Lawsuits & Settlements

SAN FRANCISCO -- Attorney General Kamala D. Harris issued the following statement on the federal grand jury indictment of Pacific Gas & Electric Co. (PG&E) for criminal violations of the federal Natural Gas Pipeline Safety Act of 1968:

“Today’s indictment is an important step in providing justice for the individuals, families and community devastated by the 2010 pipeline explosion and fire in San Bruno. As alleged in the indictment, PG&E knowingly and willfully failed to identify and evaluate threats to its transmission pipelines, including Line 132 underneath much of San Bruno. When allegedly faced with evidence of transmission line problems, PG&E knowingly and willfully chose not to assess and remediate them.
 
My office will continue our work with local and federal partners in prosecuting this matter in federal court and holding PG&E accountable for its alleged conduct."
 
On September 9, 2010, a portion of Line 132 in San Bruno exploded and resulted in a fire that killed eight people, injured 58 others, and damaged or destroyed numerous homes.  The California Department of Justice has been conducting a criminal investigation related to the explosion in partnership with local authorities from the San Mateo District Attorney’s Office, the San Bruno Police Department, and the San Bruno Fire Department, as well as federal agencies including the U.S. Attorney’s Office for the Northern District of California, the U.S. Department of Transportation’s Office of Inspector General, the Federal Bureau of Investigation, and the Pipeline and Hazardous Material Safety Administration.
 
The charges and allegations contained in the indictment against PG&E are only allegations, and the defendant is presumed innocent unless and until proved guilty.
 
A copy of the federal indictment is attached to the electronic version of this release at: https://oag.ca.gov/news

SAN FRANCISCO - Attorney General Kamala D. Harris today announced that consumers may now file claims to recover money in a $310 million multi-state settlement with major manufacturers of Dynamic Random Access Memory (DRAM) computer chips over price fixing allegations.
 
“These companies betrayed the trust of consumers by artificially inflating prices to drive up profits,” Attorney General Harris said. “I encourage California consumers who purchased one of these products to file a claim immediately.”
 
Consumers who purchased computers, printers, video game consoles or other electronic devices with DRAM memory between 1998 and 2002 are eligible to make a claim before August 1, 2014 and could receive money from the settlement.
 
To file a claim, visit www.DRAMclaims.com or call 1-800-589-1425.
 
After completing an investigation in 2006, California, with other states, filed antitrust suits alleging that consumers over-paid for electronic devices containing DRAM chips for purchases made from 1998 to 2002. DRAM is a common form of memory chip found in computers and other devices.
 
The settlement, reached in conjunction with class actions, pays individuals and businesses that purchased these chips or devices containing these chips in the United States between 1998 and 2002 from someone other than a DRAM manufacturer, such as retailers like Best Buy or Staples. The settlement also requires that these DRAM manufacturers implement antitrust compliance programs and enjoins them from certain conduct related to the sale of DRAM that would violate antitrust laws.
 
Court filings associated with the settlement can be found here: http://dramclaims.com/settlement-details/court-documents/
 
A full list of defendant companies can be found here: http://dramclaims.com/faq/
 
For more information about the settlements, visit www.DRAMclaims.com

SAN FRANCISCO – Attorney General Kamala D. Harris today announced a $2.1 billion multistate and federal settlement with Ocwen Financial Corporation and Ocwen Loan Servicing, LLC (Ocwen) over alleged mortgage servicing misconduct.

The settlement makes California homeowners eligible to receive up to $268 million in first lien principal reductions and nearly $23 million in cash payments to borrowers.
 
"This settlement will help homeowners who've been misled while trying to modify their Ocwen mortgages," said Attorney General Harris, "But our work isn't done. Too many California families are still ‎coping with uncooperative banks and mortgage service providers. My office will continue to fight on their behalf."

The settlement resolves allegations that Ocwen engaged in robo-signing, “dual tracking” of borrowers seeking loan modifications, and other misconduct in the course of its mortgage servicing activities. The settlement also resolves similar allegations against Homeward Residential, Inc. and Litton Loan Servicing, LP, which Ocwen acquired.

Ocwen holds nearly 390,000 loans in California, of which 12% are underwater. Ocwen holds approximately 6% of all California underwater loans.
 
The national settlement requires Ocwen to pay $125 million to borrowers whose homes were foreclosed between 2009 and 2012 and commit to $2 billion in first lien principal reduction loan modifications over the next three years. The Consumer Financial Protection Bureau was the lead agency for the negotiations. The settlement was signed by 49 states and the District of Columbia, including California.
 
Joe Smith, who served as the Monitor for last year’s National Mortgage Settlement, will monitor the settlement nationally.
 
