Law Enforcement

Los Angeles – Today at 11:00 a.m. Attorney General Edmund G. Brown Jr. will hold a media availability to discuss yesterday’s ruling by a federal three-judge panel ordering California to release more than 40,000 inmates from state prisons.

Date: Wednesday, August 5, 2009
Time: 11:00 a.m.
Location: Los Angeles Office of the Attorney General
First Floor
300 South Spring Street
Los Angeles, CA 90013-1230

Please call (510) 622-4500 with questions or to RSVP.

San Diego – Continuing his fight against “rip-off artists,” Attorney General Edmund G. Brown Jr. won a $1.2 million ruling against Gaston Muhammad, 42, and Ronna Green, 41, of Duluth, GA, who billed nearly a million California business owners $150 each for deceptive and unnecessary corporate minutes services.

“These rip-off artists sent nearly a million deceptive mailers to business owners, threatening them with loss of their corporate status if they didn’t pay $150 for unnecessary services,” Brown said. “In reality, this was a massive scam costing California small business owners hundreds of thousands of dollars.”

The defendants mailed solicitations to California business owners that were designed to look like State of California official forms—specifically, the Secretary of State’s “Annual Statement of Information.” The solicitations implied that unless the corporations paid the defendants a $150 annual fee, they could lose their corporate status. The defendants sent out 986,000 solicitations to California businesses between July 2007 and November 2008.

The solicitation appeared to be a government document featuring an official-looking seal, an official-sounding name, the corporation number, citations to the Corporations Code, and a return address in Sacramento. The defendants, in fact, resided in Georgia and the Sacramento address was a mail drop.

The defendants promised to prepare annual minutes for the recipient corporations, even though the information sought on the forms was insufficient to create minutes. Defendants simply invented the dates, meeting places, participants, and actions taken in the fictitious minutes they created.

Brown filed suit in San Diego Superior Court in May 2008, charging defendants with violating:

• Business and Professions Code section 17533.6 (Deceptive Mailing Statute) and 17550 (False Advertising Statute)
• Civil Code section 1716 (Phony Billing Statute)
• Permanent injunction from a previous mail scam judgment against Gaston Muhammad
• Unfair business practices within the meaning of Business and Professions Code section 17200.

On June 22, the Trial Court ruled that the solicitations were misleading. The Court also found that the disclaimers were not big and bold enough to alert the recipients that this was not an official form. It found that the defendants violated all four statues and the permanent injunction.

The court ordered defendants to pay restitution of $200,000 and imposed civil penalties of $986,000. It further issued a permanent injunction which, in addition to requiring the defendants to comply with the law, barred them from engaging in the business of providing corporate minutes in California for five years. The Court also awarded the state the costs incurred in the prosecution of this case.

Earlier this year, Brown filed suit against two brothers operating a similar scam, billing homeowners nearly $200 each for property tax reassessment services that were almost never performed and are available free of charge from local tax assessors.

The judgment and a copy of the mailer are attached.

Fresno – Attorney General Edmund G. Brown Jr. announced that agents from his Bureau of Gambling Control, working with the FBI, today arrested Chukchansi Casino’s former General Manager, Jeff Livingston, who “willfully abused his trust” by using a corporate credit card to spend more than $30,000 on down payments for two cars and a Hawaiian golf vacation.

Livingston, 49, of Fresno, was arrested at his residence this morning on two federal counts of theft by an officer or employee of a gaming establishment on Indian lands. If convicted, Livingston faces up to 20 years in prison. Livingston is a former Broward County, Florida Deputy Sheriff.

“Jeff Livingston willfully abused his trust as casino general manager to conceal more than $30,000 in lavish purchases, including a Shelby Mustang and a Hawaiian golf vacation,” Brown said.

Brown’s office launched an investigation into Livingston in February 2008 after the Tribal Gaming Agency of the Chukchansi Gold Resort and Casino discovered questionable charges on the casino’s corporate credit card. Brown’s office asked the FBI to join the investigation because the matter involved an employee of an Indian casino. The Chuckchansi Casino is located 35 miles north of Fresno in Coarsegold, Calif.

