of Arizona to cover investigation and litigation expenses.

Additionally, today’s settlement requires Western Union to provide California with access to transaction data so investigators can track trends in the flow of illicit money, identify money-laundering points and target drug, weapon and human traffickers.

The Southwest Border Anti-Money Laundering Alliance will support and fund training, information sharing and other initiatives in member states and Mexico and will work to enhance and better coordinate money-laundering investigations and prosecutions. Under the agreement, law enforcement organizations in Arizona, California, New Mexico and Texas will each be guaranteed grants totaling a minimum of $7 million to bolster efforts to combat money laundering.

The U.S. Drug Enforcement Agency estimates that $18 billion to $39 billion is being smuggled from the United States to Mexico every year.

Today’s agreement with Western Union and the Southwest Border Anti-Money Laundering Alliance’s governing agreement are attached.