Thanks, Ben Bernanke, for these Unintended Consequences of Your Keynesian Ludicrousness

Artificial central planners claim to know best.  They pontificate endlessly over models, and theories, which at their core, are nothing but claptrap designed to enable politicians to spend recklessly without consequences, all for the SOLE purpose of maintaining the power structure of the elite.

This is the premise that I am working from.  I am a libertarian philosophically, and am an ardent believer that regular folks can and do know best.  It is the meddling central planners, with demonstrably ludicrous theories, who say otherwise, and who constantly act with condescension and derision to those great unwashed masses of the flyover country.

Oh yeah, I must also point out the human nature, being what it is, will ALWAYS leave room for charlatans to strip them bare of their assets.

All of this could easily have been avoided with sound money, because NONE of the lenders would have ever lent so foolishly to begin with!

Here now, is a case in point.

I have copied the entirety of the case, below, because it shows, in great detail, the failings of central planning, the failings of those humans who, through their own greed, wanted something for nothing, and of course, and the sociopathic mindset arising in charlatans from the easy money paradigm, thanks to central planning.

The case concerns a boiler room created in the aftermath of the easy money real estate boom.  Folks who had no business taking out a home loan, did, and got behind.  The money was flowing freely, thanks to misguided central planners, including dolts like Barney Frank and the other regulators and social engineers who wanted a free ride.

The problem, as those before me have said, is that eventually the money runs out.  

So let's pick it up here.  Desperate to keep debt slaves in their homes, politicians enacted a series of centrally planned programs designed to prevent or delay foreclosures for MILLIONS of voters, err, homeowners, err, money renters that had pledged that which they were buying as collateral.  Value was irrelevant; moral hazard was irrelevant.  The only question was "Can the debtor afford the monthly payment."

In this context, naturally, there arose opportunities for financial gain.  Many predatory lenders swooped in and began foreclosing.  Scandalous conduct was revealed, like robosigning of loan documents, etc.  There arose a cottage industry claiming "show me the note" litigation tactics could--and did--result it "free" homes for the debtors.  Eventually, the process became ripe for charlatans to make sweeping promises, to assist those desperate homeowners get a loan "mod," to basically reduce the size of the monthly payment and keep the debtor from being foreclosed upon.

The premise, was again, centrally planned, and utterly foolish.  Instead of allowing for the bad debt to be defaulted upon, for prices to revert to the mean, and for the excesses of the easy moeny credit boom to be purged from the system, the central planners opted to keep the too big to fail banks solvent, under the theory that once the banks became solvent, through the carry trade based on artificially low interest rates, then, normal economic conditions would arise and all would be good once again.

Of course, nothing like that happened.  Us regular folks knew then and know now quite well what actually would happen, and which DID happen.  The central planning beget many "unforeseen" and "unintended" consequences.

One such consequence was the absolute explosion of scammers making the unbelievable, sensational claims to home debtors that by NOT making monthly mortgage payments, that would actually ASSIST one in getting a loan mod.  Of course, those underwater debtors WANTED to believe that was the case, so they fell for the trick in massive numbers.  

Home Loan Modification businesses sprung up--perhaps these were the green shoots Bernanke was speaking of?  No, seriously, these scammers were EVERYWHERE.  The situation got so bad that California enacted a law prohibiting lawyers from doing this work unless they got paid AFTER the loan was modified.  That law stopped some of the scammers, but there were literally too many to count, and countless home debtors lost it all.

This case explores that factual setting, and talks about the aftermath in terms of enforcement.  As shown, there was no criminal action.   This was a civil action, seeking restitution and "civil penalties" against the scammers.  The scammers fought the lawsuit tooth and nail, lost, and fought it on appeal, and again lost.  The decision below is replete with damning statements.  

My take away from this is my incredulity at the lack of jail time for these crooks!  Seriously, no jail time, nothing.  Why not?

Have we devolved into a system where white collar crime is not punished?  

Read the decision and see for yourself.

The sad fact remains.  Central planning leads to unintended consequences, and those 1,259 homedebtors who were scammed surely understand.

The case is set out in its entirety, here:

People v. Sarpas (2014) , Cal.App.4th
[No. G047462. Fourth Dist., Div. Three. Apr. 24, 2014.]
THE PEOPLE, Plaintiff and Respondent, v. HAKIMULLAH SARPAS et al., Defendants and Appellants.

(Superior Court of Orange County, No. 30-2009-00125950, Andrew P. Banks, Judge.)

(Opinion by Fybel, J., with Aronson, Acting P.J., and Thompson, J., concurring.)

COUNSEL

Law Offices of Murphy & Eftekhari, Thomas Murphy and Afshin Eftekhari for Defendants and Appellants.

Kamala D. Harris, Attorney General, Frances T. Grunder, Assistant Attorney General, Michele Van Gelderen and Sheldon H. Jaffe, Deputy Attorneys General, for Plaintiff and Respondent. {Slip Opn. Page 2}

OPINION

FYBEL, J.-

INTRODUCTION
Hakimullah Sarpas and Zulmai Nazarzai operated a scheme by which they promised customers they would obtain loan modifications from lenders and prevent foreclosure of the customers' homes. They operated this scheme through their jointly owned company, Statewide Financial Group, Inc. (SFGI), which did business as US Homeowners Assistance (USHA). Sharon Fasela fn. 1 was, among other things, the office manager of USHA and came up with the key misrepresentation that USHA had a 97 percent success rate. Customers paid USHA over $2 million but received no services in return. There was no credible evidence that USHA obtained a single loan modification, or provided anything of value, for its customers.

The Attorney General, on behalf of the People of the State of California, fn. 2 commenced this action in July 2009 by filing a complaint against SFGI, USHA, Sarpas, Nazarzai, and Fasela (collectively referred to as Defendants), seeking injunctive relief, restitution, and civil penalties under the California unfair competition law (UCL), Business and Professions Code section 17200 et seq., fn. 3 and the California False Advertising Law (FAL), section 17500 et seq. Accompanying the complaint were declarations from 19 purported victims. SFGI was placed in receivership on the same day that the complaint was filed.

