Lawsuits & Settlements

Attorney General Brown Sues Baby Furniture Manufacturers for Formaldehyde in Products

September 24, 2008
Contact: (916) 210-6000, agpressoffice@doj.ca.gov

OAKLAND – California Attorney General Edmund G. Brown Jr. yesterday sued five baby furniture manufacturers for failing to warn consumers about the dangerous levels of formaldehyde gas emitted by their products, including cribs and changing tables.

“We’re suing these companies because parents deserve to know if there’s a dangerous chemical in products for children,” Attorney General Brown said. “Over the past two years, we’ve brought other actions to ensure the safety of children’s products, such as lead in toys and phthalates in baby bibs. Increasingly, the wood and other materials in consumer products are produced globally, and the lack of tough safeguards and strict enforcement can lead to dangerous levels of exposure.”

Passed by voters in 1986, Proposition 65 requires manufacturers to provide “clear and reasonable warnings” of chemicals in their products that are known to cause cancer, birth defects or other reproductive harm. The state’s lawsuit alleges that Child Craft, Delta Enterprise Corp., Stork Craft, South Shore Industries and Jardine Enterprises manufactured baby furniture, such as cribs and changing tables, that emit formaldehyde—a chemical known to cause cancer—and failed to provide any warning about this risk.

In addition to being a carcinogen, formaldehyde has been shown to contribute to respiratory problems like asthma. The levels of formaldehyde gas emitted from the baby furniture, when combined with other potential sources of formaldehyde in the home, are high enough to cause respiratory irritation to children sleeping in the cribs.

The Environmental California Research and Policy Center, an organization that evaluates products for carcinogens, tested the companies’ baby furniture. Based on that testing and on his own test results, the Attorney General calculated that the furniture exposes children to formaldehyde gas at levels well above the Proposition 65 limit of 40 micrograms per day.

In addition to violating Proposition 65 standards for emission levels, the baby products exceed the recommendations for formaldehyde emission set by the Office of Environmental Health Hazard Assessment and the Department of Public Health. Formaldehyde is present in plywood, particle board (generally in the glues), fiberglass, paint and insulation. Concentrations can reach especially dangerous levels in rooms that are not well-ventilated.

Businesses that violate Proposition 65 are subject to civil penalties of up to $2,500 per day for each violation. In addition, courts may order businesses to stop manufacturing products that are in violation of the standards. Today’s lawsuit seeks to remedy past violations and to prompt manufacturers and retailers to prevent baby furniture containing formaldehyde from being sold without warning consumers about the risks of exposure.

The state is also suing the companies for violating the Unfair Competition Law, which prevents businesses from undertaking any action that gives them an advantage over other businesses. In this case, by not posting warnings about carcinogens on their products like other companies must do under the law, the five companies unfairly profited. The state is seeking $2,500 for each violation.

Proposition 65 is enforced through lawsuits brought by the attorney general, district attorneys and some city attorneys. Lawsuits may also be brought by private parties after notifying the attorney general of the alleged violation. Last November, Attorney General Brown and Los Angeles City Attorney Rockard Delgadillo sued twenty toy companies for manufacturing or selling toys with unlawful quantities of lead.

Although Proposition 65 only requires companies to post hazard warnings, many businesses choose to eliminate the toxic chemicals altogether. For more information about Prop 65, please visit http://ag.ca.gov/prop65/index.php.

The Attorney General’s lawsuit is attached.

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Attorney General Brown Prevents First Regional Bank From Enabling Online Tobacco Sales

September 18, 2008
Contact: (916) 210-6000, agpressoffice@doj.ca.gov

LOS ANGELES – California Attorney General Edmund G. Brown Jr. and the New York and Idaho Attorneys General today announced a settlement agreement with Los Angeles-based First Regional Bank to prevent the bank from providing payment-processing services to online retailers who illegally sell cigarettes and other tobacco products over the Internet.

“Stopping the illegal sale of cigarettes, especially to minors, is a major step in protecting public health. These online tobacco retailers are known to be a major source for young people to get their illegal cigarettes,” said Attorney General Brown. “We’re pleased that First Regional has agreed to take measures to address this important issue and hope that other banks and companies involved in online tobacco sales will follow suit.”

