December 29, 09

NEWS / Division of Laws Legal Efforts Brought $148 Million in Judgments, Recoveries for State in 2009

TRENTON -- Attorney General Anne Milgram and Division of Law Director Taysen VanItallie announced today that the Division obtained $148 million in recoveries and judgments on behalf of the state in 2009 through debt recovery, consumer fraud, environmental and other litigation.

The $148 million obtained by the Division compares to $154 million recovered in 2008, but represents an increase of $24 million -- or approximately 19 percent -- over the amount obtained two years ago, and a $48 million increase over 2006. (The $154 million obtained in 2008 included $63 million received from a single settlement ¨C the settlement of a pension securities fraud lawsuit against Tyco International Ltd.).

Total dollars obtained by the Division in 2009 through favorable judgments or cost recoveries included approximately $54 million from litigation related to securities fraud, consumer fraud and insurance fraud, approximately $42 million from environmental litigation and $12 million from debt recovery efforts.

In addition, Division attorneys defended the state in such areas as employment litigation and tort litigation. Combined, the amount paid out by the state as a result of legal action against it in 2009 and 2008 totaled $62 million -- $31.3 million in 2009 and $26.7 million in 2008. That figure represents a 47 percent reduction compared with the state¡¯s combined pay-out for years 2007 and 2006 of $117.9 million ($72.3 million in 2006 and $45.6 million in 2007).

Attorney General Milgram credited the Division for continuing to obtain substantial dollars on behalf of the state while sharply reducing its litigation-related financial liability.

¡°The Division of Law is staffed by many dedicated, experienced attorneys who have high-caliber legal skills,¡± said Milgram. ¡°Through its own lawyers, and through the use of outside counsel where necessary, the Division has done a consistently excellent job of protecting our state¡¯s assets and litigating on behalf of New Jersey citizens. Particularly during these tough fiscal times, the high quality of legal work provided by our Division of Law has been invaluable.¡±

"The attorneys of the Division of Law are an extraordinarily hard-working and creative group," said Director VanItallie. "Day in and day out, they deliver remarkable results for the citizens of New Jersey. Working with these lawyers is a tremendous privilege."

Overall, the Division of Law handled more than 39,000 pending legal matters in 2009, resolving or closing more than 19,000 matters and representing the state in approximately 1,200 trials and 1,100 administrative hearings.

Notable examples included a landmark state Supreme Court case in which the court held that the School Funding Reform Act is constitutional with regard to the state¡¯s Abbott districts. The decision ended years of litigation concerning school funding practices, and reflected extensive work done in collaboration with the Department of Education.

In another appellate victory in 2009, the U.S. Court of Appeals for the District of Columbia ruled in favor of New Jersey and other states in a challenge to inadequate federal standards for microscopic pollutants known as fine particulate matter or ¡°soot.¡± The court directed the federal Environmental Protection Agency to revisit its standards to ensure they protect public health with a margin of safety, and to provide scientific support for its eventual determination.

Among the significant lawsuit settlements handled by the Division in 2009 was a $5.6 million settlement with Frank E. Walsh Jr., a remaining defendant in the state¡¯s investment fraud suit against Tyco International Ltd. Walsh, an independent director, was accused of taking an improper payment that was not disclosed to investors in connection with Tyco¡¯s acquisition of CIT in 2001. He admitted no wrongdoing. In addition, the financial services firm Pricewaterhouse Coopers paid $5.85 million to settle allegations of accounting improprieties at Tyco. Under terms of the settlement agreement, there was no admission of wrongdoing.

Attorneys for the Division also finalized an agreement in 2009 under which the state will be paid $43 million to settle cost recovery and natural resource damage (NRD) claims associated with the Combe Fill South Landfill, a federal Superfund site in Morris County that operated for decades as a landfill that accepted industrial wastes, sewage sludge, chemicals and waste oils.

In a consumer protection settlement also finalized in 2009, Verizon agreed to pay the state $795,000 and provide pre-paid gift cards to more than 1,100 New Jersey consumers who complained about company marketing, promotion, sales and customer service practices related to its FiOS fiber-optic television, telephone and internet service.
Attorneys for the Division also continued the state¡¯s fight against mortgage fraud in 2009, filing lawsuits aimed at putting fraudulent lenders and mortgage ¡°rescue¡± operators out of business while making consumers whole.

