Lawsuits & Settlements

SANTA ANA – In a “notable judgment” for victims of violent hate crimes, Attorney General Edmund G. Brown Jr. announced that his office has secured a novel civil award against two individuals who targeted a man based on his ethnicity, forced him out of his car and beat him until blood flowed from his ears.

“Victims of crimes inspired by hate deserve every remedy available under the law,” Brown said. “This notable judgment ensures that in California, justice doesn’t stop at the criminal courtroom door.”

The judgment, signed late last week, requires James Joseph Kelly III, 28, of California City and Justin Louis Mullins, 26, of Garden Grove each to pay $25,000 to Felipe Alvarado, 31, whom they brutally assaulted and verbally harassed.

The incident began about 2 a.m. on August 9, 2007 in Garden Grove. As Alvarado waited at a traffic light at the intersection of Magnolia Street and Trask Avenue, Mullins and Kelly pulled up and began verbally harassing him. Alvarado ignored the insults, but on the other side of the intersection, in the parking lot of his workplace, the two men jumped out of their vehicle, forced Alvarado out of his vehicle and dragged him to the pavement. Defenseless, Alvarado was punched, kneed and kicked until blood flowed from his ears.

During the assault, the men insulted Alvarado with ethnic slurs. The beating left him with permanent back pain and hearing loss.

Today’s civil judgment follows criminal convictions in October 2008. Kelly was sentenced to nine months in jail on one count of misdemeanor assault. Mullins was sentenced to three years in state prison for misdemeanor assault, driving under the influence and violating probation.

The civil case marks the first time the Attorney General has filed a case to benefit victims of violent crimes under the Ralph Civil Rights Act, which enables victims of many types of hate crimes to pursue civil penalties in addition to criminal charges. Given the circumstances and brutality of the crimes, Brown decided to pursue a civil case after the defendants were released from confinement.

Victims who believe their rights have been violated under the Ralph Act or any of California’s other civil rights laws, can file a complaint with Brown’s Civil Rights Enforcement Section at http://ag.ca.gov/contact/complaint_form.php?cmplt=PL.

Copies of Brown’s complaint and last week’s judgment, entered in Orange County Superior Court, are attached.

OAKLAND – Continuing his fight to reduce children’s exposure to lead, Attorney General Edmund G. Brown Jr. today announced a settlement that requires two of the largest makers and installers of artificial turf to eliminate nearly all lead from their products.

“Because schools, public parks and daycare centers use artificial turf, it’s critical that we minimize the amount of lead it contains,” Brown said. “Today’s agreement will get the lead out of artificial turf in playgrounds and ball fields around the state.”

The settlement requires Georgia-based Beaulieu, LLC, the country’s largest supplier of artificial turf to retailers, and Field Turf, USA, the nation’s largest maker and installer of artificial turf fields, to reformulate their products to reduce lead levels to negligible amounts.

The agreement follows a landmark settlement last year with AstroTurf, LLC. Collectively, the three companies control most of the artificial turf market, and their settlements with Brown’s office establish the nation’s first enforceable standards applicable to lead in artificial turf.

Brown brought the case in 2008 against these companies for excessive lead levels after testing by the Center for Environmental Health found high concentrations of lead in their products. Brown’s office confirmed these findings in independent tests.

Today’s settlement requires Beaulieu and FieldTurf to change their products so that they contain less than 50 parts per million lead. Lab results found some artificial turf products with more than 5,000 parts per million, which is more than 10 times state and federal guidelines for content in children’s products. Lead is added to the products to keep colors vibrant.

There is no safe exposure to lead. In lengthy or high exposures, it is toxic to many organs and tissues including the heart, bones, intestines and kidneys. Since excessive exposure can interfere with development of the nervous system, it is particularly dangerous in children and can cause permanent learning and behavior disorders.

Lead in artificial turf usually enters the human body hand-to-mouth. Children playing on it get lead onto their hands and stick them into their mouths. Hand washing is a good way of reducing exposure.