An investigation by Attorney General Brown, in cooperation with New York Attorney General Andrew Cuomo and Idaho Attorney General Lawrence Wasden, determined that First Regional processed income from online tobacco retailers throughout the United States. The investigation included a sting against one of the largest online tobacco retailers, Scott Maybee. It was found that First Regional broke the law by allowing Maybee to process thousands of tobacco sales through the bank.

In June 2008, Attorney General Brown sued Scott Maybee for violating California laws designed to prevent cigarettes from falling into the hands of minors through online purchases. These laws include failing to call the cigarette buyer after 5 p.m. to confirm the sale, failing to impose a two-carton minimum purchase and failing to provide adequate purchase information to credit-card companies so that “Tobacco Products” can be printed on the credit card receipt. Maybee also violated the law when he sold thousands of cigarettes to California consumers that were not fire-safe.

The investigation uncovered evidence that First Regional knew it was facilitating Maybee’s illegal online tobacco sales since 2006. The bank was repeatedly advised to discontinue its practices by the California and New York State Attorneys General. Since June 2008, the Attorneys General of California, New York and Idaho have been working on an agreement with First Regional Bank to ensure that it no longer facilitates the illegal online purchase of tobacco products.

Under the settlement agreement, First Regional will:
• Pay $60,000 in civil penalties, fees and costs
• Maintain and adhere to a formal policy prohibiting the facilitation of online tobacco sales
• Train its employees on the tobacco policy requirements
• Publish its tobacco policy on its public website
• Obtain basic information about its customers and their business operations
• Conduct a background check on potential customers
• Adopt procedures to terminate merchants who violate First Regional’s tobacco policy

Many online tobacco retailers fail to follow laws enacted by states to prevent online cigarettes from falling into the hands of minors. These laws include violating state age-verification laws. Many online retailers also violate numerous other state laws, which include failing to file required monthly sales reports with state tax agencies, selling cigarettes not certified and approved for sale and selling cigarettes that are not be fire-safe, as required by California law.

This agreement furthers the efforts of California and other states to fully implement the tobacco Master Settlement Agreement, a public health agreement that aims to reduce the use of tobacco products and to stop the flow of cheap cigarettes to minors.

Through these efforts, major credit-card companies have already agreed to prevent their cards from being used to facilitate unlawful tobacco sales, and several major shippers refuse to deliver cigarettes purchased online. Clamping down on electronic sales, such as those facilitated by First Regional, will make it more difficult for these retailers to continue their illegal operations.

The settlement agreement is attached.

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Attorney General Brown Settles Edward Jones Lawsuit

September 10, 2008
Contact: (916) 210-6000, agpressoffice@doj.ca.gov

SACRAMENTO-California Attorney General Edmund G. Brown Jr. today announced a $7.5million settlement with financial-services firm Edward Jones & Co. for the company's failure to inform its customers of its revenue-sharing agreements with various mutual-fund companies. In these revenue-sharing agreements, Edward Jones obtained payments from mutual fund companies in exchange for promoting their mutual funds to its clients.

"Since we brought suit in 2004, Edward Jones has agreed to change its disclosure policies,' Attorney General Brown said. 'That settlement requires Edward Jones to notify each of its customers of any payments it receives from mutual funds that Edward Jones recommends. This will make for better-informed customer decisions.'

In 2004, Edward Jones made an agreement with federal, state and self-regulatory authorities to pay $75 million in refunds and civil penalties to its customers. Edward Jones also agreed to disclose all its revenue-sharing payments on its public website and to hire independent consultants to review and make recommendations regarding the company's disclosures.

The California Attorney General filed his own lawsuit against the company to enforce the state's consumer protection laws. In settlement of this case, Edward Jones will pay $7.5 million in civil penalties, fees and costs.

The settlement agreement is attached.

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PDF icon Settlement Agreement1.41 MB

Attorney General Brown Forges Greenhouse Gas Reduction Agreement With City of Stockton

September 9, 2008
Contact: (916) 210-6000, agpressoffice@doj.ca.gov

STOCKTON – California Attorney General Edmund G. Brown Jr. today announced a landmark agreement with the City of Stockton requiring the City to identify and reduce greenhouse gas emissions by encouraging downtown growth, constructing thousands of new residential units within its current city limits, developing a rapid transit bus system and requiring all new buildings to be energy efficient.

