Lawsuits & Settlements

OAKLAND — Attorney General Edmund G. Brown Jr. announced today that he has asked to intervene in a lawsuit in order to protect newly adopted motor vehicle emission standards that would save nearly two billion barrels of oil and reduce greenhouse gas emissions by approximately one billion tons.

Brown filed a motion to intervene in the U.S. Court of Appeals in support of the federal Environmental Protection Agency (EPA) in a suit brought by energy companies and other industries challenging the EPA’s authority to enforce the tough emission standards beginning in 2012.

“The thousands of barrels of oil spilling in the Gulf of Mexico each day are a graphic reminder that we need to cut oil consumption in America,” said Brown. “These regulations would do that, as well as vastly reducing pollution from tailpipe emissions.”

The EPA’s new vehicle emissions standards are the first significant reduction in federal fuel consumption standards in more than 30 years. Over the lifetime of the vehicles sold in the first five years, the national program is projected to reduce U.S. greenhouse gas emissions by 2.1 billion tons and save 1.8 billion barrels of oil. Consumers can expect the new standards to save them between $130 and $180 a year in fuel costs.

EPA estimates the lifetime savings under the program for 2012 through 2016 model-year vehicles at $240 billion. The benefits include fuel savings, carbon dioxide reductions, improved air quality, and enhanced energy security.

California has long set the pace in enacting tough pollution standards, and it has been active in attempting to protect its right to impose those standards and in encouraging other states and the federal government to adopt similar standards.

In Massachusetts v. EPA, 549 U.S. 497 (2007), the Supreme Court ruled that the greenhouse gases that cause global warming are air pollutants under the Clean Air Act and that EPA’s evaluation of whether those emissions from motor vehicles endanger public health or welfare had to be based solely on science. Brown’s office took a lead role in that case.

EPA has now made that endangerment finding. As the Supreme Court noted, such a finding triggers a mandatory duty on EPA to adopt motor vehicle regulations. EPA adopted those regulations on April 1 in a joint rulemaking with the National Highway Traffic Safety Administration. Those regulations set greenhouse gas emission standards and fuel economy standards that will achieve a fleet-wide fuel economy for new cars and trucks of roughly 35 miles per gallon in model year 2016.

These motor vehicle regulations are the rough equivalent of California’s regulations. As part of a nationwide deal announced at the White House in May 2009, California agreed that compliance with national standards of equivalent stringency would also constitute compliance with California’s established regulations, and the automobile manufacturing industry agreed not to challenge those standards (through model year 2016.) If these EPA vehicle standards were successfully challenged, that nationwide deal would fall apart.

Brown’s filing today is in a lawsuit challenging the motor vehicle rule brought by industrial concerns plus politicians and other opponents of EPA action on global warming. Plaintiffs include Massey Energy Company, Rosebud Mining Company, National Cattlemen’s Beef Association and the Industrial Minerals Association of North America. The challenge was not joined by the automobile manufacturing industry, the only party directly affected by the EPA regulations.

Brown filed the motion on behalf of himself, Governor Schwarzenegger and the state Air Resources Board, plus 12 other states – Delaware, Illinois, Iowa, Maine, Maryland, Massachusetts, New Mexico, New York, Oregon, Rhode Island, Vermont, and Washington – as well as the Pennsylvania Department of Environmental Protection and the City of New York.

A copy of the Motion to Intervene is attached.

Saying that “disrupting a private funeral with vicious personal attacks goes too far,” California Attorney General Edmund G. Brown Jr. has signed a friend-of-the-court brief filed today in a Supreme Court case that will test whether families grieving at a funeral have a right to be free of hate-filled attacks from fanatical protesters.

Brown is one of 48 state attorneys general who gave their support to Albert Snyder in his lawsuit against Fred W. Phelps, Sr. and the Westboro Baptist Church in Topeka, Kansas.

