Remarks to Oxnard Chamber Of Commerce

May 11, 2006

INTRODUCTION

In 1974, then-Governor Ronald Reagan said, "private business is the most over regulated, over taxed and under appreciated part of American Society." Given the ever-expanding body of regulatory law emanating from Washington, D.C., Sacramento, and local government each year, this statement is no doubt even more accurate today than it was three decades ago.

Even with our vibrant economy, businesses here in Ventura County face many challenges. Last year for example, you dealt with higher interest rates, increasing fuel and energy costs, migration of workers out of the county due to housing prices, and even natural disasters. In spite of these obstacles, according to the University of California Santa Barbara's Economic Forecast, 2005 was a very good year: with a gross product of $50.3 billion the local economy grew by 4.2 percent, 3,800 new jobs were added, the unemployment rate fell to 4.8 percent, home sales were up by 5.5 percent, commercial and industrial vacancy rates fell precipitously, retail sales increased, and agriculture production were at record levels.

In the District Attorney's Office, we recognize that the business community is vital to the quality of life and health of Ventura County . We also believe that the most important service we provide to business involves our tough, no-nonsense approach to fighting crime. Through aggressive prosecution of violent and property crime, we make Ventura County a safer and more desirable place for businesses, as well as their employees and customers. Not surprisingly, most people associate the DA's office with the blood and guts crime cases they read about on the front page of the paper. Instead, this morning I have been asked to speak about other services and programs we provide that directly affect the business community.

NSF PROGRAM

One program that has been particularly popular among local merchants involves our NSF check restitution service. Operating a business at a profit is already tough, but when an establishment receives bad checks from customers and other vendors, the bottom line suffers directly.

For the last 20 years, we have operated a program authorized under state law that allows the District Attorney to serve as a collection agency, of sorts, for businesses and individuals who have been presented with NSF or account closed checks. The program is completely free and seeks on behalf the merchant to collect 100 percent of the check amount. Annually, this program provides approximately $500,000 in restitution to local businesses for more than 4,500 bad checks they received. Since its inception, we have collected more than $10 million in restitution involving 112,200 checks. In those cases where our collection efforts are resisted or ignored, we will pursue a criminal prosecution against the bad check writer and obtain restitution in addition to fines and jail sentences. So essentially, we are able to bring the long arm of the law to the problem of bad checks in a way that directly benefits the local business community.

I am also happy to report that this program operates at virtually no cost to the taxpayer because it is financed by administrative the bad check is required to pay.

Even though the Federal Reserve Bank has reported a steady decline in the number of checks processed over the past ten years, the number of NSF and account closed checks continue to increase. In the first four months of 2006, we received more than 1,600 bad checks and have already collected full restitution on 1,242 of those checks totaling $156,332.

I brought a number of packets today that explain the program and encourage everyone who is not already using our services to take one before you leave.

CONSUMER & ENVIRONMENTAL PROTECTION

While we are not a regulatory agency, we are charged with the duty to enforce state laws designed to protect consumers, the public, and our competitive marketplace against unfair business practices and environmental hazards. As a consequence, we often prosecute businesses who engage in unlawful or unscrupulous practices that harm consumers or the environment effectively giving them a competitive advantage over law abiding businesses. In discharging our responsibilities, we constantly seek to strike an appropriate balance between economic health and responsible business practices.

In the consumer fraud arena, we prosecute everything from violations involving mislabeled products or short-weight products, to misleading advertising and fraudulent telemarketing or door-to-door sales schemes. We also pursue unlicensed contractors and violations of building and safety and zoning laws. The overwhelming majority of these cases are prosecuted civilly. One recent example involved Shell Oil company franchisees who advertising crazy Tuesday where customers could allegedly purchase gasoline at dealer cost, when in truth customers were being charged as much 5 cents above dealer cost.

Our Environmental Protection Unit prosecutes cases involving unlawful hazardous waste disposal, transportation, and storage, as well as cases involving air and/or water pollution. Many of you will remember our office's prosecution of Halaco Engineering Co. a couple of years ago. In the first air pollution jury trial in Ventura County history, Halaco was found guilty of negligently polluting the air in violation of its permit, was fined and placed on probation. A separate civil prosecution against Halaco for unlawfully burning waste oil in its furnace by my office and the California Attorney General also resulted in a civil judgment against the company. Halaco's air emissions included dangerous amounts of ammonia and several tons of carbon monoxide per year. After being placed on probation in its criminal case, Halaco repeatedly failed to pass a regular emissions test. Ultimately, Halaco shut down its smelting operation at Ormond Beach because it could not meet the emissions standards under its permit. The EPA is now evaluating Halaco's infamous waste piles for cleanup and we're optimistic about the prospects for federal cleanup. The EPA will also have authority to go after Halaco's principals to recover the costs of the cleanup.

The Consumer and Environmental Protection Division also offers mediation and small claims advisor services to both businesses and consumers. When requested, we will attempt to mediate disputes between a business and a consumer or another business. While the process is 100 percent voluntary, we have had some amazing results in saving both consumers and businesses the cost and trouble of formal litigation. We will also assist consumers and businesses with small claims actions by explaining the process and paperwork necessary for such actions.

