Lawsuits & Settlements

Brown Sues to Invalidate Pleasanton's Illegal Housing Cap

June 24, 2009
Contact: (916) 210-6000, agpressoffice@doj.ca.gov

Pleasanton, Calif. – Attorney General Edmund G. Brown Jr. today sued the City of Pleasanton to remove its “draconian and illegal” limit on new housing, a significant cause of traffic congestion, air pollution and urban sprawl in the East Bay and Tri-Valley area.

“Pleasanton’s draconian and illegal limit on new housing forces people to commute long distances, adding to the bumper-to-bumper traffic along 580 and 680 and increasing dangerous air pollution,” Brown said. “It’s time for Pleasanton to balance its housing and its jobs and take full advantage of its underutilized land and proximity to BART.”

Brown today filed a motion to intervene in Alameda County Superior Court that would force Pleasanton to lift its housing cap. The suit was initially filed by the nonprofit group Public Advocates on October 17, 2006.

In 1996, Pleasanton adopted Measure GG, which imposed a strict, permanent cap of 29,000 total housing units within the city. At the time, Pleasanton had 21,180 homes, apartments and condominiums. The cap, therefore, allowed fewer than 8,000 new housing units to be built within city limits, regardless of demand or state law requirements.

The City is now on the verge of adopting a General Plan update, which calls for the creation of 45,000 additional jobs by 2025, while retaining the 29,000 limit on housing. This, Brown contends, violates state law, which requires every California city to provide sufficient housing to accommodate its fair share of regional needs.
The State requires Pleasanton to provide 3,277 additional housing units between 2007 and 2014. The cap, however, allows for only 2,000 more to be built – and that does not account for additional housing which will likely be required after 2014.

In the past 10 years, job growth in Pleasanton has nearly doubled -- from 31,683 to more than 58,000. Yet, the number of new housing units has not kept pace with demand. This is despite the fact that there is ample land for development, including property adjacent to the Pleasanton BART station. Unless the city lifts its housing cap, this and other land near transit will most likely not be utilized for housing.

As a result of the cap, many workers have been unable to find affordable housing within Pleasanton. A 2005 Association of Bay Area Governments study found that 79 percent of Pleasanton’s 58,000 employees lived outside Pleasanton, and their commutes can take two hours per day or more.

Brown’s suit demands that Pleasanton’s housing cap be repealed – so that jobs and housing can increase in proportion with each other.

In his suit, Brown contends that:

• Pleasanton is violating state law by enforcing a housing cap that prevents the City from accommodating its fair share of the regional housing need, as required by state housing element law (Gov. Code §65583.).

• Pleasanton’s housing cap violates the state constitution, which prohibits cities from adopting ordinances that conflict with state law.

• Pleasanton’s general plan is internally inconsistent, in violation of California Government Code Section 65300.5. The City’s existing land use element contains the housing cap limit of 29,000 housing units, while its housing element recognizes that the cap must be addressed because it prevents the City from meeting its fair share of regional housing needs.

If Pleasanton continues to enforce its housing cap, the consequences for the region include:

• Increased traffic congestion and longer commute times. Interstate 580 has some of the longest commute times in the region, with evening eastbound commuters delayed 7,410 hours and morning westbound commuters delayed 5,120 hours in 2007.

• Urban sprawl. Communities outside of Pleasanton will continue to lose farmland and open space to accommodate Pleasanton’s workers. These communities will have to build more schools, fire and police stations to keep up with anticipated growth.

• Increased greenhouse gas emissions. More people will be commuting for longer periods and over greater distances. Pleasanton’s CO2 output was 1.388 million tons in 2008. When the City is projected to reach 105,000 jobs in 2025, it is estimated its CO2 output will increase to 1.940 million tons. The increase is the equivalent of adding 120,000 cars to the road every year.

• Increased dependence on foreign oil.

Transportation is the largest contributor to California’s greenhouse gas emissions. The California Air Resources Board estimates that transportation is currently responsible for 38 percent of the greenhouse gas emissions in the state. Transportation accounts for 50 percent of greenhouse gas emissions in the Bay Area.

Brown has reached several agreements and settlements with local governments and businesses across California to help them reduce their greenhouse gas emissions. Some of his actions include:

• A landmark settlement with San Bernardino County which established a greenhouse gas reduction plan that identifies sources of emissions and sets reduction targets.

• An agreement with Stockton requiring it to identify and reduce greenhouse gas emissions, permit construction of thousands of new residential units within its current city limits, develop a rapid transit bus system and require all new buildings to be energy efficient.

• An agreement with ConocoPhillips that offsets greenhouse gases attributable to an oil refinery expansion in Contra Costa County.

An agreement with the Port of Los Angeles that identifies and reduces greenhouse gas emissions generated from port operations.

Brown’s suit against the City of Pleasanton is attached.

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Brown Wins Suit Prohibiting Liberty Tax Service from Deceptive Advertising of High-Cost Tax Refund Loans

June 19, 2009
Contact: (916) 210-6000, agpressoffice@doj.ca.gov

San Francisco – Attorney General Edmund G. Brown Jr. won a lawsuit earlier this week that bars the nation’s third largest tax preparer -- Liberty Tax Service -- from deceptive advertising that “blurs the line” between tax refunds that are free and high-cost loans.

“Liberty Tax Service lured cash-strapped Californians into paying for high-cost loans, when they could obtain tax refunds free from the IRS just weeks later,” Brown said. “This ruling bars Liberty from deceptive advertising that blurs the line between IRS tax refunds and pricey loans.”

Liberty Tax Service’s print and television ads misled customers by promising 'Most Refunds in 24 Hours.” In reality, Liberty was selling refund anticipation loans, not a tax refund. Customers had to pay an upfront fee of about $30 plus interest, at a rate that could be as high as 395% annually. By contrast, tax refunds are available at no charge from the IRS and generally arrive anywhere from 8 days to 4 weeks after returns are filed.

In February 2007, Brown filed suit in San Francisco Superior Court against Liberty Tax Service as part of an effort to stop deceptive marketing associated with Refund Anticipation Loans. Brown reached settlements with Jackson Hewitt in 2007 and with H&R Block in 2009 over similar claims.

Monday’s ruling holds Liberty Tax Service responsible for its deceptive marketing, which also included print ads that failed to include disclaimers mandated by law and television ads that included those disclaimers, but so briefly and in such faint type that the Court said they were “plainly designed to be overlooked by consumers.”

According to the IRS, refund anticipation loans target low-income taxpayers, especially those who receive the Earned Income Tax Credit. Approximately 70% of Liberty Tax Service’s refund anticipation loan customers in 2006 and 2007 received this credit.

The ruling:

• Bars Liberty Tax Service from using false or misleading advertising to sell tax refund loans;
• Requires the company to review and monitor the ads run by its California franchisees;
• Requires the company to discipline franchisees that fail to receive approval of their ads from Liberty and report those franchisees to the Attorney General; and
• Requires the company to pay $1.16 million in civil penalties, $135,886 in restitution, and the Attorney General’s costs.

Two violations of the advertising provisions of the injunction by a single franchisee will result in a $15,000 fine; a third violation requires the termination of the franchisee.

The injunction also imposes limitations on Liberty’s ability to collect, on behalf of itself or others, money supposedly due from its customers for previous years’ tax refund loans.

The judgment requires Liberty Tax Service to inform these alleged debtors of supposed debts before the consumers takes any step that would commit them to having any amount of the alleged debt deducted or withheld even temporarily from their refund. This is a significant modification of Liberty Tax Service’s past collection practices.

Consumer advocates and policy makers, including the U.S. Taxpayer Advocate, have sharply criticized such practices for years.

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Brown and Delgadillo File Lawsuit Seeking Injunction that Creates 1.4 Square-Mile Gang-Free Zone Around L.A. School

June 16, 2009
Contact: (916) 210-6000, agpressoffice@doj.ca.gov

Los Angeles -- Fighting to protect the rights of students who have been “indiscriminately terrorized” by gang violence, Attorney General Edmund G. Brown Jr. and Los Angeles City Attorney Rocky Delgadillo today announced that they have filed a lawsuit seeking an injunction that creates a 1.4 square-mile gang-free zone around Fremont High School in Los Angeles.

This injunction would be the first-of-its-kind and would impose a daytime curfew on members of four violent street gangs (the Swan Bloods, Florencia 13, the Main Street Crips, and the 7-Trey Hustlers/Gangster Crips) to prevent them from being on the streets while students walk to and from school, from assembling with other gang members, and from harassing and intimidating law-abiding citizens.

“These brutally violent street gangs have indiscriminately terrorized students who simply wanted to travel to and from school,” Brown said. “This first-of-its-kind injunction would create a gang-free zone around Fremont High School that shields students from violence, intimidation and drug trafficking.”

A complaint seeking this injunction was filed in Los Angeles County Superior Court on Friday, June 12. The injunction would create the “Fremont Free Passage Safety Zone” to prevent gang activity in the 1.4 square-mile neighborhood surrounding Fremont High School in Los Angeles.

This zone will be bound by Florence Avenue to the north, Central Avenue to the east, Manchester Avenue to the south and the 110 Freeway to the west and extends 100 yards beyond each of these boundaries.

