Lawsuits & Settlements

Civil Penalties and Significant Injunctive Terms Follow the $1.18 Billion Secured for California in Initial Landmark Settlement with Volkswagen

SAN FRANCISCO - Attorney General Kamala D. Harris today announced that, in addition to the historic $14.7 billion settlement with Volkswagen announced last week, the company will also pay California an additional $86 million in civil penalties as part of a second partial settlement over the company’s use of “defeat devices” to evade emissions testing in its diesel vehicles. 

The agreement, which is subject to court approval, represents the largest amount of money recovered by the state of California from an automaker and resolves certain aspects of the California Attorney General’s claims against Volkswagen under California’s Unfair Competition Law as well as the Dodd-Frank Consumer Financial Protection Act of 2010.  Volkswagen will also agree to significant injunctive terms to deter future misconduct, including a new requirement that Volkswagen contractors and employees report to the California Attorney General’s office any request for or use of “defeat devices.”  

Of the $86 million in penalties, the Attorney General will direct $10 million in grants to local government agencies or academic institutions to research and develop technology to detect “defeat devices” and better assess on-road emissions, as well as to monitor, model, and mitigate the environmental and public health impacts of vehicle emissions, especially on children and other vulnerable populations.

“We must conserve and protect our environment for future generations and deliver swift and certain consequences to those who break the law and pollute our air.  Volkswagen tricked consumers seeking to purchase an eco-friendly car by misleading the public about the level of harmful pollutants their so-called ‘clean diesel’ vehicles were emitting,” said Attorney General Harris.  “This additional settlement sends an unequivocal message to Volkswagen and any other automaker that California will aggressively enforce our robust consumer and environmental protection laws.” 

Today’s announcement follows last Tuesday’s joint announcement by California Attorney General Kamala Harris and California Air Resources Board Chair Mary Nichols that California, alongside the U.S. Environmental Protection Agency and U.S. Department of Justice, had negotiated a landmark $14.7 billion settlement with Volkswagen over the software it installed in its diesel cars to trick emissions testing while actually emitting up to 40 times the level of harmful nitrogen oxides allowed under state and federal law. 

As part of that $14.7 billion agreement, Volkswagen agreed to spend an estimated $10 billion to compensate consumers and buy back or modify hundreds of thousands of its polluting cars, pay $2.7 billion into a trust fund for environmental mitigation projects, and spend $2 billion over 10 years on zero-emission technology.  Of the $4.7 billion in mitigation funding and investments, $1.18 billion will come to California ($800 million in zero-emissions technology investments and $380 million for environmental mitigation projects in the state).

The partial settlement announced today relates to Volkswagen’s 2.0 and 3.0 liter vehicles that deployed “defeat devices” to deceive regulators and consumers about levels of harmful emissions.  An estimated 86,000 2.0 and 3.0 liter vehicles were sold or leased in California between 2009 and 2015.  Today’s settlement preserves California’s potential criminal claims and claims for additional civil penalties and injunctive relief under state environmental laws, as well as the Attorney General’s claims for consumer relief and environmental mitigation related to the 3.0 liter vehicles.

In addition to the $86 million in civil penalties, Volkswagen agrees to strict injunctive terms as part of the settlement, including:

• Prohibitions on false and deceptive advertising
• Affirmatively disclosing defeat devices in certification applications and other submissions to the California Air Resources Board (CARB)
• Notifying the California Attorney General’s office and CARB of whistleblower and other complaints
• Requiring Volkswagen contractors and employees who are designing engine control units or engine control software to report to the California Attorney General’s office and to CARB any request for or use of defeat devices, and to keep accurate records of software features and changes that could be used as defeat devices
• Provide the California Attorney General’s office with reports of any violations, along with periodic reports regarding its efforts to implement the injunction and effectiveness of those efforts

The consent decree was filed today in U.S. District Court, Northern District of California and is attached to the online version of this news release at www.oag.ca.gov/news.

SAN FRANCISCO - Attorney General Kamala D. Harris and the California Air Resources Board (CARB) today announced a landmark $14.7 billion national settlement with Volkswagen over allegations that the company violated environmental and consumer protection laws by installing “defeat device” software to bypass emissions controls in its 2.0 liter diesel vehicles.

As part of the national agreement, which is subject to approval by the court, Volkswagen will spend approximately $10 billion to buy back or modify these vehicles, as well as pay $2.7 billion into a trust to support environmental programs and reduce emissions and an additional $2 billion on investments and promotion of zero emissions vehicles.  The agreement preserves the Attorney General’s and CARB’s claims for civil penalties and prospective injunctive relief, as well as their claims related to 3.0 liter diesel vehicles.

