Corruption convictions of Azusa firm's executives may be dismissed

A federal judge in Los Angeles has issued a tentative ruling that would dismiss the corruption convictions of executives at an Azusa power transmission equipment maker because of misconduct by prosecutors.

U.S. District Judge Howard Matz said he expected to issue a final ruling on Wednesday.

In May, a federal jury convicted Lindsey Manufacturing Co., its president, Keith Lindsey, and vice president, Steve K. Lee, of violating the Foreign Corrupt Practices Act, which make it a crime for U.S. firms to bribe foreign government officials.

Prosecutors had argued that the company hired a salesman in Mexico to bribe an official with the country's state-owned electricity utility to secure business for the company. Lindsey makes emergency electricity towers.

In May, defense attorneys asked Matz to dismiss the convictions because of “intentional government misconduct,” accusing FBI agents of making false statements in testimony to a grand jury and in a request for a search warrant.

Justice Department prosecutors were aware the testimony was false and did not correct it, defense attorney Jan L. Handzlik argued in the dismissal motion.

A government attorney acknowledged that the prosecution had made some missteps during the case.

“We regret those mistakes,” Justice Department attorney Jeffrey Goldberg told Matz at a hearing Tuesday, according to Bloomberg News. “We strive to get it right every time, and in this case we didn’t get it right every time.”

Matz's tentative ruling would dismiss the case with prejudice, meaning prosecutors would not be permitted to seek a second trial. Their only option would be to appeal Matz’s ruling.

Thom Mrozek, a spokesman for the U.S. attorney’s office in Los Angeles, declined to comment Wednesday.

“We are awaiting the court’s final ruling.  We will review when it is finalized,” Mrozek said.

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Photo: Lindsey Manufacturing Co. makes power transmission equipment Credit: Lindsey Manufacturing Co.

 

Botox maker Allergan sued by Las Vegas surgeon

A Las Vegas plastic surgeon has sued Allergan Inc., accusing the Irvine pharmaceutical company of selling its popular wrinkle treatment Botox in large vials and encouraging physicians to unsafely reuse them.

Dr. Julio L. Garcia contends that Allergan sold Botox exclusively in 100-unit vials for several years, even though a typical treatment required just 20 units. The lawsuit, filed Monday in federal court in Los Angeles, said Allergan sales reps encouraged physicians to use the vials on multiple patients, a practice now condemned by health officials.

The lawsuit accuses Botox of false advertising and violating California’s unfair competition law. It seeks unspecified monetary damages and certification as a class action. The lawsuit does not contend that any Botox patients became ill because of the alleged safety violations.

Allergan spokeswoman Caroline Van Hove declined to discuss specific allegations in the lawsuit. She said the company advocates the single use of Botox vials, as its labels indicate.

Botox is the brand name for Botulinum Toxin Type A, a toxin that temporarily weakens facial muscles that contribute to wrinkles. Botox Cosmetic was available only in 100-unit vials from 2002 until 2008, when Nevada health officials blamed a hepatitis outbreak on the reuse of vials of the drug propofol, the lawsuit said.

To defer patient costs, Allergan reps had told doctors to promote a “buddy system,” in which two or more patients came into the office together to share a single vial, Garcia said in the lawsuit.

The Centers for Disease Control and state public health agencies have warned against using medication from a single vial to treat multiple patients.

In 2008, Allergan started selling Botox in 50-unit vials, “only after the hepatitis exposure in Nevada,” the lawsuit said. Still, the majority of the medication must be discarded after use, keeping costs high and making it difficult for physicians to profit, the lawsuit said.

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Photo: A patient receives Botox treatment in Dallas. Credit: Ron Heflin/Associated Press

Cyber Monday: Feds seize 150 websites in counterfeiting crackdown

Federal authorities have seized 150 Web domain names they said were used to traffic counterfeit brand-name merchandise.

The website seizures targeted the illegal sales of a host of counterfeit products, including professional sports jerseys, golf equipment, DVDs, shoes, handbags and sunglasses, authorities announced Monday.

Visitors to the sites now find a banner that says the domain name has been seized by federal authorities and that copyright infringement is a federal crime.

