Lawsuits & Settlements

FOR IMMEDIATE RELEASE
January 16, 2009
Contact: Christine Gasparac (916) 324-5500

Brown Joined by Eight States in Seeking to Thwart
Bush Administration Effort to Gut the Endangered Species Act

SAN FRANCISCO – California Attorney General Edmund G. Brown Jr.’s effort to overturn an eleventh hour move by the Bush Administration to gut provisions in the Endangered Species Act received a major boost today when eight states – Connecticut, Delaware, Maryland, Massachusetts, New Jersey, New York, Oregon, and Rhode Island – signed on to his lawsuit.

“There is broad and deep opposition to the Bush Administration’s effort to gut the Endangered Species Act,” Attorney General Brown said. “It is my hope that the new Obama Administration will take a fresh look at these rules and restore the independent scientific review of projects affecting endangered species, which has been a hallmark of the ESA for 35 years.”

The new regulations, initially proposed by the Departments of the Interior and Commerce in August 2008, largely eliminate a requirement in the Endangered Species Act that mandates scientific review of federal agency decisions that might affect endangered and threatened species and their habitats.

The changes allow the Fish and Wildlife Service to permit mining, logging, and other commercial activities to take place on federal land and other areas subject to federal regulatory control without review or comment from federal wildlife biologists on the environmental effects of such activities on endangered and threatened species and their habitat.

The new regulations are the most significant changes to the Endangered Species Act and its implementing regulations in over 20 years. Now that these regulations have been adopted, many decisions on whether to permit commercial activity on federal land or issue federal permits or licenses will be made at the sole discretion of federal agency project proponents, without input from biological experts at the federal wildlife agencies. Federal project agencies generally lack adequate biological expertise and have incentives to conclude that their projects will not have adverse affects on endangered and threatened species and their habitat.

The changes also eliminate the requirement to consider the effects of greenhouse gas emissions on species and ecosystems from proposed federal projects. Federal agencies now no longer need to consider the possible adverse impacts on species like the polar bear from commercial projects that require federal approval or funding such as highway construction and coal-fired power plants.

The lawsuit, which was filed last December in the U.S. District Court for the Northern District of California, alleges that the Bush Administration:

• Violated the Endangered Species Act by adopting regulations that are inconsistent with that statute;
• Violated the National Environmental Policy Act by failing to consider the environmental ramifications of the proposed new regulations; and
• Violated the Administrative Procedures Act by not adequately considering public comments submitted by the Attorney General and numerous other organizations and concerned citizens.

The Attorney General’s lawsuit follows three similar lawsuits challenging the regulations filed earlier by environmental groups.

Attorney General Brown’s amended complaint challenging the regulations and comments on the proposed regulations are attached.

SACRAMENTO- Attorney General Edmund G. Brown Jr. today announced that California will recover $112 million for its Medi-Cal program as part of a national settlement with Eli Lilly and Company for the unlawful off-label marketing of its anti-psychotic drug Zyprexa, which the company aggressively marketed for such unapproved uses such as treatment for depression, anxiety, irritability, disrupted sleep, nausea and gambling.

“This settlement means that Eli Lilly can no longer reap massive profits by aggressively marketing this drug for unapproved uses at the expense of state health care programs for seniors and the infirm,” Attorney General Brown said. “California’s Medi-Cal program will receive almost $112 million, which is more than welcome at a time when the state faces massive budget deficits.”

Eighteen percent of the $112 million recovered for the Medi-Cal program will go to relators (whistleblowers) – the remainder will be split between the State, which will receive $54 million and the federal government, which will receive $41 million.

Beginning in 2001, Eli Lilly launched a marketing campaign called “Viva Zyprexa!” which encouraged physicians to prescribe Zyprexa for children, adolescents, and dementia patients.

In October 2008, the California Attorney General entered a settlement with Eli Lilly over the Zyprexa marketing campaign. In his original complaint, Attorney General Brown alleged that Eli Lilly engaged in unfair and deceptive practices when it marketed Zyprexa for off-label uses and failed to adequately disclose the drug’s potential side effects (including diabetes and hyperglycemia) to healthcare providers.

