Law Enforcement

Oakland - Attorney General Edmund G. Brown Jr. today announced a $1.8 million settlement preventing Maurice Irving Glad, owner of 22 Midas auto shops throughout California, from owning or operating an auto repair shop in the state, after the franchisee “deceptively lured” customers with cheap brake specials and then charged hundreds of dollars for unnecessary repairs.

As part of the settlement, Midas International Corporation is acquiring all of Glad’s shops, which therefore will continue to operate without interruption.

“For years, Glad ran a bait-and-switch scam, in which he deceptively lured customers into his Midas shops with cheap brake specials, then charged them hundreds of dollars more for unnecessary repairs,” Brown said. “Our settlement makes sure that Glad will never own or operate an auto repair shop in California again.”

After a four-year undercover investigation by the California Bureau of Automotive Repair, Brown filed suit against Glad in June 2009. The investigation revealed that Glad regularly advertised $79 to $99 brake specials at his Midas shops to draw in customers and then often charged another $110 to $130 for unnecessary brake-rotor resurfacing. In some cases, customers were charged hundreds of dollars more for repairs that were not needed or never performed.

The settlement requires Glad to pay $1.8 million in damages, investigative costs and attorney fees, plus permanently prevents the franchisee from:

• Applying for or holding any license or registration issued by the California Bureau of Automotive Repair or any successor agency; and
• Engaging in any business that requires any type of license or registration issued by the California Bureau of Automotive Repair or any successor agency.

In addition to acquiring Glad’s 22 shops, Midas International Corporation has agreed to honor any and all guarantees or warranties previously made or given to customers.

In 1989, the state attorney general sued Glad for similar violations, which resulted in an injunction prohibiting his shops from performing unnecessary repairs, charging for services not performed, or using scare tactics to convince customers to purchase unnecessary parts and services. The California Bureau of Automotive Repair initiated its recent investigation into Glad’s Midas shops to monitor compliance with the injunction.

Undercover agents, posing as customers, conducted approximately 30 sting operations at Glad’s shops. In total, there were more than 35 incidents, involving 105 violations, in which shop managers, mechanics and employees made false or misleading statements to pressure customers into purchasing unnecessary parts and services. On average, the shops charged undercover agents almost $300 in unnecessary brake-rotor resurfacings, brake-drum repairs, brake adjustments, brake-cleaning services and other services.

“Overselling of services has become an increasing problem,” said California Bureau of Automotive Repair Chief Sherry Mehl. “It amounts to fraud and seriously harms the consumer. That’s why we aggressively work to find and shut down these shops.”

Brown’s lawsuit was filed jointly with Alameda County District Attorney Tom Orloff (then) and Fresno County District Attorney Elizabeth A. Egan, due to the large number of shops operating in Alameda and Fresno Counties. Glad’s 22 Midas shops are located in Campbell, Clovis, Concord, Dublin, Fremont, Fresno, Hayward, Manteca, Merced, Modesto, San Jose, San Leandro, Turlock and Walnut Creek.

Brown’s lawsuit contended that Glad and his shops:

• Used false and misleading advertising in violation of Business and Professions Code 17500;
• Employed unlawful, unfair and fraudulent business practices in violation of Business and Professions Code 17200; and
• Disobeyed the 1989 Alameda County Superior Court injunction in violation of Business and Professions Code 17535.5 and 17207.

“The Department of Consumer Affairs has zero tolerance for consumer fraud,” said California Department of Consumer Affairs Director Brian Stiger. “We are very pleased that, in partnership with the Attorney General’s office, we have been able to stop a bad player from further harming both consumers and the hard-working, law-abiding players in the auto repair industry.”

Consumers who believe they have been overcharged by an auto-repair facility can file a complaint with the California Department of Consumer Affairs, Bureau of Automotive Repair online at: www.autorepair.ca.gov or by calling 1-800-952-5210.

The settlement is attached.

San Francisco—Attorney General Edmund G. Brown Jr. today petitioned the California Supreme Court to review the Second Appellate District Court of Appeal’s ruling which “wrongly threw out” the law banning felons from possessing body armor.

