LegalNewsLine.com

AG Nixon isn't joining lawsuit against governor; seeks special counsel

Chris Rizo (csrizo@hotmail.com) — Sat, 19 Jul 2008 23:57:00 CST

JEFFERSON CITY, Mo. (Legal Newsline)-Missouri Attorney General Jay Nixon's office has asked a state judge name a special assistant attorney general to pursue a lawsuit against Gov. Matt Blunt over access to e-mail records.

In a letter Friday, Deputy Attorney General Karen Mitchell requested that a special assistant attorney general be selected to continue with the lawsuit and that the trial judge allow more time to amend the lawsuit before the case is dismissed.

The letter also said Nixon will not join the lawsuit.

"The Attorney General does not intend at this time to join the lawsuit as a party. Rather, we request that this Court appoint a Special Assistant Attorney General," the letter said.

The lawsuit against the Republican governor was filed in an effort to obtain access to his administration's e-mail records. The Democratic attorney general claims the Republican governor violated the state's open records laws by deleting e-mails

The investigators appointed by Nixon are seeking back-up copies of the e-mail correspondence. The governor's office has demanded thousands of dollars in fees to retrieve copies of the emails from 2007.

Last week, Cole County Circuit Court Judge Richard Callahan dismissed the lawsuit, saying the special investigator -- retired state highway patrol superintendent Mel Fisher -- had no authority to file the complaint in Nixon's name.

"Plaintiff Fisher in his capacity as a Special Investigator for the Attorney General lacks standing to bring a lawsuit on behalf of the Attorney General for the State of Missouri," Callahan wrote in his ruling.

In his ruling, the judge gave the AG's investigators 10 days to file an amended petition "to establish personal standing or to provide the Attorney General the opportunity to join the lawsuit or seek the court."

From Legal Newsline: Reach reporter Chris Rizo at chrisrizo@legalnewsline.com.

Illinois AG: Publisher settles claims of being a bogus booster

Chris Rizo (csrizo@hotmail.com) — Sat, 19 Jul 2008 22:18:00 CST

SPRINGFIELD, Ill. (Legal Newsline)-The Illinois attorney general's office has reached a settlement with an in-state company accused of selling advertising space it falsely claimed would help local school sports programs.

The settlement announced this week by Attorney General Lisa Madigan ensures that small business owners who bought ad space from Loyalty Publishing, Inc., doing business as All-Star Publishing, would be refunded for ads they bought on local school sports schedule posters.

All-Star Publishing stopped producing the sports schedule posters after Madigan filed her lawsuit against the Peoria, Ill.-based company for purporting to be affiliated with local schools when there was no such relationship.

The company has already repaid more than $27,000 to consumers, the attorney general's office said.

"My office continues to work on this case to ensure all impacted consumers and small business owners regain the money they believed would be contributed to the school sports programs in their communities," Madigan said in a statement. "I encourage these business owners to file complaints with my office as soon as possible."

The settlement requires the company to provide full refunds to any additional parties who purchased advertising on school sports posters, as long as they file a claim with the attorney general's office by Sept.12.

The deal, win which the company admitted no wrongdoing, also requires Loyalty Publishing to contribute $5,000 to the AG's consumer enforcement and education fund, which will be used to bankroll consumer protection programs.

The settlement also prohibits Loyalty Publishing from using a school's name or identity without prior written authorization. The company is also barred from telling consumers that funds raised will go toward school athletic programs if no donation or only a nominal donation is to be made.

From Legal Newsline: Reach reporter Chris Rizo at chrisrizo@legalnewsline.com.

Lease-to-own company pays $150,000 settlement

Scott Sabatini — Sat, 19 Jul 2008 21:49:00 CST

SACRAMENTO, Calif. (Legal Newsline) - A lease-to-own company that claimed a 96 percent success rate in helping renters become owners is the latest target in California Attorney General Jerry Brown's quest to help Californians struggling from the bursting real estate bubble.

Brown announced Friday a settlement with Lease2Own Homes that will repay $150,000 to former customers who lost their entire down payment and were evicted when they defaulted on their rent payments.

"We have obtained restitution for renters who were ripped off by an unscrupulous landlord," Brown said, "who illegally seized down payments that were part of a lease-to-own home scam."

California law says a landlord may only seek eviction and unpaid rent if payments are missed in a lease-to-own plan.

Brown sued Lease2Own Homes in April claiming that employees of the business provided lease and option to purchase agreements to customers they believed were not capable of meeting the monthly payments required to successfully purchase the home, according to a press release issued by the attorney general's office Friday.

The suit further stated that the company ignored its own $70,000 minimum annual income requirement, falsely claimed that consumers would have time to clean up any bad credit before purchasing their home, and that their 96 percent success rate was a complete fabrication.