Under this settlement, Eli Lilly agreed to change its marketing practices and to cease promotion of its off-label uses. Off-label uses are those not approved by the FDA when it approves the sale and use of a particular drug. Physicians are allowed to prescribe drugs for off-label uses, but federal law prohibits pharmaceutical manufacturers from marketing products for off-label uses.

The total settlement is $1.415 billion—the largest recovery in a health care fraud investigation in U.S. history. The settlement includes $800 million in civil damages to be paid to the States and $615 million as a result of criminal charges brought against the company for illegal marketing.

Although both California and the U.S. contribute 50% to the funding of the Medi-Cal program, California’s share is larger than the federal share due to the federal Deficit Reduction Act, which provides monetary incentives to states to use False Claims Acts to pursue Medicaid fraud.

SACRAMENTO—California Attorney General Edmund G. Brown Jr. today joined a lawsuit against the United States Department of Health and Human Services (DHHS) to halt the implementation of a Bush Administration “midnight regulation” that could potentially “endanger a woman’s right to contraception,” including emergency contraception given to rape victims.

“California has carefully and thoughtfully struck a balance between the right to use contraceptives and the right of healthcare providers to abstain from administering them,” Attorney General Brown said. “This illegal and stealth regulation threatens to erode women’s hard fought privacy rights.”

Poised to take effect on the day of President-Elect Barack Obama’s inauguration, the regulation undercuts state contraception laws and jeopardizes billions of dollars in federal public health money.

On December 19, 2008, DHHS issued the regulation, one of several highly controversial “midnight regulations” issued in the waning days of the Bush Administration. The regulation purports to implement three federal funding restrictions designed to force states to permit healthcare providers to refuse to provide certain health care to which the providers have a religious, moral or ethical objection. If California does not comply with the new federal regulation, it stands to lose millions, if not billions, in federal funding.

One of the most objectionable aspects of the new federal regulation is its failure to define the word “abortion.” An earlier draft contained a very broad definition that would have clearly included some forms of contraception, including emergency contraception. In comments filed with the DHHS in September, Attorney General Brown pointed out that the failure to include a definition of so critical a term would allow the term to be “improperly extended beyond the scope of the authorizing statutes and does not afford meaningful protection for a woman’s access to other healthcare services, including those involving contraception and fertility treatments.” Instead of addressing widespread concern about the term, the DHHS eliminated the definition entirely.

California law allows healthcare workers and providers to object to dispensing contraception or performing abortions for moral or ethical reasons if they notify their employer of their objection in writing. The new federal regulation would reduce the healthcare protections afforded to women in California by allowing a healthcare provider to refuse procedures or referrals to which the provider objects without notifying the employer, the facility or the patient.

In today’s lawsuit, California joins six other states in challenging the regulation on the grounds that it :
• Fails to define “abortion.” By failing to define the term, DHHS created unnecessary ambiguity, allowing the term to be interpreted as encompassing all forms of contraception.
• Deprives patients of the right to receive factual and objective medical information and access to medical information.
• Overrides states’ rights to promote the general health and welfare of their citizens.

“We applaud Attorney General Jerry Brown’s proactive stance in protecting patients’ access to vital health care services and information,” said Kathy Kneer, president and CEO of Planned Parenthood Affiliates of California. “This HHS regulation poses a serious barrier to the states’ enforcement of their laws protecting patients.”

The complaint and accompanying exhibits are attached.

SAN FRANCISCO—California Attorney General Edmund G. Brown Jr. filed a lawsuit today on behalf of the California Department of Fish and Game Office of Spill Prevention and Response, State Lands Commission and State Water Boards against the owners, operators and pilot of the M/V Cosco Busan, the shipping vessel that spilled more than 53,000 gallons of oil into San Francisco Bay, “polluting our waters and killing thousands of birds.”

“This was a preventable accident that had tragic consequences,” Attorney General Brown said. “The Cosco Busan crashed into the Bay Bridge, polluting our waters and killing thousands of birds.”