In addition to providing consumer relief funding, California will receive $1.18 billion, representing more than one-quarter of the funding VW must provide for environmental projects in states injured by the company's conduct and investments it must make in zero emission technology.

“Our state and national environmental protection laws exist to protect public health and to preserve our planet for future generations.  Volkswagen undermined these objectives by deceiving California consumers and flagrantly violating California environmental and consumer protection laws by manipulating its diesel vehicles to produce false results when undergoing emissions testing,” said Attorney General Kamala Harris. “This landmark agreement not only ensures that consumers who were deceived are fairly compensated, but also requires Volkswagen to make unprecedented investments in protecting our environment and advancing zero emission technology.”

As part of the agreement, VW will offer compensation to those who own or lease a VW or Audi 2.0 liter vehicle as of September 18, 2015.  Owners have the option of having Volkswagen buy back their vehicle or, if approved by CARB and EPA, having VW modify their vehicle to reduce its emissions.  Owners who opt for a buyback or modification will also receive an additional cash payment of at least $5,100.  Some owners may receive as much as $10,000.

In addition to consumer relief and getting polluting cars off the road via the buyback and modification program, which is anticipated to cost Volkswagen over $10 billion, Volkswagen is also required to pay $2.7 billion into a trust to support environmental programs throughout the country to reduce emissions. CARB will receive and direct 14.12%, $380 million, of these trust funds to fund environmental mitigation projects in California.  Volkswagen is also required to buy back, modify, or scrap at least 85% of the subject vehicles nationally and in California, and it is required to pay for additional mitigation projects if it falls short of that requirement.   

Volkswagen must also spend $2 billion over a 10-year period to promote zero emissions vehicles through educational information, research and development, and infrastructure development (such as building charging stations), to further mitigate emissions and help right the market that was manipulated by the false emissions results in Volkswagen diesel vehicles.  Forty percent, or $800 million, of these investments will be made in California, pursuant to investment plans that will be subject to approval by CARB.

“This is a good deal for California’s environment and for California consumers. It will bring over a billion dollars of projects to California to supercharge our expanding zero-emission vehicle market, and fully mitigate the environmental harm to our air as a result of VW’s cheating,” said CARB Chair Mary D. Nichols. “The Consent Decree also recognizes the crucial contribution the dogged engineers in CARB’s testing lab played in exposing the illegal device in the first place – and the exceptionally costly and difficult challenges we face in our fight for cleaner air in a state where tens of millions breathe the most heavily polluted air in the nation.”

Volkswagen programmed software in its diesel cars to achieve lower emissions while undergoing testing, but in normal driving conditions, their cars were emitting up to 40 times more harmful nitrogen oxides than allowed by state and federal law. 

The parties settling claims against Volkswagen in this major agreement include the California Attorney General’s Office, CARB, the U.S. Department of Justice, and the U.S. Environmental Protection Agency (EPA).

California is uniquely affected, not only because of our robust environmental protection laws and CARB’s unique enforcement and regulatory role, but also because our state has the largest number of affected consumers.

In conjunction with the consent decree, the California Attorney General’s office filed a joint complaint with CARB in the Northern District of California this morning.  The complaint is attached to the online version of this news release at www.oag.ca.gov/news.

The agreement is subject to approval by the court following a public comment period.

The agreement is specific to 2.0 liter vehicles and does not include Volkswagen and Audi 3.0 liter vehicles that are alleged to have similar defeat devices installed.  It also preserves the ability of the Attorney General, CARB, and the EPA to seek civil penalties and further injunctive relief.

LOS ANGELES – Attorney General Kamala D. Harris today filed a lawsuit against Johnson & Johnson (J&J) for false advertising and deceptive marketing of its surgical mesh products for women.  The complaint alleges that J&J neglected to inform both patients and doctors of possible severe complications and misrepresented the frequency and severity of risks.

California co-led a multistate investigation, including 46 states and the District of Columbia, into J&J’s surgical mesh products for women, and is seeking injunctive relief and monetary penalties to ensure that J&J stops its deceptive practices.

“Johnson & Johnson put millions of women at risk of severe health problems by failing to provide critical information to doctors and patients about its surgical mesh products,” said Attorney General Harris. “Johnson & Johnson’s deception denied women the ability to make informed decisions about their health and well-being.  My office will continue to hold companies accountable for misleading consumers and patients for financial gain.”