“The appellate court wrongly threw out an important law that prohibited felons from possessing body armor,” Brown said. “We’re asking the Supreme Court to review the decision and restore important protections for the men and women in law enforcement.”

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

On December 17, 2009, the Second Appellate District Court of Appeal struck down the statute, ruling that the law was too vague.

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

• Fails to follow the test for determining whether a statute is vague;
• Contradicts the Legislature’s intent in enacting a body armor statute; and,
• Needlessly abrogates the entire body armor statute.

A copy of the Petition is attached.

Statement from Attorney General Edmund G. Brown Jr. on the Second Appellate District Court of Appeal's decision to overturn California's ban on violent felons possessing body armor:

"Every day, California's law enforcement officers put their lives on the line to protect our communities,' said Attorney General Brown. 'Allowing violent felons to possess military grade body armor puts their lives further at risk and jeopardizes public safety. My office will petition the California Supreme Court to review the appeals court decision next month.'

Los Angeles – Attorney General Edmund G. Brown Jr. announced today that his office has launched an investigation into whether four individuals defrauded more than 30 African American churches in Southern California by forcing them to pay up to $45,000 for shoddy computer kiosks originally presented as cost-free. These individuals—Michael Morris; Willie Perkins; Tonya Wilson; and Wayne Wilson—are also suspected of targeting dozens of churches in at least ten other states.

Additionally, Brown is investigating what role three national leasing companies—Balboa Capital Corporation; United Leasing Associates of America Ltd.; and Banc of America Leasing and Capital, LLC—may have played in facilitating this scam.

“These individuals sold the churches on the promise of free services and advertising revenues,” said Brown. “Instead, the churches were enticed into expensive leases, which the leasing companies aggressively enforced, even after learning of the alleged scam.”

Since 2000, Morris, Perkins, Wilson and Wilson have operated two companies—Urban Interfaith Network and Television Broadcasting Online—that peddled computer kiosks to African American churches throughout the country. In California, these individuals targeted neighborhood churches in Compton, Los Angeles, Long Beach, Moreno Valley, Murrieta, Pasadena, Perris, Pomona, Rialto, Riverside and San Bernardino.

These individuals purportedly pitched the kiosks to church leaders as cost-free, high-tech devices that could serve as electronic message boards, print retail coupons from local businesses and generate advertising revenue.

Once a church agreed to house a kiosk, the individuals presented it with a lease agreement from United Leasing Associates of America Ltd. or Balboa Capital Corp (who later sold some of its leases to Banc of America Leasing and Capital, LLC). The individuals repeatedly assured church leaders that Urban Interfaith Network, Television Broadcasting Online or other church-friendly corporate sponsors would cover all leasing costs.

Instead, churches were left with leases as high as $45,000 per year for what amounted to little more than desktop computers and printers housed in podium-sized wooden boxes. Many of the kiosks did not function.

Even after learning of the alleged scam, leasing companies continued to aggressively enforce the terms of the leases, filing lawsuits against churches to collect payment, interest and late fees. For example:

• Los Angeles-based Bryant Temple AME Church was sued by Balboa Capital Corp. to collect on a kiosk lease even after the church informed the company that it had been defrauded into signing the lease. For months, the church pooled funds together to pay down the lease and avoid the cost of litigation, however, it has recently decided to stop making payments to Balboa.

• Los Angeles-based True Way Missionary Baptist Church contends in its own lawsuit against United Leasing Associates of America, Ltd. that even after learning of the alleged scam, the leasing company collected payments on the lease by debiting the church’s bank account without authorization. The lawsuit further contends that United obtained a default judgment in Wisconsin for over $30,000 for a kiosk that the leasing company knew was worth only $2,000.

• San Bernardino-based Ecclesia Christian Fellowship Church was sued by Balboa Capital Corp. and Banc of America Leasing and Capital, LLC to collect on two separate kiosk leases. The two leasing companies continue to aggressively pursue their lawsuits.