Within the zone, police will enforce a strict curfew preventing gang members from being on the streets while students are walking to and from school, from 6:00 a.m. to 9:00 a.m. and from 2:00 p.m. to 6:00 p.m. Also, to protect all residents in the Fremont High School neighborhood, gang members must obey a night time curfew from 10:00 p.m. to 5:00 a.m. The injunction also prevents gang members from:

• Standing, sitting, walking, driving, gathering or appearing anywhere in public view, in a public place or in any place accessible to the public, with any other known gang member in the zone;

• Confronting, intimidating, annoying, harassing, threatening, challenging, provoking, assaulting, or battering any person who lives in, works in, visits or passes through the zone;

• Possessing any firearm, ammunition or weapon, whether or not concealed, in a public place or in any place accessible to the public within the zone;

• Selling, transporting, possessing or using, any controlled substance, drug or drug-related paraphernalia within the zone;

• Acting as a lookout by whistling, yelling, or signaling to warn another person engaged in unlawful or nuisance activity of the approach of law enforcement officers within the zone;

• Obstructing, impeding or blocking the free passage of any person or vehicle on any street, walkway, sidewalk, driveway, alley or parking lot within the zone;

• Drinking or possessing an open container of an alcoholic beverage in public within the safety zone;

• Damaging, defacing, marking, painting or otherwise applying graffiti to any public or private property or possessing any item to carry out such acts within the zone;

• Loitering in public for the purpose of tagging graffiti, drug-related activity or any other unlawful or nuisance activity within the zone; and

• Being present in or on the property of another person that is not open to the general public without the owner’s consent within the zone.

This injunction marks the culmination of a nine-month investigation into the gang activity of the Swan Bloods, Florencia 13, the Main Street Crips, and the 7-Trey Hustlers/Gangster Crips around Fremont High School. The 77th Division of the Los Angeles Police Department gathered and provided the evidence necessary to take action.

The investigation found that gang members frequently confronted, threatened, intimidated, assaulted, and robbed Fremont High School students traveling to and from school. These gangs also vandalized property, trespassed, loitered and sold and used drugs on sidewalks and streets near the school. For example:

• In April 2009, a young male was shot by a young female in broad daylight right next to Fremont High School on 79th Street and Avalon Boulevard.

• In March 2009, Swan Blood gang members attacked a young woman from behind in broad daylight and stole her necklace at a laundromat adjacent to Fremont High School on 78th Street and San Pedro Street.

• In February 2009, a Main Street Crip gang member armed with a handgun took a family hostage seven blocks from Fremont High School on 84th Street between Main Street and Wall Street after running from an LAPD officer.

• In November 2008, three Swan Blood gang members approached a 16-year-old student from behind, knocked him to the ground, punched and kicked him in the head and face, knocked him unconscious, and took his property. The crime occurred about four blocks from Fremont High School on McKinley Avenue at 80th Street.

• In October 2008, a 7-Trey Hustlers/Gangster Crips gang member shot into crowd of rival Swan Blood gang members with an assault rifle about one block from Fremont High School at 76th Street and San Pedro Street, killing an eight-year-old girl.

• In 2008, Florencia 13 gang members surrounded a Fremont High School student, asked him where he was from, yelled out, “This is Florencia!” proceeded to punch and kick him, and stole his money and electronics. The crime occurred less than one block from Fremont High School at 79th Street and Avalon Boulevard.

• In October 2007, a Florencia 13 gang member tried to stab a 15-year-old student walking home with a screw driver. Five to six gang members then punched and kicked the student, causing an eye abrasion, swelling to both sides of his face, bloody lips, a bump on his head and vomiting.

• In June 2007, a Swan Blood gang member murdered two young men in an alley about six blocks from Fremont High School, near 84th Street and San Pedro Street.

Many of the crimes around Fremont High School go unreported because victims and witnesses face the threat of retaliation and violence if they talk to police.

The complaint filed contends that this gang activity infringes on the constitutional right of students to obtain a public education on a safe, secure, and peaceful campus and to safely travel to and from school in violation of California’s Tom Bane Civil Rights Act. The Bane Act protects individuals from interference -- by use of threats, intimidation, or coercion -- with his or her peaceable exercise of their state and federal constitutional rights.

The complaint also contends that this gang activity constitutes a public nuisance pursuant to California Civil Code, sections 3479 and 3480.

To date, traditional law enforcement methods have not eliminated the immediate and continual risk to the lives and property of the people who live in, work, visit and pass through the neighborhood surrounding Fremont High School.

“Too often, street gangs thrive in and around our public schools. We intend to use the powers of the Bane Act to create meaningful safe passages to and from Fremont High School so that the students of that school can study and learn in peace, free from the menace of criminal street gangs,” Delgadillo said. “That is why I am proud to partner with the Attorney General and his office on this historic and creative effort to break the grips of gangs around our public schools.”

This action builds on Brown’s commitment to cracking down on violent street gangs. Last month, Brown announced the arrests of 15 members of the Merced Gangster Crips on charges of conspiracy, drug-trafficking, and weapons sales. Brown also filed 347 felony charges with San Diego District Attorney Bonnie Dumanis against dozens of members and associates of a San Diego street gang for stealing more than $500,000 from the Navy Federal Credit Union, using forged checks and an Indian Casino cash machine.

The complaint for injunctive relief, filed June 12, 2009 in Los Angeles County Superior Court, is attached.

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Brown and District Attorneys Sue Target for Illegal Disposal of Hazardous Waste

Separately, Brown and Riverside, Ventura, and San Joaquin County DAs reach settlement with Kmart over similar claims
June 15, 2009
Contact: (916) 210-6000, agpressoffice@doj.ca.gov

Oakland -- Fighting to protect Californians from exposure to “toxic and corrosive” chemicals, Attorney General Edmund G. Brown Jr., 20 district attorneys and the Los Angeles City Attorney today filed legal action against Target Corporation to block the retailer from continuing to illegally dump hazardous waste in local landfills.

Separately, Brown and the Riverside, Ventura and San Joaquin County District Attorneys have forged a settlement with Kmart over similar claims, requiring the company to stop disposing toxic substances in landfills and pay more than $8.65 million in civil penalties, costs and funding for projects to improve environmental protection in California.

“Target has shown a willful disregard for California’s hazardous waste laws by dumping flammable liquids and toxic chemicals in local landfills over a period of eight years,” Brown said. “If successful, this lawsuit would force Target to comply with state laws governing the lawful handling and disposal of toxic and corrosive waste.”

“By contrast, Kmart has cooperated, agreed to live up to its obligations under the law and will train its employees to properly handle and dispose of hazardous waste.”

Target

Target currently operates more than 200 retail stores and seven distribution centers in California. The retailer carries and handles hundreds of items with hazardous properties, including: bleach, paints, pesticides, aerosol products, oven cleaners and automotive products.

Under California law, Target is responsible for properly handling and disposing of products that are damaged during shipping or stocking, returned to the store by customers or removed because they are past their expiration date.

Target is also required under law to employ a licensed hazardous waste hauler to pick up the waste and transport it to a hazardous waste disposal facility. This ensures that hazardous waste will not end up at local landfills where toxic chemicals can seep into California’s water supplies or emit dangerous gases.

Since 2001, however, local environmental health inspectors have served Target with more than 300 Notices of Violation (NOVs) for breaking California’s hazardous waste control laws.

In March 2006, the Attorney General’s Office launched an investigation into Target’s practices in conjunction with district attorneys throughout the state after local store inspections revealed ongoing violations. Violations include:

• In May 2009, an Alameda County Target store sent flammable aerosol canisters, propane canisters, light bulbs containing mercury, corrosive spray cleaners and medical waste to a local landfill not authorized to receive such waste.

• In March 2009, a San Bernardino County Target store sent a photo processing unit with toxic liquid and other hazardous materials to a local landfill not authorized to receive such waste.

• In December 2008, a Target employee in San Joaquin County informed county inspectors that hazardous waste, including pesticides, were routinely disposed of in the store’s trash compactor for transportation to a local landfill not authorized to receive such waste.

• In January 2008, investigators discovered that multiple Los Angeles County Target stores sent several tons of products that could not be sold, to the Los Angeles Regional Food Bank. The shipments contained over 5,000 pounds of damaged, leaking and unusable items with flammable, toxic and corrosive properties. A licensed hazardous waste hauler had to be dispatched to the food bank to properly handle the hazardous waste at a cost of over $5,000.

• In March 2002, a Sacramento County Target employee dumped leaking containers of liquid pool chlorine into the store’s trash compactor. The chlorine reacted with other chemicals in the compactor and toxic fumes were released into the air. This led to the store’s evacuation, an emergency response and several individuals were transported to local hospitals.

This joint investigation found that Target stores across California have illegally dumped thousands of pounds of hazardous waste in local landfills. Target was cited by local environmental health inspectors for violations of environmental laws as recently as last month.

Brown, the 20 district attorneys and the Los Angeles City Attorney are suing Target for:

• Intentional and negligent disposal of hazardous waste at a point not authorized in violation of California’s Health and Safety Code;

• Intentional and negligent unauthorized transportation of hazardous waste in violation of California’s Health and Safety Code;

• Intentional and negligent violations of Hazardous Waste Control Laws for Hazardous Waste Handling Training and Storage Requirements in violation of California’s Health and Safety Code;

• Knowing violations of Hazardous Materials Release Response Plans and Inventory Laws in violation of California’s Health and Safety Code; and

• Violations of Unfair Competition Laws.

This lawsuit would require Target to immediately comply with California law and start using a licensed hazardous waste hauler to pick up the waste and transport it to a hazardous waste disposal facility. Additionally, the lawsuit seeks $25,000 maximum penalties for each violation.