The surgical mesh device is designed to treat common health conditions in women such as stress urinary incontinence and pelvic organ prolapse. The lawsuit alleges that J&J misrepresented the safety of these devices by concealing the possibility of serious and irreversible complications caused by mesh, including permanent pain with intercourse and/or loss of sexual function, chronic pain, permanent urinary or defecatory dysfunction, and potentially devastating impact on overall quality of life.  

J&J also misrepresented the severity and frequency of common complications, and failed to disclose that its surgical mesh devices presented risks not present in alternative treatment options.

The suit further claims that J&J knew about potential risks and side effects prior to the launch of their mesh products, yet omitted that information from educational and marketing materials provided to doctors and patients.  

J&J sold 787,232 devices nationally from 2008 to 2014, including more than 42,000 in California for that same time period.  Worldwide, more than 2 million women had been implanted with these mesh products. 

In addition to the lawsuit filed today, J&J faces over 35,000 personal injury lawsuits in state and federal court related to its surgical mesh products. 

A copy of the complaint is attached to the online version of this news release at www.oag.ca.gov/news.

SACRAMENTO - Attorney General Kamala D. Harris today filed a lawsuit against Pong Marketing & Promotions Inc., a major sweepstakes gambling software provider, for illegal gambling in violation of state criminal and unfair competition laws.  In the suit, filed in Solano County Superior Court, Attorney General Harris seeks injunctive relief and penalties of approximately $10 million.

Pong, a company based in Canada, provided software to sweepstakes cafes throughout California.  These cafes operate as mini-casinos, offering interactive gambling-themed games on computer gambling devices, which they market to a predominantly vulnerable, low-income clientele.  The California Supreme Court ruled that these machines are illegal gambling devices in violation of California Penal Code section 330b.  Pong then abandoned its sweepstakes model, changing its software to a purported skill-based system, retaining the gambling devices and having players redeem cash prizes by executing the “skill” of clicking a mouse to stop a moving cursor before the time expires.

“When casinos are allowed to masquerade as cafes in our neighborhoods, it both deceives consumers and undermines public safety,” said Attorney General Harris. “Software providers who misrepresent their games as lawful must be held accountable for their role in facilitating criminal activity.  I thank our law enforcement partners across the state for their efforts to shut down these illegal gambling operations.”

Sweepstakes gambling enterprises are a major problem nationwide, estimated to earn over $10 billion a year.  In California, Attorney General Harris has pioneered the use of the Unfair Competition Law to provide stronger monetary remedies against these operators. 

The Attorney General’s office works in tandem with local law enforcement agencies across California as part of the Sweepstakes Gambling Task Force to dismantle illegal gambling operations. The Sweepstakes Gambling Task Force includes the California Attorney General’s Office, Contra Costa County District Attorney Mark A. Peterson, Fresno County District Attorney Lisa A. Smittcamp, Kern County District Attorney Lisa S. Green, Merced County District Attorney Larry Morse II, Riverside County District Attorney Michael A. Hestrin, Solano County District Attorney Krishna Abrams, San Diego County District Attorney Bonnie M. Dumanis, Sonoma County District Attorney Jill R. Ravitch, Tulare County District Attorney Tim Ward, and Los Angeles City Attorney Mike Feuer.

SAN FRANCISCO - Attorney General Kamala D. Harris today filed a lawsuit against investment bank Morgan Stanley for misrepresentations about complex investments such as residential mortgage-backed securities, in which large pools of home loans were packaged together and sold to investors.  These misrepresentations contributed to the global financial crisis and to major losses by investors including California's public pension funds, which are responsible for the retirement security of California peace officers, firefighters, teachers, and other public employees.

The complaint, filed in San Francisco Superior Court, alleges that Morgan Stanley violated the False Claims Act, the California Securities Law and other state laws by concealing or understating the risks of intricate investments involving large numbers of underlying loans or other assets. In addition to residential mortgage-backed securities, the complaint also focuses on "structured investment vehicle" investments, which involved not just packages of residential mortgage loans but also other types of debt of individuals and corporations. 

“Morgan Stanley’s conduct in this case evidenced a culture of greed and deception that helped create a devastating economic crisis and crippled California’s budget,” said Attorney General Harris. “This lawsuit is necessary in order to hold Morgan Stanley accountable for the destruction it caused to California, our people, and our pension funds.”

Specifically, the complaint alleges that, from 2004 to 2007, Morgan Stanley assembled and sold billions of dollars in mortgage-backed securities, many of which contained risky loans made by Morgan Stanley subsidiary Saxon, or by New Century, a mortgage lender which received crucial funding from Morgan Stanley.  Morgan Stanley purchased and bundled high-risk loans from subprime lenders like New Century into seemingly safe investments, even though it knew the lenders were “not [using] a lot of common sense” when approving the loans, the complaint alleges. Additionally, the complaint alleges that Morgan Stanley did not disclose the risks because it did not want its concerns about loan quality to become a “relationship killer” that would cause it to lose its lucrative business with companies making the risky loans. 