In July 2012, following a lengthy bench trial, the trial court issued a judgment and a 19-page statement of decision finding against Defendants. The court permanently enjoined USHA, Nazarzai, Sarpas, and Fasela, and ordered restitution be made to every eligible consumer requesting it, up to a maximum amount of {Slip Opn. Page 3} $2,047,041.86. The court found USHA, Sarpas, and Nazarzai to be jointly and severally liable for the full amount of restitution, and Fasela to be jointly and severally liable with them for up to $147,869 in restitution. The court imposed civil penalties against USHA, Sarpas, and Nazarzai, jointly and severally, in the amount of $2,047,041, and imposed additional civil penalties against Fasela, USHA, Sarpas, and Nazarzai, jointly and severally, in the amount of $360,540.

In this appeal, Sarpas and Fasela challenge the judgment on six discrete grounds of error, each discussed in order in the Discussion section. (SFGI, USHA, and Nazarzai are not parties to this appeal.) As to each ground, we conclude (1) the trial court did not err by issuing a protective order limiting the Attorney General's obligation to respond to thousands of special interrogatories; (2) the trial court did not err by receiving in evidence portions of the deposition transcripts of six USHA customers; (3) the trial court did not err by ordering Sarpas and Fasela to pay restitution; (4) the award and amount of civil penalties against Sarpas are proper, the award of civil penalties against Fasela is proper, but the amount of penalties against her must be recalculated; (5) Sarpas and Fasela were not denied their due process rights to confront and cross-examine witnesses; and (6) the trial court did not err by receiving in evidence checks deposited into USHA's bank account.

Based on these conclusions, we strike the civil penalties awarded against Fasela only and remand for the trial court to recalculate those penalties, but, in all other respects, affirm the judgment.

FACTS
Sarpas was the 50 percent owner of SFGI, which did business as USHA. Nazarzai owned the other 50 percent. Sarpas and Nazarzai each received 50 percent of the company profits. From March 2008 to April 2009, Sarpas received $490,000 in profits from SFGI. Sarpas also served as operations manager of SFGI and oversaw the company's day-to-day operations. {Slip Opn. Page 4}

Fasela worked as the office manager of SFGI for about one year, ending in July 2009. USHA paid Fasela $2,746 in 2007, $135,358 in 2008, and $11,611 in 2009.

SFGI, through USHA, purported to offer loan modification services. USHA ran a "boiler room" telemarketing operation in which sales representatives, working in a "pit area," cold-called potential customers to offer assistance with modifying the terms of home loans. In addition, sales representatives were available to receive calls from potential customers, usually people who were returning calls made by USHA sales representatives. SFGI purchased the contact information of potential customers from a "lead-generating company." Every USHA sales representative had a quota of calls to be made based on those leads.

Sales representatives were instructed to tell potential customers: "USHA is a full service loss mitigation and asset preservation company based out of California and we essentially help homeowners throughout the US who have fallen behind on their mortgage payment due to some unfortunate circumstance within their household or maybe a hardship situation, in which case our legal staff will negotiate with their current lender to reduce their overall payment and make it affordable to continue living in their home." A sales representative might tell a potential customer that USHA "works with lenders to get the terms of their client's current mortgage changed by forcing the lender to comply with the new federal program."

The cost of USHA's services varied. The service fee schedule of charges given to sales representatives set a fee of $1,800 for one out-of-state loan; $2,500 for two out-of-state loans; $2,500 for one California loan; and $3,500 for two California loans. Sales representatives were instructed to charge as low as $1,000 for lower income customers with low-balance loans, and up to $4,500 for higher income customers with high balance/high payment loans. Sales representatives also were instructed, "[i]f you see that an out of state lead has money please charge them California fees." Charges had to be paid in advance. {Slip Opn. Page 5}

To induce potential customers to pay these fees, USHA made various promises, including (1) USHA would obtain a significant reduction in the principal balance of the loan, which would lower the amount of monthly payments; (2) USHA would obtain a reduction in the interest rate on the loan, which would lower the amount of monthly payments; (3) USHA would get the lender to forgive any arrearages; (4) USHA would save the customer from foreclosure; (5) the loan modification process would not take long, from 90 days to eight weeks; (6) USHA would refund the money paid by the customer if it were unable to obtain a loan modification; (7) if USHA obtained a loan modification, the fees paid to USHA would be repaid to the customer by the lender or the government; and (8) USHA was an "attorney backed company" with a "legal team" working with it to get loan modifications.

Most striking, USHA represented it had a 97 percent success rate, that it had a success rate of "over 95 percent," or that USHA never had a case in which a loan modification was not approved. Fasela came up with the 97 percent success rate figure "in the beginning." One customer testified the sales representative guaranteed USHA would obtain a loan modification.

In addition, customers were told to stop making their mortgage payments because doing so would make obtaining a loan modification easier. As a result, customers often suffered ruined credit, additional fees, foreclosure proceedings, and even loss of the home USHA had promised to save.

USHA made the representations orally in telephone calls from sales representatives and sometimes in letters purporting to set forth a loan modification proposal. A typical letter would propose (1) a reduction of the principal balance to the current property value, (2) conversion to a fixed rate loan, (3) a reduction of monthly payment, (4) forgiveness of arrearages, and (5) reporting the loan status as current to credit agencies. The letters requested the customer to complete and return forms to "allow us to move aggressively in bringing these challenges to conclusion immediately." {Slip Opn. Page 6} USHA routinely sent these letters to customers. Several customers testified they believed the letters reflected what USHA would obtain for them.

These representations were effective. During the 18 months prior to June 30, 2009, USHA took in over $2.22 million. One customer testified, "I was convinced by the--the word of [the USHA sales representative]." Another testified, "[t]he only reason I sent the money in is because he gave me a money back guarantee on that."

After paying USHA's fees, customers would have difficulty reaching anyone at USHA to find out the status of their loan modifications. Telephone calls and e-mails went unanswered; sometimes the customer could not even reach voice mail, and when the customer was able to reach voice mail, the call was not returned When customers did get hold of someone, they might be told USHA was "still negotiating" or the matter was "in the hands of a negotiator."