On November 7, 2007, the Cosco Busan, piloted by John Cota, hit the San Francisco-Oakland Bay Bridge’s Delta Tower. The crash caused approximately 53,569 of gallons of oil to spew into San Francisco Bay and spread to the Pacific Ocean and along Bay Area shorelines.

Oil from the spill was found along at least 56 miles of rocky intertidal coastline, 52 miles of sandy beach coastline, 10 miles of saltmarsh coastline, and several hundred acres of intertidal eelgrass beds. According to the California Department of Fish and Game, responders collected 1,084 live birds, of which 418 were released after rescue. Responders found 1,859 birds dead from the oil spill.

The California Department of Fish and Game Office of Spill Prevention and Response, along with the United States Coast Guard, the Governor’s Office of Emergency Services, National Oceanic & Atmospheric Administration, National Parks Service, San Francisco Department of Public Health, and the National Marine Sanctuaries arrived at the scene and immediately began clean-up and wildlife rescue efforts. To date, the state has spent countless resources from the Oil Spill Response Trust Fund on the clean-up and assessment of natural resource damages resulting from the massive oil spill.

“We appreciate the Attorney General’s efforts to assist the Department of Fish and Game Office of Spill Prevention and Response in protecting and restoring California’s wildlife, habitats and recreational opportunities that were injured or lost as a result of the Cosco Busan oil spill,” said Office of Spill Response Administrator Stephen Edinger.

"The Cosco Busan spill has all the makings of an international puzzle,” said San Francisco Bay Regional Water Quality Control Board Executive Officer Bruce Wolfe. “The Regional Water Board has unique authority under California's Porter-Cologne Water Quality Act to focus the diverse parties involved here on restoring the water quality of San Francisco Bay and other affected waters of the state. With the help of Attorney General Brown, we expect a fair and just resolution on behalf of the people of the state.'

Today’s lawsuit aims to recover damages to restore natural resources injured by the spill and the costs of response, containment and clean-up. The lawsuit also seeks to recover the costs of removal and treatment of wildlife affected by the spill, as well as the cost of assessing natural resource damages, legal costs and civil penalties.

The defendants include:
• Regal Stone Ltd.
• Fleet Management Ltd.
• Hanjin Shipping Co. Ltd.
• Synergy Management Services
• Synergy Marine Ltd.
• John J. Cota, San Francisco Bar Pilot

A copy of the complaint filed in San Francisco Superior Court is attached.

Sacramento—Attorney General Edmund G. Brown Jr. today reached a $4.85 million settlement with H&R Block, which prohibits the company from marketing refund anticipation loans as early tax refunds.

“This settlement prevents H&R Block from marketing high-cost loans as early tax refunds,” Attorney General Brown said. “This is especially important because often these loans go to those who can least afford them.”

The California Attorney General filed suit against H&R Block in early 2006 regarding its marketing and sale of income tax refund anticipation loans and a related product called refund anticipation checks.

H&R Block continues to deny any wrongdoing. During the course of the investigation, Block has worked with the Attorney General to improve its practices.

A refund anticipation loan is a short-term loan secured by a taxpayer's anticipated income tax refund. The complaint alleged a variety of deceptive practices by H&R Block including:

• Deceptive advertising designed to disguise refund anticipation loans, which carry fees and other costs, as tax refunds, which the IRS provides without charge; and

• Unfair debt collection practices by which customers' refund proceeds were garnished to pay off debts they supposedly owed.

The settlement provides for up to $2.45 million in restitution for consumers who purchased a
“Refund Anticipation Loan” or a “Refund Anticipation Check” through H&R Block between
January 1, 2001 and December 31, 2008. In addition, H&R Block will pay $500,000 in penalties and $1.9 million in fees and costs.

In addition. H&R Block will be prohibited from marketing these loans and related products in a deceptive or misleading manner and will be required to make clear and conspicuous disclosures to consumers prior to their purchase of these products. Terms of the settlement are limited to three years.

A settlement administrator will be contacting eligible consumers directly. Eligible consumers may also write to the Attorney General’s Public Inquiry Unit at P.O. Box 944255, Sacramento, CA 94244-2550, or may send an e-mail at http://ag.ca.gov/contact/.