In the next 2 years, Stockton will develop a Climate Action Plan to inventory current greenhouse gas emissions. The City is also required to estimate its 1990 level of greenhouse gas emissions and project the increase in its emissions in 2020. As part of the plan, the City must reduce its current level of greenhouse gas emissions using set target dates for reduction.

“We cannot reach our statewide greenhouse gas reduction targets without the cooperation of our largest and fastest growing cities,” said Attorney General Brown. “Stockton has shown leadership on this issue, enabling us to work together to meet our targets for significantly reducing greenhouse gas emissions. This agreement is a critical part of California’s effort to address climate change.”

Under a California law passed in 2006, the state is committed to reducing greenhouse gas emissions to 1990 levels by 2020. In 2005, the Governor issued an Executive Order requiring an additional reduction of emissions to 80% below 1990 levels by 2050. Currently, California generates approximately 500 million metric tons of CO2 equivalent, a number significantly above 1990 levels. To achieve the 2020 target, California must reduce current emissions by at least 10%.

The City of Stockton has agreed to reduce sprawl and plans to construct nearly 18,000 new home units within the current city limits, including 4,400 units to be built in downtown Stockton. To encourage infill growth, the City will consider measures such as less restrictive building height requirements and reduced permit fees to spur the development of downtown commercial and residential units. The City will initiate a subsidy program to spark infill growth.

In addition, the City will adopt several green building ordinances to ensure that new residential housing and commercial buildings are energy-efficient, conserve water and are built with green materials.

Any new development in the city will have to be transit-friendly. New commercial and residential development will be located near mass-transit stops and be accessible to vehicular, pedestrian and bicycle traffic and established neighborhoods.

Though new development will continue at city outskirts, the City agreed to phase it in gradually to ensure that it can provide adequate resources to these new areas, such as fire and police protection. Before approving new development projects, the City will demonstrate that the new development will not undermine downtown Stockton and will complement existing commercial and residential zones.

"We appreciate the collaboration with the Attorney General's Office; this is a win-win situation in which we can address environmentally sensitive issues,” said Stockton Mayor Edward J. Chavez. “Certainly, the Attorney General and his staff have been tremendous in getting this agreement put together; it will be a model that can be replicated in other communities.'

This agreement comes after the City of Stockton issued a Draft Environmental Impact Report for its General Plan that outlined how the City would manage its growth through 2035. The report, issued in December 2007, estimated that by 2035, Stockton’s population would reach 580,000, an increase of almost 50%. In January 2008, the Sierra Club filed a lawsuit to block Stockton’s General Plan, claiming that it failed to address the amount of greenhouse gases the plan would emit into an already heavily polluted San Joaquin Valley.

"We are grateful that the Attorney General came to Stockton and became involved in the city's growth plan. The settlement represents a huge step forward for good planning that should slow down sprawl at the fringe of the city and reduce the increase in greenhouse gases due to new growth,” said Dale Stocking, Member of the Mother Lode Chapter Executive Committee. “The city's commitment to adopt comprehensive green building standards and provide developer funding for a transit system should reduce vehicle trips and make Stockton a leader in the Central Valley and the state.'

The Attorney General’s Office entered into negotiations with Stockton earlier this year, citing concerns about the General Plan and the need to evaluate greenhouse gas reduction impacts under the California Environmental Quality Act. To date, the Attorney General has questioned the proposed draft environmental impact reports of several general plans, including San Bernardino County, Solano County, Tulare County, the City of San Diego, as well as regional transportation plans, refineries, cement plants, dairy expansions, and other large projects.

On their own, many communities throughout California have already begun to initiate measures to reduce greenhouse gas emissions, including Fresno, Los Angeles, San Francisco, Sonoma County, Santa Monica, Berkeley, Marin County, Palo Alto, Chula Vista and Modesto.

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Attorney General Brown Announces $1.4 Million Restitution Settlement for Drywall Workers

September 4, 2008
Contact: (916) 210-6000, agpressoffice@doj.ca.gov

ORANGE COUNTY – California Attorney General Edmund G. Brown Jr. today announced a settlement with an Orange County drywall contractor that will award $1.4 million in restitution to employees who were forced to work overtime and through state-mandated rest breaks without being fully compensated for their work.

“This settlement will right a wrong that’s been inflicted on the hard-working employees of Interwall,” Attorney General Brown said. “The company tried to increase its profit on the backs of its workforce, by denying employees rest breaks and overtime pay. With this agreement, Interwall will now be required to pay its employees a proper wage for every hour of work they performed.”