Near the 2006 Maryland funeral of Snyder’s son, Marine Lance Cpl. Matthew Snyder, the vehemently anti-gay Phelps and his parishioners demonstrated and waved signs that said “Thank God for Dead Soldiers” and some that employed even more offensive language. Matthew Snyder, 20, was killed in a Humvee accident a month after he arrived in Iraq.

“Free speech is a cherished American right,” Brown said, “but disrupting a private funeral with vicious personal attacks on the grieving family goes too far.”

Phelps believes that U.S. military deaths represent God’s judgment on the country’s tolerance of homosexuality. He and his church members have staged their hate-filled protests at some 200 military funerals across the country.

Albert Snyder filed a civil suit against Phelps for invading his family’s privacy and intentionally inflicting emotional distress on them. A U.S. district court awarded Snyder $10 million, but a federal appeals court overturned that verdict and ordered Snyder to pay Phelps’ legal costs.

Forty states have enacted “funeral picketing” or “funeral protest” laws regulating the time, place and conduct of demonstrations near funeral services.

The amicus brief, submitted by Kansas Attorney General Steve Six, argues that such laws are necessary to protect the traditional “sanctity and privacy” of funerals and to prevent mourning families of veterans from being “attacked viciously and personally.” The picketing, the brief says, “amounts to emotional terrorism” directed at a “captive audience.”

Freedom of speech does not permit hate groups to espouse hate-filled vitriol at a private funeral service for the purpose of intentionally inflicting emotional distress on mourners.

“All we wanted,” Albert Snyder told a reporter, “was a private funeral for my son. They turned it into a three-ring circus.”

The Supreme Court is expected to hear his case in October. A copy of the brief is attached.

MONTEREY – Attorney General Edmund G. Brown Jr. has filed a lawsuit to shut down the Monterey County AIDS Project and recover more than $2.8 million intended for the benefit of people affected by HIV/AIDS that was illegally diverted to other uses.

Brown said that former officers and directors of the Seaside charity, called MCAP, took some of the money for personal use and for-profit ventures, in violation of state law and a May 2000 court order specifying that at least $1.8 million be used “solely for the purpose of providing housing for people with the HIV disease.” The complaint alleges that another $1 million in other grants and donations was misspent as well.

“The duty of these officers and directors was to protect the charity’s assets so the funds could be used for the support of very sick people,” Brown said. “Instead, they violated their trust and spent the money any way they wanted.”

The Attorney General’s lawsuit, filed Friday in Monterey County Superior Court, seeks to dissolve MCAP, obtain a complete accounting of its finances, and recover any remaining assets dissipated through “the mismanagement and neglect of former officers and members of its board of directors.” Brown also seeks return of assets that were illegally diverted. Sixteen former officers and directors are named.

The complaint describes a scheme in which the MCAP officials, over nearly a decade, drained the organization’s coffers of money earmarked for HIV/AIDS patients.

The organization’s record-keeping was so sloppy and incomplete that it’s hard to determine exactly where all the money went. MCAP continued to provide housing and services for AIDS patients, but at a lesser level than its overall expenditures would suggest.

Some of the charity’s money was spent on unauthorized expenditures, such as meals at expensive restaurants, personal expenses on credit cards, purchasing items for personal use at auctions, personal moving and storage expenses, a personal mortgage payment, and steam-cleaning a carpet in a private residence.

MCAP was created in 1985 to provide support, resources and services, including housing assistance and hospice care, for HIV/AIDS patients in Seaside, north of Monterey.

Eleven years ago, MCAP received $1.8 million in cash and property from the estate of Douglas E. Madsen, a Monterey County resident, with the restriction that the bequest be used for the sole purpose of housing active AIDS patients.

But, according to Brown’s complaint, more than $2.8 million of charitable assets, including the Madsen money, was “misappropriated, misapplied or wasted.” In 1999, MCAP listed assets of $2.1 million. By 2004, that had dwindled to $1.4 million, and by 2007, only $205,000 was left.