Among other cases, the Division filed suit against a disbarred lawyer, Martin Gendel of Montville, and his son, Seth Gendel of New York City, as well as their companies Casey Properties and Lee Alan LLP, for violating New Jersey¡¯s Civil Racketeer Influenced and Corrupt Organizations (RICO) statute. The suit charged the Gendels and other defendants with using deception -- and the credit information of their unwitting victims ¨C to obtain fraudulent mortgage loans and turn a profit via the sale of urban properties at grossly inflated prices.

In two other mortgage fraud lawsuits, two unrelated companies in South Jersey -¨C Hope Now Financial Services Corp. of Cherry Hill and New Hope Modifications of Bellmawr -- were charged with selling loan modification services that never materialized, and with creating the false impression they were affiliated with a respected non-profit foreclosure prevention organization known as the Hope Now Alliance.

In July, the Division filed lawsuits against Best Interest Mortgage Company and New Day Financial Solutions charging the companies falsely represented loan modification services and collected unlawful ¡°up-front¡± fees.

Also in July, a final consent judgment was entered ordering United Credit Adjusters and related companies to pay $550,000 in civil penalties and $86,900 in reimbursement to the Division of Consumer Affairs in connection with a suit filed charging violations of the Consumer Fraud Act.

Since June 2008, the Division has filed 11 mortgage fraud and foreclosure rescue scam suits naming 102 defendants. The suits charge conduct involving fraudulent loans worth more than $45 million and affecting approximately 2,200 victims.

Other noteworthy legal actions taken by Division of Law attorneys in 2009 included:

¡öThe filing of an eight-count lawsuit on behalf of the state against executives and directors of now-bankrupt Lehman Brothers alleging stock fraud and misrepresentation that cost New Jersey¡¯s pension funds more than $100 million. The lawsuit charges that Lehman deliberately misled the state regarding the value of its assets, and that the state purchased common and preferred stock on the basis of the misleading information. The complaint seeks compensatory and punitive damages.
¡öThe filing of a suit against Merrill Lynch, charging that it sold the Division of Investment $300 million in preferred stock based on misleading information about the firm¡¯s financial condition and that it also engaged in preferential treatment. Bank of America, which acquired Merrill Lynch, was also named as a defendant.
¡öNegotiation of a settlement with Ticketmaster to resolve more than 2,000 complaints filed by consumers over the way tickets were sold to Bruce Springsteen concerts scheduled for May 2009 at the Izod Center in the Meadowlands in East Rutherford. Under the settlement, Ticketmaster agreed to take a variety of measures to satisfy consumers who were either charged for tickets they did not receive or were redirected to a Ticketmaster-owned Web site that offered tickets at exorbitant prices. Ticketmaster also agreed to pay the state $350,000 and to make changes regarding its future practices related to ticket sales.
¡öThe filing of a 16-count lawsuit against Hoboken-based Stevens Institute of Technology, the president of the university and the chairman of the board of trustees. The lawsuit charges financial mismanagement, excessive spending of endowment investment gains, improper handling of specific endowments and investments, failure to properly maintain records and accounts, and excessive compensation of the school president. The suit seeks reform of the school¡¯s governance practices, reform of internal controls and accounting practices, and removal of school president Harold J. Raveche, as well as removal of chairman Lawrence T. Babbio from the school¡¯s board of trustees.
¡öNegotiation of a settlement with the Target Corporation under which Target agreed to pay the state $375,000 to resolve allegations its stores sold infant formula and non-prescription drugs beyond expiration dates, sold merchandise that did not match posted prices, and failed to post prices on its merchandise. As part of the settlement, Target voluntarily created a new senior management position, entitled Group Pricing Compliance Specialist, whose duties include monitoring compliance with Target¡¯s policies as well as the settlement terms as to price accuracy.
¡öNegotiation of a settlement with Synthes, Inc., a major medical device manufacturer. Under the settlement, Synthes agreed to disclose ¨C to the public and to the U.S. Food and Drug Administration ¨C payments made to physicians conducting clinical trials of its devices, as well as any investments held by these physicians in the devices they test. Synthes also agreed to ban the practice of compensating clinical trial investigators with company stock or stock options.

http://www.nj.gov/oag/newsreleases09/pr20091229c.html

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