No credible evidence was presented at trial that USHA ever obtained a loan modification, or did anything of value, for any customer. USHA made no refunds to customers, despite its promises, and despite customer demands. Not only did USHA not have a legal team, it had no attorneys whatsoever working on loan modifications.

The case of Jerry Walton, a disabled man living in Mississippi, is a typical, and telling, example of how USHA operated its scam. Walton, who lives on a disability pension, was cold-called by John Kanpur of USHA. Kanpur told Walton that for a payment of $1,000, USHA would obtain a reduction in the interest rate on his home loan and that he would get his money back if USHA did not get the loan modification. Kanpur also told Walton, who was current on the loan, to stop making payments. As instructed, Walton sent USHA $1,000 and stopped making payments on his home loan. When the lender contacted Walton about missed payments, he directed it to USHA. Jean Lute, who worked as a collector for the lender bank, twice called USHA to inform it that foreclosure proceedings were about to commence and that it was important for USHA to {Slip Opn. Page 7} return her call. No one from USHA called her back. Walton had to pay about $1,000 in extra costs to save his home from foreclosure, and never received a loan modification or a refund from USHA.

After receiving five complaints from Ohio residents, the consumer protection section of the Ohio Attorney General's Office launched an investigation of USHA. As part of the investigation, consumer protection investigator Sheila Laverty called USHA and posed as a potential customer. In the phone call, Laverty said she lived in Columbus, Ohio, was behind on her mortgage payments, and was interested in learning about USHA's services. A sales representative named Ian told Laverty that due to the Home Affordable Mortgage Program, "banks are now forced to work out loan modifications with borrowers that have a hardship," and that if Laverty qualified, she would get a lowered interest rate and "could get rid of any late payments and second mortgages." Ian told Laverty that USHA "works with lenders to get the terms of their client's current mortgage changed by forcing the lender to comply with the new federal program," that USHA did "about 200 loan modifications a month," and that USHA worked with a legal team. The quoted fee for USHA's services was $3,500.

Ian later e-mailed Laverty several documents, including a letter, similar to the one described above, purporting to set forth a loan modification proposal. Laverty understood the letter as reflecting what USHA was offering to do for its customers. Also, according to Laverty, USHA had not complied with Ohio law requiring telephone solicitors to register with the Ohio Attorney General's Office.

DISCUSSION: PREFACE
Sarpas and Fasela identify six arguments by which they challenge the judgment. We start by addressing an issue which, though not expressly identified as one of those six arguments, underlies their challenge to the order of restitution and civil penalties. Only a handful of USHA customers testified at trial, and the deposition {Slip Opn. Page 8} testimony of only six customers was read into evidence. Sarpas and Fasela argue (in the context of other issues) that the amount of restitution and civil penalties must be limited to those witnesses and cannot be ordered for USHA customers whose live testimony was not presented at trial. fn. 4

Section 17203 authorizes an order of restitution as a remedy for violations of section 17200. In part, section 17203 reads: "The court may make such orders or judgments, . . . as may be necessary to restore to any person in interest any money or property, real or personal, which may have been acquired by means of such unfair competition." Section 17535 likewise authorizes an order of restitution for a violation of section 17500. "The restitutionary remedies of section 17203 and 17535 . . . are identical and are construed in the same manner." (Cortez v. Purolator Air Filtration Products Co. (2000) 23 Cal.4th 163, 177, fn. 10.)

"In a suit for violation of the unfair competition law, 'orders for restitution' are those 'compelling a UCL defendant to return money obtained through an unfair business practice to those persons in interest from whom the property was taken . . . .' [Citation.]" (People ex rel. Kennedy v. Beaumont Investment, Ltd. (2003) 111 Cal.App.4th 102, 134 (Kennedy).) The trial court has broad discretion to order restitution. (Cortez v. Purolator Air Filtration Products Co., supra, 23 Cal.4th at p. 180.)

Restitution under the UCL and FAL may be ordered without individualized proof of harm. (In re Tobacco II Cases (2009) 46 Cal.4th 298, 326 ["'California courts have repeatedly held that relief under the UCL [(including restitution)] is available {Slip Opn. Page 9} without individualized proof of deception, reliance and injury'"]; People v. JTH Tax, Inc. (2013) 212 Cal.App.4th 1219, 1255 [restitution under the FAL]; People ex rel. Bill Lockyer v. Fremont Life Ins. Co. (2002) 104 Cal.App.4th 508, 532 (Fremont Life) [restitution under the UCL]; Massachusetts Mutual Life Ins. Co. v. Superior Court (2002) 97 Cal.App.4th 1282, 1288; Prata v. Superior Court (2001) 91 Cal.App.4th 1128, 1144; People v. Toomey (1984) 157 Cal.App.3d 1, 25-26); see Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1267 [the Legislature considered UCL deterrence "so important that it authorized courts to order restitution without individualized proof of deception, reliance, and injury"].)

The defendant in Fremont Life, supra, 104 Cal.App.4th at page 531, argued that "across-the-board restitution may not be ordered without proof that all consumers were deprived of money or property as a result of an unfair business practice." The Court of Appeal rejected that argument as contradicting California Supreme Court authority and "the rule that restitution under the UCL may be ordered without individualized proof of harm." (Id. at pp. 531-532.) The court in People v. Toomey, supra, 157 Cal.App.3d at pages 25-26, likewise rejected an argument that restitution under the UCL was limited to victims who testified at trial.

Because individualized proof of harm was unnecessary, the Attorney General was not required to present testimony from each and every USHA customer for whom restitution and civil penalties were being sought. Sarpas and Fasela faced no surprise when they walked into trial because the law was settled that restitution and civil penalties under the UCL and FAL could be ordered against them without individualized proof of harm. The Attorney General presented evidence sufficient to support a reasonable inference of deception and harm as to all USHA customers, and, therefore, the restitution and civil penalties as to all USHA customers were lawful. {Slip Opn. Page 10}

DISCUSSIONI.The Trial Court Did Not Err by Issuing the Protective Order.
A. Background

Sarpas and Fasela argue the trial court erred by issuing a protective order limiting the Attorney General's obligation to respond to thousands of special interrogatories. The trial court did not err by issuing the protective order.