The joint investigation revealed that Livingston made unauthorized purchases with the casino’s corporate credit card, including:
• A $20,000 down payment on a new Ford Mustang Shelby;
• A $5,000 down payment on a new Ford Fusion for the casino’s former Vice President of Marketing; and
• A $7,000 Mercedes Benz PGA National Golf Championship package in Maui, Hawaii.

Livingston attempted to conceal the down payments by making it appear as if they were part of a ten car purchase he made for a casino giveaway.

Livingston was indicted yesterday by a federal grand jury on two counts of theft by an officer or employee of gaming establishments on Indian Lands in violation of U.S. Code Section 1168 (Title 18).

The defendant was arraigned earlier this afternoon in Fresno in the U.S. District Court, Eastern District of California.

A copy of the federal indictment, issued July 23, 2009, is attached.

East Palo Alto -- Attorney General Edmund G. Brown Jr. announced that agents from the Bureau of Narcotic Enforcement today arrested a Mexican national, Adan Alfonso Herrera, and seized 70 pounds of heroin from his Lincoln Towncar on Sacramento Street in East Palo Alto.

"The suspect stashed at least 70 pounds of heroin in a secret compartment of his car,' Brown said. 'With a street value of $7 million, this is the largest heroin seizure ever made in San Mateo County.'

Herrera, 27, is a native of Mexico and a known associate of the Sac Street Gang, a violent East Palo Alto street gang with ties to Mexican drug-trafficking organizations. Herrera has prior arrests for domestic abuse, kidnapping and providing false information to a police officer.

As part of the investigation, agents served a search warrant on Herrera's residence and vehicle, located at 559 Sacramento Street in East Palo Alto. Agents discovered a small amount of heroin in the house.

Subsequently, agents found approximately 70 pounds of heroin stashed in a secret compartment in the dashboard of the Herrera’s Lincoln Towncar. The Bureau of Narcotic Enforcement determined the street value of the heroin is in excess of $7 million.

Herrera was arrested and booked into the Santa Clara County Jail for possession of heroin for sale and for possession of a hidden compartment. Bail was set at $5 million.

The Attorney General's Bureau of Narcotic Enforcement is the oldest narcotic enforcement bureau in the United States.

Questions regarding this investigation can be directed to Special Agent in Charge Bob Cooke at (408) 452-7360.

Federal and State authorities this morning arrested 20 defendants accused of being part of ring that defrauded Medi-Cal out of nearly $4.6 million by using unlicensed individuals to provide in-home care to scores of disabled patients, many of them children with cerebral palsy or developmental disabilities.

The 20 defendants arrested this morning are among 42 defendants named in a 41-count indictment that was returned by a federal grand jury on June 25. The indictment is part of an investigation called Operation License Integrity, a two-year investigation conducted by the Federal Bureau of Investigation, the U.S. Department of Health and Human Services Office of Inspector General, and the Office of the California Attorney General-Bureau of Medi-Cal Fraud and Elder Abuse. The indictment alleges that the 42 defendants and two others, one of whom has already pleaded guilty to health care fraud charges, conspired to bill Medi-Cal nearly $4.6 million for in-home licensed nursing services that were actually provided by unlicensed individuals.

The organizer of the ring, Priscilla Villabroza, a registered nurse who ran a Santa Fe Springs-based company called Medcare Plus Home Health Providers, pleaded guilty in federal court last year to five counts of health care fraud. According to court documents, Villabroza and others hired individuals to provide care to disabled Medi-Cal patients, many of whom were children and young adults served under a program called Early and Periodic Screening, Diagnosis, and Treatment (EPSDT) Supplemental Services. The indictment alleges that from August 2004 through the end of 2007, Villabroza and others hired unlicensed individuals to provide services to the disabled Medi-Cal patients and billed Medi-Cal as if they were licensed vocational nurses (LVNs). Some of the unlicensed individuals had foreign training, but never passed a nursing exam here. Some of them had no medical training at all.