The Ocwen settlement does not grant immunity from criminal offenses and would not affect criminal prosecutions.  The agreement does not prevent homeowners or investors from pursuing individual, institutional or class action civil cases.  The agreement also preserves the authority of state attorneys general and federal agencies to investigate and pursue other aspects of the mortgage crisis, including securities cases.
 
In some cases, Ocwen will contact borrowers directly regarding principal reductions. However, borrowers should contact Ocwen to obtain more information about principal reductions and whether they qualify under terms of this settlement. A settlement administrator will contact qualified borrowers associated with foreclosed loans regarding cash payments.

Today’s settlement is the latest in a series of actions taken by Attorney General Harris and the California Department of Justice against bad lending practices in California.

In February 2012, Attorney General Harris secured a commitment from the nation’s five largest banks which has resulted in more than $20 billion for struggling California homeowners. Following the settlement, Attorney General Harris sponsored the California Homeowner Bill of Rights, a landmark package of legislation that restricts dual-track foreclosures, guarantees struggling homeowners a reliable point of contact at their lender and imposes civil penalties on fraudulently signed mortgage documents. In addition, homeowners may require loan servicers to document their right to foreclose. This legislation was signed by Governor Brown in July 2012 and took effect on January 1, 2013.

Most recently, Attorney General Harris announced a settlement with J.P. Morgan Chase & Co. over its misrepresentation in residential mortgage-backed securities sold to California’s public employee and teacher pensions. The terms of the settlement resulted in California recovering nearly $300,000 million in damages.
 
In February 2013, Attorney General Harris filed a lawsuit against Standard & Poors, one of the nation's major credit rating companies, for inflating its ratings of structured finance investments, which caused California's public pension funds and other investors to lose billions of dollars.
 
Created in May 2011 by Attorney General Harris, the Mortgage Fraud Strike Force continues to lead the charge in investigating and prosecuting misconduct at all stages of the mortgage process.

For more information about the settlement, CA Ocwen borrowers can call 1-800-337-6695 and email ConsumerRelief@Ocwen.com. The California Department of Justice also has more information available at oag.ca.gov.

SAN FRANCISCO – Attorney General Kamala D. Harris today announced a settlement with J.P. Morgan Chase & Co. over its misrepresentations in residential mortgage-backed securities sold to California's public employee and teacher pension funds, CalPERS and CalSTRS, between 2004 and 2008.

According to the terms of the settlement, California will recover $298,973,000 in damages.

“JP Morgan Chase profited by giving California’s pension funds incomplete information about mortgage investments,” Attorney General Harris said. “This settlement returns the money to California’s pension funds that JP Morgan wrongfully took from them.”

An investigation conducted by Attorney General Harris showed that offering documents for the securities failed to accurately disclose the true characteristics of many of the underlying mortgages, and that due diligence to weed out poor quality loans had not been adequately performed.

The broader settlement reached today by the United States Department of Justice and other federal and state agencies totals $13 billion, and represents the largest settlement with a single entity in American history.

CalPERS and CalSTRS will be reimbursed through this settlement for losses on investments in mortgage-backed securities of J.P. Morgan Chase or its predecessors Washington Mutual Bank and Bear Stearns.

J.P. Morgan Chase will also provide $4 billion in relief to aid consumers across the country, including Californians, harmed by the unlawful conduct of J.P. Morgan Chase, Bear Stearns and Washington Mutual. That relief will take various forms, including principal forgiveness, loan modification, targeted originations and efforts to reduce blight. An independent monitor will be appointed to determine whether J.P. Morgan Chase is satisfying its obligations.

The settlement related to California’s pension funds arises from the investigation into mortgage-backed securities by Attorney General Harris's Mortgage Fraud Strike Force, which was formed in May 2011 to comprehensively investigate misconduct in the mortgage industry. The Attorney General's additional efforts to investigate the mortgage crisis include securing an estimated $20 billion for California in the National Mortgage Settlement and sponsoring the California Homeowner Bill of Rights, a package of laws instituting permanent mortgage-related reforms.

For more information on the U.S. DOJ settlement visit: http://www.justice.gov/

SAN FRANCISCO -- Attorney General Kamala D. Harris today issued the following statement, following the announcement that California joined with 45 states, the District of Columbia and the federal government in a $2.2 billion settlement with Johnson & Johnson and its subsidiary, Janssen Pharmaceuticals, Inc., over allegations of the companies’ unlawful marketing practices, including off-label promotion and kickbacks, to promote the sales of their atypical antipsychotic drugs, Risperdal and Invega.