UNINSURED EMPLOYER COMPLIANCE PROGRAM

Workers' compensation insurance fraud represents one of the most significant issues facing businesses in California . The National Insurance Crime Bureau estimates that nationally the cost of workers' comp fraud exceeds $5 billion annually. According the Insurance Information Institute, in California the cost of workers' comp fraud equates to 10 cents of every dollar paid in premiums. For the 2003/04 fiscal, the Fraud Division of the State Department of Insurance reported receiving more than 5,000 fraudulent claims with a total value of $853,716,765. So, it probably comes as no surprise to any of you that California leads the nation in workers' comp fraud.

For nearly 15 years, the District Attorney's Office has operated a specialized unit to address this crime. The vast majority of workers' comp fraud schemes are committed by unscrupulous employees, medical doctors, and chiropractors who engage in schemes to file and report false work-related injury claims. We also prosecute employers who cut costs by failing to obtain proper worker's compensation coverage for their employees. When employers fail to provide proper coverage they leave their employees unprotected against work-related injuries. Meanwhile the employer gains an unfair competitive advantage in the marketplace.

According to the California Division of Worker's Compensation, the Uninsured Employers Fund expends approximately $26 million per year to assist the injured employees of uninsured employers. Of course, once again, this translates into higher premiums for law-abiding businesses.

In an effort to more comprehensively address employer workers' comp fraud, on March 20, 2006, we implemented a new Uninsured Employer Compliance Program. The goals of this new program are both preventative and protective in nature. We want to discourage employers from engaging in this type of fraud and at the same protect employees who suffer work related injuries.

As a part of the program, district attorney investigators go out into the field and contact employers to request written proof of insurance. Employers unable to provide the required proof will be cited for misdemeanor charges under the Labor Code (section 3700.5). Those who have insurance, but are unable to provide written proof will have ten days to do so. The maximum punishment for a first violation is one year in county jail and $10,000 fine.

During the first 45 days of the program, district attorney investigators checked 43 businesses, issued five citations and six warnings. While this program is clearly in the beginning stages, we are very optimistic about its potential to deter employer workers' comp fraud.

REAL ESTATE FRAUD PROSECUTION

"In the last two years, according to the FBI, reports of mortgage fraud nationally have tripled to 21,994, while the dollar value of the alleged crimes quadrupled to more than $1 billion." [1] Unfortunately, Ventura County has not been immune from this trend. We have experienced a growing problem of mortgage and loan frauds, as well as other types of fraudulent schemes involving real estate transactions. This problem is being fueled by a hot real estate market, low interest rates, county demographics, and the desirability of Ventura County . The real estate boom has produced a corresponding explosion in the numbers of realtors, mortgage brokers, and appraisers. We also believe that as interest rates continue to climb and market values decline more fraud is likely to be exposed.

This is very insidious crime that wreaks havoc on families, businesses, personal finances, and even credit ratings. Let me give you a few examples of cases we have prosecuted over the last year:

• People v. Edgar Berrazueta: He worked as an assistant loan officer for a company that specialized in sub-prime home loans. Berrazueta targeted Spanish-speaking homeowners by promising them lower monthly payments if they refinanced with his company. Instead, the homeowners received worse loans with higher payments. Berrazueta misrepresented and failed to disclose the true interest rates, penalties, payment amounts and loan costs. In fact, the documents he presented to monolingual Spanish-speaking customers were written entirely in English. But if that wasn't bad enough, he also made many of the loans cash-out loans and then stole the proceeds by forging the signatures of unsuspecting homeowners and depositing them into his own bank account.

• People v. Navarro: While on parole for another crime, Navarro formed a company for the purpose of stealing equity in homes belonging to people facing foreclosure. By using public records, he located and contacted homeowners facing foreclosure and persuaded them that they needed his services to secure any surplus funds. Thereafter, he would get power of attorney from the homeowners so he could receive the funds directly from the loan trustees. Through this scheme, he stole more than $600,000. He also defrauded an elderly Santa Paula resident out of more than $400,000 for the purchase of a non-existent tree farm. He then methodically laundered the money through multiple accounts and used it to make lavish purchases.  

• Today, among other cases under investigation, we are working one that involves more than 30 separate fraudulent real estate transactions where the suspect used straw buyers, inflated appraisals, and in-house escrow services to steal millions of dollars in the form of sellers' equity, loan proceeds, and bogus fees and charges.

Unfortunately, as each of these cases demonstrates, the "professionals" in whom these victims placed their trust were willing to abuse that trust and perpetrate fraud in the victim's name. Spanish-speaking, elderly, and unsophisticated homeowners of our county are at heightened risk to be victimized by real estate fraud, thereby losing thousands upon thousands of dollars or perhaps worse, their homes.

To address this problem, last October, I asked the Board of Supervisors to implement a $2 levy upon recorded documents to fund a Real Estate Fraud Prosecution Program. State law authorizes this fee for the express purpose funding the investigation and prosecution of Real Estate Fraud. With these funds, we have not established a dedicated Real Estate Fraud Unit that consists of one senior deputy district attorney and a district attorney investigator who specialize in handling these unique cases. Despite only being operational for approximately six months, our program has already received dozens of complaints which are currently being investigated and prosecuted in the courts. While this program is in its infancy, it promises to address a growing and real threat to one of our residents' most important assets-their homes.

[1] L.A. Times, pg. A1, 12/5/05.