'Villabroza and her associates concocted a clever rip-off where they hired untrained and unlicensed nurses to provide care to children with serious health conditions,' California Attorney General Edmund G. Brown Jr. said. 'At a time of budgetary crisis, they cheated California's welfare system and pocketed millions of dollars in unauthorized state reimbursements.'

'We believe that this is the largest single case alleging Medi-Cal fraud ever filed in the state,' said United States Attorney Thomas P. O’Brien. 'The nearly four dozen people associated with this fraud ring not only cheated taxpayers, they endangered the lives of young people they promised to protect and care for.'

The unlicensed nurse defendants visited the patients at home and at school and provided nursing services that included administering medications, adjusting ventilators, and feeding through gastronomy tubes. Some parents and patients reported to authorities that the 'nurses' lacked basic skills. In one case, a 'nurse' was unable to replace a tracheotomy tube that had fallen out of a young patient’s neck. In another case, an imposter nurse simply fled a medical situation when she apparently was unable to provide assistance.

Salvador Hernandez, Assistant Director In Charge of the FBI in Los Angeles, stated: 'This case is particularly troubling in that patients received sub-standard care for serious medical conditions when defendants operated without a license and in their own best interest, not their patients’ interests. The FBI and our partners will continue to provide resources to detect and fight health care fraud that affects the stability of government programs and our economy.'
Glenn R. Ferry, Special Agent in Charge for the Los Angeles Region of the Office of Inspector General for the Department of Health of Human Services, commented: 'Today's arrests send a strong message to those who would corruptly take advantage of the Medi-Cal system. Greed, at the expense of our most vulnerable citizens and their quality of care, will not be tolerated. The Office of Inspector General will continue to closely work with our Federal, State and local law enforcement partners to prevent, deter and prosecute health care fraud.'
A key assistant to Villabroza – Susan Bendigo, an RN who ran a Medcare Plus subsidiary – was indicted last year. Bendigo is a fugitive who fled the United States during the investigation into her activities.
Villabroza, Bendigo and supervisors involved in the scheme allegedly directed the unlicensed nurse defendants to lie about their licensing and qualifications by telling the parents or guardians of the disabled Medi-Cal beneficiaries that they were LVNs, according to the indictment. The unlicensed nurse defendants falsely presented themselves as professionals, concealed their unlicensed status from the parents or guardians of the disabled Medi-Cal beneficiaries, and in some cases affirmatively misrepresented themselves as LVNs.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty.
The defendants arrested today are expected to make their initial appearances this afternoon in United States District Court in Los Angeles. The other defendants named in the indictment will be summoned to appear in court for arraignments in the coming weeks.
All of the defendants named in the indictment are charged with conspiracy to commit health care fraud, a felony count that carries a statutory maximum penalty of 10 years in federal prison. All of the defendants are also named in at least one substantive count of health care fraud, a charge that carries a maximum statutory penalty of 10 years in federal prison.
Both the California Department of Registered Nursing, which licenses RNs, and the California Department of Consumer Affairs Bureau of Vocational Nursing, which licenses LVNs, maintain websites where consumers can check the licensing status of any purported professional providing services to them. These can be accessed at http://www2.dca.ca.gov.
Anyone who suspects Medi-Cal fraud related to the use of unlicensed nurses or any other type of Medi-Cal or Medicare fraud may report their concerns to the U. S. Department of Health and Human Services’ Office of Inspector General hotline at 800-HHS-TIPS (800-477 8477) or the California Department of Justice’s Bureau of Medi-Cal Fraud and Elder Abuse hotline at 800-722-0432 or webpage, http://www.dhcs.ca.gov/individuals/Pages/StopMedi-CalFraud.aspx.