The 20 district attorneys who signed onto today’s lawsuit include: Alameda County D.A. Tom Orloff; Contra Costa County D.A. Robert J. Kochly; Fresno County D.A. Elizabeth A. Egan; Humboldt County D.A. Paul V. Gallegos; Kings County D.A. Ronald Calhoun; Los Angeles County D.A. Steve Cooley; Merced County D.A. Larry D. Morse II; Monterey County D.A. Dean D. Flippo; Orange County D.A. Tony Rackauckas; Riverside County D.A. Rod Pacheco; Sacramento County D.A. Jan Scully; San Bernardino County D.A. Michael A. Ramos; San Diego County D.A. Bonnie M. Dumanis; San Joaquin County D.A. James P. Willett; San Mateo County D.A. James P. Fox; Santa Clara D.A. Dolores A. Carr; Solano County D.A. David W. Paulson; Stanislaus County D.A. Birgit A. Fladager; Ventura Country D.A. Gregory D. Totten; and Yolo County D.A. Jeff W. Reisig. Los Angeles City Attorney Rocky Delgadillo also signed onto the lawsuit.

Today’s complaint against Target, filed in Alameda County Superior Court, is attached.

Kmart

Kmart currently operates 100 retail stores throughout California. The retailer carries and handles hundreds of items with hazardous properties, such as: latex and acrylic paints, pesticides, fertilizers, aerosols, pool chemicals, jewelry cleaners, auto batteries and waste oil.

In 2005, the Riverside County District Attorney’s Office initiated a formal investigation into Kmart’s hazardous waste handling practices. Subsequently, the Attorney General’s Office joined the investigation, which uncovered that Kmart had failed to account for most of the hazardous waste it generated between 2002 and 2007.

The investigation found that:

• In December 2006, a Kmart in Ventura County dumped liquid waste down drains.

• On two separate occasions in 2006, a San Joaquin County Kmart as well as a Ventura County Kmart sent waste oil generated at the stores to private oil change companies instead of disposing of the waste oil at an authorized disposal location.

• In 2005, a Kmart in Riverside sent 32 gallons of flammable latex paint, nine bottles of flammable STP Water Remover, 11 cans of flammable spray paint, and one can of flammable Armor All Tire Foam to a local landfill not authorized to receive such waste. Fortunately, the waste was intercepted at a transfer station.

Brown’s office contends the company violated California’s:

• Hazardous Waste Control Law by sending multiple flammable and hazardous waste for disposal at local landfills and failing to properly train its employees in handling hazardous waste;

• Hazardous Materials Release Response Plans and Inventory Act by failing to submit required reporting records from 2004-2007; and

• Unfair Competition Laws.

The settlement prohibits Kmart from sending hazardous and flammable materials to landfills, and requires it to properly train its employees to comply with California’s hazardous materials and hazardous waste laws. Additionally, Kmart must properly label, segregate and store its hazardous waste.

Under the settlement, Kmart must pay $8.65 million in civil penalties, costs and funding for projects to improve environmental protection in California.

A copy of the complaint and stipulated judgment, filed in Ventura County Superior Court, is attached.

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Brown Forces CVS Pharmacy to Provide Customers a $2 Coupon if They Find Expired Products on Shelves

June 10, 2009
Contact: (916) 210-6000, agpressoffice@doj.ca.gov

San Diego - Attorney General Edmund G. Brown Jr. today forged a settlement with CVS Pharmacy requiring the company to make sure expired products are not sold in its stores and provide customers a $2 coupon if they identify products past their sell-by date.

The settlement also applies to Longs Drug Stores California, which CVS purchased in late 2008.

“CVS Pharmacy routinely sold expired baby formula, over-the-counter medication and dairy products long after the expiration date,” Brown said. “This agreement forces the company to give customers a $2 dollar coupon if they find expired products in CVS or Longs Drug Stores.”

In March 2008, Brown launched an investigation which revealed that CVS Stores in Los Angeles, Orange, and San Diego Counties had regularly sold expired baby food, baby formula, over-the-counter medications and dairy products to consumers. Expired products found include:

• Gerber’s Vanilla Custard, 11 months expired, at a Huntington Beach store.
• Bright Beginnings Ultra Baby Formula 31.7 oz., 3 months expired, at a Fullerton store.
• Bonine for Kids (children’s motion sickness medication), 5 months expired, at a Buena Park store.
• Gerber Baby Food Oatmeal with Applesauce and Bananas, 2 months expired, at an El Cajon store.

The investigation also confirmed that five CVS Pharmacies had improperly discarded more than 500 documents and prescription bottles containing confidential medical information in dumpsters outside of its stores. This discarded information included patient names, addresses, birthdates and prescription medications.

In June 2008, Brown called on CVS Pharmacy to immediately end the sale of expired products and mishandling of confidential customer information across all CVS Pharmacy stores.

Brown today filed a civil suit and a stipulated judgment in San Diego County Superior Court.

The suit contends that CVS Pharmacy violated Business and Professions Code 17200 and Civil Code 1798.81, by misleading customers about CVS’ standards to insure that products would not be sold after the expiration of the “sell buy” or “best by” date and by failing to preserve the confidentiality of customers’ personal medical records. In entering into the settlement, CVS denied any wrong-doing.

The stipulated judgment resolves the suit and forces CVS to:
• Stop the sale of expired products in CVS Pharmacy and Longs Drug stores in California;
• Implement a first-of-its-kind coupon program whereby consumers who find an expired item on store shelves are entitled to a coupon worth $2.00 which can be used in any future purchase at a CVS Store in California for any product;
• Revise existing policies regarding the sale of expired products and require employees to check at least twice a month that sell-by dates have not passed on infant formula, baby food, eggs, dairy products and over-the-counter medications;
• Revise existing policies regarding the disposal of confidential waste so that they include proper shredding policies and require written certification that all records containing personal information have been properly disposed of;
• Review and revise these updated policies annually and provide employees with written training in these new policies;
• Provide the Attorney General’s Office with sworn statements certifying that it has complied with all aspects of the Judgment;
• Perform random audits in its California stores twice a year to make certain that expired products aren’t being sold and that confidential medical information is safeguarded and disposed of properly: if CVS fails to meet these new conditions, audits will continue until these new requirements are met for two consecutive years; and
• Designate a toll-free number for employees and customers to report expired products and each store must submit reports to its corporate headquarters regarding these incidents at least twice a month.
CVS will pay $975,000 in civil penalties, attorney fees and costs.

A copy of the complaint and stipulated judgment are attached.

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Brown Sues 53 Individuals, 17 Telemarketers and 12 Charities that Exploited Donors' Desire to Help Cops, Firefighters and Veterans

May 29, 2009
Contact: (916) 210-6000, agpressoffice@doj.ca.gov

Los Angeles – As part of a nationwide crackdown on fraudulent charities, Attorney General Edmund G. Brown Jr. is filing today eight lawsuits against 53 individuals, 17 telemarketers and 12 charities that “shamelessly exploited” people’s generosity and squandered millions of dollars of donations intended to help police, firefighters and veterans.

Brown’s suits are intended to permanently stop the charities’ deceptive practices and require the repayment of all funds raised under false pretenses. Brown is seeking involuntary dissolution of eight of the charities.

“These individuals shamelessly exploited the goodwill of decent citizens trying to help police, firefighters and veterans,” Brown said. “In point of fact, a shockingly small portion of donations went to those in need, while millions went to pay for aggressive telemarketing and bloated overhead – and in one case – to purchase a 30-foot sailboat.”

Brown filed these suits in conjunction with the Federal Trade Commission and 48 other states as part of a nationwide sweep called “Operation False Charity.”

In California, just as in the other participating states, the so-called charities raised millions of dollars based on false claims that donors’ contributions would benefit police, firefighters and veterans organizations. But in reality, these charities rarely benefit public safety personnel. And, in most cases, 85 percent to 90 percent of donations are used to pay the fees of for-profit telemarketing firms.

Last year, Brown launched an investigation into 12 of the worst offenders, resulting in the eight cases filed today in Los Angeles, Orange, San Bernardino, and San Mateo counties. It is estimated that since 2005, hundreds of thousands of Californians have been deceived by the solicitation campaigns these charities and their fundraisers have conducted.

Brown is filing three suits against 5 charities and their fundraisers in Los Angeles County Superior Court:
• Law Enforcement Apprenticeship Program, based in Los Angeles.
• California Police Youth Charities, based in Sacramento.
• American Association of Police Officers, Police Protective Fund, Inc. and Junior Police Academy -- all of which are based in Los Angeles and are operated by the same directors.

Brown is filing three suits against 5 charities and their fundraisers in Orange County Superior Court:
• Association for Firefighters and Paramedics, based in Santa Ana.
• Association for Police and Sheriffs, Inc., based in Fullerton.
• Coalition of Police and Sheriffs, Disabled Firefighters Fund, and American Veterans Relief Foundation – all of which are based in Santa Ana and are operated by the same staff.

Brown is filing one suit against a charity and its fundraiser in San Mateo County Superior Court:
• Homeless and Disabled Veterans Corporation, based in Washington D.C.

Brown is filing one suit against a charity and its fundraisers in San Bernardino County Superior Court:
• California Organization of Police and Sheriffs, based in San Bernardino.