In addition to reformulating their products, Beaulieu agreed to pay for wipe-testing of products in California daycare facilities, schools and playgrounds that were purchased after October 2004. FieldTurf took action in 2003 to reduce lead in its turf products. This settlement requires it to replace turf fields installed in California before November 2003 at a discount if they test high for lead, and also to reduce the lead content of its new products.

The Los Angeles City Attorney and Solano County District Attorney joined Brown in the case against the three companies. AstroTurf paid $170,000 in penalties, grants and fees, and agreed to improve its products. Beaulieu will pay $285,000 and FieldTurf will pay $212,500.

In the past year, Brown has initiated several enforcement actions against manufacturers and retailers for lead in products designed for children.

In June, Brown demanded that Rainbow and 5-7-9 stores remove from their shelves jewelry with parts containing as much as 97% lead. Earlier this year, Target removed teddy bears from its stores after Brown notified the company that lead was found in the bears. In November 2009, Brown warned several retailers, including Walmart, Sears and Walgreens, to remove from their store shelves several products designed for children found to contain excessive levels of lead.

Copies of the artificial turf settlements are attached.

SAN DIEGO – Attorney General Edmund G. Brown Jr. today filed a lawsuit against mortgage giants Fannie Mae and Freddie Mac for blocking an innovative California clean energy program that was designed to create tens of thousands of jobs, promote energy independence and lower utility bills.

“As the nation struggles through the worst recession in modern times, California is taking action in federal court to stop the regulatory strangulation of the state’s grass-roots program that is spreading across the country,” said Brown.

The PACE (Property Assessed Clean Energy) program stimulates the economy and promotes energy independence by assisting homeowners and small businesses in securing funding to make their properties more energy efficient. Property owners repay the costs of energy improvements through assessments spread out over a decade or more. Under California law, these costs are classified as tax assessments.

Ignoring California law, Fannie Mae and Freddie Mac have effectively shut down the program by wrongly characterizing PACE assessments as loans that must be subordinate to their own mortgages. The Federal Housing Finance Agency affirmed Fannie and Freddie’s decision on July 6 over the objections of Attorney General Brown and congressional leaders.

For California, the stakes are high. Almost half the counties in California have developed PACE programs or plan to start one. The mortgage giants’ actions have stopped these programs dead in their tracks, destroying job creation, stifling energy independence and hampering California’s economic recovery. Clean energy companies have had to lay off workers, and California risks losing more than $100 million in federal stimulus money.

“Fannie Mae and Freddie Mac received enormous federal bailouts,” Brown said, “but now they’re throwing up impermeable barriers to bank lending that creates jobs, stimulates the economy and boosts clean energy.”

One example of the effects of this: San Diego planned to launch a PACE program this summer but it has now been suspended indefinitely, leaving more than 100 people trained in energy retrofits without jobs.

“I believe that the PACE program is critical to stimulating our local and statewide economy,” said San Diego Mayor Jerry Sanders. “I’m glad to see this lawsuit filed so that this novel program can continue.”

In his lawsuit, Brown asks the court to apply California law, require Fannie Mae and Freddie Mac to recognize PACE assessments for what they are, and allow PACE to move California’s economy forward.

The lawsuit is attached to this release. A letter from Attorney General Brown to President Obama is also attached. For a copy of the Attorney General’s letter sent to federal housing regulators in May, please see http://ag.ca.gov/newsalerts/release.php?id=1920&

LOS ANGELES -- Attorney General Edmund G. Brown Jr. today announced a settlement with Washington state-based Rena Ware International, Inc., which “made fraudulent and unethical claims” that its high-priced cookware could cure diseases such as diabetes and heart disease. The company agreed to pay more than $600,000 in refunds and other fees.

“This company made fraudulent and unethical claims that its products cured serious diseases,” Brown said. “Their illegal, high-pressure sales tactics preyed on the fears of vulnerable Californians.”