Sonoma – Attorney General Edmund G. Brown Jr. announced today that Kim Louise Lemoine, 36, who passed “bogus” state government checks totaling $308,000, was sentenced today to five years in prison on charges of identity theft, forgery and grand theft.

Two of Lemoine’s associates are in custody; two remain at large.

“This band of counterfeiters fabricated 235 state government checks that looked and felt like the real thing,” Brown said. “They were able to pass these forgeries and amass more than $300,000.”

On March 11, 2009, Brown filed 63 criminal charges of grand theft, possession of counterfeit card making equipment, identity theft, forgery of a California driver’s license, forgery of a check and forgery of the California state seal against:

• Kim Louise Lemoine, 36, arrested on March 13, pled guilty in Sonoma County Superior Court on April 28 and was sentenced today to five years in prison;
• Hiedi Lynn Roth, 36, arrested on April 22, and is expected to be sentenced to 8 years in prison on July 21;
• Daria Inessa Sidorkina, 23, who is being held in Solano County jail on unrelated charges;
• Laura Renee Harkey, 29, who remains at large; and
• Mary Nicole Holstein, 35, who remains at large.

The defendants cashed 235 counterfeit checks at Bank of America branches located in 20 California counties from October 2007 until September 2008. The counterfeit checks ranged from $777 to $3,000.

The counterfeit checks looked similar to state-issued checks and included the state seal, bank routing information, and the state Controller’s signature. The driver’s licenses that the defendants used to verify their identifications also appeared valid. In reality, both the checks and driver’s licenses were forgeries, created at Lemoine’s home in Sonoma County.

On July 28, 2008, a bank teller in Sebastopol refused to cash one of the checks. After being informed that the check would not be honored, the suspect grew angry and demanded the items back. The bank employee refused, and the bank’s staff then contacted the California State Controller’s Office.

The Controller’s Office launched an investigation in conjunction with Brown’s office. Last September, agents discovered counterfeiting equipment capable of producing fraudulent checks and driver’s licenses, including laminating machines, printers, check paper and blank driver’s license cards at Lemoine’s home in Sonoma County.

The agents also discovered personal information for more than 50 individuals and businesses in a duffel bag. The information included credit reports, driver’s license numbers, social security numbers, and dates of birth.

Sacramento -- Attorney General Edmund G. Brown Jr. announced that agents from his office this week raided Internet cafes in Stockton and San Diego that illegally operated “Las Vegas-style games” including video poker, keno and slots.

"Agents from my office shut down Internet cafes in Stockton and San Diego that are a cover for illegal gaming operations,' Brown said. 'These are unregulated and illegal gambling parlors, operating Las Vegas-style games in violation of the law.”

Beginning in early June, undercover agents entered establishments in Stockton and San Diego and played various Las Vegas-style games on computers at these Internet cafes. The agents purchased a card that allowed them 'Internet time' on the café’s computers. If they won, an on-site employee paid them in cash.

In Stockton, law enforcement agents raided the Lucky Déjà Vu Internet Cafe and the Déjà Vu topless bar and seized 98 computer terminals, 2 master computer servers, money machines and business records, plus more than $4,000 in cash.

In San Diego, law enforcement agents raided five locations: Café Hong Hung, ‘08 Wireless, Café 2000, Phnom Penh Video and ‘05 Billiards. In total, agents seized 31 video slot machines and approximately $13,000 in cash.

Additional sites in San Diego and Oceanside are under investigation for similar activity.

Brown’s office is working with the San Diego Police Department in “Operation Jackpot” to identify and close businesses that offer illegal gambling in violation of Penal Code Section 330b, which prohibits individuals from owning and operating slot machines.

Agencies involved include the Attorney General’s Office Bureau of Gambling Control, the San Joaquin Sheriff’s Office, the San Joaquin District Attorney’s Office, the High Tech Crimes Task Force, the Department of Alcoholic Beverage Control, the San Diego Police Department, the San Diego District Attorney’s Office and the Oceanside Police Department.