During the investigation, federal law enforcement agents made undercover purchases of a host of products from online retailers, officials said. In most cases, the goods were shipped directly into the United States from suppliers in other countries.

If the trademark holders confirmed that the purchased products were counterfeit, seizure orders for the domain names of the websites that sold the goods and associated websites were obtained from federal judges, authorities said.

"The sale of counterfeit goods cheats consumers and robs legitimate businesses -- both large and small -- of the fruits of their hard-earned work," said Assistant Atty. Gen. Lanny A. Breuer, who oversees the Justice Department's criminal division. "We will not tolerate those who seek to profit by abusing the Internet and stealing intellectual property at the expense of authors, artists and inventors. The Department of Justice will continue to work aggressively to combat intellectual property crime."

The seizures were part of an ongoing investigation authorities dubbed "Operation In Our Sites," which targeted online counterfeiting and piracy. Since its launch in 2010, the operation has seized 350 domain names that were allegedly used to sell counterfeit goods.

Agencies involved include the Justice Department, Immigration and Customs Enforcement and the FBI.

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Photo: Counterfeit apparel bearing Burberry tags in Hong Kong. Credit: Bobby Yip / Reuters

Scam watch: Cyber Monday, pre-IPO fund, tech support

Here is a roundup of alleged cons, frauds and schemes to watch out for.

Cyber Monday -- Online shoppers can expect to find many discounts the Monday after Thanksgiving, or Cyber Monday. But the biggest online shopping day of the year also can present opportunities to Internet criminals. The Better Business Bureau has some recommendations to avoid scams on Cyber Monday, including: installing anti-virus software, shopping only at trusted sites, avoiding deals that sound too good to be true, paying with a credit card because those charges can be disputed and looking for the “s” in https:// -- a sign that a website is encrypted.

Pre-IPO fund -- For investors who had been excluded from recent initial public offerings of hot companies, one Florida-based hedge fund seemed like a golden opportunity. Operators of the Praetorian Global Fund claimed to hold pre-IPO shares of coveted companies such as Facebook, Twitter and Groupon. Investors responded in droves, piling more than $12.6 million into the fund since August 2010, much of it through a broker in New York. What the investors didn’t know was that the fund was operated by a convicted felon named John A. Mattera and held no pre-IPO shares, the Securities and Exchange Commission alleged in a recent lawsuit. Instead, Mattera used most of the investors’ money to support a lavish lifestyle, spending it on private jets, luxury cars and fine art, the SEC said. The U.S. attorney’s office in Manhattan filed criminal charges against Mattera, who was arrested Nov. 17.

Tech support phone calls -- North Carolina consumers have reported getting calls from phony tech support specialists who are out to access their personal information and use it to steal their money, North Carolina Atty. Gen. Roy Cooper said. More than a dozen North Carolina residents have called Cooper’s Consumer Protection Division in November to report suspicious calls from phony tech support specialists claiming to be partners with Microsoft or Windows. The consumers are directed to a website through which the scam artists are able to access all data stored on the victims’ computers, Cooper said. The calls seem to target seniors and other consumers who may not be technologically savvy. Cooper and other law enforcement officials encourage consumers to never provide personal information such as bank account or credit card numbers to a stranger over the telephone. If you have a concern about your computer, contact the manufacturer directly.

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Photo: Facebook founder Mark Zuckerberg. Credit: Paul Sakuma / Associated Press 

Naked Juice not so natural, lawsuit says

There’s more to Naked Juice than the Monrovia-based juice company promotes in its advertising, according to a lawsuit filed in Los Angeles County Superior Court.

The lawsuit accuses Naked Juice and parent PepsiCo Inc. of marketing juice products as “all natural” when they actually contain “unnaturally processed and synthetic ingredients.”

Those ingredients include zinc oxide, ascorbic acid, cyanocobalamin and others.

“Consumers were deceived into believing that the unnatural products were in fact natural substances,” but were actually created through "artificial and mechanical means," the lawsuit said.

Andrea Foote, a spokeswoman for Naked Juice, said the company by policy does not comment on pending litigation.

“We stand behind the juices that we craft and we’re committed to full compliance with labeling laws and regulations,” she said.