• San Bernardino-based New Hope Missionary Baptist Church was sued by Banc of America to collect payment on two leases it purchased from Balboa Leasing. The church filed a countersuit contending that Balboa, working with Urban Interfaith Network and Television Broadcasting Online, defrauded the church. Balboa’s motion to dismiss the church’s countersuit was overruled in court.

Brown has served investigative subpoenas on the three leasing companies: United Leasing Associates of America Ltd.; Balboa Capital Corporation; and Banc of America Leasing and Capital, LLC; and the two companies operated by Morris, Perkins, Wilson and Wilson: Urban Interfaith Network and Television Broadcasting Online.

Last month, Michigan Attorney General Mike Cox filed criminal charges against Morris and Perkins, including: one count of racketeering, one count of conspiracy to commit false pretenses over $20,000, four counts of false pretenses over $20,000 and four counts of fraudulently obtaining a signature.

Sacramento – Attorney General Edmund G. Brown Jr. sent a letter last week to six major retailers, warning them that a number of children’s products on their store shelves were found to contain “illegal levels of lead” and to pull the products from their stores immediately.

“Private testing uncovered a number of products designed for children that contain dangerous and illegal levels of lead,” Brown said. “These products must be removed from store shelves at once to protect our kids from toxic lead exposure.”

Children are particularly susceptible to the risks of lead exposure, which can damage the nervous system and other organs. Children are exposed by ingesting the lead when they put the products in their mouths, handle them and then touch their mouths, or transfer the lead from the products to food.

Any children’s product that contains more than 300 parts per million (ppm) of lead is considered a hazardous substance and therefore illegal to sell in the state. The following products were found to contain excessive levels of lead:

• Kids Poncho sold by Walmart, 677 ppm;
• MSY Faded Glory Rebecca Shoes sold by Walmart, 1331 ppm;
• Reversible Croco Belt sold by Target, 4270 ppm;
• Dora the Explorer Activity Tote sold by TJ Maxx, 2348 ppm;
• Paula Fuschia Open-Toed Shoes sold by Sears, 3957 ppm;
• Disney Fairies Silvermist’s Water Lily Necklace sold by Walgreens, 22000 ppm;
• Barbie Bike Flair Accessory Kit sold by Tuesday Morning, 6196 ppm.

Brown has also requested that the companies provide his office with results from any of their own tests conducted on the products and report how they plan to ensure that other items do not contain toxic quantities of lead.
Brown has reported the findings to the federal Consumer Product Safety Commission, which could order a recall of the products.

In 2008, Brown’s office reached a settlement with several major toy companies over excessive levels of lead in their products. The settlement allocated $548,000 in funding for consumer safety groups to monitor lead levels in consumer goods and to provide outreach about product recalls. The Center for Environmental Health discovered the current violations with a grant from the Public Health Trust, which administers the settlement fund.

"Based on our testing, it appears there are fewer problem toys on store shelves this year. But parents should know that some children's products still contain high levels of lead,' said Michael Green, Executive Director of the Center for Environmental Health. 'After all the attention to lead-tainted toys, manufacturers and retailers still need to do more to keep lead out of our kids' hands.'

A sample copy of the letter:

November 13, 2009

Dear Retailer:

We just received a report about a children’s product purchased in your store in Richmond, California that contains illegal levels of lead. The lead levels reported exceed the limits in the federal Consumer Product Safety Improvement Act (“CPSIA”). Furthermore, selling the product without a proper warning likely violates California’s Safe Drinking Water and Toxic Enforcement Act of 1986, commonly known as “Proposition 65.” We are writing to ask that you stop selling the product immediately and take other corrective action as needed.

The children’s product is a Cherokee brand reversible “Croco” belt, Style 1139915TG, purchased at your store in Richmond on September 27, 2009. The SKU is 492020800102. Our internal reference number is PHT 082. Please use it in communications with our office about this. We have enclosed photographs of the product.