California’s share of the national settlement is $89 million, which is the largest recovery ever for California from a national civil settlement regarding atypical antipsychotic drugs.

“Motivated by profit, these companies made false claims that jeopardized the health of California’s most vulnerable patients, including children and senior citizens—and left California taxpayers with the bill,” said Attorney General Harris. “Today’s record settlement reinforces the California Department of Justice’s commitment to rooting out this kind of greed wherever we find it.”

As part of this global resolution, the companies have agreed to resolve civil liabilities for their alleged unlawful conduct, which caused false and/or fraudulent claims to be submitted to Medi-Cal and improper Medi-Cal purchases. The complaint highlights practices by Johnson & Johnson and Janssen, including marketing to patient populations (children, adolescents and the elderly) for whom the drugs were not FDA approved and making false and misleading statements about the efficacy of these drugs.

To compensate the Medicaid programs, the companies will pay $1.114 billion as the combined federal and states’ share of the civil settlement for both drugs. After a statutory relator’s share is paid to the whistleblowers who brought the fraud to the attention of the government, the Department of Health Care Services will be reimbursed $44.5 million for losses incurred from the fraud; the remainder will go to support Medi-Cal fraud and enforcement efforts.

In addition, Janssen Pharmaceuticals, Inc. plead guilty to a criminal misdemeanor charge of misbranding Risperdal in violation of the Food, Drug, and Cosmetic Act.  As part of the criminal plea, Janssen has agreed to pay an additional $400 million in criminal fines and forfeitures.

The Attorney General’s Bureau of Medi-Cal Fraud and Elder Abuse investigates and prosecutes claims of Medi-Cal civil and criminal fraud, as well as allegations of elder abuse, such as physical assaults or financial theft.

SACRAMENTO – California Attorney General Kamala D. Harris today announced that the California Attorney General’s Office and the Fair Political Practices Commission (FPPC) have jointly secured a $1 million civil settlement against two out-of-state organizations for violations of the California Political Reform Act. 

According to the terms of the settlement, the Arizona-based Center to Protect Patient Rights (CPPR) and Arizona-based Americans for Responsible Leadership (ARL) have admitted to making millions of dollars in unlawful intermediary contributions in connection with the November 2012 election in California and have agreed to each pay a fine of $500,000. 

“This case demonstrates in clear terms that California’s campaign finance laws are in desperate need of reform,” Attorney General Harris said. “California law currently contains a loophole for certain groups to evade transparency by maintaining the anonymity of their donors. I fully endorse swift legislative action to change the law. 

In October 2012, $11 million was funneled to a campaign committee supporting Proposition 32 and opposing Proposition 30.  A civil investigation was initiated by the FPPC, which was represented by the California Department of Justice’s Civil Law Division. Following the election, the California Department of Justice’s Criminal Law Division opened an investigation to examine potential criminal wrongdoing.

The investigation revealed that a Virginia nonprofit, Americans for Job Security (AJS), raised approximately $28 million in 2012 for issue advocacy opposing tax increases and supporting "pro-paycheck public policy."  Current law permits donors to remain anonymous if their contributions are used for issue advocacy. Shortly before the general election, AJS decided that were it to spend the money on issue advocacy at that time, it would trigger a California law requiring disclosure of the funds’ sources. Instead, AJS decided to make multiple donations to another non-profit, CPPR, which has a history of funneling millions of dollars to support conservative causes. AJS expected and hoped that CPPR would be able to find other money to support AJS’s efforts in California. AJS gave CPPR a donation of $4.05 million on September 10, 2012, $14 million on October 11, 2012 and $6.5 million on October 19, 2012.

Following these donations, CPPR made two major contributions of its own. First, on September 11, 2012, CPPR donated $7 million to the Iowa-based American Future Fund (AFF). As an intermediary, AFF then made a contribution of $4.08 million to a third entity, the California Future Fund (CFF). CFF used that money to support Proposition 32 in the California general election.

CPPR’s second contribution occurred on October 12, 2012, in the form of $13 million to ARL. As an intermediary, ARL returned $11 million to California through a contribution to the Small Business Action Committee (SBAC), a campaign committee supporting Proposition 32 and opposing Proposition 30. CPPR’s contributions were funneled back to California campaign committees through intermediaries AFF and ARL, which violated civil provisions of the California Political Reform Act of 1974.

The Department of Justice’s investigation did not reveal evidence to prove a knowing or willful violation of the Act by these parties.  As a result, the California Attorney General's Office has concluded its investigation and will not pursue criminal charges.

