Lawsuits & Settlements

SACRAMENTO – Seeking to recover more than $200 million in illegal overcharges and penalties, Attorney General Edmund G. Brown Jr. today announced that he has filed suit against State Street Bank and Trust -- one of the world’s leading providers of financial services to institutional investors -- for committing “unconscionable fraud” against California’s two largest pension funds -- CalPERS and CalSTRS.

The suit, which was unsealed today by a Sacramento Superior Court judge, contends that Boston-based State Street illegally overcharged CalPERS and CalSTRS for the costs of executing foreign currency trades since 2001.

"Over a period of eight years, State Street bankers committed unconscionable fraud by misappropriating millions of dollars that rightfully belonged to California’s public pension funds,' Brown said. 'This is just the latest example of how clever financial traders violate laws and rip off the public trust.'

The case was originally filed under seal by whistleblowers – “Associates Against FX Insider Trading,” who alleged that State Street added a secret and substantial mark-up to the price of interbank foreign currency trades. The interbank rate is the price at which major banks buy and sell foreign currency.

Subsequently, Brown launched an independent investigation into the allegations.

Brown’s investigation revealed that State Street was indeed overcharging the two funds. Despite being contractually obligated to charge the interbank rate at the precise time of the trade, State Street consistently charged at or near the highest rate of the day, even if the interbank rate was lower at the time of trade.

Additionally, State Street concealed the fraud by deliberately failing to include time stamp data in its reports, so that the pension funds could not determine the true execution costs by verifying when State Street actually executed the trades. Commenting on this deception, one State Street senior vice president said to another executive that “…if providing execution costs will give [CalPERS] any insight into how much we make off of FX transactions, I will be shocked if [State Street] or anyone would agree to reveal the information.”

Brown’s office estimates that the pension funds were overcharged by more than $56.6 million over eight years. The lawsuit asks for relief in the amount of triple California's damages, civil penalties of $10,000 for each false claim; and recovery of costs, attorneys' fees and expenses. It is estimated that damages and penalties could exceed more than $200 million.

Under California's False Claims Act, anyone who has previously undisclosed information about a fraud, overcharge, or other false claim against the state, can file a sealed lawsuit on behalf of California to recover the losses. They must notify the Attorney General as well.

Such a case is called a 'qui tam' case. If there is a monetary recovery, the law provides that the whistleblower “qui tam plaintiff” receives a share of the amount recovered if the requirements of the statute are met.

A copy of the complaint is attached.

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.

San Diego – Continuing his fight against “rip-off artists” operating in California, Attorney General Edmund G. Brown Jr. filed suit today against eight individuals and six businesses that operated scams targeting small business owners. The lawsuits, filed today in San Diego Superior Court, seek to recover more than $3 million.

Schedule note: Brown is in San Diego this morning and is available to speak about these cases at approximately 10:30 -- at the Hilton Bayfront Hotel - downtown (Indigo A Room,
1 Park Blvd in San Diego 92101.

“These cases will send a powerful signal that small business owners must be on the alert,” Brown said. “These rip-off artists sent official-looking documents through the mail for the sole purpose of duping small business owners into paying them money – for no value in return.”

The three cases are separate scams, each following a similar theme. The defendants mailed to small businesses solicitations that appeared to be government documents featuring an official-looking seal, an official-sounding name, citations to the Corporations Code and a “reply by” date. The forms claimed that the business was in danger of losing its corporate or limited liability status if payment was not made within a short period of time.

In the first case, Anthony Williams operated Compliance Annual Minutes Board that mailed to California businesses official-looking forms demanding that the recipient complete the form and return it with payment of an “Annual Fee” of $150 or risk loss of corporate status. Williams claimed that in exchange for payment, he would provide corporate minutes. Instead, he prepared generic fictitious minutes for the business owners who paid his fee.

The next case involved George Alan Miller, Rebecca Miller, Arghisti Keshishyan and Kristina Keshishyan who together operated two corporations and one limited liability company: Annual Review Board, Inc., Business Filings Division and Corpfilers.com, LLC. Miller and his co-conspirators mailed solicitations to California limited liability companies and corporations, demanding that the recipients complete the form and return it with payment or risk penalties, fines and suspension. The payment amounts varied from $195 to $239, but all mailers were designed to be official-looking government documents that misled the recipients into sending money.