1. First Motions to Compel

Eleven days after the complaint was filed, Sarpas and Fasela each served the Attorney General with a set of 83 special interrogatories (the first sets of special interrogatories). The first sets of special interrogatories asked generally whether the Attorney General made certain contentions and, if so, to state all facts supporting those contentions. The Attorney General served responses to the first sets of special interrogatories in September 2009. The responses in total were about 400 pages.

Sarpas and Fasela each brought a motion to compel further responses to every interrogatory of the first sets of special interrogatories (the first motions to compel). In April 2010, the trial court denied the first motions to compel, stating in a minute order: "Plaintiff . . . was proper in its Responses. Plaintiff can only provide and only need[] provide the information that it has at the time it responds to particular discovery. Plaintiff apparently did this here with as much specificity to a particular Defendant as the information it had would allow. The objections that Plaintiff made were proper and were not tested by the Motions Defendants brought, in any event. As time goes on, supplemental discovery may well develop more particularized responses as to some of the defendants, victims, dates etc."

2. Second Motions to Compel

On the same day that the trial court denied the first motions to compel, Sarpas and Fasela propounded a request for supplemental responses to the first sets of {Slip Opn. Page 11} special interrogatories. The Attorney General served responses totaling about 900 pages, accompanied by five exhibits. On June 17, 2010, after discussion between counsel about the responses, the Attorney General served supplemental responses.

Sarpas and Fasela each brought a motion to compel further responses to the request for supplemental responses (the second motions to compel). They argued: "Time and again, Plaintiff provides an evasive and generalized response that totally fails to answer the question posed. After reading and reviewing each response, no individual Defendant has any inkling of what specifically it, he or she allegedly did, to whom, or when. The only information provided is a generalized and sweeping summary of the charges set forth in the Complaint. In this discovery, Defendants sought specific information as to what, where, when, and to whom they each, individually, allegedly did wrong. Absent proper responses, Defendants cannot possibly defend themselves against the generalized allegations brought."

3. Second Sets of Special Interrogatories

In the responses to the first sets of special interrogatories, the Attorney General identified hundreds of USHA customers, including 585 customers identified by the court-appointed receiver. In June 2010, each Defendant served a second set of special interrogatories (the second sets of special interrogatories) propounding eight interrogatories for every one of about 550 of the USHA customers identified by the Attorney General. fn. 5 {Slip Opn. Page 12}

In February 2011, each Defendant served a third set of special interrogatories, with each set containing 1,248 interrogatories. Each set propounded the same eight questions from the second sets of special interrogatories in regard to about 156 USHA customers. About 5,328 questions in these third sets of special interrogatories were directed to the USHA customers who were also the subject of the second sets of special interrogatories. In March 2011, each Defendant served a fourth set of special interrogatories, with each set containing 400 questions.

4. Motion for Protective Order

In March 2011, the Attorney General filed a motion for a protective order "that Plaintiff need not respond to Defendants' second and third sets of special interrogatories." In the motion, the Attorney General argued: "[T]hese interrogatories reflect a fundamental misunderstanding of what the People need to prove at trial to prevail on their claims, and what the People are obligated to provide in discovery. The People are not obligated to prove each and every specific individual harm suffered by every one of the hundreds of victims of Defendants' illegal acts. If that were the case, the People would be required to bring to Court the hundreds of victims as part of a multi-year trial. Rather, the People will establish that Defendants or those acting under their direction engaged in a pattern of illegal and deceitful behavior. While some victims will be called, the case will largely be based upon expert testimony, deposition testimony {Slip Opn. Page 13} (including the Depositions of Defendants), employee testimony, and Defendants' own admissions and documents."

5. The Trial Court's Order

On April 1, 2011, following a hearing, the trial court issued a minute order denying the second motions to compel. The order stated: "Defendants have failed to show a reasonable and good faith attempt at meeting and conferring on the issues presented by these Motions. In addition, the motions failed to comply with applicable rules regarding Separate Statements."

The trial court granted the Attorney General's motion for a protective order. The order stated: "1. Plaintiff is only required to respon[d] to each Defendants' second and third set of special interrogatories as they pertain to those individuals Plaintiff anticipates will be called at trial; [¶] 2. As to the individuals Plaintiff does not anticipate calling at trial, Plaintiff is to (a) specifically state that it will not call those individuals, or (b) provide a specific date by which it will make the determination and then answer those interrogatories within 30 days of that date either stating that the particular individual will not be called or providing the requested information." The court ordered the Attorney General to provide to Defendants' counsel, by May 16, 2011, a list of those persons whom the Attorney General intended to call at trial, to provide additional names by June 16, and to serve interrogatory responses as to any additional names provided by July 16.

B. Standard of Review

The standard of review for a discovery order is abuse of discretion. (Costco Wholesale Corp. v. Superior Court (2009) 47 Cal.4th 725, 733.) We also review an order granting or denying a motion for a discovery-related protective order under the abuse of discretion standard. (Liberty Mutual Ins. Co. v. Superior Court (1992) 10 Cal.App.4th 1282, 1286-1287.) {Slip Opn. Page 14}

The abuse of discretion standard has been described generally in these terms: "The appropriate test for abuse of discretion is whether the trial court exceeded the bounds of reason." (Shamblin v. Brattain (1988) 44 Cal.3d 474, 478.) Under the abuse of discretion standard, "[w]here there is a [legal] basis for the trial court's ruling and it is supported by the evidence, a reviewing court will not substitute its opinion for that of the trial court." (Lipton v. Superior Court (1996) 48 Cal.App.4th 1599, 1612.)

C. The Trial Court Did Not Abuse Its Discretion.

The legal basis for the protective order issued by the trial court is Code of Civil Procedure section 2030.090: "When interrogatories have been propounded, the responding party, and any other party or affected natural person or organization may promptly move for a protective order. . . ." (Code Civ. Proc., § 2030.090, subd. (a).) "The court, for good cause shown, may make any order that justice requires to protect any party or other natural person or organization from unwarranted annoyance, embarrassment, or oppression, or undue burden and expense." (Id., § 2030.090, subd. (b).) A protective order may include the direction that "the set of interrogatories, or particular interrogatories in the set, need not be answered," "the response be made only on specified terms and conditions," or "the method of discovery be an oral deposition instead of interrogatories to a party." (Id., § 2030.090, subd. (b)(1), (4), & (5).)