Rena Ware targeted Spanish-speaking immigrants in the Los Angeles-area to sell its high-priced cookware. Sales representatives employed deception to enter people’s homes -- claiming to offer health and nutrition information, to be taking an opinion poll, or to be willing to service the consumer’s current cookware.

Once inside the home, the representatives claimed the consumer’s cookware caused a variety of diseases such as cancer and Alzheimer’s, diabetes and heart problems. The representatives claimed Rena Ware’s products were not only safe to use but could actually cure some of these diseases.

Consumers who were persuaded to buy the products were often enticed into financing plans with a rate of more than 21% a year. Sales representatives often did not tell consumers they had a three day cooling-off-period to change their minds and cancel the order, a right California law guarantees all consumers who buy products from door-to-door salespeople.

Rena Ware sent consumers harassing debt collection notices purportedly signed by an attorney, but no attorney had signed the notices or seen customers’ files to verify whether the debts were actually owed. The purpose of the notices was sheer intimidation.

In late 2008, a Rena Ware International sales representative went to the home of Mercedes Ballestero in Los Angeles. The representative requested an in-home demonstration to show off Rena Ware’s products and put to shame Ms. Ballestero’s current cookware. The representative claimed Rena Ware’s products could reduce high blood pressure by removing hormones from meat as it cooked. Ms. Ballestero bought a set of Rena Ware cookware for more than $1,500 with a hidden interest rate of 21.5 percent. After discovering the high interest rate, Ms. Ballestero canceled her contract, but the company refused to return her deposit.

Today’s agreement requires Rena Ware to pay $135,400 in penalties, $250,000 in refunds to consumers, and $239,600 in other costs.

Rena Ware must also obtain an independent monitor to ensure the company refrains from using false information or high-pressure sales tactics to lure customers.

Brown’s office was joined in today’s agreement by the Los Angeles County District Attorney. The Los Angeles County Department of Consumer Affairs assisted in the investigation.

In 2008, Brown obtained a judgment against Hy Cite Corporation for similar misrepresentations in the sale of its “Royal Prestige” line of cookware. Hy Cite was required to pay more than $1.3 million in penalties, restitution and costs, agreed to three years of independent monitoring, and forced to change its business practices.

Rena Ware customers who are eligible for a refund will be contacted by mail, and any consumers who feel they have been victimized by Rena Ware International, Inc. or other houseware companies may file a complaint with the Attorney General’s Public Inquiry Unit at www.ag.ca.gov/consumers/general.php, or by calling (800) 952-5225.

Copies of the complaint and settlement, filed in Los Angeles County Superior Court, are attached.

LOS ANGELES – Attorney General Edmund G. Brown Jr. today announced a $173 million settlement with six manufacturers of Dynamic Random Access Memory (DRAM) computer chips who “conspired in an illegal global scheme to fix prices.”

DRAM is a common form of memory chip that stores information temporarily for quick access. It is found in desktop computers, laptops, servers, printers and networking equipment such as routers and hubs. DRAM sales to major electronic manufacturers, including Dell, IBM, and Hewlett-Packard, exceed $5 billion a year in the United States and $17 billion worldwide.

“These companies conspired in an illegal global scheme to fix prices on chips used in computer equipment sold to consumers, schools and government offices,” Brown said. “The large price tag of this settlement should serve as a warning that we will crack down on any manufacturers around the world that choose to gouge consumers through illegal price-fixing schemes.”

Brown and 32 other state attorneys general participated in the settlement. In July 2006, the multi-state group, led by California, filed a complaint in federal district court alleging that California’s consumers, state agencies, universities and local governments were forced to pay illegally inflated prices for products containing DRAM chips.

The DRAM manufacturers named in the lawsuit include the American companies Micron Technology, Inc. and NEC Electronics America, Inc., as well as foreign companies Infineon Technologies A.G. in Germany; Hynix Semiconductor, Inc. in South Korea; Elpida Memory Inc. in Japan; Mosel-Vitelic Corp. in Taiwan; and their American subsidiaries.