In the third case, Maria Jones operated Corporate Filings Division and Corporate Compliance Filings, Inc., which mailed official-looking forms entitled “Annual Minutes Disclosure Statement” to California businesses, implying that the recipient business was required to complete the form and return it with payment of an “Annual Fee” of $175 or risk loss of corporate status. In exchange for payment, Jones agreed to provide corporate minutes. The information she solicited, however, was inadequate for legitimate corporate minutes, and she instead provided fictitious minutes.

All defendants are accused of violating:

• Business and Professions Code section 17533.6 (Deceptive Solicitation Statute)
• Civil Code section 1716 (Phony Billing Statute)
• Business and Professions Code section 17500 (False Advertising Statute)
• Unfair business practices within the meaning of Business and Professions Code section 17200.

In all three cases, the Attorney General’s Office seeks civil penalties, injunction and other equitable remedies and costs.

Since 2004, the Attorney General’s Office has received more than 5,000 complaints against a growing number of individuals who mailed solicitations made to look like governmental forms to small businesses in California. Today’s announcement adds to the five cases the office has already successfully handled since these scams were brought to the office’s attention.

The three complaints and the mailers are attached.

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.

San Francisco – Launching an investigation into credit rating agencies’ role in fueling the financial crisis, Attorney General Edmund G. Brown Jr. today issued subpoenas to Standard & Poor’s, Moody’s and Fitch to determine whether the firms violated California law when they recklessly gave “stellar ratings to shaky assets.”

“Standard & Poor’s, Moody’s and Fitch put their seal of approval on high risk mortgage-backed securities, recklessly giving stellar ratings to shaky assets that proved toxic to the entire financial system,” Brown said. “This investigation is meant to determine how these agencies could get it so wrong and whether they violated California law in the process.”

Moody’s Investors Service, Standard & Poor’s, and Fitch Ratings grade the creditworthiness of corporations and municipalities and the financial instruments (e.g., bonds and securities) they issue. Investors depend on these ratings to gauge risk and make investment decisions.

At the peak of the housing boom, these agencies gave their highest ratings to complicated financial instruments – including securities backed by subprime mortgages –making them appear as safe as government-issued Treasury bonds.

In rating these securities, the agencies worked behind the scenes with the same Wall Street firms that created them. For their work, the firms earned billions of dollars in revenue, at a rate nearly double what they earned for rating other financial products.

Banks, pension funds and other investors relied on these ratings when they purchased trillions of dollars of securities backed by subprime mortgages because of the high returns and apparent low-risk. Those purchases helped fuel the housing bubble by providing funding for lenders to issue ever-riskier subprime and other toxic mortgages. When the bubble burst, however, those risky mortgages defaulted in record numbers and investors were left holding worthless securities, unable to sell them.

Subsequently, the agencies downgraded the credit ratings of $1.9 trillion in residential mortgage backed securities, a tacit acknowledgement of their failure to adequately assess the risks of the debt they rated. The rating agencies either ignored or did not understand the risks of the debt they rated.

Given the role the rating agencies’ played, Brown is directing the agencies to provide by October 19, 2009 information that will help answer the following questions:

• Whether the rating agencies failed to conduct adequate due diligence in the rating process;
• Whether the rating agencies gave high ratings to particular securities when they knew or had reason to know that high ratings were not warranted;
• Whether the rating agencies failed to comply with their own codes of conduct in rating certain securities;
• Whether the rating agencies profited from giving inaccurate ratings to particular securities;
• Whether the rating agencies made fraudulent representations concerning the quality or independence of their ratings;
• Whether the rating agencies compromised their standards and safeguards for profits;
• Whether the rating agencies' statistical models captured the risk inherent in subprime and other risky assets and, if not, what was the rating agencies' response; and
• Whether the rating agencies conspired with the companies whose products they rated to the detriment of investors.

Brown’s investigation of the rating agencies is one of many actions by his office to address financial practices relating to the mortgage meltdown, including his 2008 lawsuit against Countrywide and recent crackdown on foreclosure consultants and loan modification scams.

Los Angeles – Attorney General Edmund G. Brown Jr. has filed legal action to permanently stop Professor Gerald D. Buckberg, M.D., and five officers of the nonprofit L.B. Research Foundation from “diverting donations” from the charity to their own personal business ventures and medical research activities.

“California law strictly prohibits the use of charitable donations for one’s personal benefit,” Brown said. “Yet, Professor Buckberg and his associates diverted donations from L.B. Research Foundation to fund their research and development projects in clear violation of California law.”