The lawsuit, filed Monday by Los Angeles consumer Gina Park, seeks certification as a class action. It accuses Naked Juice of violating California’s Unfair Business Practices Act and seeks unspecified monetary damages and an injunction ordering the company to discontinue its marketing practices.

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Photo: Naked Protein Zone Mango is one product identified in lawsuit against Naked Juice and parent PepsiCo Inc. Credit: nakedjuice.com 

 

Scam watch: Social Security, malware, investments

Here is a roundup of alleged cons, frauds and schemes to watch out for.

Social Security -- Thieves have been impersonating Social Security Administration employees in an attempt to steal seniors' personal information, AARP said in a recent bulletin. The con artists call seniors, claim to be updating their records and ask for seniors’ Social Security numbers, birth dates and bank account numbers, AARP said. Consumers should never disclose such information over the telephone to strangers, AARP said. If concerned, consumers can call or visit a Social Security office to verify that the contact was legitimate.

Malware -- The U.S. attorney’s office in Manhattan has charged seven international suspects -- six from Estonia and one from Russia -- with operating an Internet fraud scheme that infected more than 4 million computers worldwide with malicious software, or malware. At least 500,000 computers in the U.S. were infected during the scheme, which ran from 2007 until October, the U.S. attorney’s office said in a news release. The malware enabled the suspects to hijack Internet searches and re-route computers to certain websites and advertisements that paid the suspects for Web traffic. The scheme generated $14 million in illegitimate income for the suspects, the news release said. Victims’ computers were infected with the malware when they visited certain websites or downloaded certain software to view videos online, according to an indictment.

Investment fraud -- The Securities and Exchange Commission has accused a San Diego investment advisor of failing to disclose that his firm received a 10% commission whenever clients invested in a nonpublic stock offering he promoted. The SEC said it has initiated administrative proceedings to determine whether Western Capital Pacific Management and its president, Kevin James O’Rourke, inappropriately profited when clients purchased shares of Ameranth Inc. in 2005 and 2006. The company paid Western Pacific a 10% “success fee” each time it directed a client to purchase shares of its nonpublic stock, the SEC said. In addition, the SEC accused O’Rourke and the firm of misrepresenting the liquidity of a hedge fund they operated.

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Photo: The Securities and Exchange Commission. Credit: Bloomberg

Nevada casinos see big drop in gambling revenue

Nevada casinos won nearly 6% less from gamblers in September than they did during the same month last year, Nevada casino regulators reported.

The report by Nevada's State Gaming Control Board on Wednesday showed casinos statewide won $864 million from gamblers, $53.8 million less than in September 2010, the Associated Press reported.

Mike Lawton, senior analyst with the control board, told the Associated Press that a big decline in the play of baccarat, a volatile, high-roller game favored by Asian players, was largely to blame for the decrease.

Baccarat players wagered $647.4 million in September, down $344 million, or 34.7%. Of that, casinos won $81.9 million, a decline of $46.4 million, or 36.2%, Lawton said.

Excluding baccarat, overall statewide winnings fell less than 1%, indicating the industry's main gambling revenue sources — card games, slot machines, roulette — are showing signs of recovery after years of double-digit decreases during the economic downturn.

"That core business is showing strength," Lawton told the Associated Press.

Gambling revenue on the Las Vegas Strip fell 5.7% to $490.9 million. Strip resorts generate about half of total statewide casino revenues.

Casinos in Reno won $48.9 million for a 2.6% increase over September 2010. South Lake Tahoe casinos, which have struggled with the spread of Indian casinos in California and the recession, saw revenues drop 14.3%.

Gambling-related stocks plunged Wednesday, along with the rest of the world’s markets. Shares of MGM Resorts International fell 7.3%, Wynn Resorts Ltd. dropped 4% and Las Vegas Sands Corp. was down 3.75%. BJK, an exchange-traded fund that holds dozens of gaming stocks, was down 5.1%.

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Photo: MGM Grand Hotel and Casino in Las Vegas. Credit: Ronda Churchill / Bloomberg

 

Ex-Oregon congressman Wester Cooley pleads guilty to tax evasion

Former Oregon congressman Wester Cooley pleaded guilty in Los Angeles federal court to a tax charge related to the allegedly fraudulent sale of stock in an online auction site.