Attorney General Brown previously settled claims against Jackson Hewitt and recently concluded a trial against Liberty Tax Service, the second and third largest tax preparation companies in the country, respectively. All three lawsuits involved refund anticipation loans and related products.

FOR IMMEDIATE RELEASE
December 29, 2008
Contact: Christine Gasparac (916) 324-5500

Attorney General Brown Sues to Overturn Bush Administration Rules Undermining Endangered Species Act

SAN FRANCISCO– California Attorney General Edmund G. Brown Jr. has filed suit in federal court to block an “audacious attempt” by the Bush Administration to gut provisions in the Endangered Species Act mandating scientific review of federal agency decisions that may threaten endangered species and their habitat.

“The Bush Administration is seeking to gut the Endangered Species Act on its way out the door,” Attorney General Brown said. “This is an audacious attempt to circumvent a time-tested statute that for 35 years has required scientific review of proposed federal agency decisions that affect wildlife.”

The new regulations, initially proposed by the Departments of the Interior and Commerce in August 2008 and made final on December 16, largely eliminate a requirement in the Endangered Species Act that mandates scientific review of federal agency decisions that might affect endangered and threatened species and their habitats.

The changes allow federal agencies to undertake or permit mining, logging, and other commercial activities on federal land and other areas without obtaining review or comment from federal wildlife biologists on the environmental effects of such activities.

The new regulations are the most significant changes to the Endangered Species Act and its implementing regulations in 20 years. Now that these regulations have been adopted, many decisions on whether to permit commercial activities on protected land will be made at the discretion of federal agency project proponents. These agencies generally lack adequate biological expertise and have incentives to conclude that their projects will not have adverse affects on endangered and threatened species and their habitat.

The changes also eliminate the requirement to consider the effects of greenhouse gas emissions on species and ecosystems from proposed federal projects. Federal agencies now no longer need to consider the possible adverse impacts on species like the polar bear from commercial projects that require federal approval or funding such as highway construction and coal-fired power plants.

The lawsuit, which was filed yesterday in the U.S. District Court for the Northern District of California, alleges that the Bush Administration:

• Violated the Endangered Species Act by adopting regulations that are inconsistent with that statute;
• Violated the National Environmental Policy Act by failing to consider the environmental ramifications of the proposed new regulations; and
• Violated the Administrative Procedures Act by not adequately considering public comments submitted by the Attorney General and numerous other organizations and concerned citizens.

The Attorney General’s lawsuit follows three similar lawsuits challenging the regulations filed earlier by environmental groups.

Attorney General Brown’s complaint challenging the regulations and comments on the proposed regulations are attached.

FOR IMMEDIATE RELEASE
December 18, 2008
Contact: Christine Gasparac (916) 324-5500

Attorney General Brown Reaches Agreement with MillerCoors to Ban Sale of Alcoholic Energy Drinks

SAN FRANCISCO– California Attorney General Edmund G. Brown Jr. today announced that 13 states and the City of San Francisco have forged an agreement with MillerCoors to stop “the growing and widespread use” of caffeine-spiked alcoholic beverages, often marketed to young adults.

“With this agreement, we’re shutting down 90% of the market in caffeine-spiked alcoholic beverages,” said Attorney General Brown. “The growing and widespread use of caffeine mixed with alcohol can distort judgment, weaken inhibitions and encourage risky behavior, especially in young people.” Brown added.

Alcoholic energy drinks mix alcohol with ingredients like caffeine, guarana, taurine or ginseng. The alcoholic content in these drinks range from 6-12% per volume, more than most beers. Together, the stimulating effect of caffeine in the beverage mixed with the alcohol can mask how intoxicated the drinker actually is. A drinker may feel alert, but will still suffer the debilitating effects of alcohol consumption, including diminished reaction times and basic motor skills.

Sparks currently has 90% of the market share for alcoholic energy drinks. Last June, Attorney General Brown and other attorneys general announced that Anheuser-Busch had signed an agreement to stop producing its alcoholic energy drinks. With today’s agreement, most of the alcoholic energy drinks that were available in the beginning of the year will now be taken off the market. California and the other states will continue to investigate the smaller companies that continue to sell alcoholic energy drinks.