"Oppression" means the ultimate effect of the burden of responding to the discovery is "incommensurate with the result sought." (West Pico Furniture Co. v. Superior Court (1961) 56 Cal.2d 407, 417.) In considering whether the discovery is unduly burdensome or expensive, the court takes into account "the needs of the case, the amount in controversy, and the importance of the issues at stake in the litigation." (Code Civ. Proc., § 2019.030, subd. (a)(2).)

Substantial evidence supported findings the second sets of special interrogatories and third sets of special interrogatories were unwarrantedly oppressive, or unduly burdensome or expensive. Each of the second sets of special interrogatories {Slip Opn. Page 15} propounded about 4,400 interrogatories, and each of the third sets of interrogatories propounded 1,248 interrogatories. Over 5,300 interrogatories propounded in the third sets of interrogatories were duplicative of interrogatories propounded in the second sets of special interrogatories. The needs of the case did not warrant all of the interrogatories because, as we have explained, individualized proof of harm is not required for restitution under the UCL. (Fremont Life, supra, 104 Cal.App.4th at p. 532.) Thus, for example, the basis for and the amounts of individual claims of restitution were unnecessary for defending the claims at trial.

Much of the information sought by the interrogatories had already been provided or could be obtained by other means. Attached to the complaint were declarations from 19 USHA customers. The complaint and the declarations disclosed the Attorney General was asserting violations of sections 17200 and 17500, and described the conduct forming the basis for the alleged violations. In interrogatory responses, the Attorney General provided Sarpas and Fasela with the names and addresses of 585 USHA customers. Sarpas and Fasela had the opportunity to interview, depose, or subpoena to testify at trial, any or all of those USHA customers, if Sarpas and Fasela had wanted to do so. As the trial court explained, "if [the deputy attorney general]'s given you the names of everybody else, you can incur the costs and effort to find out if any of them have good things to say . . . . Because it appears to me it is an undue burden for them to go beyond giving you everybody's name and, if they've got statements from those people, copies of their statements."

In opposing the Attorney General's ex parte application for an order extending the time to answer interrogatories, counsel for Sarpas and Fasela stated, "we're really not interested in [the deputy attorney general] answering all these interrogatories unless he's intending to bring these people to trial." The trial court gave Sarpas and Fasela what they wanted by directing the Attorney General to answer the interrogatories related to those USHA customers whom the Attorney General intended to call as {Slip Opn. Page 16} witnesses to testify at trial. The trial court did not abuse its discretion by issuing the protective order.

Finally, Sarpas and Fasela state in the heading under "Ground 1," on page 9 of their opening brief, that the trial court abused its discretion "in denying appellants' motion to compel." (Boldface & some capitalization omitted.) Although Sarpas and Fasela argue generally they were entitled to the information sought by the special interrogatories, they never specifically address the first motions to compel, the second motions to compel, or the grounds on which the trial court denied those motions. The trial court denied the first motions to compel because the Attorney General had provided all information known at the time the first sets of special interrogatories were propounded. The trial court denied the second motions to compel because Defendants had not shown a reasonable and good faith attempt at meeting and conferring and because the motions failed to comply with the applicable rules regarding separate statements. We find no abuse of discretion in the trial court's rulings.

II.The Trial Court Did Not Err by Receiving in Evidence Deposition Testimony of USHA Customers.
A. Introduction

Sarpas and Fasela contend the trial court erred by receiving in evidence portions of the deposition transcripts of six USHA customers for whom the Attorney General did not provide interrogatory responses. The excerpts came from properly noticed depositions of witnesses who lived more than 150 miles from the courtroom. (Code Civ. Proc., § 2025.620, subd. (c)(1).) Sarpas and Fasela do not contend otherwise. They argue instead that receipt in evidence of portions of the deposition transcripts violated the terms of the protective order, which required the Attorney General to provide {Slip Opn. Page 17} interrogatory responses to those USHA customers who "Plaintiff anticipates will be called at trial."

After the trial court issued the protective order, the Attorney General answered the second sets of special interrogatories and the third sets of special interrogatories as to 16 USHA customers. Of these 16, the Attorney General called five to testify at trial. In addition, the trial court received in evidence portions of the deposition transcripts of six USHA customers fn. 6 for whom the Attorney General had not provided interrogatory responses. Defendants objected on the ground that use of the deposition transcripts at trial violated the terms of the protective order. At the outset of trial, they had filed a motion in limine to exclude testimony from any USHA customer for whom interrogatory responses had not been served.

Overruling the objection, the trial court stated: "There's no surprise when you set a person's depo[sition]. . . . [I]n the court's mind that is the functional equivalent of the notice to the other side about what--who you're going to call. And because you're deposing them live, you're hearing the questions, and there's just no prejudice. [¶] . . . [I]f the defendants then wanted to have interrogatories directed to those people whose deposition was taken on these eight issues . . . , then they could have . . . . [¶] The idea that only the people identified in those interrogatories and not people whose deposition you noticed could be called at trial just isn't correct. I . . . don't see any prejudice. Everybody gets equal access to the person and the potential for their testimony to be used at trial."

The trial court also received in evidence portions of the deposition transcripts of bank collector Lute and investigator Laverty. Defendants did not object to Laverty's deposition transcript. {Slip Opn. Page 18}

B. The Trial Court Did Not Abuse Its Discretion.

Trial court rulings on the admissibility of evidence, whether made in limine or during trial, are usually reviewed under the abuse of discretion standard. (Pannu v. Land Rover North America, Inc. (2011) 191 Cal.App.4th 1298, 1317.)

Whether the trial court erred by receiving in evidence the deposition transcripts of the six USHA customers depends on the meaning of the protective order. As relevant to this issue, it stated: "Plaintiff is only required to respon[d] to each Defendants' second and third set of special interrogatories as they pertain to those individuals Plaintiff anticipates will be called at trial." (Italics added.)