Brown’s investigation revealed that from 1998 to 2002, the salespeople and upper management of all the companies held frequent meetings, made telephone calls and initiated other contacts in which they exchanged confidential information and agreed to charge customers illegally inflated prices on DRAM chips.

The result of this collusion was to keep DRAM prices artificially high instead of letting market forces operate freely through competition.

The U.S. Justice Department called the scheme “one of the largest cartels ever discovered.” As a result of a federal investigation, four companies ¬-- Samsung, Hynix, Infineon, and Elpida – and 12 individuals have pleaded guilty to criminal price-fixing.

In October 2008, Brown filed a second lawsuit in state court in San Francisco on behalf of 96 local California government entities, including cities, counties, school districts, special districts, and the University of California, all of which had purchased computer equipment containing DRAM chips.

The settlement announced today requires the companies to refrain from illegal price-fixing and to conduct extensive employee-compliance training. The settlement must be approved by the court.

The defendants agreed to resolve both lawsuits, as well as lawsuits by private plaintiffs, by paying $173 million over two years plus interest to the affected consumers, schools and government offices. Samsung and another company, Winbond, reached settlement for $113 million in 2007.

“The settlement money is welcome,” Brown said, “but the illegal overcharging never should have happened in the first place. Especially when times are tight, schools and government agencies can’t afford to be ripped off by companies that violate our anti-trust laws to keep profits high.”

The other states participating in the settlement are Arizona, Arkansas, Colorado, Florida, Hawaii, Idaho, Illinois, Iowa, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Nebraska, Nevada, New Mexico, New York, North Carolina, North Dakota, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Utah, Virginia, Washington, West Virginia, and Wisconsin.

Copies of the complaints are attached.

SAN FRANCISCO – Attorney General Edmund G. Brown announced today that 3,500 investors, whose holdings in auction rate securities were frozen in the financial crisis of 2008, have recovered $1.4 billion through a settlement the Attorney General hammered out with Wells Fargo affiliates.

“We went to bat for people who believed their investments were like cash,” Brown said, “but discovered after the financial meltdown that they couldn’t get their hands on even a dime of their money for two long years. Now, because of the settlement, they have all of their money back.”

The investors, big and small, included retirees, working families, small businessmen, and charities. Nearly half are Californians, who received $695 million through buybacks of their securities by Wells Fargo.

Many invested in the securities because of assurances they were “like cash” -- safe and liquid. The securities turned out to be neither. Unable to sell the securities, investors were stuck.

More than 90 percent of the owners of the securities elected to take the Wells Fargo buyback offer under the settlement.

“Getting this money back takes a lot of pressure off me,” said Johanna Markley of Newport Beach, who suffers from cancer. “I wondered who would fight for us.”

“I’m retired and over 70 years old,” said William O’Brien of El Dorado County. “It was frustrating to have that money just sitting there for over two years and being unable to access it when we needed it.”

“Getting the investment back has helped save jobs in our company,” said Boris Levine, a San Francisco businessman.

Brown said Wells Fargo was co-operative throughout the repayment process and did what it said it would do.

In November, the Attorney General reached a settlement with Wells Fargo Investments, LLC; Wells Fargo Brokerage Services, LLC; and Wells Fargo Institutional Investors, LLC. The buybacks were made pursuant to that agreement.

Auction rate securities are long-term bonds whose interest rates are adjusted frequently at auction. If there are no takers for the bonds, they can become frozen and effectively worthless.

The Attorney General’s Office has submitted a request for dismissal of its action against Wells Fargo in San Francisco Superior Court, signaling the successful completion of the repayments.

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.

OAKLAND — Attorney General Edmund G. Brown Jr. announced today that he has asked to intervene in a lawsuit in order to protect newly adopted motor vehicle emission standards that would save nearly two billion barrels of oil and reduce greenhouse gas emissions by approximately one billion tons.