Among other things, Morgan Stanley's offering documents, which were required to fully and accurately inform investors about the risks, actually misrepresented the quality of the loans contained in the investment packages, by failing to disclose that many of them were underwater (the mortgage was more than the property was worth) and by failing to disclose the number of delinquent loans.  They also used exaggerated appraisals which overstated the value of the properties securing the loans, and knowingly presented incorrect data concerning owner occupancy and loan purpose, which tended to understate the riskiness of the loans.   

The complaint goes on to allege that Morgan Stanley sometimes even took loans that it had already decided not to include in its investment packages because they were too risky, and then included them in later investment packages, despite knowing the problems with the loans, and doing nothing to fix them. The complaint alleges that the lack of disclosure prompted a Morgan Stanley employee to observe to his co-workers that someone “could probably retire by shorting these upcoming . . . deals,” “someone needs to benefit from this mess.”

The complaint also alleges that Morgan Stanley played a central role in crafting the Cheyne structured investment vehicle, which sold supposedly safe short-term investments based on mortgage-backed securities and other complex investments.  Investors were particularly reliant on accurate disclosure of the risks because of the complicated nature of these investments.  The complaint alleges, however, that while Morgan Stanley knew of significant risks, it nevertheless worked to portray the investments as extremely safe.  In fact, Morgan Stanley managed to procure extremely high credit ratings, in some cases the same ratings as the very safest investments such as U.S. government bonds, for investments in Cheyne notes. Morgan Stanley bragged that it “shaped rating agency technology” to “get . . . the rating we wanted in the end,” prompting a SIV manager to observe, “it is an amazing set of feats to move the rating agencies so far.”  Unfortunately, the result of Morgan Stanley's success was huge losses to investors when the SIV failed.     

The California Public Employees Retirement System (CalPERS) and the California State Teachers Retirement System (CalSTRS) – two of the nation's largest institutional investors – lost hundred of millions of dollars on these Morgan Stanley investments.  CalPERS provides retirement security and health plans to more than 1.6 million California firefighters, peace officers, and other public employees.  CalSTRS provides retirement, disability, and survivor benefits for over 850,000 of California’s pre-kindergarten through community college educators and their families. 

The lawsuit arises from a multiyear investigation into the issuance and rating of mortgage-backed securities by Attorney General Harris's California Mortgage Fraud Strike Force.

The Attorney General’s Mortgage Fraud Strike Force was created in May 2011 to comprehensively investigate misconduct in the mortgage industry. As a result of that investigation, Attorney General Harris has to date recovered over $900 million for California’s public pension funds in settlements with three banks and a credit rating agency over misrepresentations in connection with structured finance investments sold to CalPERS and CalSTRS. 

The Attorney General's additional efforts to investigate the mortgage crisis include securing an estimated $18 billion for California in the National Mortgage Settlement and sponsoring the California Homeowner Bill of Rights, a package of laws instituting permanent mortgage-related reforms.

SAN FRANCISCO - Attorney General Kamala D. Harris today announced a preliminary approval of settlements resolving allegations that LG, Hitachi, Panasonic, Toshiba, and Samsung, companies all based in Japan or Korea, fixed prices on critical components of televisions and computer monitors from 1995 to 2007.  Those critical components, known as Cathode Ray Tubes or CRTs, were used to display images on computer monitors and televisions screens before they were replaced by flat screens. The court has approved the settlement pending valid objections submitted within 60 days.    

The companies’ price fixing scheme caused damage to California consumers and government entities that overpaid for their televisions and computers. The announced settlement has led to legally enforceable judgments against these foreign companies.

“LG, Hitachi, Panasonic, Toshiba, and Samsung deliberately targeted the U.S. market to raise prices for televisions and computers worldwide,” said Attorney General Harris. “These settlements bring justice and relief to California consumers and end the malicious practice of price-fixing by these companies.”

The settlements, which were filed in San Francisco Superior Court, require all five companies to pay a total of $4.95 million to settle claims of overcharges paid by California government entities, general damages suffered by the State’s economy, and civil penalties. The settlements require that the companies pay back the illegally obtained profits to those affected by their actions. In addition, the settlements include injunctive relief, which requires that each company engage in company-wide antitrust compliance training and reporting that involves products in addition to CRTs and extends to foreign companies and subsidiaries. Finally, the settlements include requirements, enforceable by the court via fines and imprisonment, to prevent future violations of antitrust law. 