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

SAN FRANCISCO -- Attorney General Kamala D. Harris today filed a lawsuit against Corinthian Colleges, Inc. (CCI) and its subsidiaries that operate Everest, Heald and WyoTech colleges for false and predatory advertising, intentional misrepresentations to students, securities fraud and unlawful use of military seals in advertisements.

The complaint alleges that CCI intentionally targeted low-income, vulnerable Californians through deceptive and false advertisements and aggressive marketing campaigns that misrepresented job placement rates and school programs. CCI deployed these advertisements through persistent internet, telemarketing and television ad campaigns. The complaint further alleges that Corinthian executives knowingly misrepresented job placement rates to investors and accrediting agencies, which harmed students, investors and taxpayers.

“The predatory scheme devised by executives at Corinthian Colleges, Inc. is unconscionable. Designed to rake in profits and mislead investors, they targeted some of our state’s most particularly vulnerable people—including low income, single mothers and veterans returning from combat,” Attorney General Harris said. “My office will continue our investigation into the for-profit college industry and will hold accountable those responsible for these illegal, exploitative practices.”

According to Harris’ complaint, CCI’s predatory marketing efforts specifically target vulnerable, low-income job seekers and single parents who have annual incomes near the federal poverty line. In internal company documents obtained by the Department of Justice, CCI describes its target demographic as “isolated,” “impatient,” individuals with “low self-esteem,” who have “few people in their lives who care about them” and who are “stuck” and “unable to see and plan well for future.”

According to the complaint, CCI advertised job placement rates as high as 100% for specific programs when, in some cases, there is no evidence that a single student obtained a job during the specified time frame. The complaint further alleges that CCI runs millions of online and mobile ads offering ultrasound, x-ray, radiology, and dialysis technician programs at their California campuses—when, in fact, CCI does not offer those programs. CCI’s call center agents are disciplined if they tell callers that CCI does not offer these programs. Additionally, according to the complaint, CCI includes official Army, Navy, Air Force, Marine Corps, and Coast Guard seals in mailings and on web sites without authorization and in violation of California law.

The complaint alleges that CCI committed securities fraud by reporting a nationwide job placement rate of 68.1% in presentations to investors, when senior executives knew this percentage was false. The complaint describes internal audits emailed to CCI executives that show job placement data error rates between 53% and 70%. The complaint references an email from a CCI executive which explains that in 2011, two Everest College campuses (Hayward and San Francisco) paid a temporary employment agency “to place students to meet the accreditation deadline and minimum placement %.” The complaint also states that CCI double-counted job placements and failed to maintain required records of reported job placements.

According to a recent CCI securities filing, the average tuition for a CCI associate’s degree is $40,000 and the average tuition for an online CCI associate’s degree is $34,000.  The average tuition for CCI’s non-degree healthcare programs is $17,000.

CCI is based in Santa Ana and currently operates 24 Everest, Heald and WyoTech campuses in California, 111 total campuses in North America and three online programs. Out of the 81,000 students who attend CCI colleges, approximately 27,000 (33%) are in California.

CCI is a publicly traded corporation with assets of over $1 billion. Federal funds account for almost all of CCI’s annual revenue.

In July 2013, Attorney General Harris filed a separate lawsuit in Sacramento Superior Court to enforce an investigative subpoena against Bridgepoint Education Inc., operator of Ashford University, as part of an investigation of that company’s practices.

Current or former CCI students who wish to file a complaint can contact the Attorney General’s Office at: http://oag.ca.gov/contact/consumer-complaint-against-business-or-company

Resources for current or former CCI students are available at: oag.ca.gov

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

SAN FRANCISCO -- Attorney General Kamala D. Harris today announced a settlement in People v. Help Hospitalized Veterans, et al that forces all Help Hospitalized Veterans officers and directors named as defendants to resign and requires payment of $2.5 million in restitution.

In August 2012, Attorney General Harris sued the charity’s executive officers and directors for improperly diverting funds intended to support programs serving veterans and active-duty military, including providing arts and craft kits to hospitalized veterans. Executives used these funds to pay for fundraising and excessive compensation.

“Veterans face many challenges when they return home – it’s unconscionable that Help Hospitalized Veterans officials misused charitable money intended for those who served and have sacrificed for our country,” said Attorney General Harris. “I am pleased this settlement forces these officials to resign, in addition to paying restitution.”

The lawsuit alleged that the directors and officers of Help Hospitalized Veterans breached their fiduciary duty by wasting its charitable assets on such things as golf memberships and a condominium for use by executives to fundraise, and authorized excessive compensation for the group’s former president, Roger Chapin, and its current president, Michael Lynch. 