"Virtually no one was able to purchase a home as they described," Gareth Lacy, Brown's spokesman.

Lacy cited one incidence of an unemployed, divorced mother of four who paid $9,000 down for a home from Lease2OwnHomes. When she missed her $1,650 monthly payment, she was evicted and her deposit was seized.

At least 75 renters in Sacramento and San Joaquin County signed up for the program, according to the Attorney General's office.

Lease2OwnHomes President Quentin Hazell claimed to work exclusively with buyers who were within a year or two of having sufficient credit and resources to buy a home.

Under terms of the settlement, the company must pay $300,000 in civil penalties if it doesn't provide $150,000 in refunds to former customers whose down payments were seized.

Justices refuse to reconsider $100 million tax ruling

Chris Rizo (csrizo@hotmail.com) — Sat, 19 Jul 2008 19:15:00 CST

CARSON CITY, Nev. (Legal Newsline)-The Nevada Supreme Court has rejected a request by the state attorney general to reconsider its 6-1 ruling that food provided for free to casino patrons and some employees is tax exempt.

"The ruling has the potential to not only apply to the payment of use tax on meals, but also to the payment of sales tax," Attorney General Catherine Cortez Masto wrote to the court in a petition for a rehearing.

"The potential fiscal impact of this decision could be devastating to the state," the Democrat said in court papers filed in April.

In a four-page order this week denying the request, the high court said it rehears cases only when it has overlooked or misunderstood a fact or legal issues.

In the case, the justices sided with John Ascuaga's Nugget, a casino resort in Sparks, which is requesting a $1.3 million refund from the state for taxes it paid on complimentary meals between April 1999 and February 2002.

Observers say the ruling could cost ultimately the Silver State $100 million.

Masto and leaders in the state Capitol have said that the court's ruling in favor of the Nugget will worsen the state's budget shortfall, expected to reach $900 million by mid-2009.

To help balance the books, Republican Gov. Jim Gibbons in January ordered a 4.5 percent across-the-board budget reduction, and that cut was to help bridge the gap without taking into account claims by the Nugget and other casinos.

The court's majority opinion, signed by Chief Justice Mark Gibbons and five other justices, said "no taxable event occurred when the Nugget provided complimentary meals to its patrons and employees."

The ruling also said the state constitution exempts most "food for human consumption" from both sales and use taxes.

"Whether this exemption is the best approach is not for us to decide," the justices wrote. "We are bound to follow the constitution's plain language even though a different result might be desirable in some circumstances."

Justice Michael Douglas dissented, arguing that the state Legislature intended the tax exemption to apply to the purchase of food for preparation and consumption at home, not meals provided free of charge or otherwise by a restaurant.

"Thus Nevada law unequivocally requires a tax to be paid on meals that are provided free of charge to patrons and employees," Douglas wrote.

From Legal Newsline: Reach reporter Chris Rizo at chrisrizo@legalnewsline.com.

Missouri AG candidate's contribution shunned by fellow Democrat

Chris Rizo (csrizo@hotmail.com) — Sat, 19 Jul 2008 19:00:00 CST

JEFFERSON CITY, Mo. (Legal Newsline)-A Missouri candidate for the state Legislature says he has returned a $300 contribution from fellow Democrat state Sen. Chris Koster, who's running for attorney general.

Dr. Vernon (Doc) Harlan of St. Louis is running for the 71st District state House seat in the Aug. 5 primary.

Harlan said he returned the contributions amid recent revelations that Koster's campaign may have "been connected to laundering of political funds."

Koster's camp is accused in an state Ethics Commission complaint of skirting state campaign finance laws by directing contributors to give to an outside entity since political action committees may give many more times the amount individuals may contribute to a campaign.

The Koster campaign allegedly told contributors who wished to donate more to Koster than state law allowed to make an additional donation to a group called the Economic Growth Council.

The Economic Growth Council then funneled the money it received into Koster's campaign coffers.

Koster's campaign has said it has complied with the state's campaign finance laws.

Koster and fellow Democratic state Reps. Margaret Donnelly and Jeff Harris are fighting for their party's AG nomination in a particularly bitter primary race.

The winner of the Aug. 5 Democratic primary will go up against Republican AG candidate Senate President Pro Tem Michael Gibbons, R-Kirkwood, in November.

The candidates are vying to replace outgoing Attorney General Jay Nixon, a Democrat, who is running for Missouri governor.

From Legal Newsline: Reach reporter Chris Rizo at chrisrizo@legalnewsline.com.

Cuomo files criminal charges against apartment broker

John O'Brien (john@legalnewsline.com) — Fri, 18 Jul 2008 15:28:00 CST

NEW YORK (Legal Newsline) - A company acting as an apartment broker on popular classifieds Web site Craigslist.org is in trouble with New York Attorney General Andrew Cuomo, who claims the company cheated 4,000 New Yorkers.