In 2011, after the Office of Attorney General Harris conducted a confidential investigation into price-fixing involving CRTs, Attorney General Harris filed complaints against these companies for having entered into a price-fixing conspiracy of critical components of television and computer screens. That conspiracy involved top-level meetings of key executive decision-makers in Asia and Europe to set prices and outputs of CRTs.  It also involved worldwide meetings among lower-level executives to exchange confidential information.  Californian subsidiaries of these companies were involved in this conspiracy and took on the role of monitoring the prices of televisions and computers in California stores.

This case, filed by Attorney General Harris, requested the court award damages to California consumers. A parallel case filed by private counsel in federal court, known as the Indirect Purchaser Plaintiffs, also requested damages on behalf of Californians, and Attorney General Harris and the Indirect Purchaser Plaintiffs coordinated their discovery and settlement efforts.

Due to these coordinated efforts, California consumers or sole proprietorships that purchased at least one television or computer between 1995 and 2007 can make a claim, with a guaranteed minimum check of $25.

All eligible California consumers and sole proprietorships can file claims for reimbursement at https://www.crtclaims.com/. The new deadline for filing those claims is June 30, 2016.

In December 2015, Attorney General Harris announced a settlement resolving allegations that Pratibha Syntex Ltd., a company based in India, gained an unfair competitive advantage over American-based companies by using pirated software in the production of clothing imported and sold in California. The settlement, which was filed in Los Angeles Superior Court, required Pratibha Syntex to pay $100,000 in restitution, prohibited Pratibha Syntex from using unlicensed software or reproducing any part of a copyrighted software program without the permission of the legitimate copyright holder, and required the company to perform four complete audits of the software on their computers and fix any violations within 45 days. That case marked the first time a state has secured a legally enforceable judgment against an international company for these types of violations. 

Copies of the complaint, memorandum in support of preliminary approval, and the order granting preliminary approval, are all attached to the online version of this release at www.oag.ca.gov/news.  Further details can also be found at http://oag.ca.gov/consumers/crt_notice.

LOS ANGELES - Attorney General Kamala D. Harris and five district attorneys today announced a $8,500,000 settlement with Wells Fargo Bank over privacy violations that included recording consumers’ phone calls without timely telling consumers they were being recorded, as required by California law. The investigation into Wells Fargo and the subsequent settlement were the result of the work of the Attorney General’s Office and the office of Los Angeles County District Attorney Jackie Lacey, along with the Consumer Protection Divisions of Alameda County District Attorney Nancy E. O’Malley, Riverside County District Attorney Michael Hestrin, San Diego County District Attorney Bonnie M. Dumanis and Ventura County District Attorney Gregory D. Totten.

As part of the settlement, which is in the form of a stipulated judgment, Wells Fargo will pay civil penalties totaling $7,616,000 and will reimburse the prosecutors' investigative costs of $384,000. In addition, Wells Fargo will contribute $500,000 to two statewide organizations dedicated to advancing consumer protection and privacy rights.  

“Protecting the privacy of California consumers is increasingly crucial as technology rapidly develops and becomes a bigger part of our lives,” said Attorney General Harris. “This settlement holds Wells Fargo accountable for violating the privacy of its customers by recording calls without providing adequate notification, and ensures that the bank makes the changes necessary to protect the privacy of its customers.”

The civil complaint, filed in Los Angeles Superior Court, alleged that Wells Fargo violated sections 632 and 632.7 of the California Penal Code by failing to timely and adequately disclose its automatic recording of phone calls with members of the public. California has some of strongest privacy laws in the country.  In California, each party to a confidential conversation must be advised at the outset if a call is being recorded, so that the individual can object or terminate the call if he or she does not wish to be recorded.

In addition, the settlement agreement states that Wells Fargo must comply with California's standards for recording confidential communications between the bank and its customers by making clear, conspicuous, and accurate disclosures.  Wells Fargo has also agreed to implement an internal compliance program to ensure that the policy changes are made. This is a significant step that is aligned with Attorney General Harris’ ongoing efforts to preserve California businesses’ ability to innovate while ensuring that consumers’ right to privacy is protected.

“Wells Fargo failed to recognize that Californians place a high value on privacy,” said Los Angeles County District Attorney Jackie Lacey. “Today’s settlement takes another step toward ensuring that consumers’ rights are protected.”  