As Attorney General, Brown is the official charged with ensuring that charitable organizations in California spend their money for the purposes specified by their founding documents, internal policies and state law.

MCAP’s filings with the Attorney General’s Registry of Charitable Trusts can be found at http://ag.ca.gov/charities/index.php

The complaint is attached.

SACRAMENTO –Yodeling, operas, musicals, Japanese drumming and symphonies are among the summer events around the state sponsored by more than a half million dollars from a Department of Justice settlement with music companies in a case of fixing advertised prices.

Attorney General Edmund G. Brown Jr. and the California Arts Council today announced dozens of musical presentations during this summer’s festival season and throughout 2010. Visit the California Arts Council’s website for a full listing of concerts and events benefiting from the grants:
http://www.cac.ca.gov/programs/doj/.

“The Attorney General’s office is proud to be part of providing these cultural events that bring people together to experience all types of music. It’s affordable because of our ability to provide discounted tickets,” Brown said, “and these performances are a testament to the incredible richness and diversity of the state’s music.”

The grants support performances and events in 43 of the state’s 58 counties, reaching an estimated audience of 200,000.

In September 2002, California, along with 42 other states, settled an antitrust case against five of the country’s largest music CD companies and three national music retail chains on allegations of fixing advertised prices for music CDs. In the final settlement, the companies paid a total of $67.4 million in cash and provided $75.7 million in music CDs to schools, universities and libraries nationally, including distributing more than 660,000 CDs in California.

California’s share of the remaining cash, $549,000, was given to the Arts Council to establish a one-time music presenting grants initiative. As dictated by the terms of the settlement, the goal of the initiative is to support a broad range of musical performances across a wide geographical reach. In October 2009, the Department of Justice and the Arts Council announced awards to more than 40 local arts organizations to present free or inexpensive events throughout the state. Many of the artists are utilizing the grants for children’s programs and for performances in front of audiences that otherwise would not have access to live music.

For example, Fresno County public schools are hosting free public autoharp performances this month. In June, school groups will travel to see the musical “Aida” at the Performance Riverside festival, utilizing grant funds for field trip transportation costs that are hard to come by in tough budgetary times. In July, free and discounted performances of Mexican swing music will be presented in Susanville, and in August, there will be free Latin jazz performances in the city of Greenfield.

Live music brings communities together, but high ticket prices can exclude middle and lower income Californians, something the music grants sought to remedy.

“There are 19 musicians in the well-loved band Malo,” said Marie Acosta, the executive and artistic director of La Raza Galeria Posada, a Sacramento nonprofit cultural center that is sponsoring a concert this week featuring the influential Latin rock band headlined by Jorge Santana, Carlos Santana’s brother. “It’s expensive to present a group of that size, but with this funding the musicians are getting paid a living wage and the tickets are affordable, even for low-income Californians.”

A $15,000 grant has allowed the tickets to the Malo performance in Cesar Chavez Park on May 22 to be discounted to $10.

The California Arts Council is a state agency with the mission to advance Californians through the arts and creativity. It was established in January 1976 by the state Legislature and signed into law by then-governor Edmund G. Brown Jr.

For more information about the cultural grants, please contact Mary Beth Barber at (916) 322-6588 or go to http://www.cac.ca.gov/programs/doj200910.php. For more information about the Department of Justice’s Antitrust Law Section, please see http://ag.ca.gov/antitrust/.

*** Brown will hold a news conference today at 1 p.m. at 1300 I Street in Sacramento to discuss the lawsuit. ***

LOS ANGELES – Attorney General Edmund G. Brown Jr. today announced that his office has filed a civil suit against former California Public Employees Retirement System (CalPERS) Board Member Alfred Villalobos, his company ARVCO Capital, and former CalPERS CEO Federico “Fred” Buenrostro, charging them with fraud.