The item was purchased by an investigator for the Center for Environmental Health, using a grant from a fund administered by the Public Health Institute. The fund was established through a Proposition 65 settlement between our office and several companies over lead in toys. (People v. Mattel et al., Alameda County Super. Ct., Civ. No. RG 07-356892.) After screening the product for lead, the Center for Environmental Health sent a sample to a federally-approved laboratory for further testing. The test results, which are enclosed, indicate 4,270 parts per million (“ppm”) lead in the black artificial leather on the front surface of the belt. This exceeds federal lead limits, which deem a children’s product with more than 300 ppm lead in an accessible component a “banned hazardous substance.” It also appears to violate Proposition 65, which requires a clear and reasonable warning prior to exposing persons to known carcinogens and reproductive toxins, including lead. (Cal. Health & Saf. Code, § 25249.6; Cal. Code Regs., tit. 27, § 27001.)

Lead is a toxic metal that damages the nervous system and other organs. Even at low levels of exposure, lead can impact brain development in children. Based on what appears to be violations of federal and state law, you should stop selling the product immediately. Additionally, please send us any test results you have and any representations from the manufacturer or supplier about the lead content in the product. Please contact us immediately so we can discuss what further actions your company intends to take.

Sincerely,

EDMUND G. BROWN JR.
Attorney General

Sacramento—Attorney General Edmund G. Brown Jr. today announced the arrest of William Arthur Sassman II who “looted” the life savings of dozens of investors to bankroll his lavish lifestyle and prop up a multi-million dollar Ponzi scheme.

Sassman, 41, of Sacramento, was arrested at his residence this morning on a total of 100 counts: 43 counts of grand theft, 40 counts of misrepresentation or omission in the sale of a security, 16 counts of first-degree burglary and 1 count of use of a device, scheme, or artifice to defraud in the sale of a security. If convicted, Sassman faces up to 52 years in prison. Sassman is being held in the Sacramento County Jail and bail has been set at $3.2 million.

“William Arthur Sassman solicited millions of dollars from California investors with promises of high returns on business and real estate investments,” Brown said. “In reality, Sassman looted their savings to prop up a Ponzi scheme, so he could buy homes and Ferraris.”

Over the past decade, Sassman used four companies—InTex, LLC; Formulating Insurance Agency (FIA); Formulating Investments (FI); and Systematic Management Services (SMS)—to solicit investments ranging from approximately $10,000 to $500,000 from more than 50 individuals across Northern California and beyond.

Sassman, a licensed insurance agent, convinced investors, many of whom were senior citizens, to shift their savings from IRAs, annuities, life insurance accounts, 401(k)s and certificates of deposit to “high return” investments with his companies. These investments included foreclosed properties and real estate in Georgia, Mare Island and Vallejo; a strip mall in Folsom; commercial property in El Dorado Hills; the production of a laptop computer stand called the “Notefloat” and annuity, stock and foreign currency investments.

However, Sassman made few, if any, of these investments and rarely paid the double to triple digit returns he promised. Instead, Sassman spent investors’ millions financing his lavish lifestyle, including $1.1 million on his American Express card, $300,000 on automobiles, $75,000 at Polo Ralph Lauren and three homes.

The limited funds Sassman invested were channeled into other illegal operations including a “stock trading program” run by a group indicted in federal court earlier this year for running a Ponzi scheme and a European investment scam that promised a 200 percent profit in 45 days or 800 percent annually.

As Sassman burned through investor funds, he paid returns to early investors by using funds from new ones. Investors are still owed close to $4.4 million, and additional losses could reach $3 million.

In September 2009, Sassman and his companies filed for bankruptcy.

Some of Sassman’s Victims

In October 2004, a Sacramento resident invested more than $250,000 in FIA. Sassman promised her a seven percent annual return. Her money was combined with money from other investors for a total of more than $700,000. Of that money, approximately $400,000 was spent on Sassman’s personal expenses, more than $50,000 went to Sassman’s wife, and more than $34,000 was paid in returns to other investors. The victim lost $170,000 of her investment.

In late 2005, Sassman promised a Rancho Cordova woman that if she closed her $78,000 life insurance policy and invested the funds with him, she would receive an 8 percent return on her investment. In early 2009, the victim was diagnosed with cancer and her son took over her finances. Her son contacted Sassman and requested $7,000 from his mother’s investment to help pay for her medical expenses. Sassman promised to send a check, which never arrived. Soon after, the victim’s son contacted Sassman and asked him to return the entire balance of the $78,000 investment. Sassman sent a check for $14,000 that bounced. The victim’s investment was never returned.