Los Angeles – Responding to a directive from Attorney General Edmund G. Brown Jr. to reform its police force, the Maywood City Council late Tuesday evening unanimously approved a stipulated court order that will end the “widespread abuse and gross misconduct” exposed over the course of a 16-month investigation.

“This court order will compel the City of Maywood to overhaul its police department after years of widespread abuse and gross misconduct,” Brown said. “It paves the way for real reform, enabling the Maywood police department to live up to its potential by truly serving and protecting.”

On April 28, 2009, Brown released a report that found that the City of Maywood Police Department routinely used excessive force, did not obtain probable cause to justify arrests and searches and operated without adequate oversight.

The report also found a lack of accountability, inexperienced and untrained officers and civilian complaints routinely ignored.

Brown’s investigation examined some 30,000 pages of documents from January 2002 through April 2007. Sixty-four witness interviews were conducted with sworn officers, city council members, City of Maywood administrative personnel, city residents and civil rights attorneys.

Over the past two months, Brown’s office and the City of Maywood negotiated a stipulated court order to reform the police department. With last night’s city council approval, the order will now be submitted to the Los Angeles Superior Court and entered into as a legally binding agreement.

The agreement will be enforced for at least three years following the date it is approved by the Court.

The stipulated court order compels the city to:

1. Hire well-trained and experienced officers to combat crime effectively and lawfully. The Maywood Police Department’s hiring policies must exceed industry standards as defined by the California Commission on Peace Officer Standards and Training.

2. Ensure strong oversight.
• The City Council has hired a professional city manager who will have direct responsibility for overseeing the Department.
• An auditor, hired by the City, will write annual public reports about the state of the Department’s operations. The first report will be released in March 2011.

3. Stop the use of excessive force through monitoring and holding officers accountable.
• Officers will be required to use digital audio recorders while in the field, and video cameras will be installed on police vehicles and in the Maywood police station.
• Following use-of-force incidents, reports must be submitted and reviewed to determine whether use of force was necessary.
• An “Early Intervention System” will be established to track and monitor the activities of sworn personnel to identify problem officers and to take corrective action, which may include formal disciplinary procedures.

4. Improve training for officers to prevent and fight crime in a lawful manner.
• Officers will be trained on the legal requirements of motor vehicle stops, probable cause, appropriate use of force, determination of need for supervisor assistance and the city’s ethnic, racial and religious makeup.
• One Maywood police sergeant will be enrolled at a Peace Officer Standards and Training certified Supervisory and Leadership Institute every year.
• A zero tolerance policy will be put in place regarding sexual innuendo, harassment, vulgarity, cultural, racial and ethnic insensitivity.
• Sworn personnel promoted to sergeant will complete a Peace Officer Standards and Training certified Basic Supervisory Course within six months of appointment.

5. Establish a system whereby residents can lodge complaints that will be investigated and resolved by the Maywood Police Department.
• Each issue in the complaint will be thoroughly investigated and addressed by a Maywood Police Department Internal Affair’s investigator.
• Complaint forms will be made readily available in English and Spanish.
• The personnel history of the officer in question will be reviewed in determining the credibility of the complaint.
• The rationale for any stop or search related to a complaint must be investigated, evaluated and addressed by Internal Affairs.

6. Change the operating philosophy of the department from an “us versus them” philosophy to a community oriented policing philosophy. The City must revise the policies and procedures of the Department to bring them into conformity with contemporary police practices and adopt a strategic plan based on a community policing philosophy.

Additionally, Brown will appoint an expert on police matters who will advise him on the progress the City is making in implementing its reforms. If the City fails to comply with any terms of the agreement, Brown may seek a contempt of court citation against the city.

"The City is very committed to working with the Attorney General to complete its commitment to community-based policing and the reforms outlined in the Attorney General's report,” said Paul Philips, Maywood Interim City Manager. “The City appreciates the working relationship it has established with the Attorney General's staff over the past two years.'