“Working as a placement agent for ARVCO, Villalobos spent tens of thousands of dollars to lavishly entertain key senior executives at CalPERS, who then influenced the Board to authorize investments that generated over $40 million in commissions to Villalobos,” explained Brown. “None of these actions were disclosed as required by law, as state pension holders and taxpayers have every right to expect.”

According to the complaint, Villalobos influenced these CalPERS officials by, among other things, taking two of them on an around-the-world trip, taking another on a private jet trip to New York, and giving Buenrostro a $300,000 job and a condo when he left the pension fund.

Brown also obtained a court order to freeze Villalobos’ assets and place them in receivership to recover the more than $40 million in commissions that Villalobos earned during the period alleged in the complaint. Brown explained that the freeze order, granted yesterday, was necessary because Villalobos has transferred real estate suspiciously, has lost tens millions of dollars in high-stakes gambling, and maintains over 20 bank accounts. Among the assets placed under receivership are two Bentleys, two BMWs, a Hummer H2, art work worth more than $2.7 million, $6 million in yet-to-be-paid placement-agent commissions, and 14 pieces of real property in California, Nevada and Hawaii.

Specific charges allege that:

• Villalobos and ARVCO falsely represented that they had the required securities licenses and complied with all laws;

• Defendants gave, accepted, and failed to disclose gifts;

• Villalobos and ARVCO submitted bogus disclosure forms.

In addition to a permanent order preventing the defendants from violating state securities and unfair competition laws, and the imposition of civil penalties, Brown seeks to recover the more than $40 million in placement agent commissions that Villalobos and ARVCO collected. The receiver appointed by the court will be charged with recovering the money.

Brown's Office acknowledges the full support and assistance of CalPERS and its special review headed by Philip Khinda, Esq., of the Steptoe and Johnson law firm.

SAN DIEGO — Attorney General Edmund G. Brown Jr. today announced settlements that will bring $400 million in refunds for California consumers who were victimized by market manipulation and exorbitant prices during the energy crisis of 2000-2001.

The two-part agreement with San Diego-based Sempra Energy will provide reimbursement of $270 million to California utility customers who each month pay off debt from the utility crisis on their gas and electric bills. Sempra will also pay $130 million to consumers to settle separate claims by the state Public Utilities Commission and the Department of Water Resources.

“The settlements,” Brown said, “will put hundreds of millions of dollars back into the pockets of California energy consumers who suffered blackouts and great economic harm during the energy crisis.”

Including the prior settlement of a class-action suit, Sempra has now paid more than $700 million for the benefit of state utility customers.

During the energy crisis, Enron, Sempra and other energy companies created phony energy shortages, blackouts and record high energy prices. As a result, California’s two largest utilities, PG&E and Southern California Edison, became insolvent, forcing the state to spend billions of dollars for huge amounts of emergency power to keep the lights on.

In legal documents, Sempra was accused of “Enron-style gaming” of the energy markets and “a pervasive pattern of market manipulation and abuse.” It was accused of entering “Enron-style partnerships” that had a destructive impact on the market, driving prices higher and reducing energy availability and reliability. It was accused of a variety of other exotic schemes called “False Import, Paper Trading and Circular Scheduling” to short-circuit the proper functioning of energy markets.

Customers of PG&E, Southern California Edison and San Diego Gas and Electric (a subsidiary of Sempra) continue to pay for the energy crisis in a line item on their utility bills labeled “DWR bond charge.” Funds received in the settlements will go toward reducing those costs to ratepayers.

For the past nine years, the Attorney General has investigated, litigated and negotiated with Sempra and other energy sellers whose misconduct caused the energy crisis.

The Sempra settlement is the latest of 39 settlements hammered out by the Attorney General, in co-operation with the Public Utilities Commission, Department of Water Resources, PG&E, and Southern California Edison, that will provide more than $3 billion in ratepayer relief. The Attorney General continues to press California’s claims for compensation to ratepayers for overpriced energy sold to the state.