Los Angeles:
People v. Law Enforcement Apprenticeship Program, et al.
Brown today sued Los Angeles-based Law Enforcement Apprenticeship Program, its directors and its for-profit fundraiser, Rambret, Inc., for falsely promising contributors that their donations would be used to operate an apprenticeship program for at-risk youth. The program was never operated and no students were ever enrolled in it.

Instead, donations were used to pay for fundraising expenses, the personal expenses of the charity’s directors and the purchase of a 30-foot sailboat.

In 2003, Law Enforcement Apprenticeship Program raised $529,863, but only $31,501 – just 6 percent -- was spent on its program services. In 2004, the charity raised $372,623, but spent only $5,615 – 1.5 percent -- on program services.

Brown’s suit against the charity, its directors and its for-profit fundraiser, contends that they:
• Conspired to defraud donors.
• Engaged in unfair business practices in violation of Business and Professions Code section 17200.
• Failed to use contributions for the purpose solicited in violation of Business and Professions Code section 17510.8.
• Made illegal distributions in violation of Corporations Code section 5237.
• Knowingly filed false public documents in violation of Corporations Code section 6215.
• Failed to keep corporate books and records in violation of Corporations Code section 6320.

Brown seeks to dissolve the charity, to prevent the directors from operating a charity in California again, and to prevent the fundraiser from soliciting funds for a charity in California until it complies with state law.

Brown also seeks a court order requiring the charity to file a report of its receipts and expenses, to recover the funds misappropriated by the directors and civil penalties in excess of $150,000.

People v. California Police Youth Charities, et al.
Brown today sued Sacramento-based California Police Youth Charities, its executive director and its for-profit fundraisers -- National Consultants, Inc. and Public Appeals, Inc. -- for falsely promising contributors that 100 percent of donations would go to support the charity’s programs to help at-risk youth. In reality, less than 20 percent of the $9 million raised in 2006 and 2007 was spent on charitable programs.

The charity also filed false documents with the IRS and the Attorney General’s Office. In 2006, the charity reported that it made almost $1 million in grants, when it actually made grants totaling only $110,000.

Brown’s suit against the charity, its executive director and its for-profit fundraisers contends that they:
• Conspired to defraud donors.
• Engaged in deceptive and misleading solicitations in violation of Government Code section 12599.6.
• Engaged in reporting violations in violation of Government Code sections 12586 and 12599.
• Engaged in unfair business practices in violation of Business and Professions Code section 17200.
• Used false or misleading statements when soliciting for contributions in violation of Business and Professions Code section 17500.
• Failed to use contributions for the purpose solicited in violation of Business and Professions Code section 17510.8.
• Knowingly filed false public documents in violation of Corporations Code section 6215.

Brown seeks a permanent injunction to end these deceptive solicitation practices. He also seeks to recover misappropriated charitable funds and civil penalties in excess of $100,000 from the charity and its for-profit fundraisers.

People v. American Association of Police Officers, Police Protective Fund, and Junior Police Academy, et al.
Brown today sued Los Angeles-based American Association of Police Officers, Police Protective Fund, and Junior Police Academy, their officers David Dierks and Philip LeConte, and their for-profit fundraisers for misleading donors into thinking that their solicitors were volunteer police officers and that contributions would benefit donors’ local police departments.

The for-profit fundraisers include: West Coast Advertising (known as Professional Communications Network) and Mark Christiansen (doing business as Charitable Fundraising Services).

Additionally, the charities violated both state and federal law when they filed reports with the IRS and the Attorney General’s Office that under-reported fundraising and administrative expenses and over-reported the amount spent on charitable programs.

In 2007, for example, Police Protective Fund raised $6.8 million and claimed in its tax returns that it spent $1.7 million on its charitable program. However, that $1.7 million improperly included fundraising expenses, a $350,000 judgment paid to the State of Missouri and other administrative expenses.

Likewise, in 2007, American Association of Police Officers reported in its tax returns that it spent $493,798 on its charitable program. However, out of that amount, $425,000 was paid to the charities’ officers and other administrative and fundraising personnel. David Dierks and Philip LeConte were each paid $168,000 in salary, and were also provided with vehicles such as a $45,000 Range Rover and a $25,000 Jeep Cherokee.

Brown’s suit against the charity, its directors and its for-profit fundraisers, filed in Los Angeles County Superior Court, contends that they:
• Engaged in deceptive and misleading solicitations in violation of Government Code section 12599.6.
• Engaged in unfair business practices in violation of Business and Professions Code section 17200.
• Used false or misleading statements when soliciting for contributions in violation of Business and Professions Code section 17500.
• Failed to use contributions for the purpose solicited in violation of Business and Professions Code section 17510.8.
• Knowingly filed false public documents in violation of Corporations Code sections 6215 and 6812.
• Improperly compensated its directors and officers in violation of Corporations Code section 5227.

Brown seeks injunctive relief to prevent defendants from operating any charities in California and to stop future fraudulent solicitation and reporting practices. Brown also seeks to recover misappropriated funds and civil penalties in excess of $150,000.

Orange County:
Association for Firefighters and Paramedics
Brown filed suit today against Santa Ana-based Association for Firefighters and Paramedics, its president, Michael F. Gamboa and its for-profit fundraisers -- Public Awareness, L.L.C., Community Support, Inc., and Courtesy Call, Inc -- for falsely claiming that it used donations to assist local firefighters, paramedics, and burn victims.

Brown’s office discovered that from 2005-2008, only 3 percent of approximately $10 million dollars was spent on assistance to burn victims. No funds were ever used to assist firefighters and paramedics.

The remainder – some $9.7 million -- went to pay for the charity’s fundraising expenses and overhead.

In addition, the charity sent fraudulent invoices to people who had not made a pledge and sent letters to donors who had never given, asking them to mail in their “usual” annual donation.

Brown’s suit against the charity, its president and for-profit fundraisers contends that they:
• Engaged in deceptive and misleading solicitations in violation of Government Code section 12599.6.
• Engaged in unfair business practices in violation of Business and Professions Code section 17200.
• Used false or misleading statements when soliciting for contributions in violation of Business and Professions Code section 17500.
• Failed to use contributions for the purpose solicited in violation of Business and Professions Code section 17510.8.
• Violated Federal regulations regarding deceptive and abusive telemarketing practices.

Brown is seeking to dissolve the charity. He also seeks a permanent injunction against the charity’s president to prohibit him from any future involvement with a California charity, and civil penalties in excess of $150,000.

People v. Association for Police and Sheriffs, Inc., et al.
Brown today sued Fullerton-based Association for Police and Sheriffs, Inc., its directors and its for-profit fundraisers -- Public Awareness, LLC, and Courtesy Call, Inc., for falsely claiming that the majority of donations would be used to help the victims of domestic violence.

Brown’s investigation revealed that of the $2.6 million raised in 2005 and 2006, 90 percent of the donations went to pay the for-profit fundraisers. Most of the remaining donations were used to pay salary and other personal benefits for its president, Lloyd Jones, and others.

In violation of federal law, the fundraisers blocked donors’ Caller ID. Once on the phone, the fundraisers engaged in aggressive and abusive conduct.

The investigation also found that the charity and its for-profit fundraisers sent pledge confirmation cards to people who never agreed to donate and that some of the charity’s fundraisers represented that they were police officers, when they were not.

Brown’s suit against the charity, its directors, and its for-profit fundraisers contends that they:
• Engaged in deceptive and misleading solicitations in violation of Government Code section 12599.6.
• Committed registration and reporting violations in violation of Government Code sections 12599 and 12599.6.
• Engaged in unfair business practices in violation of Business and Professions Code section 17200.
• Used false or misleading statements when soliciting for contributions in violation of Business and Professions Code section 17500.
• Failed to use contributions for the purpose solicited in violation of Business and Professions Code section 17510.8.
• Breached their fiduciary duty to the charity in violation of Corporations Code section 5231 and 5233
• Violated federal regulations regarding deceptive and abusive telemarketing practices.
Brown seeks to dissolve the charity, recover improperly diverted funds, recover civil penalties in excess of $150,000, and to obtain a permanent injunction preventing all defendants from any involvement with a California charity until they comply with California law.

People v. Coalition of Police and Sheriffs, Disabled Firefighters Fund, American Veterans Relief Foundation, et al.
Brown today filed a lawsuit against Santa Ana-based Coalition of Police and Sheriffs, Disabled Firefighters Fund, and American Veterans Relief Foundation, their directors and for-profit fundraisers for falsely claiming that donations would be used for programs to help injured police and firefighters, and homeless veterans.

The for-profit fundraisers include Campaign Center, Inc., KWS Productions, Inc., Tel-Mar Productions, Inc, Community Publications, Inc., and Roman Promotions, Inc.
Through 2005, the charities raised $17 million, but only $351,000 – approximately 2 percent -- was spent on programs for cops, firefighters, and veterans. The vast majority of donations went to paid telemarketers.

The President, Jeffrey Duncan, used charitable funds for his personal expenses, including trips to Hawaii and to Las Vegas, and for meals, including one for $1,200 at Medieval Times.

Joseph Shambaugh, who founded all three of these charities, was indicted by federal authorities on charges of mail fraud and money laundering. He is currently at large.

Brown’s suit against the charities, their directors, and for-profit fundraisers contend that they:
• Conspired to defraud donors.
• Engaged in deceptive and misleading solicitations in violation of Government Code section 12599.6.
• Engaged in unfair business practices in violation of Business and Professions Code section 17200.
• Used false or misleading statements when soliciting for contributions in violation of Business and Professions Code section 17500.
• Failed to use contributions for the purpose solicited in violation of Business and Professions Code section 17510.8.
• Violated federal regulations regarding deceptive and abusive telemarketing practices.