Brown sued Interwall Development Systems last January for engaging in unfair and unlawful business practices. The suit alleged that Interwall denied certain overtime pay, did not provide accurate itemized wage statements, and did not allow its employees to take breaks during afternoon shifts. Approximately 400 employees were affected by the company’s practices. The company slashed its labor costs in an effort to underbid competition for at least 150 drywall installation projects in Los Angeles, San Bernardino, Riverside, Orange and San Diego Counties.

The settlement, approved by the judge today in Orange County Superior Court, prohibits Interwall from circumventing the state’s labor laws. It will award just over $1.4 million to current and former employees of Interwall that were not properly paid for work they had done. Of the $1.4 million to be paid by the company, $674,396 will be applied to resolve unpaid overtime claims, $303,607 will resolve interest claims on the overtime, and $425,996 will be paid to compensate workers who had to work through state mandated break periods.

Additionally, Interwall will pay up to $131,000 in employer share payroll taxes that the company would have paid if it had adequately compensated its employees for their work.

Since the company violated provisions of the California Business & Professions Code on unfair business practices, it will have to pay civil fines in the amount of $200,000 to the state.

Investigators found that some Interwall employees worked Monday through Saturday, up to twelve hours per day, and received no overtime payments. Interwall also denied rest breaks to employees during their afternoon shifts. Under California law, workers are entitled to a ten-minute break every four hours and to overtime pay for working more than eight hours per day or forty hours per week.

To avoid paying overtime, Interwall set up a business operation with affiliate companies that paid employees, at regular pay rates, for the extra hours. In one case, an employee worked sixty-eight hours for Interwall, but was paid for forty hours by Felts Construction Company and twenty-eight hours by Cinco Construction.

Last December, Brown sued two janitorial companies, Excell Cleaning & Building Services and MO Restaurant Cleaning Services, for committing flagrant violations of California’s basic wage and hour laws. Brown also sued Brinas Corporation, a Southern California drywall contractor, found to be paying workers below minimum wage and also denying overtime wages. The state was awarded nearly $1.4 million in the Brinas case in June of this year. Brown also sued PacifiStaff, a company that was teaching construction companies how to avoid providing state mandated workers’ compensation benefits.

Attorney General Brown enforces California laws that require fair business practices in order to protect working men and women and ensure a level playing field where all businesses adhere to the same rules of conduct. His office has several ongoing investigations into employment, payroll and record-keeping practices of various businesses and construction companies across California.

The settlement and original complaint are attached.

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PDF icon Settlement2.38 MB
PDF icon n1605_complaint.pdf1.08 MB

Attorney General Brown Settles Predatory Consumer Marketing Case with Hy Cite Corporation

September 3, 2008
Contact: (916) 210-6000, agpressoffice@doj.ca.gov

LOS ANGELES—California Attorney General Edmund G. Brown Jr., in conjunction with the Los Angeles Department of Consumer Affairs (LADCA), today announced a million-dollar settlement with Wisconsin-based Hy Cite Corporation, which was investigated for using discriminatory business practices and false advertising in the sales of its high-priced Royal Prestige cookware to California consumers. This is the Attorney General’s second settlement agreement with Hy Cite Corporation for similar consumer fraud tactics.

“Hy Cite’s sales approach has been to scare people into buying high-priced pots and pans by telling customers that the cookware in their own home was unsafe,” said Attorney General Brown. “We won’t tolerate this type of predatory consumer marketing in California. This settlement will put an end to Hy Cite’s bogus chemical tests and predatory lending terms and ensure that the company treats its customers fairly and honestly.”

Hy Cite Corporation sells high-priced cookware targeting Latino consumers and neighborhoods through in-home demonstrations. Hy Cite’s salespeople allegedly lied their way into people’s homes by telling consumers that they had won a prize or by asking them to participate in opinion polls. Once in consumers’ homes, the salespeople often used high-pressure sales tactics and deception to convince consumers to buy the expensive cookware. Salespeople scared consumers into believing that cookware made of non-stick materials or aluminum would make them sick, claiming that Royal Prestige’s stainless steel cookware was safer to use.