In January 2007, a Sacramento couple invested more than $80,000 with Sassman’s company SMS to be invested into real estate and to earn interest. Sassman informed the couple that their money had been used to purchase property, which was undergoing renovation. The couple was unaware that their entire investment had been used to pay other investors.

Statement from Attorney General Edmund G. Brown Jr. on Superior Court Judge Robert J. Perry's order for Howard K. Stern, Khristine Eroshevich and Sandeep Kapoor to stand trial on charges of conspiring to illegally furnish prescription medications causing the death of Anna Nicole Smith.

"These are very serious violations that will deservedly be heard by a jury,' said Attorney General Brown. 'This will send a message that the laws regarding prescription drug safety will be vigorously enforced in California.'

Santa Ana – Attorney General Edmund G. Brown Jr. announced that Ralph Adam Rendon, 33, of Orange County, was sentenced to five years in state prison yesterday for selling $154,000 in “phony travel packages” to senior citizens seeking to visit Cuba for religious and cultural purposes.

Rendon pleaded guilty to one count of Grand Theft. As part of the plea agreement, Rendon was ordered to pay $154,000 in restitution.

"This individual sold $154,000 of phony travel packages, ripping off senior citizens who wanted to go to Cuba for religious and cultural purposes,” Brown said. “In reality, Rendon never arranged for travel to Cuba, but used the funds to purchase a Mercedes, pay his rent and hire a divorce lawyer.”

Brown’s criminal complaint, filed in Orange County Superior Court last year, contends that in 2006 Rendon began advertising his travel agency, USA to Cuba, in religious magazines. USA to Cuba purportedly arranged trips for Jewish and Greek Orthodox Americans who wanted to visit members of their faith in Cuba.

Approximately 41 individuals, including 20 senior citizens, responded to the ads and purchased travel packages from Rendon. About half the victims were Californians. The remainder came from New York, Texas, Michigan, Illinois, Florida, Wyoming, Nevada, Arizona and Utah.

Victims paid up to $4,000 for the travel. Once Rendon received payment, he falsely informed his victims that the trip had been cancelled by the U.S. Treasury Department. Rendon ignored demands for refunds.

In June 2006, investigators with Brown’s office and the Santa Ana Police Department launched an investigation, interviewed victims and conducted an audit of Rendon’s financial records. The audit revealed that he used his customers' money to pay for personal expenses.

The case was referred for prosecution and Rendon was arrested April 17, 2008. While out on bail, Rendon started a second company, London Exchange, which charged customers $500 to apply for credit cards that did not exist. Brown had Rendon arrested last month on suspicion of grand theft and forgery. As part of the plea agreement, charges related to this matter will not be pursued.

The Attorney General’s Office offers the following reminders to people who want to purchase a travel package:

• Travel agents must register with the Attorney General's Office as a seller of travel. To see if a travel agent is registered, go to: http://vcinweb.doj.ca.gov/SellerOfTravel/SotprodTest/sotInput.asp.
• Travel agents must deliver services before charging their fee to arrange trips.
• If an agent is unable to arrange a trip, they must refund all consumers' money within three days.
• Travel agents must deposit the money they are given to arrange trips in a special trust account.
• Travel agents that sell trips to Cuba must obtain a Travel Service Provider license from the U.S. Treasury Department.

Siskiyou County – Attorney General Edmund G. Brown Jr. announced that he has filed criminal charges against the former manager of a Mount Shasta-based medical clinic who filed “bogus claims” under Medi-Cal for medical services that were never performed.

Denise Fairhurst, 57, of Redding, was arrested Wednesday on five criminal counts of grand theft, insurance fraud and submitting false claims to the government. She is being held in Siskiyou County Jail on $1 million dollar bail. Arraignment is set for today in Siskiyou Superior Court at 3:00 p.m.