Brown filed a motion to intervene in the U.S. Court of Appeals in support of the federal Environmental Protection Agency (EPA) in a suit brought by energy companies and other industries challenging the EPA’s authority to enforce the tough emission standards beginning in 2012.

“The thousands of barrels of oil spilling in the Gulf of Mexico each day are a graphic reminder that we need to cut oil consumption in America,” said Brown. “These regulations would do that, as well as vastly reducing pollution from tailpipe emissions.”

The EPA’s new vehicle emissions standards are the first significant reduction in federal fuel consumption standards in more than 30 years. Over the lifetime of the vehicles sold in the first five years, the national program is projected to reduce U.S. greenhouse gas emissions by 2.1 billion tons and save 1.8 billion barrels of oil. Consumers can expect the new standards to save them between $130 and $180 a year in fuel costs.

EPA estimates the lifetime savings under the program for 2012 through 2016 model-year vehicles at $240 billion. The benefits include fuel savings, carbon dioxide reductions, improved air quality, and enhanced energy security.

California has long set the pace in enacting tough pollution standards, and it has been active in attempting to protect its right to impose those standards and in encouraging other states and the federal government to adopt similar standards.

In Massachusetts v. EPA, 549 U.S. 497 (2007), the Supreme Court ruled that the greenhouse gases that cause global warming are air pollutants under the Clean Air Act and that EPA’s evaluation of whether those emissions from motor vehicles endanger public health or welfare had to be based solely on science. Brown’s office took a lead role in that case.

EPA has now made that endangerment finding. As the Supreme Court noted, such a finding triggers a mandatory duty on EPA to adopt motor vehicle regulations. EPA adopted those regulations on April 1 in a joint rulemaking with the National Highway Traffic Safety Administration. Those regulations set greenhouse gas emission standards and fuel economy standards that will achieve a fleet-wide fuel economy for new cars and trucks of roughly 35 miles per gallon in model year 2016.

These motor vehicle regulations are the rough equivalent of California’s regulations. As part of a nationwide deal announced at the White House in May 2009, California agreed that compliance with national standards of equivalent stringency would also constitute compliance with California’s established regulations, and the automobile manufacturing industry agreed not to challenge those standards (through model year 2016.) If these EPA vehicle standards were successfully challenged, that nationwide deal would fall apart.

Brown’s filing today is in a lawsuit challenging the motor vehicle rule brought by industrial concerns plus politicians and other opponents of EPA action on global warming. Plaintiffs include Massey Energy Company, Rosebud Mining Company, National Cattlemen’s Beef Association and the Industrial Minerals Association of North America. The challenge was not joined by the automobile manufacturing industry, the only party directly affected by the EPA regulations.

Brown filed the motion on behalf of himself, Governor Schwarzenegger and the state Air Resources Board, plus 12 other states – Delaware, Illinois, Iowa, Maine, Maryland, Massachusetts, New Mexico, New York, Oregon, Rhode Island, Vermont, and Washington – as well as the Pennsylvania Department of Environmental Protection and the City of New York.

A copy of the Motion to Intervene is attached.

Saying that “disrupting a private funeral with vicious personal attacks goes too far,” California Attorney General Edmund G. Brown Jr. has signed a friend-of-the-court brief filed today in a Supreme Court case that will test whether families grieving at a funeral have a right to be free of hate-filled attacks from fanatical protesters.

Brown is one of 48 state attorneys general who gave their support to Albert Snyder in his lawsuit against Fred W. Phelps, Sr. and the Westboro Baptist Church in Topeka, Kansas.

Near the 2006 Maryland funeral of Snyder’s son, Marine Lance Cpl. Matthew Snyder, the vehemently anti-gay Phelps and his parishioners demonstrated and waved signs that said “Thank God for Dead Soldiers” and some that employed even more offensive language. Matthew Snyder, 20, was killed in a Humvee accident a month after he arrived in Iraq.