OAKLAND – Attorney General Edmund G. Brown Jr. today announced that California, along with other jurisdictions, has reached a $520 million settlement with AstraZeneca Pharmaceuticals LP, to settle allegations it engaged in the “dangerous practice” of promoting drugs for unapproved uses in marketing Seroquel, its blockbuster antipsychotic drug.

London-based AstraZeneca will pay states and the federal government a total of $520 million in damages and penalties. California’s share is $31 million for Medi-Cal, which provides health care to the state’s poor, and other state programs.

“This company engaged in an illegal, off-label marketing campaign to boost sales of Seroquel, a powerful antipsychotic drug that should be prescribed with great caution,” said Brown. “This practice of promoting drugs for unapproved uses is dangerous and can have serious and unforeseen consequences.”

Seroquel is an antipsychotic medication used to treat psychological disorders. From 2001 through 2006, AstraZeneca was found to have promoted the drug not only to psychiatrists, but also to primary care physicians and other healthcare professionals for unapproved uses in the treatment of medical conditions such as aggression, Alzheimer’s disorder, anger management, anxiety, attention deficit hyperactivity disorder, dementia and sleeplessness.

Doctors may prescribe medications for off-label uses, but drug makers are prohibited from promoting drugs for treatment of medical conditions not approved by the Food and Drug Administration (FDA.)

In its marketing campaign, AstraZeneca was also alleged to have made illegal payments to physicians, paying their way to travel to resort locations to “advise” AstraZeneca about marketing messages for unapproved uses, to serve as authors of articles written by AstraZeneca and its agents, and to conduct studies for unapproved uses of Seroquel.

The settlement resolves claims that, as a result of these promotional activities, AstraZeneca encouraged physicians to prescribe Seroquel for children, adolescents and dementia patients in long-term care facilities for uses not medically accepted or FDA-approved. Among other side effects, the drugs have been shown to cause significant weight gain in children. The company also failed to adequately disclose studies that show Seroquel increases the risk of diabetes.

As part of the settlement, AstraZeneca will enter into a Corporate Integrity Agreement with the United States Department of Health and Human Services, Office of the Inspector General, which will closely monitor the company’s marketing and sales practices.

This settlement is based on qui tam cases, or whistle-blower lawsuits, that were filed in the United States District Court for the Eastern District of Pennsylvania.

“DHCS works closely with the California Department of Justice and federal authorities to identify and recover improper payments caused by these unlawful practices. The funds recovered in this action will be put back into the Medi-Cal program to serve the medically needy citizens of this state,” said DHCS Director David Maxwell-Jolly.

A National Association of Medicaid Fraud Control Units team, including members from California and other states, participated in the investigation and entered into the settlement negotiations with AstraZeneca on behalf of the states.

LOS ANGELES – Accusing giant bond-rating firm Moody’s Investors Service of withholding evidence documenting its role in the housing and Wall Street meltdown, Attorney General Edmund G. Brown Jr. today announced court action to force Moody’s to explain why it gave its highest ratings to “risky and toxic” mortgage-backed securities that ultimately cost investors and taxpayers billions of dollars.

Brown’s action comes seven months after the Attorney General subpoenaed Moody’s, but the firm has refused to comply with the subpoena.

“The need for court action to enforce a state subpoena is highly unusual,” Brown said, “because companies almost always comply without such a drastic step being necessary.” But he said Moody’s, which played a central role in the run-up to the collapse of housing prices, has refused to explain its ratings practices to the state. Moody’s said responding to the state subpoena would be a “waste of time.”

“The state’s subpoena seeks information regarding Moody’s decision to give its highest credit ratings to securities backed by risky and toxic mortgage-backed securities,” Brown said.

“By taking this step, I intend to stop Moody’s from ignoring the state’s subpoena,” Brown said. “The people of California have the right to know how this credit rating agency got it so wrong and whether it violated California law in the process.”