Under California law, “no part of a charitable organization’s income or assets may inure to the benefit of any director, officer, member or private person.” However, since 1997, L.B. Research Foundation’s officers have used its funds to finance their own medical research, the research activities of companies in which they had a financial interest and the development of medical devices that they sold.

Dr. Buckberg founded L.B. Research Foundation in 1997. The purpose, as stated in the articles of incorporation, was to assist people suffering from physical and mental disabilities. The Foundation was funded primarily by Buckberg, although it also received some donations from several other individuals and businesses.

Brown’s office launched an investigation in 2007. The investigation revealed that the foundation has been under the primary control of Buckberg and LB has been used primarily to fund Buckberg's research and development projects and the research of his colleagues and friends.

For instance:

• From 1997 through 2004, Buckberg used $120,000 in donations to produce an educational DVD for use by medical professionals. The rights to the DVD belong to The Helical Heart Company, a for-profit corporation which Buckberg owns.

• In 2000, $1 million of the charity’s funds were donated to UCLA to establish an endowed faculty chair. Buckberg then applied for an appointment to the chair and, when that application was rejected, L.B. Research Foundation sued UCLA. Approximately $300,000 of the Foundation’s assets have been used to pay legal fees related to that lawsuit.

• In 2003, Buckberg used $15,000 of the charity’s funds to pay General Theming Contractors, LLC – which he owns -- to build plastic heart models, which he subsequently sold.

• From 2002 to 2006, Buckberg used over $50,000 of the charity’s funds to pay the travel and hotel expenses of physicians whose research benefited a medical device licensed and patented by a for-profit corporation owned and controlled by Buckberg.

The investigation further revealed that not all board members knew they were officers of LB or that they were even part of LB’s board of directors. Buckberg had sole custody of the charity’s financial records and checkbook. Very few of the board’s grant-making decisions were documented and board members failed to understand that the charity’s assets could not be used for their personal benefit.

Brown’s suit, filed in Los Angeles Superior Court, contends that the charity and its officers:

• Failed to maintain adequate books and records in violation of Corporations Code section 6320;
• Breached their fiduciary duties in violation of Corporations Code sections 5233, 5260 and U.S. Code section 4945;
• Failed to maintain an independently elected board of directors in violation of Corporations Code sections 5210 and 5213;
• Filed and distributed false and incomplete reports in violation of Corporations Code sections 6215 and 6812; and
• Engaged in unfair competition in violation of Business and Professions Code section 17200.

Brown is seeking to recover over $500,000 in misappropriated funds, permanently dissolve the charity, assess civil penalties of over $100,000 and prohibit the defendants from running a charity until they provide accounting statements to his office.

To report charity fraud, contact the Attorney General’s Office at 1-800-952-5225 or fill out a complaint form, available on the charities pages of the Attorney General’s website at http://ag.ca.gov/charities/forms/charitable/ct9.pdf.

Los Angeles – Attorney General Edmund G. Brown Jr. today announced that deputies in his office are launching an independent inquiry into how Health Maintenance Organizations review and pay insurance claims submitted by doctors, hospitals and other medical providers.

This investigation is prompted by reports that California’s five largest health-insurance providers are denying insurance claims at rates of up to 39.6 percent.

“These high denial rates suggest a system that is dysfunctional, and the public is entitled to know whether wrongful business practices are involved,” Brown said.

In the coming days and weeks, deputies will review records and will speak with individuals who have relevant knowledge of the issues raised.

Sacramento – Attorney General Edmund G. Brown Jr. today announced that California will receive $34.8 million as part of a nationwide settlement with Pfizer, Inc., resolving civil and criminal charges that the company paid “illegal kickbacks” and conducted improper marketing campaigns for more than a dozen of its drugs. Under the nationwide agreement, Pfizer will pay a total of $2.3 billion to the federal government and all 50 states.

Brown also announced that California will receive an additional $2.7 million in a separate settlement with Pfizer over the illegal off-label marketing of Geodon, an anti-psychotic medication. Under this agreement, Pfizer will pay a total of $33 million to California and 42 other states.

“Pfizer paid illegal kickbacks in the form of cash, high-priced dinners and weekend getaways to induce physicians to prescribe its drugs,” Brown said. “In what is the largest health care fraud settlement in U.S. history, the company will pay more than $2.3 billion, including $35 million to the state of California.”