“Free speech is a cherished American right,” Brown said, “but disrupting a private funeral with vicious personal attacks on the grieving family goes too far.”

Phelps believes that U.S. military deaths represent God’s judgment on the country’s tolerance of homosexuality. He and his church members have staged their hate-filled protests at some 200 military funerals across the country.

Albert Snyder filed a civil suit against Phelps for invading his family’s privacy and intentionally inflicting emotional distress on them. A U.S. district court awarded Snyder $10 million, but a federal appeals court overturned that verdict and ordered Snyder to pay Phelps’ legal costs.

Forty states have enacted “funeral picketing” or “funeral protest” laws regulating the time, place and conduct of demonstrations near funeral services.

The amicus brief, submitted by Kansas Attorney General Steve Six, argues that such laws are necessary to protect the traditional “sanctity and privacy” of funerals and to prevent mourning families of veterans from being “attacked viciously and personally.” The picketing, the brief says, “amounts to emotional terrorism” directed at a “captive audience.”

Freedom of speech does not permit hate groups to espouse hate-filled vitriol at a private funeral service for the purpose of intentionally inflicting emotional distress on mourners.

“All we wanted,” Albert Snyder told a reporter, “was a private funeral for my son. They turned it into a three-ring circus.”

The Supreme Court is expected to hear his case in October. A copy of the brief is attached.

MONTEREY – Attorney General Edmund G. Brown Jr. has filed a lawsuit to shut down the Monterey County AIDS Project and recover more than $2.8 million intended for the benefit of people affected by HIV/AIDS that was illegally diverted to other uses.

Brown said that former officers and directors of the Seaside charity, called MCAP, took some of the money for personal use and for-profit ventures, in violation of state law and a May 2000 court order specifying that at least $1.8 million be used “solely for the purpose of providing housing for people with the HIV disease.” The complaint alleges that another $1 million in other grants and donations was misspent as well.

“The duty of these officers and directors was to protect the charity’s assets so the funds could be used for the support of very sick people,” Brown said. “Instead, they violated their trust and spent the money any way they wanted.”

The Attorney General’s lawsuit, filed Friday in Monterey County Superior Court, seeks to dissolve MCAP, obtain a complete accounting of its finances, and recover any remaining assets dissipated through “the mismanagement and neglect of former officers and members of its board of directors.” Brown also seeks return of assets that were illegally diverted. Sixteen former officers and directors are named.

The complaint describes a scheme in which the MCAP officials, over nearly a decade, drained the organization’s coffers of money earmarked for HIV/AIDS patients.

The organization’s record-keeping was so sloppy and incomplete that it’s hard to determine exactly where all the money went. MCAP continued to provide housing and services for AIDS patients, but at a lesser level than its overall expenditures would suggest.

Some of the charity’s money was spent on unauthorized expenditures, such as meals at expensive restaurants, personal expenses on credit cards, purchasing items for personal use at auctions, personal moving and storage expenses, a personal mortgage payment, and steam-cleaning a carpet in a private residence.

MCAP was created in 1985 to provide support, resources and services, including housing assistance and hospice care, for HIV/AIDS patients in Seaside, north of Monterey.

Eleven years ago, MCAP received $1.8 million in cash and property from the estate of Douglas E. Madsen, a Monterey County resident, with the restriction that the bequest be used for the sole purpose of housing active AIDS patients.

But, according to Brown’s complaint, more than $2.8 million of charitable assets, including the Madsen money, was “misappropriated, misapplied or wasted.” In 1999, MCAP listed assets of $2.1 million. By 2004, that had dwindled to $1.4 million, and by 2007, only $205,000 was left.

As Attorney General, Brown is the official charged with ensuring that charitable organizations in California spend their money for the purposes specified by their founding documents, internal policies and state law.

MCAP’s filings with the Attorney General’s Registry of Charitable Trusts can be found at http://ag.ca.gov/charities/index.php

The complaint is attached.