The Attorney General argues the italicized phrase refers only to those witnesses who were to be called to provide live testimony at trial. We agree. That is the plain meaning of the term "called at trial." When a deposition transcript is read or offered in evidence at trial in lieu of live testimony the deponent is not being "called at trial."

This meaning is consistent with the Code of Civil Procedure which, in describing the modes of taking witness testimony, distinguishes between a deposition ("a written declaration, under oath, made upon notice to the adverse party, for the purpose of enabling him to attend and cross-examine") and oral examination testimony ("an examination in presence of the jury or tribunal which is to decide the fact or act upon it, the testimony being heard by the jury or tribunal from the lips of the witness"). (Code Civ. Proc., §§ 2004, 2005.) A deponent is noticed or subpoenaed to testify outside the presence of the trier of fact. (Id., §§ 2025.010, 2025.210, 2025.250, 2025.280, 2025.320.) In describing how a subpoena may be obtained, the Code of Civil Procedure distinguishes between using a subpoena "[t]o require attendance before a court, or at the trial of an issue therein" and "[t]o require attendance out of court . . . before a judge, justice, or other officer authorized to administer oaths or take testimony." (Id., § 1986, subds. (a) & (c).) The Code of Civil Procedure refers to the "use" of a deposition at trial, {Slip Opn. Page 19} refers to the "deponent" rather than the witness, and, in describing the situations in which the deponent is unable to testify, refers to the deponent's inability "to attend or testify," the inability "to compel the deponent's attendance," and the inability "to procure the deponent's attendance." (Id., § 2025.620, subds. (a), (b), (c)(2)(C), (D), & (E).) In sum, the Code of Civil Procedure consistently distinguishes between testimony of a deponent obtained by deposition and testimony by a witness at trial, and between attendance at a deposition and attendance at trial.

The Attorney General points out that at the hearing on the protective order motion, the trial court, after hearing the Attorney General's proposal about identifying witnesses, stated, "[o]kay. So that would take care of live witnesses." Later at the same hearing, the trial court stated it wanted the Attorney General only "to turn over the answers to interrogatories as to the people he intends to call at trial." These comments by the trial court support the interpretation of the protective order as requiring the Attorney General to respond to interrogatories only for persons whom the Attorney General anticipated calling to provide live testimony at trial.

Even if the protective order could be construed as requiring the Attorney General to provide interrogatory responses for the six USHA customers whose deposition transcripts were used at trial, Sarpas and Fasela can show no prejudice. As the trial court commented, the depositions were properly noticed, and counsel for Defendants could have attended them and cross-examined the witnesses.

Sarpas and Fasela argue their counsel made a calculated decision not to attend the depositions because "each such deponent was outside of the protective order issued by the Court, rendering any such participation a waste of time." Sarpas and Fasela cite to nothing in the record to show their counsel tried to clarify the meaning of the protective order or confirm their interpretation of it was correct. The argument that participation in the depositions would have been a waste of time is unconvincing. Sarpas and Fasela argue some witnesses "did little to support [the Attorney General]'s case," {Slip Opn. Page 20} and, by participating in the depositions, their counsel might have uncovered more unfavorable testimony to use in their defense. To lower costs, counsel could have attended the depositions by telephone. (Code Civ. Proc., § 2025.310, subd. (a).)

Sarpas and Fasela's reliance on Thoren v. Johnston & Washer (1972) 29 Cal.App.3d 270 is misplaced, for in that case the plaintiff deliberately excluded the name of a potential witness from interrogatory responses. The appellate court held that the trial court did not abuse its discretion by barring the plaintiff from calling that witness from testifying at trial. (Id. at p. 275.) The issue in this case is the meaning of the protective order, i.e., whether the phrase "individuals Plaintiff anticipates will be called at trial" includes deponents whose deposition transcripts the Attorney General used at trial. The names of all the deponents whose deposition transcripts were used at trial were disclosed in interrogatory responses and by the notices of deposition.

Sarpas and Fasela also argue the trial court erred by receiving in evidence portions of the deposition transcripts of Lute and Laverty. Lute was not a USHA customer, was not a subject of the special interrogatories, and, therefore, her testimony was not subject to the protective order. Sarpas and Fasela did not object to Laverty's deposition transcript and thereby forfeited any challenge to its admission. (Evid. Code, § 353, subd. (a).)

Sarpas and Fasela state there was "neither legal rhyme nor reason" why the trial court excluded one of their witnesses on the ground they did not identify the witness in interrogatory responses, yet allowed the Attorney General to use the six deposition transcripts "in violation of both the Discovery Act and the Protective Order." The only explanation for this result, Sarpas and Fasela assert, is judicial bias. Accusations of judicial bias are serious, and we treat them as such. Our review of the record leads us to categorically reject these accusations of bias. As we have explained, the trial court did not err by allowing the Attorney General to use the deposition transcripts, one of which was not covered by the protective order, and another of which was used without {Slip Opn. Page 21} objection. There is not so much as a hint of judicial bias from the trial judge, who presided in a fair and exemplary manner over a difficult case.

III.The Trial Court Did Not Err by Ordering Sarpas and Fasela to Pay Restitution.
A. Introduction

Based on findings that Defendants violated sections 17200 and 17500, the trial court ordered USHA, Sarpas, and Nazarzai, jointly and severally, "to offer and make restitution to each and every customer, client or person who paid a fee for loan modification services to USHA . . . , during the period beginning January 1, 2008 through and including July 14, 2009 and who requests restitution in response to the offer." The court determined the maximum amount of restitution to be $2,047,041.86. Of that amount, Fasela was found to be jointly and severally liable for up to $147,869.

Sarpas and Fasela challenge the restitution order on two grounds. First, they argue they cannot be ordered to pay restitution because neither of them received funds directly from USHA customers. Second, they argue the evidence was insufficient to establish either actively participated in, or aided and abetted, a scheme to deceive.