“The collaboration of the District Attorney’s Offices and the Attorney General resulted in today’s settlement,” said Alameda County District Attorney Nancy E. O’Malley. “As information technology reaches ever further into the lives of our citizens, strict compliance with California’s privacy laws becomes ever more imperative to protect the rights of those individuals.”

“Preserving an individual’s right to privacy is among the greatest challenges we face in the Digital Age,” said San Diego County District Attorney Bonnie M. Dumanis. “This settlement underscores our office’s commitment to protecting San Diego County consumers from intrusions and privacy violations in the marketplace.”

Once Wells Fargo was notified by investigators of the alleged deficiencies in their recording disclosures, the bank and its counsel worked cooperatively to implement changes in the company’s policies nationwide, without admitting liability.

In October 2015, Attorney General Harris reached a similar settlement with Houzz Inc., an online platform for home remodeling and design, to resolve allegations that the company violated California privacy laws by recording incoming and outgoing telephone calls without notifying all parties on the call that they were being recorded. The settlement required Houzz to appoint an individual to serve in a Chief Privacy Officer capacity to oversee Houzz’s compliance with privacy laws, marking the first time such a provision has been included in a California DOJ settlement.  . 

Copies of the complaint and stipulated judgment are attached to the online version of this release at www.oag.ca.gov.

LOS ANGELES – Attorney General Kamala D. Harris today announced that her office has obtained a $1.1 billion judgment against defunct Corinthian Colleges, Inc. (CCI) for their predatory and unlawful practices. While CCI filed for bankruptcy in May 2015, this judgment can help secure further relief for struggling students.

Former Corinthian Students should visit the Attorney General’s Interactive Tool for tailored information to help them locate needed resources and relief.

In October 2013, Attorney General Kamala D. Harris led the charge against CCI and its subsidiaries that operate Everest, Heald, and Wyotech colleges, filing suit seeking to put an end to abusive practices that left tens of thousands of students under a mountain of debt and useless degrees. CCI filed for bankruptcy in May 2015. Today, the Court granted a default judgment against CCI.  In the judgment, the Court ordered restitution on behalf of students in the amount of $820,000,000 and civil penalties totaling $350,025,000, for a total of $1,170,025,000 in monetary relief. 

“For years, Corinthian profited off the backs of poor people – now they have to pay. This judgment sends a clear message: there is a cost to this kind of predatory conduct,” said Attorney General Harris. “My office will continue to do everything in our power to help these vulnerable students obtain all available relief, as they work to achieve their academic and professional goals.”

Attorney General Harris’ original complaint alleged that CCI intentionally targeted low-income, vulnerable Californians through deceptive and false advertisements and aggressive marketing campaigns that misrepresented job placement rates and school programs. CCI deployed these advertisements through persistent internet, telemarketing and television ad campaigns. The complaint further alleged that Corinthian executives knowingly misrepresented job placement rates to investors and accrediting agencies, which harmed students, investors and taxpayers. The Attorney General filed many of these documents in Court before entry of the Court’s judgment, and they are now publicly available.

In the Final Judgment, the Court found, among other things, that:

• From at least 2009 until the closure of its schools, many of CCI’s representations and advertisements related to job placement were untrue and/or misleading.   In numerous cases, the placement rate data in CCI’s files show that the actual placement rate is lower than the advertised rate.  The placement rates that CCI published were systematically false, misleading, erroneous and/or failed to comply with applicable state and federal regulations and/or accreditor standards.  In addition, many of these published placement rates could not be substantiated using CCI’s own internal placement data and files. 
• CCI did not offer ultrasound technician programs, x-ray technician programs, radiology technician programs, or dialysis technician programs in California.  Despite this fact, from at least 2010 until the filing of this action, CCI ran millions of ads stating that they did offer those programs.  CCI executives knew that these false ads misled students.
• CCI unlawfully used the official seals of the United States Department of the Army, the United States Department of the Navy, the United States Department of the Air Force, the United States Marine Corps, and the United States Coast Guard.
• CCI’s enrollment agreements contained unlawful clauses.
• CCI engaged in unlawful debt collection.
• CCI failed to discloses its role in the Genesis Private Student Loan Program.
• CCI misrepresented the transferability of credits.
• CCI misrepresented its financial stability to students.

In April 2015, Attorney General Harris and eight other state Attorneys General sent a letter to the U.S. Department of Education urging immediate debt relief for the students who attended Heald College and other CCI campuses.  In May 2015, Attorney General Harris sent a letter to U.S. Department of Education Secretary Arne Duncan, asking the Department to exercise its authority under closed school discharge regulations to provide aid to students affected by Corinthian’s predatory practices.  In June 2015, after calls from Attorney General Harris for substantive relief for students suffering from crippling debt, the U.S. Department of Education announced expanded debt relief options for Corinthian students, which resulted in many more students being eligible for relief.  