$2.3 Billion Nationwide Settlement
Brown, the other attorneys general, and the U.S. Department of Justice contend that Pfizer engaged in a pattern of unlawful marketing activity to promote drugs for uses which the Food and Drug Administration (FDA) had not approved. It is not illegal for a physician to prescribe a drug for an unapproved use, but federal law prohibits a manufacturer from marketing a drug for off-label uses not approved by the FDA. This promotional activity included:

- Marketing Bextra for conditions and dosages other than those for which it was approved;

- Promoting the use of the anti-psychotic drug Geodon for a variety of off-label conditions such as attention deficit disorder, autism, dementia and depression for patients that included children and adolescents;

- Selling the pain medication Lyrica for unapproved conditions;

- Making false representations about the safety and efficacy of Zyvox, an antibiotic only approved to treat certain drug resistant infections.

The settlement also contends that Pfizer paid illegal kickbacks to health care professionals to induce them to promote and prescribe Bextra, Geodon, Lyrica, Zyvox, Aricept, Celebrex, Lipitor, Norvasc, Relpax, Viagra, Zithromax, Zoloft and Zyrtec. These payments allegedly took many forms, including entertainment, cash, travel and meals. Federal law prohibits payment of anything of value in exchange for the prescribing of a product paid for by a federal health care program.

As a condition of the settlement, Pfizer will enter into a Corporate Integrity Agreement with the U.S. Department of Health and Human Services, Office of the Inspector General, which will closely monitor the company’s future marketing and sales practices.

This settlement is based on nine whistleblower (qui tam) cases that were filed on behalf of California and other states in the U.S. District Court for the District of Massachusetts, the U.S. District Court for the Eastern District of Pennsylvania and the U.S. District Court for the Eastern District of Kentucky. Actions were filed by private individuals under state and federal false claims statutes, including California’s False Claims Act.

California’s pre-interest recovery of $34.8 million represents double damages, half of which will go to Medi-Cal. The remaining $17.4 million will be deposited, pursuant to state law, in the Attorney General’s False Claims Fund, which is used to support ongoing investigations and prosecutions of false claims unlawfully filed at the expense of the state.

A National Association of Medicaid Fraud Control Units team participated in the investigation and conducted the settlement negotiations with Pfizer on behalf of California and the other settling states. Prosecutors and auditors from the Attorney General’s Bureau of Medi-Cal Fraud and Elder Abuse participated in these negotiations.

$33 Million Geodon Settlement
In the second settlement, Brown and the other attorneys general contend that Pfizer engaged in unfair and deceptive practices when it marketed Geodon for off-label uses between January 1, 2001 to December 31, 2007. As part of the settlement, Pfizer has agreed to change how it markets Geodon and has agreed to stop promoting off-label uses.

Geodon is the brand name for the prescription drug ziprasidone. The drug has been approved by the FDA for treatment of schizophrenia in adults and for manic or mixed episodes of bipolar disorder in adults. The complaint contends that Pfizer promoted Geodon for a number of off-label uses, including pediatric use and use at dosage levels higher than had been approved by the FDA. Although a physician is allowed to prescribe drugs for off-label uses, federal law prohibits pharmaceutical manufacturers from marketing their products for off-label uses.

The settlement mandates that Pfizer shall:
• Not make any false, misleading or deceptive claims regarding Geodon;
• Not promote Geodon for off-label uses;
• Not promote Geodon using selected symptoms of the FDA-approved diagnoses unless certain disclosures are made regarding the approved diagnoses;
• Post on its website a list of physicians and related entities who receive payments from Pfizer until 2014;
• Provide product samples of Geodon only to health care providers who have specialties that customarily treat patients who have diseases for which treatment with Geodon would be consistent with the product’s current labeling;
• Register and post on a publicly accessible website certain Pfizer-sponsored clinical trials; and
• Require its medical staff to be responsible for the identification, selection, approval and dissemination of scientific article reprints containing off-label information regarding Geodon, and that such information not be referred to or used in a promotional manner.

California will receive $2.7 million in civil penalties from Pfizer.

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

Los Angeles – Attorney General Edmund G. Brown Jr. today forced CashCall, Inc., an Anaheim-based fast-money lender, to stop using “loan shark tactics” in collecting debt, including abusive calls at all hours of the day and night and empty threats of law enforcement action.

The court-ordered judgment also forces CashCall to stop misleading consumers with deceptive advertising and pay $1 million in civil penalties and legal expenses. CashCall used former child actor Gary Coleman as its television spokesman.

“CashCall preyed on consumers desperate for cash, charging triple digit interest rates and using loan shark tactics to collect on their debts,” Brown said. “This judgment forces CashCall to stop harassing its customers and should serve as a warning to consumers to be wary of fast-money lenders.”