B. Restitution Is Not Limited to Direct Payment from Victims.

Relying on Bradstreet v. Wong (2008) 161 Cal.App.4th 1440 (Bradstreet), Sarpas and Fasela argue they cannot be ordered to pay restitution absent evidence either one received money directly from USHA customers. Although the trial court found that USHA received over $2 million from customers, Sarpas and Fasela argue neither of them personally received money directly, and "[l]egally, under California law, a defendant who has violated the UCL, cannot be made to restore to a consumer that which he or she never directly received from the consumer." (Italics added.) This argument is legally incorrect. {Slip Opn. Page 22}

In Bradstreet, the California Labor Commissioner filed a complaint against the shareholders, officers, and directors of several garment manufacturing corporations, seeking to hold them personally liable for the corporations' failure to pay employee wages. (Bradstreet, supra, 161 Cal.App.4th at p. 1444.) The complaint alleged the failure to pay wages constituted violations of the Labor Code and sought relief from the defendants personally on the ground they came within the relevant definition of employer. (Id. at p. 1446.) A private association and two former employees were permitted to file a complaint in intervention alleging violations of section 17200 and seeking restitution from the defendants personally. (Bradstreet, supra, at pp. 1444, 1446.)

The trial court found the common law definition of the word "employer" applied to the Labor Code violations alleged, the defendants were not employers under that definition, and, therefore, the defendants were not personally liable for the unpaid wages. (Bradstreet, supra, 161 Cal.App.4th at p. 1447.) The court found the plaintiff had failed to prove the defendants were the alter egos of the corporations. (Ibid.) On the section 17200 cause of action, the trial court found "an order requiring defendants to pay the wages owed by the . . . Corporations, was not an available remedy in a private action under the UCL, because defendants had not personally obtained any money or property from the plaintiffs." (Id. at p. 1448.)

The Court of Appeal affirmed. On the Labor Code violations, the court stated: "The issue is whether defendants, as the shareholders, officers, or managing agents of the . . . Corporations, may be held personally liable for the many violations of the Labor Code that occurred when these employees were not paid, and the corporations went out of business." (Bradstreet, supra, 161 Cal.App.4th at p. 1449.) After addressing relevant authority, the court concluded the common law definition of the word "employer" applied to the Labor Code provisions the defendants allegedly violated and, {Slip Opn. Page 23} under that definition, only the corporations, not the shareholders, officers, and directors, were the employers. (Id. at p. 1454.)

On the section 17200 violations, the Court of Appeal stated, "[a]lthough it is well established that an owner or officer of a corporation may be individually liable under the UCL if he or she actively and directly participates in the unfair business practice, it does not necessarily follow that all of the remedies imposed with respect to the corporation are equally applicable to the individual." (Bradstreet, supra, 161 Cal.App.4th at p. 1458.) If the defendants had directly and actively participated in an unfair business practice, there would be no dispute that they would be subject to civil penalties in a public action and that unpaid wages could be recovered as restitution from the corporations. (Id. at p. 1459.) "The issue in the case before us," the court stated, "is whether these defendants, who were not the employers, and who were not found to have required any employee to work for them personally, or to have misappropriated corporate funds for their own use, may also be required to pay the earned but unpaid wages as restitution." (Ibid.)

The Court of Appeal concluded the defendants could not be held liable for restitution because the interveners did not perform labor for them personally: "In the absence of a finding that intervener performed labor for defendants personally, rather than for the benefit of [the] Corporations, or that defendants appropriated for themselves corporate funds that otherwise would have been used to pay the unpaid wages, we agree with the trial court's conclusion that an order requiring defendants to pay the unpaid wages would not be 'restitutionary as it would not replace any money or property that defendants took directly from' intervener." (Bradstreet, supra, 161 Cal.App.4th at p. 1460.) The court distinguished cases cited by the interveners on the ground that "none addresses the question whether the corporate officer or owner could be directed to return money or property to the plaintiff that the corporation had obtained through an unfair {Slip Opn. Page 24} practice, but that the individual defendant had not personally obtained or misappropriated." (Id. at p. 1461.)

Here, the parties argue at length over whether Bradstreet is an "employment" case or a UCL case, whether Bradstreet remains good law, whether it was wrongly decided, and whether it is distinguishable. The trial court in this case concluded Bradstreet "is an employment case based on a narrow employment-law doctrine since abrogated by the California Supreme Court." Bradstreet is, however, both an "employment" case and a UCL case. Bradstreet addressed two distinct issues, one being the definition of employer for purposes of the alleged Labor Code violations, and the other being whether the defendants could be personally liable for restitution under the UCL. In Martinez v. Combs (2010) 49 Cal.4th 35, 50, footnote 12, the California Supreme Court abrogated Bradstreet only on its definition of "employer" under the relevant Labor Code section.

Whether or not Bradstreet is a UCL case or remains good law on the issue of restitution under the UCL ultimately is beside the point. We are not bound by Bradstreet (Sarti v. Salt Creek Ltd. (2008) 167 Cal.App.4th 1187, 1193 ["there is no horizontal stare decisis in the California Court of Appeal"]), and the case does not support Sarpas and Fasela's position that restitution under the UCL and FAL is available only from those who receive money directly from the victims of the fraudulent, unlawful, or unfair practice. Significant to the reasoning of the Court of Appeal in Bradstreet was the lack of evidence the defendants in that case had misappropriated corporate funds that otherwise would have been used to pay wages. (Bradstreet, supra, 161 Cal.App.4th at p. 1460.) Under this reasoning, the defendants might have been held liable for restitution if they had indirectly benefitted from the failure to pay wages.

In support of the argument they cannot be liable for restitution, Sarpas and Fasela also rely on the following passage from Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1149 (Korea Supply): "Any award that plaintiff would {Slip Opn. Page 25} recover from defendants would not be restitutionary as it would not replace any money or property that defendants took directly from plaintiff." (Italics added.) Several cases explain why Sarpas and Fasela's reliance on this passage is misplaced and illustrate how, in particular circumstances, restitution under the UCL and FAL is available from those who did not receive money directly from the victims of the fraudulent, unlawful, or unfair practice. We next analyze each of these cases. All of them support restitution to the victims in this case.