Cuomo said Thursday that Innovative Apartments and Screening Services, Inc., used bait-and-switch schemes to fraudulently gain nearly $1 million. Cuomo's undercover investigation resulted in criminal charges against the company.

"Craigslist.org can be a terrific asset for New Yorkers trying to navigate a difficult real estate market, but bait-and-switch schemes orchestrated by crooked apartment brokers can turn hunting for an apartment into a nightmare," Cuomo said.

"By aggressively prosecuting disingenuous online brokers, we can ensure New Yorkers don't waste their time and money by pursuing phony leads for apartments."

The company charged customers $200 for credit reports and background checks that were never conduct and advertised "exclusive" listings that were actually apartments that did not exist, Cuomo said.

Innovative also recycled other Craigslist ads and advertised apartments that required the payment of fees, Cuomo said. The company obtained more than $900,000 doing so, partly because requests for refunds were ignored or not fully satisfied, Cuomo added.

Charged are co-owners Nader Jaber and Igor Portnov, a.k.a. Bobby Portnov, and employees Brooke Corio and Boris Portnov, a.k.a. Brian Portnov.

From Legal Newsline: Reach John O'Brien by e-mail at john@legalnewsline.com.

Blumenthal: Businesses better register

John O'Brien (john@legalnewsline.com) — Fri, 18 Jul 2008 15:16:00 CST

HARTFORD, Conn. (Legal Newsline) - The State of Connecticut collected more than $1 million in fines from out-of-state companies that did not properly register in fiscal year 2008.

State Attorney General Richard Blumenthal and Secretary of State Susan Bysiewicz joined in investigating the 310 companies that had to pay.

"These fines are a powerful preemptive strike against consumer fraud," Blumenthal said. "When companies fail to register, it impedes my office from easily identifying and holding accountable businesses that harm Connecticut citizens."

All businesses must register with the Secretary of State and pay a fee before they can conduct business in Connecticut. There are more than 47,000 registered.

"Only the most irresponsible companies will subvert simple requirements to register," Blumenthal said. "We will continue our cooperative crackdown to protect consumers, as well as lawfully registered businesses."

The smallest fine assessed was $165, while the largest, charged to Florists Transworld Delivery, was $22,380.

Kemira Chemicals had to pay $17,805, and T&M Equipment Corp. had to pay $16,912.50.

The average fine was $3,341.53, a 22-percent increase from the previous fiscal year. For a complete list of companies fined, click here.

From Legal Newsline: Reach John O'Brien by e-mail at john@legalnewsline.com.

Brown claims 'shocking new details' in Countrywide lawsuit

Scott Sabatini — Fri, 18 Jul 2008 11:00:00 CST

SACRAMENTO, Calif. (Legal Newsline)-California Attorney General Jerry Brown upped the ante Thursday on his legal action against Countrywide Financial Corp. after discovering "shocking new details" about the company's deceptive business practices.

Brown's office issued a press release Thursday claiming the beleaguered mortgage company ignored its own underwriting guidelines and rewarded employees for selling home loans to customers who presented a high degree of risk.

"These shocking new details provide further evidence of Countrywide's dangerous lending practices," Brown said, "which included ignoring borrowers' low credit scores and rewarding employees for selling risky loans."

In June, Brown sued Countrywide alleging misconduct in the sale of loans. Other states, including a prominent lawsuit in Florida that has opponents charging Florida Attorney General Bill McCollum with politicizing the issue, have also sued Countrywide.

In light of the new revelations, Brown amended his lawsuit in Los Angeles Superior Court to include 20 new details about the company's practices, which Brown alleges were meant to deceive customers. The amended suit, according to the Attorney General, had been previously withheld.

Brown's investigation includes the practice of enticing customers with a "very low 'teaser' rate" according to the press release. Higher commissions were paid to loan offices when customers signed loans with higher than normal interest rates and fees than their credit score qualified them for, Brown's suit claims.

"In one case the company approved an adjustable rate mortgage to an 85-year-old disabled veteran with such a low credit score and high debt that he defaulted in less than six months," Brown said.

The Attorney General cited several other specific examples where customers were seemingly destined to fail to make their loan payments, including a borrower who was convinced to take a Pay Option ARM with a one-month teaser rate and a three-year prepayment penalty, plus a home equity line of credit.

"The borrower's debt-to-income was 47 percent and credit score was 663," the press release said. "The loan office offered the loan even though the company's underwriting review indicated strong doubts about the borrower's ability to repay. The loan closed in January 2006, and a Notice of Default issued in 2007."

As of April, 21.11 percent of mortgages owned by Countrywide Home Loans were in some stage of delinquency or foreclosure, including nearly 48 percent of non-prime loans, according to the Attorney General's latest figures.