Attorney General Harris remains committed to protecting vulnerable students, most recently through the Department of Education’s negotiated rulemaking sessions on borrower defense, where Attorney General Harris called for revisions to proposed borrower defense regulations to ensure meaningful debt relief for students misled by predatory for-profit colleges. 

A copy of the judgment is attached to the electronic version of this release at: https://oag.ca.gov/news 

Agreement to provide certain California borrowers with loan modifications; foreclosed HSBC loans may be eligible for payments for past abuse 

SAN FRANCISCO – Today Attorney General Kamala D. Harris announced that California will join the U.S. Department of Justice, Department of Housing and Urban Development, and 48 other states in entering into a consent judgment with mortgage lender and servicer HSBC over its faulty mortgage servicing practices. This ruling will address mortgage origination, servicing, and foreclosure abuses perpetuated by HSBC.

“California homeowners worked hard and played by the rules to stay in their homes during the housing crisis, but for too many, their struggle and sacrifice was met by abusive mortgage servicing practices,” said Attorney General Harris. “This settlement holds HSBC accountable for its abusive practices that manipulated people fighting to stay in their homes. I encourage eligible borrowers who receive a claim form and feel they were a victim of HSBC’s practices to file a claim immediately.”      

Under the terms of the agreement, HSBC will pay $100 million in cash, of which $59.3 million will be used to distribute payments to borrowers whose homes were foreclosed upon between 2008 and 2013, and $40.5 million will be paid to the federal government. The agreement also requires HSBC to provide $370 million in other consumer relief, such as loan modifications, principal reductions, and loan refinancing.

Based on foreclosure numbers, it is estimated that California borrowers are eligible for about 10% of the $59.3 million fund for payments to foreclosed borrowers.

This agreement is very similar to the National Mortgage Settlement of 2012, in which Attorney General Harris secured a historic $20 billion for California homeowners affected by the mortgage crisis. In 2014, Attorney General Harris announced several multimillion dollar settlements regarding mortgage fraud crime, including a national settlement with SunTrust Mortgage that provided $40 million in payments and $500 million in consumer relief nationwide; a national settlement with Bank of America in which California recovered $300 million in damages and $500 million in consumer relief credits; and a national settlement with Citigroup in which California recovered $102.7 million in damages and $90 million in consumer relief. 

Additional information concerning today’s announcement is listed below.

Loan Modifications

The HSBC agreement requires the company to provide certain California borrowers with loan modifications or other relief. The modifications, which HSBC chooses through an extensive list of options, include principal reductions and refinancing for underwater mortgages. HSBC decides how many loans and which loans to modify, but must meet certain minimum targets. Because HSBC receives only partial settlement credit for many types of loan modifications, the settlement will provide relief to borrowers that will exceed the overall minimum amount.

Payments to Borrowers

Approximately 7,526 eligible California borrowers whose loans were serviced by HSBC and who lost their home to foreclosure from January 1, 2008 through December 31, 2012 and encountered servicing abuse will be eligible for a payment from the national $59.3 million fund for payments to borrowers. The borrower payment amount will depend on how many borrowers file claims. 

Eligible borrowers will be contacted about how to qualify for payments.

Mortgage Servicing Standards

The settlement requires HSBC to substantially change how it services mortgage loans, handles foreclosures, and ensures the accuracy of information provided in federal bankruptcy court.

The terms will prevent past foreclosure abuses, such as robo-signing, improper documentation, and lost paperwork. 

The settlement’s consumer protections and standards include:

• Making foreclosure a last resort by first requiring HSBC to evaluate homeowners for other loss mitigation options;
• Restricting foreclosure while the homeowner is being considered for a loan modification;
• Procedures and timelines for reviewing loan modification applications;
• Giving homeowners the right to appeal denials; and

Requiring a single point of contact for borrowers seeking information about their loans and maintaining adequate staff to handle calls.

Independent Monitor

The National Mortgage Settlement’s independent monitor, Joseph A. Smith Jr., will oversee HSBC agreement compliance for one year. Smith served as the North Carolina Commissioner of Banks from 2002 until 2012, and is also the former Chairman of the Conference of State Banks Supervisors (CSBS). Smith will oversee implementation of the servicing standards required by the agreement and issue public reports that identify whether HSBC complied or fell short of the standards imposed by the settlement. If HSBC is alleged to have violated terms of the agreement, the states and federal agencies can seek relief through the court.