Brown seeks to dissolve the charity, to prevent the directors from operating a charity or being involved in charitable fundraising in the future, and to prevent the fundraisers from soliciting on behalf of a charity in California until they comply with state law.

He also seeks to recover misappropriated charitable funds and civil penalties in excess of $100,000 from the charities, their directors and for-profit fundraisers.

San Mateo:
People v. Homeless and Disabled Veterans, et al.
Brown today sued Washington, D.C.-based Homeless and Disabled Veterans, and its for- profit fundraiser, Atmost, Inc. for falsely representing to donors that their charitable contributions would be used to assist homeless and disabled veterans in California with food, shelter, and self-help programs. Yet no donations were used for these purposes.

Instead, the vast majority of the donations -- over 70 percent -- were used for fundraising expenses, and the rest went for administrative expenses at its headquarters in Washington, D.C.

Brown’s suit against the charity, its directors and its for-profit fundraiser contends that they:
• Engaged in deceptive and misleading solicitations in violation of Government Code section 12599.6.
• Engaged in solicitation activities in California in violation of the registration and reporting requirements set forth in Government Code sections 12599, 12599.5, and 12599.6.
• Engaged in unfair business practices in violation of Business and Professions Code section 17200.
• Used false or misleading statements when soliciting for contributions in violation of Business and Professions Code section 17500.
• Failed to use contributions for the purpose solicited in violation of Business and Professions Code section 17510.8.
• Breached their fiduciary duty to the charity in violation of Corporations Code sections 5231 and 5237.

Brown seeks to dissolve the charity, to prevent the directors from operating a charity in California again, and to prevent the fundraiser from soliciting on behalf of a charity in California until it complies with state law.

He also seeks to recover misappropriated charitable funds and civil penalties in excess of $150,000 from the charity, its directors and its for-profit fundraiser.

San Bernardino:
People v. California Organization of Police and Sheriffs, et al.
Brown today sued San Bernardino-based California Organization of Police and Sheriffs, its directors, officers and its for-profit fundraisers – Civic Development Group, LLC and Rambret, Inc. -- for falsely representing that donations would be used to benefit law enforcement officers and that 100 percent of each donation would be received by the charity.

Donors were told that their contributions would be used to purchase bullet-proof vests, make grants to families of officers killed or injured in the line of duty, provide veterinary treatment for service animals injured in the line of duty and mentoring of at-risk youths.

Out of the $30 million raised from 2005 to 2007, over $25 million was spent on fundraising.

No money was spent on bullet-proof vests, no grants were made to families of officers, $6,600 was spent on veterinary treatment for service animals, and $16,500 was spent on mentoring.

Brown’s suit against the charity, its officers, directors and for-profit fundraisers, contends that they:
• Conspired to defraud donors.
• Engaged in deceptive and misleading solicitation in violation of Government Code section 12599.6.
• Engaged in unfair business practices in violation of Business and Professions Code 17200.
• Used false or misleading statements when soliciting for contributions in violation of Business and Professions Code section 17500.
• Failed to use contributions for the purpose solicited in violation of Business and Professions Code 17510.8
• Violated federal regulations regarding deceptive and abusive telemarketing practices.
• Knowingly filed false public documents in violation of Corporations Code section 8215.
• Committed registration and reporting violations in violation of Government Code sections 12599 and 12599.6.

Brown seeks to dissolve the charity, to prevent the directors from operating a charity in California again, and to prevent the fundraisers from soliciting on behalf of a charity in California until they comply with state law.

He also seeks to recover misappropriated charitable funds and civil penalties in excess of $150,000 from the charity, its directors and its for-profit fundraisers.

States participating in “Operation False Charity” include:
Alabama, Alaska, Arkansas, Arizona, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, , Virginia, Washington, West Virginia, Wisconsin and Wyoming. The District of Columbia is also participating.

The Attorney General’s Office offers the following tips to potential donors to help them avoid being the victims of charity fraud:
• If you receive an unsolicited call asking for a donation, it is most likely from a paid telemarketer who may keep a substantial part of your donation as payment of fundraising fees.
• Recognize that the words 'veterans' or 'military families' in an organization's name don't necessarily mean that veterans or the families of active-duty personnel will benefit from your donation.
• Donate to charities with a track record and a history. Charities that spring up overnight may disappear just as quickly.
• If you have any doubt about whether you have made a pledge or a contribution, check your records. If you don=t remember making the donation or pledge, resist the pressure to give.
• Check out an organization before donating. Some phony charities use names, seals and logos that look or sound like those of respected, well-established organizations.
• Ask the soliciting charity or the paid fundraiser what percentage of your donation will go towards fundraising expenses and what percentage will go towards the charity’s charitable purpose.
• Do not send or give cash donations. For security and tax record purposes, it is best to pay by check made payable to the charity.
• Ask for a receipt showing the amount of your contribution.
• Be wary of promises of guaranteed sweepstakes winnings in exchange for a contribution. You never have to give a donation to be eligible to win a sweepstakes.

There are a number of resources to obtain information about a charity. The Attorney General’s website is a good place to start ( http://ag.ca.gov/charities.php ).

Use the search feature (http://justice.doj.ca.gov/cfr/cfr.asp) to find out if a charity and its fundraiser are registered. Review the Attorney General’s Guide to Charitable Giving for Donors (http://ag.ca.gov/charities/publications/CharitiesSolicitation.pdf ) for additional tips. Other sites that have valuable information include:

www.charitywatch.org - American Institute of Philanthropy
www.bbb.org - Better Business Bureau Wise Giving Alliance
www.charitynavigator.org - CharityNavigator
www.ftc.gov/charityfraud/ – Federal Trade Commission

Brown Ends YTB's Online Travel Pyramid Scheme

May 14, 2009
Contact: (916) 210-6000, agpressoffice@doj.ca.gov

Los Angeles – Bringing an end to an “elaborate pyramid scheme,” Attorney General Edmund G. Brown Jr. today completed an agreement forcing YTB International to stop the deceptive marketing of its largely unprofitable travel websites and prohibiting the company from charging consumers nearly $500 to recruit others into its endless chain scheme.

“YTB falsely promised customers they could get rich quick by selling travel online,” Brown said. “In reality, customers were reeled into an elaborate pyramid scheme and most never earned a dime. Today’s settlement ends YTB’s pyramid scheme by arming consumers with hard facts and eliminating the need to sign up for this largely unprofitable website.”

On August 7, 2008, Brown filed suit against YTB (also known as yourtravelbiz.com), its affiliates, and founders to end the pyramid scheme and stop YTB’s false and misleading marketing campaign. Today’s stipulated judgment, filed with the Los Angeles County Superior Court, accomplishes this by:

• Prohibiting false and deceptive marketing;
• Requiring that YTB provide consumers with information in a clear and conspicuous manner about how difficult it is to make money by selling travel through YTB;
• Prohibiting the company from charging nearly $500 to recruit others into the scheme and requiring that new member recruitment be done using a free online demonstration;
• Limiting income from “downstream sellers” (e.g., people who have been recruited and who have become recruiters themselves);
• Eliminating perks and other incentives for joining; and
• Making it easier to quit.

YTB lured consumers into its travel business with false promises of wealth and deceptive marketing. YTB charged customers $449.95 for the purchase of a website, and $49.95 a month to operate it. In total, consumers paid YTB over $1,000 in the first year of operation.

Many signed up to sell travel or to obtain travel discounts, but they quickly found it virtually impossible to make money selling travel. A plane ticket from Los Angeles to New York, for instance, would only yield $3 in profit. An international ticket from San Francisco to London would net only $6 in profit.

In 2007, the annual median income for those selling travel was $39.00, less than one month’s cost to operate the website. The majority of consumers who purchased YTB websites made no money through the sale of travel, and many lost money through continued website operations.

By contrast, recruiting others to purchase websites, and having those purchasers recruit others to purchase websites (and so on), was much more profitable. Members earned money based on how many websites they sold, as well as how many websites those they recruited sold. These multi-level sales, combined with the required purchase of the $449.95 website, formed the foundation of YTB’s pyramid scheme.

The stipulated judgment ends this pyramid scheme by:

• Prohibiting false and misleading marketing and requiring that consumers be provided with information about how difficult it is to make money through YTB. Until now, YTB has made wildly misleading claims about how much people can earn from selling travel. This included videos of YTB agents driving luxury cars and holding up $10,000 checks, and making misleading statements about millions of dollars earned in commissions. The stipulated judgment requires YTB to provide consumers with information in a clear and conspicuous manner about typical income earned by website purchasers, typical cost of operations, the number of people who quit, and the number of people who have not earned commissions. This allows consumers to see that most YTB travel sellers make no money, and in fact rack up high costs.

• Prohibiting YTB from charging consumers money in order to recruit others. Until now, the only way that consumers could demonstrate the website is if they had already purchased one for $449.95. The stipulated judgment requires YTB to establish a free demonstration website that must be used when recruiting others. This will reduce the incentives for people to purchase YTB websites, which are largely unprofitable when used to sell travel.

• Significantly limiting how much people can make from individuals they have recruited and who have become recruiters themselves. Sixty percent of recruiters’ sales must come from persons who are not themselves recruiters; otherwise, their income will be reduced.