Wester Cooley, who served in Congress from 1995 to 1997, had been charged with seven felonies surrounding the sale of more than $10 million of private stock in Tujunga-based Bidbay.com and related companies from 2000 to 2003.

Under an agreement with federal prosecutors, Cooley, 79, pleaded guilty to the single tax fraud charge Monday before U.S. District Judge Dean D. Pregerson.

Cooley, who is free on bond and living in Oregon, agreed to return to court Feb. 27 for sentencing. The charge carries a maximum sentence of three years in federal prison, but defense attorney Steve Escovar said he would request a lesser sentence to be served under house arrest.

The former congressman has a heart condition and dementia, his attorney said.

“I don’t think anything would be accomplished by imprisoning Mr. Cooley,” Escovar said. “He’s demonstrated acceptance of responsibility and remorse.… We’re hopeful it will be something less than 12 months.”

The plea agreement calls for Cooley to pay $3.6 million in restitution to investors. However, Cooley has no assets to repay them, Escovar said.

Prosecutors accused Cooley and two associates, George Tannous and De Elroy Beeler Jr., of falsely telling investors that they could make substantial profit because Bidbay was about to be acquired by EBay. In truth, EBay had no plans to acquire Bidbay and had sued the company for infringing on its trademark, prosecutors said. 

About 400 victims invested more than $10 million in Bidbay before the fraud was discovered, prosecutors said.

Cooley was accused of diverting more than $1.1 million of investor funds for his personal use.

Tannous, a former Internal Revenue Service agent, and Beeler have also pleaded guilty to charges related to the scheme. They were listed as potential witnesses against Cooley, according to a government trial brief.

After leaving Congress, Cooley launched a vitamin company called Rose Laboratories Inc. He became a vice president for Bidbay in 2000 and served as a director on the company’s board. After allegations of the fraud were leveled in a 2002 lawsuit, Cooley sought to hide his illicit profit by giving the money to a third party to invest, prosecutors alleged.

The tax fraud charge alleged that Cooley claimed a false deduction on his 2001 tax return and failed to report $494,000 of income. The guilty plea marked the second time that the former Republican lawmaker has been convicted of a criminal charge. He was previously convicted of making false statements about his military record in an Oregon voter guide.

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Photo: EBay headquarters in San Jose. Credit: Paul Sakuma/Associated Press

 

 

Buzz Aldrin's lawsuit against trading-card company tossed

Buzz Aldrin may have stepped foot on the moon, but he wasn’t able to walk over trading-card company Topps Inc. in court.

Aldrin accused Topps in a lawsuit filed last year of improperly using his image in a series of historic trading cards.

U.S. District Judge Dean D. Pregerson ruled that Topps’ use of photographs from the Apollo 11 mission was protected as “free speech of an issue of public interest.” He dismissed the lawsuit Sept. 27.

Aldrin has appealed to the U.S. 9th Circuit Court of Appeals.

At the center of the disagreement is a series of trading cards Topps issued in 2009 called, Topps American Heritage. The set of cards includes hundreds of images of well-known American politicians, actors, athletes and events, including a photograph of Aldrin during the historic mission.

Aldrin argued that Topps’ use of his image was “unprotected commercial speech,” for which he was entitled toc compensation.

"We believe that the federal trial court's ruling could effectively end California's well-established and statutory right of publicity law as it affects the use of celebrity images on trinkets such as plates, pencils, trading cards and the like," Aldrin's attorney, Robert C. O'Brien, said. "Accordingly, Dr. Aldrin has appealed the ruling to the 9th Circuit. He is hopeful for a positive result from the appeals court."

Topps was represented by the law firm Davis Wright Tremaine, which also represents The Times.

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Photo: The cover of Buzz Aldrin's book, "Reaching for the Moon." Credit: HarperCollins Children's Books

Scam watch: Credit cards, weight-loss supplement, chimney sweeps

Here is a roundup of alleged cons, frauds and schemes to watch out for.