Additional Terms

The agreement resolves potential violations of civil law based on HSBC’s deficient mortgage loan origination and servicing activities. The agreement does not prevent state or federal authorities from pursuing criminal enforcement actions related to this or other conduct by HSBC, or from punishing wrongful securitization conduct that is the focus of the Residential Mortgage-Backed Securities Working Group. Additionally, the agreement does not prevent any action by individual borrowers who wish to bring their own lawsuits.

The agreement will be filed as a consent judgment in the U.S. District Court for the District of Columbia. 

For more information on how to file a claim against a business/company, visit: https://oag.ca.gov/contact/consumer-complaint-against-business-or-company

LOS ANGELES – Attorney General Kamala D. Harris today announced that she has lodged a lawsuit against Southern California Gas Company for violations of California law in connection with a massive methane leak from its Aliso Canyon natural gas storage facility.  In addition to filing suit in her independent capacity as Attorney General, Harris’s lawsuit also includes her client, the California Air Resources Board. The natural gas leak has caused a public health and statewide environmental emergency, which has sickened residents of Porter Ranch and compelled them to relocate.   

The lawsuit alleges that Southern California Gas Company violated state health and safety laws by failing to promptly control the release of the natural gas and report the leak to authorities. In addition, the lawsuit cites the environmental threat the uncontrolled release of more than 80,000 metric tons of methane into the atmosphere poses to California’s efforts to reduce greenhouse gas (“GHG”) emissions and mitigate the pace and effects of climate change.   

“The impact of this unprecedented gas leak is devastating to families in our state, our environment, and our efforts to combat global warming. Southern California Gas Company must be held accountable,” said Attorney General Harris. “This gas leak has caused significant damage to the Porter Ranch community as well as our statewide efforts to reduce greenhouse gas emissions and slow the impacts of climate change. My office will continue to lead this cross-jurisdictional enforcement action to ensure justice and relief for Californians and our environment.” 

Specifically, the lawsuit alleges claims of public nuisance under California Civil Code section 3479 and violations of California’s Unfair Competition Law (Bus. & Prof. Code, § 17200, et seq.), joining the City and County of Los Angeles’ pending claims. Attorney General Harris’s lawsuit also alleges violations of Health and Safety Code sections 41700 (discharge of air contaminants) and 25510 (hazardous materials release reporting); and Government Code section 12607 (impairment of the State’s natural resources). 

The Attorney General seeks relief in the form of injunction, civil penalties, and restitution.

The leak, which was discovered on October 23, 2015, has yet to be abated.  The primary component of the leak is methane, which is the second largest component of GHG emissions in California behind carbon dioxide.  As of January 8, 2016 – eleven weeks after the leak was discovered – it was estimated that cumulative methane emissions amount to more than two million metric tons of carbon dioxide equivalent (approximately two percent of estimated statewide GHG emissions over the same period), and this cumulative total will grow as the leak continues.  

"Attorney General Harris' action today is a significant step in the ongoing effort to hold Southern California Gas accountable, end this public health emergency and assure it never happens again," said Los Angeles City Attorney Mike Feuer, who filed suit against Southern California Gas Company on December 7. 

"This action recognizes the impacts of this ongoing leak on our climate and ensures there’s accountability,” said California Air Resources Board Chair Mary D. Nichols.

Given the critical nature and magnitude of the release, its negative impact on California’s statewide GHG emissions reduction efforts, and the Attorney General’s broad authority to remedy the harms at issue, the Attorney General’s participation in the enforcement action is necessary to ensure that the interests of the people of the State of California are fully represented.

The Attorney General and the California Air Resources Board are in an ideal position to ensure that effective GHG emission mitigation is achieved.  Additionally, the Office of the Attorney General is uniquely situated to coordinate multiple agency claims and represent the interests of those agencies, conserving state resources.  The Attorney General is already serving a crucial coordinating role, facilitating the exchange of information among the numerous state, federal, and local agencies with jurisdiction over the gas leak.

The Attorney General’s filing complements ongoing actions of the numerous government agencies that are coordinating efforts related to the gas leak.  In addition to the Air Resources Board, these agencies include the California Energy Commission, the California Public Utilities Commission, the Department of Fish and Wildlife, the Division of Oil, Gas and Geothermal Resources, the Governor’s Office of Emergency Services, the Los Angeles Regional Water Quality Control Board, the Office of Environmental Health Hazard Assessment and the South Coast Air Quality Management District. Also included are the U.S. Environmental Protection Agency, Region 9 and Los Angeles County.