“Fairhurst ran a health clinic that was losing money and in danger of closing because of widespread financial mismanagement,” Brown said. “To keep her operation afloat, she submitted bogus claims to Medi-Cal and in the process violated California law.”

Brown’s criminal complaint, filed in Siskiyou Superior Court, contends that between January 2004 and December 2007, Fairhurst, the former manager of Alpine Healthcare Clinic, billed Medi-Cal $2.2 million for services not rendered to beneficiaries to help pay Alpine’s operations and management. In addition, Fairhurst used $33,492 of the funds to pay personal credit card bills.

The clinic’s financial problems stemmed from Fairhurst’s inability to set appropriate compensation rates for employees and physicians. For instance, a member of the maintenance staff was paid $1000 a month to work one hour a week. Other medical clinics in town lost employees to Alpine because they could not compete with its pay structure. The clinic also lost income because of an agreement she made with doctors to provide care to patients when they were admitted to a hospital.

With costs rising, Fairhurst submitted false claims to Medi-Cal. She forged Medi-Cal forms, claiming that patients had received care at the clinic, even though some patients had not been to it in years. It is estimated that two-thirds of the claims she submitted were fraudulent.

The scheme unraveled when a member of the clinic’s board of directors discovered that payment claims had been submitted for patients who had not been seen at the clinic. The board of directors hired an accounting firm to conduct an audit of the clinic’s finances. Fairhurst refused to provide any information to the firm and resigned in June 2008.

The audit uncovered further evidence of Fairhurst’s activities, including the use of a personal credit card that was linked to the clinic’s bank account. The clinic’s board of directors referred its findings to the Attorney General’s Bureau of Medi-Cal Fraud and Elder Abuse for prosecution earlier this year.

If convicted, Fairhurst faces up to five years in prison.

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

LOS ANGELES -- Attorney General Edmund G. Brown Jr. today sued Todd Swick and Michael Sardo, owners of Los Angeles based Executive Financial Credit Services, for ignoring “repeated warnings” to register with his office and post a $100,000 bond with the Secretary of State.

“Swick and Sardo violated California law by refusing to register their credit repair business with the Attorney General’s office and post a $100,000 bond, even after repeated warnings,” Brown said. “So today, attorneys from my office are filing suit, sending a clear signal to credit repair firms operating in California that they must register with the Attorney General’s office and follow the law.”

Executive Financial Credit Services offers to help repair their customers’ credit by challenging negative or inaccurate items on credit reports directly with the three credit report bureaus—Experian, TransUnion, and Equifax. Under California’s 1984 Credit Services Act, companies providing credit repair services in California are required to register with the Attorney General’s office and post a $100,000 surety bond with the Secretary of State.

In late 2008, Brown’s office sent a letter directing the business to register and provided information to assist in the process. The business did not respond. Despite repeated warnings, Executive Financial Credit Services did not register and obtain a bond.

Later Swick claimed the business was no longer conducting credit repair services and didn’t need to register. Brown’s office, however, discovered the business was continuing to operate as a credit repair firm. In early 2009, Sardo informed Brown’s office that the business was moving from California to Arizona and would not complete the registration process. Brown’s office informed Sardo that if the business continued offering credit repair services in California, it was bound by California law to register.

Nevertheless, Executive Financial Credit Services still has not registered. So today, Brown filed suit in San Diego Superior Court, contending that the business violated:

• California Civil Code section 1789.18 for not posting a $100,000 surety bond with the Secretary of State’s office;
• California Civil Code section 1789.25 for conducting a business without first obtaining a certificate of registration from the Attorney General’s Office; and
• California Civil Code section 1789.13(a) for charging consumers money before completely performing the services they promised.

The suit seeks a permanent injunction to keep Executive Financial Credit Services and its principals from operating illegally, civil penalties of not less than $200,000 and restitution for victims.

Brown has taken recent action against credit fraud. Last week, Brown arrested a con artist who stole more than $300,000 from over 600 victims through a credit card and credit repair scam. Ralph Adam Rendon offered victims credit lines of up to $100,000 without any credit checks and offered credit repair counseling. Victims paid an upfront fee of $500 but never received the credit card or any credit repair services.