Stolen credit cards -– A Costa Mesa man has been convicted of identity theft and other federal crimes related to the theft of credit cards from Vietnamese immigrants living in Southern California. A federal jury in Los Angeles convicted Hung Van Tieu, 62, of conspiracy, credit card fraud and identity theft. The charges carry a sentence of two to 32 years in federal prison. Tieu was part of a team of con men who called credit card companies in 2010 and 2011, impersonated customers and asked for new cards to be mailed to the address on file. The team intercepted the cards from the mail and used them to run up more than $100,000 in purchases of luxury goods, including Rolex watches, and to withdraw thousands of dollars in Las Vegas casinos, including the Bellagio, Mandalay Bay and MGM Grand hotels.

Weight-loss supplement -- As part of a crackdown on companies promoting bogus health claims, the Federal Trade Commission settled charges brought against three people and two companies for deceptively advertising a supposed weight-loss supplement ingredient. One defendant was banned from making any weight-loss claims related to foods, drugs or dietary supplements and was ordered to turn over a vacation home and other assets to the FTC. The marketers were part of a scheme that supplied manufacturers of weight-loss supplements with a substance they claimed was a derivative of a plant native to southern Africa commonly referred to as hoodia.

Chimney sweeps -– With winter approaching, the Better Business Bureau is warning consumers to be careful about who they hire to clean their chimneys. So far this year, the group has received more than 380 complaints from consumers who say they were scammed by chimney cleaners who did poor work or no work at all. That’s an increase from 342 complaints in all of 2010. “Chimney sweeping is not something that homeowners deal with often, so we may lack knowledge of the cleaning process,” said Katherine Hutt, spokesperson for the Council of Better Business Bureaus. “Many scammers take advantage of this.” The group suggests that consumers research chimney sweep companies on the Internet to find out how long they’ve been in business, whether they have liability insurance and whether employees were certified by the nonprofit Chimney Safety Institute of America.

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Photo: The Bellagio hotel in Las Vegas. Credit: Jim Laurie / Associated Press 

Scam Watch: Acne treatment, StubHub email, real estate loans

Acne-fighting app -- There are smartphone applications for just about anything -- programming your television’s DVR, researching cocktail recipes or finding a Yelp-approved Thai restaurant within a mile. But one company went too far by claiming its app could clear up acne, the Federal Trade Commission said. The FTC obtained a court order prohibiting AcneApp and AcnePwner from making acne-treatment claims. The mobile applications were sold on Apple’s iTunes store and the Android marketplace and claimed to treat acne with colored lights emitted from smartphones. The app sold for $1.99 on iTunes and 99 cents on the Android marketplace, the FTC said. Nearly 15,000 people paid for the app. Three people who marketed the apps settle a lawsuit with FTC by agreeing to no longer market the products.

StubHub email -- Email inboxes are filled with danger. Click on a link in an email and you could add malicious software to your computer. People down on their luck may find bogus emails announcing they've won foreign lotteries -- all they have to do is pay the taxes upfront. And now there’s this one: emails that appear to come from StubHub ticket marketplace, but actually are attempts to steal your credit card information. People who get the emails are asked to sign in to their StubHub accounts; anyone who does so gives away their user name and passwords, enabling third parties to begin making fraudulent charges to the credit cards, the Better Business Bureau said in a recent bulletin. Anyone who believes that they fell victim to this scam should immediately change their StubHub passwords, alert credit reporting agencies and contact StubHub at safety@stubhub.com.

Real estate loans -- A West Covina woman has been sentenced to nine years in federal prison for running a fraudulent investment scheme that took in about $6.9 million from more than 150 victims. In addition to the prison term, Guadalupe Valencia was ordered to repay $5.2 million to victims. Valencia had pleaded guilty in December to mail fraud, wire fraud and tax fraud. Prosecutors said Valencia ran her scheme out of the Downey offices of Real Estate & Loan Consultants and R.E. Equity Group Inc.  from 2001 to 2009. She told investors that she would use their money to make real estate loans and loans to small businesses. But instead of making the investments, she used the money to make payments to early investors, prosecutors said.

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-- Stuart Pfeifer

Photo: Prototype of an Android phone. Credit: David Paul Morris / Bloomberg