Lawsuits & Settlements

LOS ANGELES -- Attorney General Kamala D. Harris today announced a settlement with cargo terminals at the ports of Long Beach and Los Angeles over diesel emissions from exhaust that requires the terminals to complete projects to reduce their diesel emissions and better notify the public of emissions.

Attorney General Harris filed suit in June alleging the terminals violated Proposition 65, by exposing thousands of neighboring residents to high levels of diesel exhaust without giving the required warning.

“This settlement will speed the requirements for port terminals to reduce diesel emissions,” said Attorney General Harris. “This is vitally important because expanding port traffic leads nearby residents to be exposed to polluted air, and increased risk of cancer and other diseases.”

Approved today in Los Angeles Superior Court, the settlement requires the terminals to: implement an innovative warning program using newspaper ads, bus shelter signs and the Internet to inform the community about the diesel exposures; undertake projects valued at $1 million per terminal to reduce diesel emissions from their respective operations; and pay monies to the ports of Long Beach and Los Angeles for projects to lower diesel emissions from the trucks, tractors and trains that operate at the port.

The $1 million projects to be undertaken at the seven terminals include pilot projects to test solar electric panels that withstand the salt water environment and a crane mounted system to capture exhaust from idling vessels. The terminals will also pay $756,000 to the Port of Los Angeles for grants to allow small trucking firms to buy new, low-emission trucks; $324,000 to the Port of Long Beach for projects for clean running trucks and locomotives; and $540,000 in civil penalties.

In addition, the terminal operators will have to warn the public that they are being exposed to diesel exhaust, as required by Proposition 65. The settlement requires the terminal operators to keep giving the warnings – at bus stops, in newspapers and on the Internet – until diesel emissions no longer pose a significant risk to the community.

The seven terminals at the Ports of Long Beach and Los Angeles that cause the largest diesel exposures to the surrounding neighborhoods are: APM Terminals Pacific, Ltd.; Eagle Marine Services, Ltd.; International Transportation Service, Inc.; SSA Terminal (Long Beach) LLC; SSA Terminals, LLC, Pacific Maritime Services, L.L.C.; Trapac, Inc.; West Basin Container Terminal LLC; Yusen Terminals, Inc.

In February, Attorney General Harris filed a friend-of-the-court brief in a Ninth Circuit Court of Appeals case in support of efforts by the Port of Los Angeles to reduce air pollution through its Clean Trucks program (http://oag.ca.gov/news/press_release?id=2039&).

SAN FRANCISCO –-- Attorney General Kamala D. Harris today announced a national settlement with JP Morgan Chase & Co. (JPMC) as part of an ongoing nationwide investigation over allegations of anti-competitive and fraudulent conduct in the municipal bond derivatives industry.

“School districts, non-profits and municipalities in this case were all defrauded by Wall Street,” Attorney General Harris said. “This settlement brings a measure of restitution, justice and closure to the victims.”

The settlement was based on allegations that JPMC made secret deals with competitors in the bidding process. This illegal conduct included bid-rigging, peeking at competitors’ bids and offering non-competitive courtesy bids. These schemes enriched the financial institutions and brokers at the expense of cash strapped state agencies, cities, school districts and non-profits that could ill afford the steep financial consequences of this illegal conduct.

The settlement also provides that JPMC will pay $17 million in restitution directly to certain other government and not-for-profit entities as part of separate agreements it entered into today with the U.S. Securities and Exchange Commission and the Office of the Comptroller of the Currency.

The state and federal settlements are distinct components of a coordinated global $228 million settlement that JPMC entered into today. JPMC also reached agreement with the U.S. Department of Justice’s Antitrust Division, the Internal Revenue Service and the Federal Reserve Board.

JPMC is the third financial institution to settle with the multistate working group in the ongoing municipal bond derivatives investigation following Bank of America and UBS AG. To date, the state working group has obtained settlements worth approximately $250 million. California entities are set to receive approximately $6.7 million for restitution under the JPMC settlement.