CashCall, owned by Paul Reddam, founder and former owner of DiTech mortgage company, currently charges 139.34% annual interest on the $2,600 loan it offers to consumers. This means that consumers who make the required $298.94 monthly payment over 36 months pay $10,761.84 over the life of the loan. That adds more than $8,000 in interest to the loan.

Brown contends that CashCall used illegal and abusive debt collection practices when customers were unable to make on-time payments, in violation of California Business and Professions Code Section 17200. These practices included:

• Making excessive and verbally abusive telephone calls at all hours of the day and night;
• Causing borrowers to incur bank fees by repeatedly trying to collect payments despite knowing there were insufficient funds in the borrowers’ accounts;
• Threatening to initiate law enforcement and wage garnishment proceedings against borrowers without any basis for doing so;
• Improperly discussing private financial information with borrowers’ friends, colleagues and neighbors;
• Failing to honor borrowers’ requests to cancel automatic withdrawals from checking accounts; and
• Continuing to contact borrowers by phone after receiving requests to only contact them in writing.

Brown also contends that CashCall misled customers with deceptive television, radio and online advertising in violation of Business and Professions Code Section 17500.

CashCall’s advertisements falsely suggested that low interest rate loans were available to all borrowers, when in reality, the rates advertised were only offered to some borrowers, usually members of the military. CashCall offered lower interest rates because Federal law limits the interest it can charge on loans to active duty servicemembers and their families.

Today’s court order puts an end to CashCall’s illegal debt collection practices and stops its misleading advertising. The settlement also requires CashCall to:

• Stop making excessive and verbally abusive telephone calls at all hours of the day and night;
• Pay $1 million in civil penalties and expenses related to the investigation and resolution of this case;
• Train its employees within 30 days and not fewer than four times per year thereafter to ensure compliance with the judgment;
• Terminate any officer, director or employee who violates the terms of the judgment;
• Record all telephone calls made to, or received from, prospective and current borrowers; and
• Maintain a detailed log of all consumer complaints.

A copy of the complaint and final judgment, filed in Los Angeles County Superior Court, is attached.

Oakland – Attorney General Edmund G. Brown Jr. and eight District Attorneys today reached an agreement requiring U-Haul Company of California to “clean up its act” and improve the way it handles and disposes of hazardous materials at its 179 regulated facilities throughout the state.

“U-Haul has turned a blind eye to California’s hazardous materials laws for years, even after an explosion and fire severely damaged one of its facilities,” Brown said. “This agreement forces U-Haul to clean up its act and improve the way it handles hazardous materials, plans for emergencies and trains employees.”

U-Haul’s hazardous materials practices first came under scrutiny in November 2004, following an explosion and two-alarm fire at a Santa Rosa facility, which resulted in flash burns to an employee.

The emergency response team that arrived on the scene had difficulty assessing the situation due to the lack of information about stored hazardous materials. The facility had no site map indicating where hazardous materials were stored as required by law, and employees had failed to properly label flammable materials including gasoline. The building was damaged in the fire and ultimately closed.

Subsequently, the Attorney General’s office and 8 District Attorneys launched a 2-year statewide investigation into U-Haul’s handling of hazardous materials and training of employees. The investigation revealed violations at virtually all of U-Haul’s 179 California regulated facilities. Despite being repeatedly notified of the violations, U-Haul did not address them.

Such violations include:

• Inadequate training regarding handling of hazardous materials and hazardous materials business plans;
• Improper storage of hazardous waste such as oil filters and pans, waste gasoline and car batteries;
• Improper transport of hazardous waste; and
• Lack of statutorily mandated hazardous material business plans and emergency response plans.

The Attorney General’s office, joined by the District Attorneys of Sonoma, Alameda, Sacramento, San Joaquin, Solano, San Francisco, Santa Clara and Riverside, filed suit on July 27, 2006, seeking penalties and a permanent injunction to enforce compliance with hazardous materials and hazardous waste laws.

Today’s agreement resolves the lawsuit and requires U-Haul to:
• Complete and maintain statutorily mandated hazardous material business plans and emergency response plans for regulated facilities;
• Train its employees how to properly handle hazardous materials;
• Retain an environmental coordinator who will oversee, monitor and submit annual reports on the company’s compliance;
• Inspect hazardous waste storage areas at regulated facilities on a weekly basis;
• Properly transport hazardous waste; and
• Pay $2 million in costs and penalties.

This settlement, filed in Alameda County Superior Court, is attached.