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
– 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 – 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 -– 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:
- The
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.
- The
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.
- Negotiation
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.
- The
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.
- Negotiation
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.
- Negotiation
of a settlement with Synthes, Inc., a major
medical device manufacturer. Under the settlement,
Synthes agreed to disclose – to the
public and to the U.S. Food and Drug Administration
– 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.
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