Young people are most vulnerable to the effects of alcoholic energy drinks like Sparks because they are prone to engage in risky behaviors such as binge-drinking and are less experienced in gauging the debilitating effects of alcohol. They are also more at risk of acute alcohol problems, including traffic crashes, violence, sexual assault, and suicide.

A study by researchers at the Wake Forest University School of Medicine found that students who consumed alcoholic energy beverages were twice as likely to be involved in alcohol-related accidents and injuries. They were also more likely to be involved in sexual assaults or drunk driving.

After an investigation into the product, Attorney General Brown and the participating attorneys general alleged that Sparks was unsafe, MillerCoors was making false or misleading health-related statements about Sparks’ energizing effects, and much of the marketing was directed toward youth, a violation of California laws on marketing tobacco or alcoholic products to minors.

Under today’s settlement agreement, MillerCoors will:

• Cease manufacturing and marketing all caffeinated alcoholic beverages, including Sparks,

• Reformulate Sparks so that it does not contain stimulants, including caffeine, guarana, taurine or ginseng, and eliminate the use of images that suggest an energizing effect,

• Not promote the mixing of caffeinated products with alcoholic beverages,

• Inform distributors and retailers that reformulated Sparks contains alcohol, but no caffeine, and Sparks should be displayed separate from non-alcoholic energy drinks. The company will also immediately discontinue its current Sparks website without directing visitors to a new site.

California was joined in this settlement by Arizona, Connecticut, Idaho, Illinois, Iowa, Maine, Maryland, Mississippi, New Mexico, New York, Ohio, Oklahoma, and the City and County of San Francisco.

The agreement is attached.

SACRAMENTO – California Attorney General Edmund G. Brown Jr. today joined with 32 other state attorneys general in announcing a landmark $7 million settlement with Airborne, Inc. that forces the company to stop advertisements that “dramatically misrepresented” its dietary supplements as cold remedies.

“Airborne dramatically misrepresented its products as cold remedies without any scientific evidence to back up its claims,” Attorney General Brown said. “Under this agreement, the company will stop advertisements that suggest that its products are a cure for the common cold.”

Airborne began selling its products as a cold remedy on the Internet around July 2000 and on television in 2004. In its advertisements, Airborne featured people suffering from cold and flu symptoms and made unsupported statements suggesting its products were a cure for the common cold. This included:

• “Airborne Cold Remedy”
• “A Miracle Cold Buster!”
• “Sick of Catching Colds?”
• “Take at the first sign of a cold symptom.”

The company also requested that retailers sell Airborne products in the cold/cough aisle.

To substantiate their claims, Airborne relied upon studies that claimed the major ingredients in their products -- Vitamin C, Vitamin E, Selenium, and Zinc -- prevent colds. However, subsequent definitive studies found that these ingredients do not have any discernable effect to prevent colds. Despite the information, Airborne continued to market its products as cold remedies.

Investigators also raised concerns about the levels of Vitamin A in Airborne products. In older formulations, Airborne contained 5,000 International Units of Vitamin A. If the product was taken as instructed, consumers would ingest up to 15,000 International Units of Vitamin A daily.

This amount of Vitamin A poses potential health risks to vulnerable populations, including children and pregnant women. During the negotiation process, Airborne reformulated its product to contain only 2,000 International Units of Vitamin A.

Under today’s agreement, Airborne Inc. agreed:
• Not to make any claim concerning the health benefit, performance, efficacy or safety of its dietary supplements.
• Not to make any claims that imply that Airborne can diagnose, mitigate, prevent, treat, or cure colds, coughs, the flu, an upper respiratory infection or allergies.
• Not to require, demand, or otherwise influence where a retailer places Airborne, Inc. products, such as in the cold and cough aisle.
• Not to market any product that contains directions for use that would, if followed, result in an individual ingesting 15,000 International Units of Vitamin A per day.
• Pay a total of $7 million to 33 states.