Municipal bond derivatives are contracts that tax-exempt issuers use to reinvest proceeds of bond sales until the funds are needed, or to hedge interest-rate risk.

In April 2008, the states began investigating allegations that certain large financial institutions, brokers and swap advisors engaged in various schemes to rig bids and commit other deceptive, unfair and fraudulent conduct in the municipal bond derivatives market.

The investigation, which is still ongoing, revealed collusive and deceptive conduct involving individuals at JPMC and other financial institutions, and certain brokers with whom they had working relationships. The wrongful conduct took the form of bid-rigging, submission of non-competitive courtesy bids and submission of fraudulent certifications of compliance to government agencies, among others, in contravention of U.S. Treasury regulations.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

SAN FRANCISCO – Attorney General Kamala D. Harris today announced a $90.8 million national settlement, which includes some $6.3 million for California agencies, with the multinational Swiss bank UBS AG over allegations of anticompetitive and fraudulent conduct in the municipal bond derivatives industry.

“This financial fraud harmed school districts, cities, state agencies, and non-profit groups,” Attorney General Harris said. “The multi-million dollar settlement provides restitution to those victimized and sends a strong warning to anyone contemplating similar scams.”

California participated with federal agencies and 24 other states in the negotiations that led to today’s settlement. In addition to the approximately $6.3 million in restitution, California will be entitled to a share of the $2.5 million civil penalty and $5 million in investigation costs that UBS has agreed to pay.

Under the settlement, UBS agreed to pay back a total of $90.8 million to local and state agencies nationwide, as well as to non-profit groups, that had municipal bond derivative contracts with UBS, or used UBS as a broker, between 2001 and 2004. That restitution is part of a $160 million settlement package that includes federal agencies.

Municipal bond derivatives are contracts that tax-exempt issuers use to reinvest the proceeds of bond offerings until the funds are needed, or to hedge interest rate risk.

In 2008, a group of states began an investigation of allegations that certain large financial institutions, including national banks, insurance companies, brokers and swap advisors, engaged in various schemes to rig bids and commit other deceptive, unfair and fraudulent conduct in the municipal bond derivatives market.

The investigation, which is continuing, revealed collusive and deceptive conduct involving individuals at UBS and other financial institutions, along with certain brokers with whom they had working relationships. This conduct took the form of bid-rigging, submission of non-competitive courtesy bids and submission to government agencies, among others, of fraudulent certifications of compliance with U.S. Treasury regulations.

Regardless of the means used to perpetrate the schemes, the objective was to enrich the financial institution and/or the broker at the expense of the issuer, depriving the issuer of a competitive, transparent marketplace.

As a result of such this conduct, state, local and not-for-profit entities entered into municipal bond derivatives contracts on less advantageous terms than they would have otherwise.

Other states joining California in today’s settlement are Alabama, Colorado, Connecticut, District of Columbia, Florida, Idaho, Illinois, Kansas, Maryland, Massachusetts, Michigan, Missouri, Montana, Nevada, New Jersey, New York, North Carolina, Ohio, Oregon, Pennsylvania, South Carolina, Texas, Tennessee and Wisconsin.

The Attorney General’s investigative team in the office’s antitrust section included Senior Assistant Attorney General Kathleen Foote; Supervising Deputy Attorney General Natalie S. Manzo; Deputy Attorneys General Paula Lauren Gibson, Winston Chen and Ben Labow; Annette Goode-Parker, senior legal analyst; and Sheila Rhoads, legal analyst.

As a part of the same investigation, California reached a $67 million multi-state settlement in December with Bank of America for illegal activity by some of its employees in investing the proceeds of municipal bonds. This activity amounted to bid rigging, price fixing, and other anti-competitive practices that defrauded state agencies, local governments and non-profit groups. California’s share was about $6 million.