To convince consumers of their claims, Hy Cite representatives would routinely perform bogus “tests” on the victim’s cookware, heating a mixture of baking soda and water in non-stick or aluminum pans, creating a bad-tasting paste through the resulting chemical reaction. The representatives claimed that toxic chemicals were transferred into the family’s food, making the consumer’s existing cookware unsafe for their families.

In many cases, consumers were convinced to finance their purchases through the company’s financing plan, but were misled to believe that the percentage rate was lower than the 20% or more financing rate they were charged. Many people who were scared into buying the products were unable to afford them, fell behind on their payments, and faced collection calls and damage to their credit rating.

During the investigation, the Attorney General’s office found that the company had developed two separate credit structures for customers, based on the customer’s ethnicity. Hy Cite’s “Anglo” customers were offered 90-day payment deferral, contract cancellation, and the use of post-dated checks. These options were not offered to Hy Cite’s Hispanic customers.

After receiving several consumer complaints about the company’s predatory sales practices, the Attorney General’s office began its investigation in March 2007.

This is California’s second settlement with the Hy Cite Corporation for consumer marketing fraud. In 2000, the California Attorney General’s office reached a settlement agreement with Hy Cite Corporation, in which the company agreed to drastically reform its business practices, pay restitution and civil penalties to victims of its predatory sales tactics, and honor a permanent injunction from engaging in these actions in the future.

Under the current settlement, Hy Cite and several of its top executives agreed to pay $1 million as restitution to consumer victims, plus penalties and costs to the Attorney General and LADCA. In addition to these penalties, Hy Cite has agreed to hire an independent monitor for three years to conduct in-depth interviews with future consumers of Hy Cite products. The judgment also sets forth strict requirements on what its salespeople can say to convince consumers to listen to a sales presentation and what can be said during the sales presentation itself.

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Atty. General Brown Forces Settlement with Citibank: Investigation Reveals Bank Was Stealing From Its Customers

August 26, 2008
Contact: (916) 210-6000, agpressoffice@doj.ca.gov

SAN FRANCISCO- California Attorney General Edmund G. Brown Jr. today announced that he has reached a settlement with Citibank after a three-year investigation into the company’s use of an illegal “account sweeping” program. Nationally, the company took more than $14 million from its customers, including $1.6 million from California residents, through the use of a computer program that wrongfully swept positive account balances from credit-card customer accounts into Citibank’s general fund.

“The company knowingly stole from its customers, mostly poor people and the recently deceased, when it designed and implemented the sweeps,” Attorney General Brown said. “When a whistleblower uncovered the scam and brought it to his superiors, they buried the information and continued the illegal practice.”

Between 1992 and 2003, Citibank employed a computerized “credit sweep” process to automatically remove positive or credit balances from credit-card customer accounts. An account could show a credit balance if a customer double-paid a bill or returned a purchase for credit. The credit sweeps were done without notifying the customer and without regard for whether the customer had any unpaid balances or other charges owed to Citibank.

The credit sweeps targeted more than 53,000 customers nationwide. All of the affected accounts were in a recovery status, which includes accounts of customers who have died, sought bankruptcy protection, or been the target of litigation or other collection efforts by Citibank.

In July of 2001, a Citibank employee uncovered the practice and brought it to the attention of his superiors. The employee was later fired for discussing the credit sweeps with an internal audit team. In the words of a Citibank executive, “Stealing from our customers is a business decision, not a legal decision.” The same executive later said that the sweep program could not be stopped because it would reduce the executive bonus pool.

The Attorney General launched its investigation of Citibank in 2005 to determine whether the company violated the California False Claims Act by filing false holder reports with the California State Controller that omitted any reference to the swept funds. The 3-year investigation led to today’s settlement.

The settlement includes:
• Permanent injunction – Citibank will be permanently prevented from re-initiating the credit sweeps.
• Refunds to victims – Citibank will refund all improperly swept funds to customers who were victimized by the sweeps. Citibank will also pay California customers 10% interest on the amount taken.
• Penalties – Citibank will pay $3.5 million in damages and civil penalties to the State of California.
• Compliance audit – After Citibank’s refund process is complete, an independent auditor will review Citibank’s work to ensure that it has lived up to its obligations.

Citibank has affirmed that it can identify most of the victims of the credit sweeps and has begun the process of reviewing archived account data and refunding the improperly swept funds going back to 1992.