To read the report on the abuse and misconduct found in the Maywood Police Department, go to http://ag.ca.gov/newsalerts/release.php?id=1722&.

A copy of the agreement is attached.

Sacramento -- Attorney General Edmund G. Brown Jr. announced today that prosecutors from his office have filed grand theft, embezzlement and burglary charges against Maria Elna Flora, 59, of Sacramento, after she “fleeced” retirees out of almost $350,000 to pay for a daily gambling habit.

Flora was arrested yesterday by Yolo County law enforcement officials and is being held in Sacramento County Jail. Bail has been set at $400,000. Flora is scheduled to be arraigned on June 22. If convicted on all charges, she could spend more than 30 years in prison.

The case is a product of an investigation by the California Department of Insurance, with assistance from the Yolo County District Attorney’s office.

“Maria Elna Flora fleeced retirees out of hundreds of thousands of dollars by getting them to shift their life savings into sham real estate investments,” Brown said. “Flora stole thousands from retirees and gambled it away playing the slots at the local casino.”

Flora, a licensed life insurance agent, sold annuities to retirees looking for financial security. After completing legitimate annuity sales, Flora would offer additional investment opportunities, promising returns ranging from 10 to 20 percent. The funds, she said, would be used to make real estate loans to investors willing to pay high interest rates. In reality, none of the funds Flora collected were invested as promised.

From January 2005 through August 2007, Flora convinced at least ten individuals living in Butte, El Dorado, Sacramento, Solano, Stanislaus and Yolo counties to invest between $5,000 and $88,000. Flora encouraged investors, who ranged in age from 67 to 92 years old, to shift savings from life insurance policies, certificates of deposit and savings accounts, to her short term, high return investment. In total, retirees invested almost $350,000 with Flora.

In most of these cases, Flora made a few interest payments to investors and then stopped. When victims asked about the returns, Flora promised to pay at a later date, but never did.

In 2007, the California Department of Insurance initiated an investigation after Flora’s former employer filed a complaint. Earlier this year, the case was turned over to the Yolo County District Attorney’s Office for prosecution. The Yolo County District Attorney’s Office continued the investigation and then referred the case to Brown’s office because there were victims in at least five other California counties.

The investigation found that Flora used investors’ money to fund an expensive gambling habit which included almost daily slot play from January 2005 through August 2007 at Thunder Valley Casino.

Flora’s victims included:
• A 78-year old Placerville resident who invested $88,000;
• A 76-year old retired bookkeeper in Elk Grove who invested $50,000;
• An 85-year old retired education professional in West Sacramento who invested $47,000;
• A 71-year old Modesto resident who invested $45,000;
• An 83-year old Chico resident who invested $42,600;
• A 72-year old Woodland resident who invested $32,000;
• A 92-year old Vacaville resident who invested $20,000;
• An 80-year old retired department store employee in Citrus Heights who invested $10,000;
• A 73-year old Sacramento resident who invested $10,000; and
• A 67-year old West Sacramento resident who invested $5,000.

Yesterday, Brown filed 92 criminal charges against Flora in Sacramento County Superior Court for:
• Grand theft in violation of Section 487 of California’s Penal Code;
• Embezzlement from an elder or dependent adult in violation of Section 368 of California’s Penal Code; and
• Burglary in violation of Section 459 of California’s Penal Code.

Brown is committed to protecting Californians from financial scams. Earlier this month, Brown announced that agents from his office, working with law enforcement in Tennessee and Nevada, arrested two individuals for stealing millions of dollars through phony stock sales and an illegal pyramid scheme. Last month, Brown filed 79 criminal charges against three men who swindled thousands of individuals, including many retirees who lost their life savings, in a $200 million Ponzi scheme.

Copies of the felony complaint and arrest warrant affidavit, filed in Sacramento County Superior Court, are attached.

Riverside – Attorney General Edmund G. Brown Jr. announced that agents from his office, working with law enforcement in Tennessee and Nevada, arrested two individuals earlier this week for stealing millions of dollars through “phony stock sales” and an illegal pyramid scheme.