Under the settlement, Help Hospitalized Veterans will receive $2 million from the Chapin Trust. Chapin passed away in August. Lynch will retire from his position as president of Help Hospitalized Veterans and resign from the board. After a transition period, he and the four directors named in the suit – Thomas Arnold, Robert Beckley, Gorham L. Black III, and Leonard Rogers -- will be permanently barred from acting as an officer, director, fiduciary or trustee of any California charity.

The directors will resign on a rolling basis, to facilitate an orderly transition to new management. New board members will be subject to the approval of the Attorney General’s office.

In addition, the charity’s director and officer liability insurance policy will pay $450,000 to Help Hospitalized Veterans in restitution, on behalf of the defendant officers and directors.

Controversy around the performance of veteran’s charities like Help Hospitalized Veterans was brought to the public’s attention in 2007 by Rep. Henry A. Waxman who, as Chairman of the House Oversight and Government Reform Committee Hearings, held hearings into their fundraising practices and overhead.   

A copy of the settlement document is attached to this press release at www.oag.ca.gov

SAN FRANCISCO -- Attorney General Kamala D. Harris today announced a $750 million settlement with Powerex over claims arising from the 2000-2001 California energy crisis. The vast majority of the settlement money will go to ratepayers of California’s largest utilities.

According to testimony submitted by the Attorney General, Powerex engaged in market gaming by purchasing and exporting to Canada huge quantities of electricity California needed, and selling it back to California at exorbitant prices.

“Californians suffered through huge rate hikes and blackouts during the energy crisis,” Attorney General Harris said. “This settlement brings long-awaited compensation to California ratepayers for Powerex’s conduct.”

The settlement includes the Department of Water Resources’ California Energy Resources Scheduling (CERS) Division, the Public Utilities Commission and the state’s investor-owned utilities (IOUs), PG&E, Southern California Edison and SDG&E.

During the energy crisis, CERS purchased energy on behalf of California’s IOUs to help keep the lights on for customers. The Public Utilities Commission will determine how settlement funds will flow to the ratepayers of the investor-owned utilities.

LOS ANGELES -- Attorney General Kamala D. Harris today filed an enforcement action against JPMorgan Chase & Co. (Chase) alleging that the bank engaged in fraudulent and unlawful debt-collection practices against tens of thousands of Californians.

The suit alleges that Chase engaged in widespread, illegal robo-signing, among other unlawful practices, to commit debt-collection abuses against approximately 100,000 California credit card borrowers over at least a three-year period.

“Chase abused the judicial process and engaged in serious misconduct against California credit card borrowers,” Attorney General Harris said. “This enforcement action seeks to hold Chase accountable for systematically using illegal tactics to flood California’s courts with specious lawsuits against consumers. My office will demand a permanent halt to these practices and redress for borrowers who have been harmed.”

From January 2008 through April 2011, Chase filed thousands of debt collection lawsuits every month in the State of California. On one day alone, Chase filed 469 such lawsuits in California. The Attorney General’s complaint against Chase alleges that, to maintain this pace, Chase employed unlawful practices as shortcuts to obtain judgments against California consumers with speed and ease that could not have been possible if Chase had adhered to the minimum substantive and procedural protections required by law.

“At nearly every stage of the collection process, Defendants cut corners in the name of speed, cost savings, and their own convenience, providing only the thinnest veneer of legitimacy to their lawsuits,” the complaint states.

Chase used California’s judicial system as a mill to obtain default judgments, the suit alleges, using illegal tactics to flood the state’s court system in order to secure default judgments and garnish wages from Californians.

The alleged misconduct includes:

• Robo-signing: Chase illegally robo-signed various litigation filings, including sworn documents, declarations, and verified complaints, without reviewing the relevant files or bank records or even reading the documents before signing.

• “Sewer Service”: Chase failed to properly serve notice of debt collection lawsuits against consumers while claiming they had been served as required by law. This practice, known as “sewer service,” deprives the consumer of any notice of the lawsuit.

• Filing Irregularities: Chase haphazardly assembled its official legal filings. For example, Chase failed to redact consumers’ personal information in attachments to filings, potentially exposing them to identity theft and in violation of California law. In addition, when asking courts to enter default judgments against consumers, Chase consistently swore under penalty of perjury that the consumers were not on active military duty. In fact, Chase never checked.  This deprived servicemembers of important legal protections to which they are entitled while on active duty.

The suit was filed in Los Angeles Superior Court and a copy of the complaint is attached to the online version of this release at http://oag.ca.gov.

Consumers who believe they have been victims of this misconduct may submit a complaint online at http://oag.ca.gov/consumers.