Today’s settlement covers all Airborne products including:
• Airborne- Original
• Airborne- Pink Grapefruit
• Airborne- Lemon Lime
• Airborne- Nighttime
• Airborne- Jr. On-The-Go
• Airborne- Seasonal Relief
• Airborne- Sore Throat Gummi Lozenges
• Airborne- Soothing Throat Gummi Lozenges
• Airborne- Power Pixies

The states involved in today’s settlement include Alaska, Arkansas, Connecticut, Delaware, The District of Columbia, Florida, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Maine, Maryland, Michigan, Mississippi, Missouri, Montana, Nebraska, Nevada, New Jersey, New Mexico, Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Vermont, Washington, and Wisconsin.

California will receive $460,000 under the settlement.

SACRAMENTO – California Attorney General Edmund G. Brown Jr. and Los Angeles City Attorney Rocky Delgadillo have reached a settlement with Mattel, Inc. – and several other toy makers – that will “safeguard California’s children” from lead-contaminated toys this Christmas.

Even though a new federal law ratcheting down standards for lead in toys won’t go into effect until February 10, 2009, Mattel and its subsidiary Fisher-Price, RC2 (which makes Thomas the Tank Engine toys), A&A Global Industries, Cranium Inc., Eveready Battery Company, Marvel Entertainment, Toy Investments, Kids II, and Amscan, have agreed to adopt the tough new federal standards immediately. By this agreement, the companies have pledged not to sell any toys they know contain lead, and in addition will pay $550,000 for lead testing and improved consumer notification.

“These consumer protection agreements will safeguard California’s children from lead-contaminated toys this Christmas,” Attorney General Brown said.
“Putting these agreements into effect immediately is absolutely critical because so many toys are sold between Thanksgiving and Christmas, months before new federal standards go into effect.”

In the wake of disturbing revelations about lead-contaminated toys imported from China over the past two years, Attorney General Brown and City Attorney Delgadillo filed suit against 17 toy manufacturers and retailers on November 19, 2007. Nine months later, Congress passed landmark consumer product safety legislation, the Consumer Product Safety Improvement Act.

The federal legislation:
• Lowers the standard for lead in paint and surface coatings from 600 parts per million currently to 90 parts per million after August 14, 2009.
• Establishes increasingly tight restrictions for lead in other materials used in toys – such as plastics, metals and fabrics. These restrictions are phased in over time.

February 10, 2009 – 600 parts per million
August 14, 2009 – 300 parts per million
August 14, 2011 – 100 parts per million

By the terms of the settlement agreement announced today, the companies will:
• Implement the federal lead standards on December 1, 2008, instead of February 10, 2009.
• Meet the 90 parts per million lead in paint standard by December 1, 2008, instead of by August 14, 2009, except for Kids II and Amscan, which will adhere to the federal timeline.

• Meet the 300 parts per million standard for lead in plastics, metals, and fabrics by December 1, 2008, instead of August 14, 2009, except for Kids II and Amscan, which will adhere to the federal timeline.
• If the companies find toys in excess of the lead standard, they will stop selling and distributing those toys, regardless of when the toy was made. This will be in effect this holiday season.
• Pay into a $550,000 fund to test toys for lead and improve outreach about future recalls. They will pay another $460,000 for the Attorney General’s and Los Angeles City Attorney’s Proposition 65 enforcement activities and $548,500 in civil penalties.
• Implement a Quality Assurance System that is designed to identify and to segregate toys with lead during and after the manufacturing process.
• Send direct notice of a recall to consumers of the product for whom they possess address or email contact information.

If the companies violate the lead standard in the future, the Attorney General can obtain penalties through an expedited enforcement process.

This agreement settles a lawsuit filed by the State of California and the LA City Attorney in November 2007, after receiving notices of violation from the Center for Environmental Health, As you Sow, and the Environmental Law Foundation.

The lawsuit alleges that Mattel and 16 other companies knowingly exposed individuals to lead—a chemical known to the State of California to cause cancer and reproductive harm—and failed to provide any warning about this risk.

Other defendants not part of this settlement are: Costco, KB Toys, Kmart, Michaels, Sears, Target, Toys ‘R’ Us, and Wal-Mart.