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

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

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

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

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

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

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

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

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

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

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

SACRAMENTO – Attorney General Kamala D. Harris today asked a Sacramento County Superior Court to hold “Tax Lady” Roni Deutch in contempt of court, imprison her for five days on each violation and fine her thousands of dollars for shredding millions of pages of documents and failing to pay refunds to her clients in violation of a court order.

“Deutch showed herself to be a predator for profit, preying on innocent, hard-working people who were simply hoping to settle their accounts with the IRS,” Attorney General Harris said. “By defrauding these victims, and then pleading poverty, she created a real danger that her clients will never receive their advance fees back.”

In August, the Attorney General filed a $34 million lawsuit against Deutch for swindling thousands of people facing serious and expensive tax collection problems with the IRS. On August 31, the court issued an order that prohibited Deutch from destroying evidence.

“Despite this order,” the Attorney General said in today’s action, “Deutch has been routinely shredding documents on an almost a weekly basis.” The Attorney General estimates that to date Deutch has shredded some 1,643,000 to 2,708,600 pages of documents. Deutch’s shredding campaign has permanently deprived the Attorney General of evidence needed to fully prosecute the action against her.

Deutch’s law firm, based in Sacramento County, had revenues of at least $25 million a year. She spent $3 million a year on advertising, much of it on late-night cable TV, and frequently offered tax advice on popular TV shows. In her pitches, she promised to significantly reduce the IRS tax debts of people who signed up with her firm. Instead, she took thousands of dollars in up-front fees from clients but offered little or no help in lowering their tax bills. Hundreds of clients complained to the Attorney General and other government agencies.

In addition to shredding documents, the Attorney General also charged that Deutch violated a November 17 preliminary injunction by failing to issue some $435,000 in refunds to her clients within 60 days. Instead she “decided to disperse funds to friends, family and other creditors. By draining her estate and that of the law firm, Deutch has placed her clients at serious risk of never receiving their refunds.”

For instance, Deutch opted to transfer hundreds of thousands of dollars in equity from the sale of her home to a media firm. She also personally withdrew $241,000 from the law firm’s accounts and her personal accounts at just one bank. In addition, since the preliminary injunction order was issued, Deutch made more than $21,000 in unnecessary expenditures, including gifts to family and friends, and a payment to a NASCAR racing team.

The Attorney General asked the court to fine Deutch $1,000 and imprison her for five days for each count of contempt, to immediately freeze Deutch’s personal assets, and to appoint a receiver to manage her law firm’s business operations.

Copies of the court filings are attached to the version of this press release found at ag.ca.gov.

LOS ANGELES -- Attorney General Kamala D. Harris today filed a lawsuit against one of the nation’s largest funeral trusts, which pooled the funds of more than 27,000 California consumers who prepaid for funerals for themselves or loved ones, charging that the organization engaged in conspiracy and kickbacks while illegally diverting some $14 million.

Attorney General Harris filed the suit, seeking a permanent injunction and restitution to consumers, against the California Master Trust, the California Funeral Directors Association, and other defendants in Los Angeles Superior Court. The suit was filed on behalf of the Cemetery and Funeral Bureau of the Department of Consumer Affairs, which regulates the funeral industry in California.

“The defendants preyed upon thousands of Californians at one of the most vulnerable times of their lives,” Attorney General Harris said. “This lawsuit will make sure their money goes where it was intended: to pay for their funerals or the funerals of loved ones.”

The trust, created in 1985 by the funeral directors, is a “preneed” funeral trust that pools the prepaid funeral payments of individual purchasers throughout California. It controls about $63.5 million.

By the end of 2009, some 27,000 California consumers who were customers of more than 300 funeral establishments, had entrusted funds with the organization for their own or loved ones’ funeral services. They were “among California’s most vulnerable and trusting consumers,” according to the suit.

Preneed funeral contracts are usually purchased by the elderly and paid in installments. Seven years elapse on average between a consumer’s purchase of a preneed contract and the beneficiary’s death.