• Prohibiting YTB from:
• Issuing travel credentials in California and advertising that travel discounts, perks and tax-write offs are available by purchasing a website.
• Stating or implying that their travel rates are comparable with those of travel booking sites such as Expedia or Orbitz.
• Providing any recruitment bonuses or compensation based on the recruiter’s purchase of a website.

• Requiring YTB to open up its operations to scrutiny by the Attorney General’s Office. The Attorney General’s Office will have access to all YTB marketing materials, events, meetings, gatherings and presentations to ensure the company is complying with the agreement and California law. YTB will also register as a franchise with the California Department of Corporations as required by law.

• Requiring YTB to make quitting easily available by fax, email, or telephone.

• Requiring YTB to pay $1 million in penalties, costs, and restitution to California victims who filed complaints against YTB.

In filings with the SEC since Brown’s 2008 lawsuit, YTB stated that there is “substantial doubt about the Company’s ability to continue as a going concern.” Also, it revealed that in 2008 and the first quarter of 2009, YTB has lost $5.9 million from its operations. The number of internet websites sold decreased 75% in first quarter 2009 compared to first quarter 2008, and the total number of website owners decreased 53% in first quarter 2009 compared to first quarter 2008.

Today's settlement builds on the Attorney General's ongoing commitment to protect Californians from the get-rich-quick schemes that proliferate in a down economy. In March, Brown entered into a settlement enforcing tough restrictions on two companies - Imergent, Inc. and Stores On Line - that falsely promised customers that they could earn full-time income by selling merchandise over the Internet.
Today’s settlement is attached.

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PDF icon n1737_ytbstipulatedjudgment.pdf946.87 KB

Brown Sues to Block Property Tax Rip-Off

May 12, 2009
Contact: (916) 210-6000, agpressoffice@doj.ca.gov

San Diego—Continuing his fight to stop scams against homeowners, Attorney General Edmund G. Brown Jr. today filed suit against two brothers who “ripped off homeowners” seeking help in reducing their property tax assessments.

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.

“These scam-artists ripped off thousands of homeowners for property reassessment services readily available free of charge,” Attorney General Brown said. “This lawsuit seeks to end the deception and blocks these companies from continuing to scam homeowners.”

Brown’s suit, filed in San Diego County Superior Court against brothers Sean and Michael McConville and their businesses, “Property Tax Reassessment” and “Property Tax Adjustment Services,” seeks an end to the scam and at least $2.5 million in civil penalties. The suit contends that these companies:

• Made and continue to make untrue and misleading statements with the intent to induce consumers to purchase products and services in violation of Business and Professions Code Section 17500 and 17537.9;

• Distributed solicitations implying a government connection, approval or endorsement in violation of Business and Professions Code Section 17533.6;

• Distributed solicitations that appear to be billing statements in violation of California Civil Code Section 1716; and

• Engaged in unfair competition in violation of Business and Professions Code Section 17200.

These Southern California-based companies targeted tens of thousands of Californians looking to lower their property taxes with mailers that read like government billing statements, featured official-looking logos and demanded hundreds of dollars in payments for reassessment and reassessment appeal services. The statements warned homeowners that if payments were not received by the “due date” they faced late fees or would have their file marked “non-responsive” or “ineligible for future tax reassessments.”

Brown contends that neither company adequately informed consumers that they were not a governmental entity, the solicitations were not a bill, purchase of the services was not required and services were available free of charge from county assessors.

Additionally, few, if any, of the property tax assessment services homeowners were billed for in 2008 were completed.

These companies continue to solicit California homeowners and have recently sent out mailers with due dates of May 26, 2009.

Last week, the Ventura District Attorney’s Office charged one of the brothers, Sean McConville, with 20 felony counts for criminal conduct stemming from his property tax reassessment operations.

To avoid becoming a victim, homeowners who believe their property value has declined and they are paying too much in property taxes should:

• Never pay money for something they did not ask for; and
• Avoid a middleman and instead contact a local county tax assessor’s office for a free property value reassessment.

Homeowners who believe they have been victimized by this or any other property tax scam should contact the Attorney General's Office at:

http://ag.ca.gov/contact/complaint_form.php?cmplt=CL ;
• 1-800-952-5225; or
• P.O. Box 944255 Sacramento, CA 94244.

This lawsuit follows the property tax scam alert Brown issued on February 12, 2009. Since taking office Brown has made protecting homeowners a top priority. In the past three months alone, Brown has:
• Obtained a guilty plea from a woman who operated a sophisticated Los Angeles-based loan scam;
• Announced the arrest of two loan modification scam artists that operated a company called Foreclosure Freedom responsible for conning vulnerable homeowners out of thousands of dollars;
• Sent perpetrators of a San Bernardino-based foreclosure scam engineered by the First Gov company to prison;
• Issued a warning about scam artists using forged letterhead to con homeowners into paying for non-existent loan modification services.
• Stopped a massive statewide scheme that unfairly overcharged thousands of Californians for shoddy and home repair work; and

Today’s complaint is attached.

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PDF icon n1734_propertytaxassessment.pdf2.33 MB

Brown Impide Que Una Compañia de Tarjetas Telefonicas Aumente Ganacias Cobrando Honorarios Ocultos.

May 8, 2009
Contact: (916) 210-6000, agpressoffice@doj.ca.gov
Los Ángeles- Como parte de una gran campaña federal-estatal en estafas de rescate de ejecución hipotecaria, El Procurador General Edmund G. Brown Jr., en una conferencia de

prensa, anunció hoy la presentación de acción legal contra 21 individuos y 14 compañías

que estafaron a miles de propietarios de casas desesperados por un rescate de ejecución

hipotecaria.

Brown esta exigiendo millones en penas civiles, restitución para las víctimas, y una

orden judicial permanente a las compañías para que los acusados no puedan ofrecer los

servicios de consejero de rescate de ejecución hipotecaria.

"La industria de modificación de préstamos está llena de hombres de confianza y

charlatanes, que estafan a propietarios de casas desesperados frente a una ejecución de

hipoteca,' dijo Brown. 'A pesar de las promesas firmes y garantías de devolución de

dinero, estos estafadores se embolsaron miles de dólares por cada víctima y no

proporcionaron ni una onza de ayuda.'

Brown presentó cinco demandas como parte de la 'Operación de Préstamos Falsos,' una

operación nacional de consejeros fraudulentos de rescate de ejecución hipotecaria, que

dirigió con la Comisión Federal de Comercio, la oficina del Fiscal de los EE.UU., y con

otras 22 agencias federales y estatales. En total, se presentaron 189 demandas y órdenes

de suspensión a negocios en todo el país.

Tras el colapso de la vivienda, cientos de compañías de modificación de préstamo

hipotecario y de rescate de ejecución hipotecaria han surgido, cobrando miles de dólares

en honorarios abiertos y reclamando que ellos pueden reducir los pagos de la hipoteca.
Sin embargo, las modificaciones del préstamo raramente, si acaso, se obtienen. Menos del

uno por ciento de propietarios al nivel nacional han recibido reducciones principales de

cualquier tipo.

Brown ha sido líder en la lucha contra compañías fraudulentas de modificación de

préstamo. El ha buscado órdenes judiciales para cerrar varias compañías, entre ellas

First Gov y Foreclosure Freedom, y ha obtenido cargos criminales y largas sentencias de

prisión para los consultores fraudulentos de modificación de préstamo.

La oficina de Brown, presentó las siguientes demandas en el condado de Orange y en el

Tribunal de Distrito de los EE.UU. para el Distrito Central (Los Ángeles):

- U.S. Homeowners Assistance, basado en Irvine;

- U.S. Foreclosure Relief Corp y su afiliado legal Adrian Pomery, basado en City of

Orange;

- Home Relief Services, LLC, con oficinas en Irvine, Newport Beach y Anaheim, y su

afiliado legal, el Diener Law Firm;

- RMR Group Loss Mitigation, LLC y sus afiliados legales Shippey & Associates y Arthur

Aldridge. RMR Group tiene oficinas en Newport Beach, City of Orange, Huntington Beach,

Corona, y Fresno;

- y

- United First, Inc, y su filial abogado Mitchell Roth, basado en Los Ángeles.

U.S. Homeowners Associates
Brown demando a U.S. Homeowners, el lunes, y sus ejecutivos -- Hakimullah 'Sean' Sarpas

y Zulmai Nazarzai -- por estafar a docenas de propietarios de miles de dólares a cada

uno.

U.S. Homeowners Associates afirmo ser una agencia del gobierno con una tasa de éxito de

98 por ciento en ayudar a los propietarios. En realidad, la compañía no es una agencia

del gobierno y nunca fue certificado como consejero de vivienda aprobado por el

Departamento Estadounidense de Desarrollo Urbano y Vivienda (HUD). Ninguna de las

victimas conocidas de U.S. Homeowners Associates recibió modificación de préstamo a

pesar de pagar honorarios por adelantado de por lo menos $1,200 a $3,500.

Por ejemplo, en enero del 2008, una víctima recibió una carta de su prestamista,

indicando que su pago mensual de la hipoteca aumentaría de $2,300 a $3,500. Días

después, ella recibió una llamada telefónica no solicitada de U.S. Homeowners Associates

prometiéndole una reducción de un 40 por ciento en el principal y una reducción de

$2,000 en su pago mensual. Ella pagó por adelantado $3,500 para los servicios de U.S.

Homeowners Associates.