Background on Proposition 65

During the last year and a half, there have been frequent recalls of toys imported from China due to lead in the paint. Subsequently, the Attorney General’s Office began an investigation under Proposition 65, which ensures that businesses cannot expose individuals to hazardous chemicals without posting a clear and reasonable warning.

Proposition 65 is enforced through lawsuits brought by the Attorney General, district attorneys and city attorneys in cities with a population exceeding 750,000. Lawsuits may also be brought by private parties, but only after these parties notify the Attorney General of the alleged violation. Businesses that violate Proposition 65 are subject to civil penalties of up to $2,500 per day for each violation.

Proposition 65 requires the Governor to publish a list of chemicals that are known to the State of California to cause cancer, birth defects or other reproductive harm. Lead has been listed since 1987 as a chemical that can cause reproductive harm and birth defects, and has been on the list of chemicals known to cause cancer since 1992.

For more information about Prop 65 and to view the private party notices please visit: http://ag.ca.gov/prop65/index.php.

SAN DIEGO—California Attorney General Edmund G. Brown Jr. and San Diego District Attorney Bonnie Dumanis today announced a settlement with Wal-Mart Stores, Inc. that will “help consumers as the holiday season approaches” by giving customers $3 back at the cash register for price-scanning errors.

“We found price-scanning errors in Wal-Mart stores across California,” Attorney General Brown said. “Consumers saw one price in the aisles, but were charged a higher price at the cash register. With this agreement, Wal-Mart will give customers $3 back when pricing mistakes are found at the cash register. In these tough times, this will help consumers as the holiday season approaches.”

In December 2005, the California Attorney General’s Office began an investigation into allegations that Wal-Mart stores in California were scanning items at a higher price than the prices advertised on store shelves and signs. Through random price-checking, county Departments of Weights and Measures across the state found that 164 Wal-Mart Stores in 30 counties had made scanning errors. On average, customers who were overcharged paid an extra $8.40 at the checkout.

Examples of price-scanning errors include:

• From late August to November 2006, customers were overcharged $1.00 on sports bras in Ventura, San Diego, Los Angeles, San Bernardino, Stanislaus, Siskiyou and Tuolumne Counties.
• In January and February 2007, customers were overcharged $2.00 for woven shirts in San Diego, Sacramento, Ventura, Los Angeles and San Bernardino Counties.
• In December 2007, customers were overcharged $2.00 on S/S Polo in San Diego County.
• In November 2003, customers were overcharged $5.16 on a Journey CD in Ventura and Los Angeles Counties.
• From December 2004 to February 2005, customers were overcharged $5.02 on Hanes underwear in Los Angeles County.
• In October and November 2006, customers were overcharged $2.00 on a pair of men’s pants in San Diego and Tuolumne Counties.
• In March and April 2006, customers were overcharged $1.00 on Kellogg’s Special K cereal in Los Angeles and Santa Clara Counties.
• Also in March and April 2006, customers were overcharged $.46 on Kellogg’s Rice Krispies cereal in Madera, King and Ventura Counties.

In the settlement agreement, Wal-Mart agreed to implement a pricing accuracy program in California for at least four years. The program will include:

• A designated person (or group of people) who will receive and address customer complaints from Wal-Mart stores in California.

• An employee (or group of employees) in every Wal-Mart Store who will scan items on a weekly basis and confirm price accuracy.

• An automatic refund program. Whenever an employee becomes aware that a customer has been or is being charged a price higher than the lowest price currently listed, Wal-Mart will give the customer a $3.00 reduction on the item. If the item is less than $3.00, the customer will receive that item for free.

• A sign, in English and Spanish, will be posted at every check-out stand in every Wal-Mart Store clearly outlining the new store refund policy.

In settlement of the case, Wal-Mart has agreed to pay $1.4 million in restitution, civil penalties and reimbursement for investigative costs, and $50,000 to the State Consumer Protection Prosecution Trust Fund.

The case is People vs. Wal-Mart, Inc, San Diego Superior Court case number 37200800096757-CU-BT-CTL. A copy of the Complaint and Settlement Agreement are attached.