The suit alleges that millions of dollars of consumers’ money paid to the trust was misspent or mismanaged, that defendants paid at least $4.6 million in illegal kickbacks to funeral homes, and that the defendants paid themselves excessive administrative fees.

The suit seeks an injunction to halt such illegal activities plus restitution of about $14 million with interest. It also seeks to wrest control of the trust away from the Funeral Directors Service Corp., a subsidiary of the California Funeral Directors Association, and place it under a new trustee, and seeks a full accounting of the trust’s financial transactions as well as the defendants’ financial transactions with the trust since 2000.

Many of the problems with the California Master Trust were uncovered in an extensive audit conducted by the Cemetery and Funeral Bureau and released in June 2010.

Prosecuting the case are deputy attorney generals Nancy Kaiser and Geoffrey Ward.

Consumers with questions can call the Cemetery and Funeral Bureau toll-free at 800-952-5210.

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

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

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

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

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

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

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

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

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

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

LOS ANGELES -- Attorney General Kamala D. Harris filed a lawsuit today seeking restitution and civil penalties totaling $803,100 in a scam that defrauded 33 African American churches in Southern California. Promoters promised that the leased computer kiosks would enhance the experience of parishioners, but the scheme ended up creating big debts for the churches.

The Attorney General’s lawsuit, filed today in Los Angeles Superior Court, names Television Broadcasting Online, Ltd., Urban Interfaith Network, Willie Perkins, Michael Morris, Wayne Wilson, Tanya Wilson, Balboa Capital Corp., and United Leasing Associates of America, Ltd. It charges them with violations of the state’s unfair competition and false advertising laws, and seeks restitution, civil penalties and an injunction to prevent any further illegal activities.

“This was a cruel and hypocritical scheme,” said Attorney General Harris. “The perpetrators preyed on institutions of faith. Let this be a lesson to others who may look to defraud our community organizations: you will be caught and you will be held accountable.”

The Attorney General’s complaint states that defendants Television Broadcasting Online, Ltd., Urban Interfaith Network, Willie Perkins, and Michael Morris “engaged in a nationwide scam” in which they persuaded “195 African American churches in 15 different states to enter into expensive and onerous leases for shoddy computer equipment housed in wooden cabinets.” They promised the churches the kiosks would be free, advertisers would make the lease payments and the churches would be under no financial obligation.

By 2006, the scam reached California, where 33 African American churches were persuaded to enter into leases for the kiosks. Twenty-four of the churches are located in Los Angeles County, five in Riverside County and four in San Bernardino County.

Defendants Wayne and Tanya Wilson -- on behalf of Television Broadcasting Online, Ltd., Urban Interfaith Network, Willie Perkins and Michael Morris -- pitched themselves to the California churches, according to the Attorney General’s complaint, as representing “a business/religious entity, national in scope, with strong ties to both the African American community and enlightened corporate sponsors” that wanted to help this religious community. They said the computer kiosks would connect the churches and their parishioners to “national advertisers, government, businesses and even generate some revenue for themselves.”

When the churches failed to pay the monthly lease payments, Balboa and United filed collection suits, seeking full payment plus interest, attorneys’ fees and costs.

According to the Attorney General’s complaint, the leasing companies, Balboa and United, are liable because the other defendants were acting as their agents and because, even after the leasing companies learned of the misrepresentations, they failed to alert churches to the scam and vigorously continued to enforce the terms of the leases.

Wayne and Tanya Wilson live in Rancho Cucamonga. Balboa Capital Corp. is based in Irvine. United Leasing is based in Brookfield, Wisconsin. Urban Interfaith Network, Inc. and Television Broadcasting Online, Ltd. are based in Oxon Hill, Maryland. Perkins and Morris were convicted in Michigan of racketeering, conspiracy, and false pretenses in connection with the scam. Morris is serving 5 to 20 years, and Perkins is serving 4 to 20 years.

A copy of the complaint is attached to the press release at ag.ca.gov