A fines de abril del 2008, su prestamista le informó que su petición de modificación de

préstamo había sido negada y le envió los documentos que U.S. Homeowners Associates

había presentado en su nombre. Después de revisar esos documentos, ella descubrió que

U.S. Homeowners Associates había falsificado su firma y su información financiera -

inclusive fabricaron un acuerdo de arrendamiento con un arrendatario ficticio.

Cuándo ella enfrentó a U.S. Homeowners Assistance, fue inmediatamente desconectada y no

ha podido comunicarse con la compañía.

La demanda de Brown afirma que U.S. Homeowners Assistance violó:

- La sección 17500 del Código de Negocios y Profesiones de California por declarar

falsamente que era una agencia del gobierno y engañar a propietarios reclamando una tasa

de éxito de 98 por ciento a obtener modificaciones de préstamo;

- La sección 17200 del Código de Negocios y Profesiones de California, al no realizar

los servicios prometidos a cambio de honorarios por adelantado;

- La sección 2945.4 del Código Civil de California por colectar ilegalmente honorarios

por adelantado para servicios de modificación de préstamo;

- La sección 2945.45 del Código Civil de California por no registrarse en la Oficina del

Procurador General de California como consultores de ejecución hipotecaria; y

- El Código Penal de California sección 487 por robo grande (Grand Theft);

Brown le pide a la corte $7.5 millones en penas civiles, restitución completa a las

víctimas, y una orden judicial permanente a la compañía para que los demandados no

puedan ofrecer los servicios de consejero de rescate de ejecución hipotecaria.

US Homeowners Assistance también hizo negocios utilizando diferente aliases como

Statewide Financial Group, Inc., We Beat All Rates, y US Homeowners Preservation Center.

US Foreclosure Relief Corporation
Brown la semana pasada demandó a US Foreclosure Relief Corporation, H.E. Service

Company, sus ejecutivos -- George Escalante y Cesar López – así como a su afiliado legal

Adrian Pomery por ejecutar una estafa prometiendo a los propietarios la reducción en el

principal y las tasas de interés tan bajo como el 4 por ciento. Brown se unió en esta

demanda con la Comisión Federal de Comercio y el Estado de Missouri.

Utilizando tácticas agresivas de tele venta (telemarketing), los demandados solicitaron

a propietarios desesperados y colectaron honorarios por adelantado de por lo menos

$1,800 a $2,800 por servicios de modificación de préstamo. Durante un período de tan

solo nueve-meses, los consumidores pagaron a los demandados por encima de $4.4 millones.

Sin embargo, en la mayoría de los casos, los acusados no proporcionaron los servicios de

rescate de ejecución hipotecaria. Una vez que los consumidores pagaban el honorario, los

acusados evitaban responder a las indagaciones de los consumidores.

En respuesta a un gran número de quejas de los consumidores, varias agencias

gubernamentales dirigieron a los acusados a detener sus prácticas ilegales. En vez de

eso, ellos cambiaron su nombre del negocio y continuaron sus operaciones - utilizando

seis aliases diferentes del negocio en los últimos ocho meses.

La demanda de Brown alega que las compañías y los individuos violaron:
- El Registro Nacional No Llame (National Do Not Call Registry), 16 C.F.R. sección

310.4 y la sección 17200 del Código de Negocios y Profesiones de California al hacer

tele ventas de sus servicios a personas registradas.

- El Registro Nacional No Llame (National Do Not Call Registry), 16 C.F.R. sección 310.8

y la sección 17200 del Código de Negocios y Profesiones de California al hacer tele

ventas de sus servicios sin pagar la cuota anual obligatoria para el acceso a los

números de teléfono dentro de la zona de códigos incluida en el registro.

- La sección 2945 et seq. del Código Civil de California y la sección 17200 del Código

de Negocios y Profesiones de California al exigir y colectar honorarios por adelantado

antes de realizar cualquier servicio, por no incluir notas reglamentarias en sus

contratos, y por no cumplir con otros requisitos impuestos a los consultores de

ejecución hipotecaria;

- Las secciones 17200 y 17500 del Código de Negocios y Profesiones de California al

representar que ellos podrían obtener modificaciones de préstamo para la vivienda a

consumidores pero fallando de hacerlos en la mayoría de los casos; al representar que

consumidores deben hacer pagos adicionales aunque ellos no hubieran realizado ninguno de

los servicios prometidos; al representar que ellos tienen una tasa alta de éxito y que

ellos pueden obtener modificación de préstamo en no más de 60 días cuando de hecho estas

representaciones eran falsas; y al decirle a los consumidores que evitaran el contacto

con sus prestamistas y que dejaran de hacer los pagos del préstamo causando que algunos

prestamistas iniciaran procedimientos de ejecución de hipoteca y causar daños en el

expediente de crédito de los consumidores.

Las víctimas de este fraude incluyen a un padre de cuatro hijos luchando contra el

cáncer, un dueño de un pequeño negocio, una pareja mayor de edad, un alguacil (sheriff)

cuyos ingresos se redujeron debido a los recortes presupuestarios de la ciudad y a un

veterano de la guerra de Iraq. Ninguna de estas víctimas recibió la modificación de

préstamo prometida.

Brown le pide a la corte penas civiles inespecíficas, restitución completa a las

víctimas, y una orden judicial permanente a la compañía para que los demandados no

puedan ofrecer los servicios de consejero de rescate de ejecución hipotecaria.

Los acusados también hicieron negocios bajo otros nombres incluyendo Lighthouse Services

y California Foreclosure Specialists.

Home Relief Services, LLC
Brown demando a Home Relief Services, LLC, el lunes, y sus ejecutivos Terrance Green Sr.

y Stefano Morrero, el Diner Law Firm y a su abogado principal Christopher L. Diener por

estafar a miles de propietarios de miles de dólares a cada uno.

Home Relief Services cobró a propietarios más de $4,000 en honorarios por adelantado,

prometió bajar las tasas de interés al 4 por ciento, convertir las hipotecas de

tasa-ajustable a préstamos bajos de tipo-fijo y reducir el principal hasta el 50 por

ciento dentro de 30 a 60 días.

En algunos casos, estas compañías también procuraron ser el agente de los prestamistas

en la venta-corta (short-sale) de las casas de sus clientes. Al hacerlo, los acusados

trataron de utilizar la información financiera personal de los clientes para su propio

beneficio.

Home Relief Services y el Diener Law Firm dirigió a los propietarios que pararan el

contacto con sus prestamistas porque los acusados actuarían como su único agente y

negociador.

La demanda de Brown afirma que los acusados violaron:

- La sección 17500 del Código de Negocios y Profesiones de California por declarar una

tasa de éxito de 95 por ciento a obtener modificaciones de préstamo y prometerle a los

consumidores reducciones significativas en el balance principal de sus hipotecas;

- La sección 17200 del Código de Negocios y Profesiones de California, al no realizar

los servicios prometidos a cambio de honorarios por adelantado;

- La sección 2945.4 del Código Civil de California por colectar ilegalmente honorarios

por adelantado para servicios de modificación de préstamo;

- La sección 2945.3 del Código de Negocios y Profesiones de California por no incluir

avisos de cancelación en sus contratos;

- La sección 2945.45 del Código Civil de California por no registrarse en la Oficina del

Procurador General de California como consultores de ejecución hipotecaria; y

- El Código Penal de California sección 487 por robo grande (Grand Theft);

Brown le pide a la corte $10 millones en penas civiles, restitución completa a las

víctimas, y una orden judicial permanente a la compañía para que los demandados no

puedan ofrecer los servicios de consejero de rescate de ejecución hipotecaria.

Otras dos compañías con la misma administración también participaron en el esfuerzo de

engañar a propietarios: Payment Relief Services, Inc. y Golden State Funding, Inc.

RMR Group Loss Mitigation Group
Brown demando a RMR Group Loss Mitigation, el lunes, y sus ejecutivos Michael Scott

Armendáriz de Huntington Beach, Rubén Curiel de Lancaster, y Ricardo Haag de Corona;

Living Water Lending, Inc.; y al abogado Arthur Steven Aldridge de Westlake Village así

como el bufete de abogados de Shippey & Associates y a su abogado principal Karla C.

Shippey de Yorba Linda por estafar a más de 500 victimas de casi $1 millón de dólares.

La compañía solicitó a propietarios a través de llamadas telefónicas y visitas a casa en

persona. Los empleados declaraban una tasa de éxito de 98 por ciento a obtener

modificaciones de préstamo y garantía de devolución de dinero. Ninguna de las víctimas

conocidas recibió ningún reembolso o modificación de préstamo, con la asistencia de los

acusados.

Por ejemplo, en julio del 2008, una víctima de 71 años de edad, se dio cuenta que su

pago mensual de la hipoteca aumentaría de $ 2,4700 a $ 3,295. El pagó $2,995 y aún no a

recibido una modificación de préstamo ni reembolso.

Además, RMR insistió en que los propietarios se abstengan de contactar a sus

prestamistas, porque los acusados actuarían como sus agentes.