Moody’s and other credit rating agencies ignored red flags in the run-up to the collapse in housing prices and gave stellar ratings to shaky securities, which made those investments appear as safe as government-issued Treasury bonds, Brown explained.

“But investors swiftly learned that the ratings were as worthless as the securities themselves,” he said.

Brown said Moody’s and other ratings agencies worked behind the scenes with the same Wall Street firms that created the securities, earning billions of dollars in revenue from those firms at a rate nearly double what they earned for rating other securities.

“A central question in the aftermath of the financial meltdown is whether Moody’s gave investment banks and other securities packagers unwarranted high ratings at the expense of investors, who depended upon the integrity and independence of Moody’s ratings,” Brown said.

The subpoena issued by Brown’s office on Sept. 17, 2009, seeks to determine:

• Whether Moody’s knew that the AAA ratings it gave to high-risk securities weren’t warranted
• Whether Moody’s made fraudulent representations about the quality of its ratings
• Whether Moody’s made fraudulent representations concerning the independence of its ratings
• Whether Moody’s conspired with companies it rated to the detriment of investors
• Whether Moody’s profited from giving inaccurate ratings to some securities
• Whether Moody’s compromised its own standards and safeguards in order to increase its own profits.

Moody’s and other Wall Street ratings agencies grade the credit worthiness of the bonds and securities that corporations and municipalities issue. Investors depend on these ratings to gauge risk in making investments. At the peak of the housing boom, these agencies gave their highest ratings to complicated, high-risk financial instruments that soon accelerated the financial collapse.

Brown said banks, pension funds and other investors, in California and elsewhere, relied on these ratings when they purchased trillions of dollars of securities backed by risky mortgages, seeking high returns and reassured by ratings indicating the issues were low-risk. Those purchases helped inflate the housing bubble by enabling ever-riskier mortgages.

When the speculative bubble burst, those risky mortgages defaulted in record numbers and investors were left unable to sell now-worthless securities. The agencies then downgraded the credit ratings of more than $1.9 trillion in residential mortgage-backed securities, a tacit acknowledgement they had ignored or did not understand the risks of the debt they rated, Brown said.

Moody’s is one of the most profitable companies in the country. It had the highest profit margin of any company in the S&P 500 in the years leading up to 2008 – higher than Google or Microsoft, according to U.S. Representative Henry Waxman, Chairman of the House Committee on Oversight and Government Reform.

Brown’s investigation of Moody’s is one of many actions by his office to fight financial abuses relating to the mortgage meltdown, including his 2008 lawsuit that resulted in an $8.68 billion settlement with Countrywide Home Loans over its fraudulent lending practices, as well as recent crackdowns by the Attorney General on foreclosure consultants and loan-modification scammers.

LOS ANGELES—-Attorney General Edmund G. Brown Jr. today filed a lawsuit against MDP California, Inc. for “dodging fair wage and labor laws” by denying workers overtime pay, worker’s compensation and pay for all hours worked. He is seeking $500,000 in restitution for cheated workers.

MDP California, a Nevada Corporation doing drywall installation throughout Southern California, also failed to pay state-mandated unemployment insurance, state disability fund payments, and state and federal taxes.

“MDP California cheated its workers and the State out of hundreds of thousands of dollars by dodging fair wage and labor laws,” Brown said. “Those kinds of business practices will not be tolerated in California.”

In late 2009, Brown launched an investigation into MDP California after being notified of possible worker’s rights violations. The subsequent investigation found hundreds of violations of California law.

Brown’s office also alleged that because the firm did not pay its workers a fair wage or pay state taxes, MDP California had an unfair advantage over its competitors and could underbid them for jobs.

Today’s lawsuit contends MDP California violated:
• California Labor Code section 510 by denying overtime pay
• California Labor Code section 226 by providing wages to employees in other employees’ names
• California Wage Order 16-2001(4)(A) denying pay for all hours worked
• California Labor Code section 226.7 by denying employees with a 10-minute break each four hours
• California Labor Code section 3700 by failing to pay worker’s compensation insurance
• California Labor Code section 201 by failing to pay wages owed to laid-off employees immediately
• California Business and Professions Code section 17200 for engaging in unfair business practices.