A copy of the settlement is attached

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In Response To Today's Prop 8 Court Order

August 8, 2008
Contact: (916) 210-6000, agpressoffice@doj.ca.gov

SACRAMENTO--In response to today’s Sacramento Superior Court decision to deny a lawsuit challenging the title and summary and ballot label for Proposition 8, California Attorney General Edmund G. Brown Jr. issued the following statement:

“This lawsuit was more about politics than the law. The court properly dismissed it.”

One of the many responsibilities of the attorney general is to prepare a title and summary for initiative measures. For more information visit: http://ag.ca.gov/initiatives/index.php

The court’s order, issued today, is attached.

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Brown Sues To Topple Online Pyramid Scheme

August 5, 2008
Contact: (916) 210-6000, agpressoffice@doj.ca.gov

FOR IMMEDIATE RELEASE
Contact: Gareth Lacy (916) 324-5500

Brown Sues To Topple Online Pyramid Scheme

LOS ANGELES--California Attorney General Edmund G. Brown Jr. today announced a lawsuit against YourTravelBiz.com for operating a 'gigantic pyramid scheme' that recruited tens of thousands of members with deceptive claims that members could earn huge sums of money through its online travel agencies.

“YourTravelBiz.com operates a gigantic pyramid scheme that is immensely profitable to a few individuals on top and a complete rip-off for most everyone else,” Attorney General Brown said. “Today’s lawsuit seeks to shut down the company’s unlawful operation before more people are exploited by the scam.”

YourTravelBiz.com and its affiliates operate an illegal pyramid scheme that only benefits members if and when they find enough new members to join the scam. Once enrolled, members who join the pyramid scheme earn compensation for each new person they enlist, regardless of whether they sell any travel. The company lures new members by offering huge income opportunities through online travel agencies yet the typical person actually makes nothing selling travel.

According to company records there were over 200,000 members in 2007 who typically pay more than $1,000 per year--$449.95 to set up an “online travel agency” with a monthly fee of $49.95. In 2007, only 38 percent of the company’s members made any travel commissions. For the minority of members who made any travel commission in 2007, the median income was $39.00--less than one month’s cost to keep the Website. There are at least 139,000 of the company’s travel Websites, all virtually identical, on the Internet.

YourTravelBiz’s extensive marketing materials include videos of people driving Porsches and other luxury cars, holding ten-thousand dollar checks, and claiming to be raking in millions of dollars in profits. The company advertises through its Website www.ytb.com, and at conventions, workshops and nationwide sales meetings which have been held in California locations such as Los Angeles, Sacramento, San Francisco and San Diego.

Brown charges the company, its affiliates, and the company’s founders J. Lloyd Tomer, J. Scott Tomer, J. Kim Sorensen and Andrew Cauthen with operating an “endless chain scheme,” an unlawful pyramid in which a person pays money for the chance to receive money by recruiting new members to join the pyramid. Brown also charges the company with unfair business practices and false advertising practices including:

* Deceptive claims that members can earn millions of dollars with the company
* Operating without filing legally mandated documents with the attorney general and the Department of Corporations
* Selling an illegal travel discount program

Under California’s unfair business practices statue, the company is liable for $2,500 per violation of law. Attorney General Brown is suing YourTravelBiz.com to get a court order that:

* Bars the company from making false or misleading statements
* Assesses a civil penalty of at least $15,000,000 and at least $10,000,000 in restitution for Californians who were ripped off by the company.

From August 6 through 10, thousands of members are preparing to travel to St. Louis for a national convention to learn new techniques to recruit more victims into the illegal pyramid scheme. Last year at least 10,000 people attended a similar national conference. For more details on the company’s plan to perpetuate its scheme visit: http://www.yourtravelbiz.com/bizRep/BizReports/BIZREPORT_07-18-08.htm

For more information on pyramid schemes visit: http://ag.ca.gov/consumers/general/pyramid_schemes.php

Consumers who believe they have been bilked by YTB should send a written complaint with copies of any supporting documentation to:

Office of the Attorney General
Public Inquiry Unit, P.O. Box 944255
Sacramento, CA 94244-2550

Or through an on-line complaint form: http://ag.ca.gov/contact/complaint_form.php?cmplt=CL.