La demanda de Brown afirma que los acusados violaron:

- La sección 17500 del Código de Negocios y Profesiones de California por declarar una

tasa de éxito de 98 por ciento a obtener modificaciones de préstamo y prometerle a los

consumidores reducciones significativas en el balance principal de sus hipotecas;

- La sección 17200 del Código de Negocios y Profesiones de California, al no realizar

los servicios prometidos a cambio de honorarios por adelantado;

- La sección 2945.4 del Código Civil de California por colectar ilegalmente honorarios

por adelantado para servicios de modificación de préstamo;

- La sección 2945.3 del Código de Negocios y Profesiones de California por no incluir

avisos de cancelación en sus contratos;

- La sección 2945.45 del Código Civil de California por no registrarse en la Oficina del

Procurador General de California como consultores de ejecución hipotecaria; y

- El Código Penal de California sección 487 por robo grande (Grand Theft);

Brown le pide a la corte $7.5 millones en penas civiles, restitución completa a las

víctimas, y una orden judicial permanente a la compañía para que los demandados no

puedan ofrecer los servicios de consejero de rescate de ejecución hipotecaria.

United First, Inc.
El 6 de julio, del 2009, Brown demando a un consejero de rescate de ejecución

hipotecaria y un abogado – Paul Noe, Jr., y Mitchell Roth – los cuales defraudaron a

2,000 propietarios, desesperados por evitar la ejecución hipotecaria (foreclosure) de

sus casas, cobrando honorarios exorbitantes por “demandas falsas.”

Las demandas fueron archivadas en las cortes y luego abandonadas después de haber

cobrado a los propietarios un promedio de $1,800 para iniciar los casos con pagos

mensuales de por lo menos $1,200 y honorarios contingentes (condicionales) de hasta el

80 porciento del valor de sus casas.

Noe convenció a más de 2,000 propietarios que firmaran “acuerdos de negocio conjunto con

participación de riesgos” (joint venture) con su compañía, United First, y empleó a Roth

para archivar las demandas en las cortes reclamando que los préstamos no eran válidos

porque las compañías hipotecarias habían vendido las hipotecas en el Wall Street tantas

veces que las compañías hipotecarias no podían demostrar quienes eras los dueños de las

hipotecas. En otros estados con demandas similares, el resultado nunca es la

eliminación de la deuda del préstamo hipotecario.

Después de archivar las demandas en la corte, Roth prácticamente no hacia nada por

avanzar los casos. Varias veces no cumplió con los requisitos de la corte, no archivó

documentos exigidos por las cortes, no respondió a peticiones legales, no cumplió con

fechas de límite de la corte, ni se presentaba ante la corte. En cambio, la oficina de

Roth simplemente prolongaba los casos lo más posible para poder cobrar honorarios

adicionales mensualmente.

United First cobraba a los propietarios aproximadamente $1,800 dólares en honorarios

para iniciar el caso, y por lo menos $1,200 dólares adicionales por mes. Si se llegaba

a un acuerdo en el caso, los propietarios tenían que pagar un 50 porciento del valor del

arreglo. Por ejemplo, si United First obtuvo una reducción de $100,000 dólares de la

deuda hipotecaria, el propietario tenía que pagar honorarios de $50,000 dólares a United

First. Si United First eliminaba completamente la deuda, el propietario tenía que pagar

a la empresa el 80 porciento del valor de la casa.

La demanda de Brown afirma que Noe, Roth y United First:

- Violaron las leyes de asesoramiento de crédito y las leyes de consejero de ejecución

hipotecaria de California, secciones 1789 y 2945 del Código Civil;

- Introdujeron términos injustos en los contratos;

- Se dedicaban a acciones ilegales; es decir que Roth se asoció ilegalmente con United

First, Inc., y Noe, los cuales no eran abogados, para generar negocio a su despacho de

abogados violando el Código 6150 de Negocios y Profesiones de California; y

- Violó el Código 17500 de Negocios y Profesiones de California.

La oficina de Brown pide a la corte $2 millones de dólares en penas civiles, restitución

completa a las victimas, y una orden judicial permanente a la compañía y los demandados

para que no hagan negocio en los servicios de consejero de rescate de ejecución

hipotecaria.

Consejos a Propietarios

NO le pague a personas que prometen negociar con su prestamista para modificar su

préstamo. Es ilegal que consejeros de rescate de ejecución hipotecaria cobren antes de

(1) darle un contrato por escrito detallando los servicios que promete proporcionar y

(2) realizan todos los servicios descritos en el contrato; por ejemplo la negociación de

nuevos pagos mensuales o un nuevo préstamo de hipoteca. Sin embargo, un abogado puede

cobrar por adelantado, o un corredor de bienes raíces (real estate bróker; no un agente)

el cual ha sometido el acuerdo de honorarios por adelantado al Departamento de Bienes

Inmuebles para ser revisado por el departamento.

Llame a su prestamista usted mismo. Su prestamista quiere hablar con usted y

probablemente estará más dispuesto a trabajar directamente con usted que con un

consejero de rescate de ejecución hipotecaria.

NO ignore las cartas (o correspondencia) de su prestamista. Considere ponerse en

contacto con su prestamista usted mismo, muchos prestamistas están dispuestos a trabajar

con los propietarios que están atrasados con sus pagos.

NO pase el título o venda su casa al rescatador de ejecución hipotecaria. Consejeros

fraudulentos de rescate de ejecución hipotecaria a menudo prometen a los propietarios

que si transfieren el título de su casa, pueden quedarse en su casa como arrendatarios y

después comprar su casa otra vez. Los consejeros de rescate de ejecución hipotecaria

dicen que es necesario pasar el título para que una persona con mejor crédito pueda

obtener un nuevo préstamo para prevenir la ejecución hipotecaria. TENGA CUIDADO! Esto es

un fraude muy común, 'rescatadores de ejecución hipotecaria' suelen desalojar a los

propietarios y robar todo o la mayor parte de la equidad (equity) de su casa

NO le dé sus pagos de hipoteca a otra persona que no sea su prestamista, aunque esa

persona prometa entregar los pagos al prestamista. Consejeros fraudulentos de rescate

de ejecución hipotecaria a menudo se quedan con su dinero.

NO firme ningún documento sin antes leerlo. Muchos propietarios creen que firman

documentos para un nuevo préstamo para pagar una hipoteca con pagos atrasados. Después

descubren que en realidad transfirieron el título de su propiedad 'al consejero.'
CONSIDERE ponerse en contacto con un consejero de viviendas aprobado por el Departamento

Estadounidense de Desarrollo Urbano y Vivienda (U.S. Department of Housing and Urban

Development - HUD) el cual puede ser que le ayude sin costo alguno. Para obtener

información de un consejero de vivienda cerca de usted, favor de llamar a HUD al

800-569-4287 (TTY: 800-877-8339) o diríjase a la página de Internet www.hud.gov

Si usted cree que ha sido víctima de un fraude por consultantes de rescate de ejecución

hipotecaria en California, por favor contacte a la Procuraduría General el Departamento

de Indagaciones Públicos al http://ag.ca.gov/contact/index_espanol.php

Brown Prevents Calling Card Company from Boosting Profits by Charging Hidden Fees

May 8, 2009
Contact: (916) 210-6000, agpressoffice@doj.ca.gov

Los Angeles -- Attorney General Edmund G. Brown Jr. today obtained a court order preventing Los Angeles-based Total Call International, Inc. from charging “hidden and deceptive” fees for its pre-paid calling cards.

“Total Call International has raked in profits by advertising bargain basement prices then charging exorbitant fees when their cards were used.” Brown said. “Today’s agreement safeguards California’s consumers by forcing this company to fully disclose hidden and deceptive calling card fees.”

Total Call International advertised low per-minute base rates on its calling cards and then charged consumers steep, undisclosed add-on fees and surcharges when consumers used their cards, Brown said. This significantly reduced the amount of calling time available.

Brown and the California Public Utilities Commission launched an investigation and prepared a lawsuit contending that Total Call International violated a California law that specifically requires disclosure of pre-paid calling card fees, as well as California’s false advertising and unfair competition laws.

Brown and the utilities commission today filed a complaint and a stipulated judgment resolving the case. The stipulated judgment requires Total Call International to:

• Disclose all fees, add-ons, and surcharges in a clear and conspicuous manner and include those charges in the marketing of its per-minute rate.

• Maintain records and allow the Attorney General’s office to monitor its activities to determine if Total Call International is in compliance with the settlement and California Law.

• Pay civil penalties of $300,000.

During the course of the investigation, Total Call International agreed to stop charging a “real-time rate surcharges,” costing the company $1.5 million in profits. Total Call International did not admit any wrongdoing.

Calling cards, often sold at newsstands and grocery stores, are meant to be a convenient, affordable tool for users that make frequent international calls and may not have regular access to telephone service.

Calling card users should take the following steps to protect themselves:

1. Make sure you’re getting what you pay for- buy a card for a small denomination first to test out the service.
2. Check with family and friends to find out their experience with calling cards.
3. Ask the retailer if they stand behind the card if the telephone service is unsatisfactory. It’s important to remember that the store where the card is purchased from doesn’t control the quality of the service.
4. Remember that very low rates, particularly for international calls, may indicate poor customer service, or a sign that hidden fees and surcharges apply.
5. Always look for disclosures about surcharges, monthly fees, per-call access, in addition to advertised rate-per-minute.
6. Check the expiration date. Some cards expire after a certain amount of time.
7. Make sure the card comes in a sealed envelope or has a sticker covering the PIN. Otherwise, anyone who copies the PIN can use the phone time you’ve already paid for.

This is the second case that Brown has filed forcing the disclosure of fees. In 2007, Brown forced San Francisco-based Devine Communications, Inc. to disclose all hidden fees. Florida and New Jersey have also been actively prosecuting similar cases.

Today’s settlement, filed in San Francisco Superior Court is attached.