The defendants -- James A. Sweeney, II, 62, of Afton, TN and Patrick M. Ryan, 34, of Canyon Lake, CA -- were arrested on June 3, 2009 in Afton, TN and Las Vegas, NV, respectively, and are being held until they are extradited to Riverside County. Both face 78 counts of grand theft and securities fraud. Bail has been set at $8.8 million each.

“These two con men stole $8.8 million dollars through phony stock sales and an illegal pyramid scheme,” Brown said. “They stole investors’ money and used it to pay for luxury homes, fancy cars and a $100,000 Las Vegas wedding.”

Brown’s complaint contends that Sweeney and Ryan, co-founders of Riverside-based Big Co-op, Inc., stole $8.8 million from more than 1,000 Californians through an illegal pyramid scheme and phony stock sales.

Big Co-op, also operating as Ez2Win.biz, purported to be an online shopping hub where consumers could go to purchase thousands of goods and services from big name retailers including, Sears, Target and Macy’s, at discounted prices.

Pyramid Scheme

Consumers were informed that if they purchased a Big Co-op membership, they could save money on their own purchases and also earn commissions and rewards by convincing others to shop on the site.

In reality, consumers never received rebates or rewards. Instead, profits were based on recruiting others to purchase memberships, and having those purchasers recruit others to purchase memberships (and so on).

Members earned $100 commissions for every six members recruited. Those recruited then paid Big Co-op from $19.95 to $99.95 in ongoing monthly membership fees.

According to the complaint, from 2005 to 2007, Big Co-op generated $1.3 million in revenues through this pyramid scheme.

Phony Stock Sale

In addition to the pyramid scheme, the two sold phony stock in Big Co-op as a stand-alone investment and as part of certain membership plans.

At seminars and meetings across California, Sweeney and Ryan pitched Big Co-op as the future of online commerce, compared it to Google and EBay, and falsely informed investors the company was already turning huge profits. Investors were also told that an initial public offering (IPO) was imminent, and that when the company went public, the shares could climb to well over $100 per share.

In reality, Big Co-op was never profitable, there was not an impending IPO, and the only significant revenue generated was a result of the sale of phony stock and membership fees for the pyramid scheme.

Shares in the company were sold for $0.50 to $5.00, with two-for-one deals offered to investors willing to pay cash. From 2005 to 2007, Big Co-op took in $7.5 million from this scheme.

With investor cash, Sweeney and Ryan bought luxury homes, country club memberships, five Mercedes, paid for a $100,000 Las Vegas wedding and ran up $30,000 to $50,000 in monthly credit card bills.

After receiving numerous complaints, the California Department of Corporations issued two “Desist and Refrain Orders” against Sweeney, Ryan and other associates: the first, on October 23, 2006, directed them to cease selling stock in the company and the second, on May 2, 2007, directed them to cease selling memberships in the company. Following the second order, the case was referred to Brown’s office for prosecution.

On May 29, 2009, Brown filed 78 criminal charges in Riverside County Superior Court against both Sweeney and Ryan for:
• Grand theft, in violation of California Penal Code section 487(a);
• Sale of unqualified securities in violation of California Corporations Code section 25110;
• Fraud in the offer of securities in violation of California Corporations Code sections 25540/25401;
• Operation of a fraudulent securities scheme in violation of California Corporations Code sections 25540/25541; and
• Operation of an endless chain scheme in violation of California Penal Code section 327.

If convicted on all charges, each could face more than 25 years in prison.

These arrests build on Brown’s commitment to protect Californians from the get-rich-quick schemes that proliferate in a down economy. In the past few months, Brown has entered into settlements enforcing tough restrictions on three companies – YTB International, Imergent, Inc. and Stores On Line - that falsely promised customers that they could earn full-time income by selling merchandise and travel over the Internet.

A copy of the felony complaint is attached.