Today’s lawsuit against YourTravelBiz.com, filed yesterady in Los Angeles Superior Court, also names affiliates which include YTB Travel Network, Inc., YTB Travel Network of Illinois, Inc., as well as the company’s founders J. Lloyd Tomer, J. Scott Tomer, J. Kim Sorensen and Andrew Cauthen. For a copy of the lawsuit please contact the attorney general's press office: (916) 324-5500.

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Atty. Gen. Brown Settles Potato Chip Lawsuit With Heinz, Frito-Lay & Kettle Foods

August 1, 2008
Contact: (916) 210-6000, agpressoffice@doj.ca.gov

Contact: Abraham Arredondo: (916) 324-5500 or Ed Weil (510) 622-2149

Atty. Gen. Brown Settles Potato Chip Lawsuit With Heinz, Frito-Lay & Kettle Foods

LOS ANGELES--California Attorney General Edmund G. Brown Jr. today settled lawsuits against Heinz, Frito-Lay, Kettle Foods and Lance Inc. after the companies agreed to slash levels of the cancer-causing chemical acrylamide in their potato chips and french fries.

“The companies agreed to reduce this carcinogenic chemical in fried potatoes--a victory for public health and safety in California,” Attorney General Brown said. “Other companies should follow this lead and take steps to reduce acrylamide in french fries and potato chips,” Brown added.

In 2005, the attorney general sued McDonald’s, Wendy’s, Burger King, KFC, Frito-Lay, Kettle Foods, Lance, Procter & Gamble and Heinz, for selling potato chips and french fries containing high levels of acrylamide, a chemical known to the state to cause cancer. Acrylamide is a by-product of frying, roasting and baking foods--particularly potatoes--that contain certain amino acids. In 2002, Swedish scientists discovered high levels of cancer-causing acrylamide in fried potato products.

The attorney general sued french fry and potato chip companies under Proposition 65, the Safe Drinking Water and Toxic Enforcement Act, which requires companies to post warnings of any cancer-causing chemicals in their products unless they can prove that the levels do not pose a significant health risk.

Last year, restaurant chains including KFC, McDonald’s, Wendy’s and Burger King agreed to post acrylamide warnings at their restaurants and to pay civil penalties and costs. In January, Procter & Gamble agreed to reduce acrylamide in Pringles potato chips by 50 percent so that no warning would be required.

Under today’s settlements, Frito-Lay, Inc., which sells most of the potato chips sold in California, Kettle Foods, Inc., maker of “Kettle Chips,” and Lance, Inc., maker of Cape Cod Chips will reduce acrylamide over a period of three years to 275 parts per billion. For Frito Lay, this is about a 20% reduction, while for Kettle Chips, which contain far more acrylamide; this is an 87% reduction in acrylamide. Most Cape Cod chips are already near the compliance level, but one product, “Cape Cod Robust Russets,” contains over 7,000 parts per billion of acrylamide, and immediately will either carry a warning label on the package or will be removed from the market. Frito-Lay will pay $1.5 million in penalties and costs, $550,000 will be forgiven if it can reduce acrylamide in its products in half the time required by the settlement. It will pay an additional $2 million if it fails to reduce acrylamide in the required time. Kettle Foods will pay $350,000 in penalties and costs, while the much smaller Lance, Inc., will pay $95,000 in fees and costs.

Last week the Attorney General reached agreement with Heinz, Inc., the manufacturer of Ore-Ida frozen french fries and tater tots, will pay $600,000 in penalties and costs and will change its fried potatoes to contain 50 percent less acrylamide.

The settlements were approved today by Los Angeles Superior Court Judge William F. Highberger. A trial had been scheduled before Judge Highberger on July 28, but today’s settlement marks the end of the state’s litigation. Had the lawsuit gone to trial it would have been a legal battle with scientific experts debating the extent of the cancer risk posed by acrylamide.

The U.S. FDA is studying the problem of acrylamide in fried potatoes but has not taken formal action. The FDA’s website advises consumers that acrylamide can be reduced by not over-browning potatoes during cooking. For more information visit: http://www.cfsan.fda.gov/~dms/acryfaq.html

Brown said he will work with the companies to find a way to effectively give consumers information about the acrylamide in their products, while at the same time preventing undue public alarm and unnecessary warning signs concerning foods that contain insignificant amounts of the chemical.

For more information on acrylamide and Proposition 65 please visit:
http://ag.ca.gov/prop65/