Last week in an interview with Legal Newsline, California Deputy Attorney for General Consumer Law Ben Diehl said the ongoing investigation into Countrywide's practices could well have far reaching effects on the industry as a whole.

"We hope to have an impact on the mortgage lending business going forward," Diehl said. "California being the big state that it is, we think ought to have an impact."

AGs welcome massive agreement with ISPs

John O'Brien (john@legalnewsline.com) — Thu, 17 Jul 2008 13:31:00 CST

WASHINGTON, D.C. (Legal Newsline) - What started with New York Attorney General Andrew Cuomo has spread across the rest of the country.

The National Association of Attorneys General announced an agreement with the National Cable & Telecommunications Association that is designed to limit the distribution of child pornography on the Internet.

Cuomo has already reached agreements with five major Internet Service Providers that will eliminate child porn Newsgroups and Web sites. His investigation found 88 Newsgroups that contained more than 11,000 pictures of child porn.

New Jersey Attorney General Anne Milgram called the NAAG agreement "an important first step."

Eighteen ISPs joined in the agreement, which blocks any access to Web sites known to feature any child pornography files. Those ISPs provide Internet access to 87 percent of homes in the country.

NAAG President and Rhode Island Attorney General Patrick Lynch said the agreement "is notable as the first such agreement (National Center for Missing and Exploited Children) has reached with an entire sector of the nation's communications industry.

"The NCTA agreement with NCMEC will limit the ability of predators to store and exchange images of exploitation of those who are, by definition, among the more vulnerable in society. We congratulate the cable industry for taking a strong stand in support of child safety."

Forty-five attorneys general took part in the agreement. The cable operators signed the agreement include: Comcast; Time Warner Cable; Cablevision; US Cable Corporation; Cox Communications; Charter Communications; Bright House Networks; Suddenlink Communications; Mediacom Communications Corp; Insight Communications; Bresnan Communications; Midcontinent Communications; Broadstripe; BendBroadband; Eagle Communications; GCI; Sjoberg's Inc.; and Harron.

From Legal Newsline: Reach John O'Brien by e-mail at john@legalnewsline.com.

Scruggs scheme co-conspirator receives prison of choice

John O'Brien (john@legalnewsline.com) — Thu, 17 Jul 2008 12:39:00 CST

OXFORD, Miss. (Legal Newsline) - It was obviously never Sidney Backstrom's wish to be sentenced to prison, but he was recently sentenced to the prison he wished.

Backstrom, who pleaded guilty with famed plaintiffs attorney Richard "Dickie" Scruggs in March to attempting to bribe a state judge, received notice Monday that he will be serving his 28-month sentence at the Federal Correctional Institution Satellite camp in Forrest City, Ark.

During his June 27 sentencing, Backstrom, 39, asked to be placed at the facility because of its proximity to his wife's family. He will begin his time there Aug. 4.

He was also fined $250,000 and ordered to pay the costs of his imprisonment.

Backstrom, a former member of the Scruggs Law Firm, was seen as the more emotional between he and Scruggs on March 14, the day both pleaded guilty to the scheme.

Backstrom offered an apology that day, something Scruggs did not do.

"I would like to express my profound apologies for my involvement," Backstrom said during his sentencing.

Scruggs first made a name for himself in asbestos cases, representing shipyard workers. After that, his work led to the 1998 Tobacco Master Settlement Agreement, which has an estimated worth of $246 billion for the 52 participating territories and states.

After 2005's Hurricane Katrina, he grouped together a handful of law firms to create the Scruggs Katrina Group. The group represented insurance policyholders who believed their insurance companies were misrepresenting the amount of damage done to their properties by wind (covered by the policy) and water (covered by a federal program).

More than 600 cases were settled early in 2007, earning the SKG $26.5 million in attorneys fees. John Griffin Jones filed suit against Scruggs, claiming his firm was shortchanged when the money was divided.

Scruggs admitted that he gave the go-ahead for attorney Timothy Balducci to offer $50,000 to Lackey for a ruling that would have sent the dispute to an arbitration panel. Balducci pleaded guilty in November to the scheme, and his business partner Steven Patterson, a former state Auditor, soon followed.

Lackey contacted the FBI soon after Balducci's first mention of a bribe. Scruggs agreed to a maximum prison sentence of five years, pleading guilty to a conspiracy charge while the other five were dropped.

Son Zach pleaded guilty misprision of a felony, meaning he knew about the scheme but did nothing to prevent it. He was sentenced to 14 months in prison despite recommendations for probation from both sides.

Both Scruggses asked U.S. District Judge Neal Biggers to be placed in a federal corrections facility in Pensacola, Fla.

From Legal Newsline: Reach John O'Brien by e-mail at john@legalnewsline.com.