According to workers interviewed by Brown’s office, MDP California required workers to regularly work nine to 11 hours per day, Monday through Saturday and on sometimes on Sunday. None of the workers received any additional compensation for overtime worked.

One worker who was injured on the job was forced to take time off unpaid because he was not provided with any worker’s compensation.

Last week, Brown announced his office had won restitution for over 200 employees of Charles Evleth Construction, Inc., a Bakersfield construction company. The agreement also prohibited the company from denying workers fair wages and overtime pay, paying employees in cash to avoid state and federal taxes, and permitting supervisors to take kickbacks from employees in exchange for the employees being allowed to work.

Last month, Brown announced two other lawsuits against companies that denied their workers minimum wage, overtime pay, and in some cases, subjected workers to potentially deadly working environments.

On March 10, Brown sued Juan Munoz, a farm labor contractor in Southern California, for neglecting to provide rest breaks, potable drinking water or shade to field workers.

On March 3, Brown sued Livermore-based Country Builders after the company falsified payroll records to hide underpayments, deliberately misclassified workers to reduce the company's workers' compensation premiums and violated state prevailing wage laws.

The Attorney General’s investigation was conducted by his Underground Economy Unit. To protect mistreated workers, Brown created the unit in 2007 to investigate businesses for suspected violations of state wage and labor laws.

A copy of the lawsuit filed in Los Angeles County Superior Court is attached.

LOS ANGELES – Attorney General Edmund G. Brown Jr. today announced a multi-state agreement with Valero Oil to stop young people from purchasing tobacco products at its convenience stores.

“For years gas station convenience stores have served as an illegal provider for underage smokers. Today, Valero has finally joined the growing list of companies that have made a commitment to prevent illegal access to tobacco,” Attorney General Brown said. “Smoking remains a serious public-health problem in our country, and we need to do everything possible to keep young people from picking up the habit.”

Every day, some 2,000 children begin smoking in this country. One-third of them will die of tobacco-related diseases. Nearly half of underage smokers said they bought their cigarettes at gas station convenience stores.

Attorneys General throughout the country reached this agreement after a nationwide investigation, led by Brown’s office, of tobacco selling practices at convenience stores owned by or affiliated with Valero.

The agreement includes the following provisions:

• Valero retail personnel will receive training about the health risks associated with childhood tobacco use.
• Valero will administer independent compliance checks to monitor sales practices at company-owned convenience stores, to ensure they are not selling tobacco to minors.
• Vending machines, free samples, and self-service displays of tobacco products will be prohibited at company-owned stores.
• In-store tobacco advertisements will be limited to reduce youth demand for tobacco products.
• Valero will require all of its convenience store operators to notify the company if tobacco products are sold to minors in violation of state law.
• The states will continue to impose sanctions against stores that sell tobacco to minors.

There are over 900 Valero stations in California. Although Valero does not directly own or operate the convenience stores at many of those stations, it has agreed to adopt procedures designed to reduce tobacco sales to minors at all of its outlets.

Nationwide, 47% of underage youths who reported buying cigarettes said they got them at gas station convenience stores. Studies have linked retail tobacco marketing with underage smoking. In addition, many convenience stores are located near schools and playgrounds. Studies show that most adult smokers began smoking before the age of 18.

Recently, other multi-state agreements have been inked to curb the sale of tobacco to minors at gas station convenience stores, including Conoco, Phillips 66, 76, Exxon, Mobil, BP, ARCO, Chevron, and Shell, as well as retail and pharmacy outlets operated by Kroger, 7-Eleven, Walgreens, Rite Aid, CVS, and Wal-Mart. Participating grocery stores include Ralphs, Safeway, and Vons.

A copy of the agreement is attached.