The trial court in Troyk v. Farmers Group, Inc. (2009) 171 Cal.App.4th 1305, 1314-1315, 1340 (Troyk), ordered the defendants, an insurance company and its corporate attorney in fact, to pay restitution under the UCL for unlawful service charges paid by the class members to a billing company. On appeal, the defendants argued they could not be ordered to pay restitution because the service charges were paid directly to the billing company, not to them. (Troyk, supra, at p. 1338.) The defendants cited the same passage from Korea Supply, supra, 29 Cal.4th at page 1149, on which Sarpas and Fasela rely. (Troyk, supra, at p. 1338.)

The Court of Appeal in Troyk rejected the defendants' interpretation of Korea Supply because "that language was parsed from the facts and analysis in that case, which involved money in which the plaintiff never had a vested interest and for which the plaintiff, in effect, sought disgorgement, rather than restitution, from the defendant." (Troyk, supra, 171 Cal.App.4th at p. 1338.) The Troyk court concluded Korea Supply was inapposite and "does not hold that a plaintiff who paid a third party money (i.e., money in which the plaintiff had a vested interest) may not seek UCL restitution from a defendant whose unlawful business practice caused the plaintiff to pay that money." (Troyk, supra, at p. 1338.) After reviewing California Supreme Court and Court of Appeal decisions, the Troyk court stated: "Accordingly, case law does not support [the defendant]s' argument that they cannot be liable for restitution under the UCL because {Slip Opn. Page 26} [the billing company], rather than [the defendants], was the direct recipient of the service charges." (Id. at p. 1340.)

In Shersher v. Superior Court (2007) 154 Cal.App.4th 1491, 1494-1495, the plaintiff sought restitution under the UCL from defendant Microsoft Corporation for a product he purchased from a retailer. Relying on Korea Supply, the trial court granted Microsoft Corporation's motion to strike the prayer for restitution on the ground restitution under the UCL was limited to direct purchasers and excluded those who purchased products from a retailer. (Shersher v. Superior Court, supra, at p. 1494.) The Court of Appeal issued a writ of mandate to overturn that ruling. The Court of Appeal concluded: "[The] respondent court's ruling went beyond the holding in Korea Supply, which was that an individual private plaintiff in a tort action may not invoke the court's equitable power under the UCL to seek the return of money or property in which the plaintiff never had an ownership interest. Nothing in Korea Supply conditions the recovery of restitution on the plaintiff having made direct payments to a defendant who is alleged to have engaged in false advertising or unlawful practices under the UCL." (Ibid.)

The plaintiffs in Hirsch v. Bank of America (2003) 107 Cal.App.4th 708, 712 (Hirsch), were property owners who, in the course of completing real estate transactions, deposited money with escrow and title companies, which in turn deposited the plaintiffs' funds in demand deposit accounts with the defendant banks. Although federal law prohibited the banks from paying interest on demand deposit accounts, the banks could reward large depositors through other lawful means, including "earning credits" or the purchase of "monthly revolving credit facilities." (Id. at pp. 713-715.) The plaintiffs alleged those forms of reward were disguised interest payments and should have been paid to the plaintiffs rather than to the escrow and title companies. (Id. at pp. 714-715.) In addition, the banks charged the escrow and title companies a variety of fees to service the demand deposit accounts, and those fees were "passed on to {Slip Opn. Page 27} consumers as higher fees for separate services or higher fees for escrow services generally." (Id. at p. 721.)

The Court of Appeal held the plaintiffs could not recover the "interest" payments as restitution because they would not have been entitled to interest in the first place. (Hirsch, supra, 107 Cal.App.4th at pp. 712, 717-718, 721.) But, the court held, the plaintiffs had "stated a valid cause of action for unjust enrichment based on [the] Banks' unjustified charging and retention of excessive fees which the title companies passed through to them. [The] Banks received a financial advantage--excessive fees charged to the title companies--which they unjustly retained at the expense of [the plaintiffs], who absorbed the overage. To confer a benefit, it is not essential that money be paid directly to the recipient by the party seeking restitution. [Citation.]" (Id. at p. 722.) The plaintiffs were entitled to relief under the traditional equitable principles of unjust enrichment, "upon a determination that under the circumstances and as between the two individuals, it is unjust for the person receiving the benefit to retain it. [Citations.]" (Ibid.)

Thus, "it is not essential that money be paid directly to [Defendants] by the party seeking restitution." (Hirsch, supra, 107 Cal.App.4th at p. 722.) Sarpas and Fasela received money indirectly from customers by having them pay USHA. The customers parted with property in which they had an ownership interest and are entitled to its return. The rule urged by Sarpas and Fasela would allow UCL and FAL violators to escape restitution by structuring their schemes to avoid receiving direct payment from their victims.

Sarpas and Fasela argue that, if Sarpas can be ordered to pay restitution, his share of restitution must be limited to the net profits he received from USHA. We disagree. "Where restitution is ordered as a means of redressing a statutory violation, the courts are not concerned with restoring the violator to the status quo ante. The focus instead is on the victim. 'The status quo ante to be achieved by the restitution order was {Slip Opn. Page 28} to again place the victim in possession of that money.' [Citation.] 'The object of [statutory] restitution is to restore the status quo by returning to the plaintiff funds in which he or she has an ownership interest.' [Citation.]" (Kennedy, supra, 111 Cal.App.4th at pp. 134-135.) The evidence was sufficient to support findings that Sarpas violated the UCL and FAL, and, as a result, customers were fraudulently induced to make payments to USHA, which was owned by Sarpas and Nazarzai, for loan modification services they never received. As a remedy for those violations, Sarpas must restore money wrongfully taken from USHA customers to restore them to the status quo ante.

In distinguishing Bradstreet, the trial court found that Sarpas and Nazarzai "drained substantial amounts of money from the corporation" and there was no evidence that either of them put funds into the corporation. Sarpas and Fasela do not challenge those findings. Based on those findings and the evidence presented at trial, the trial court could exercise its equitable discretion to conclude USHA, Sarpas, and Nazarzai acted as a single enterprise for the purpose of ordering restitution under the UCL and the FAL. (Troyk, supra, 171 Cal.App.4th at pp. 1340, 1343.)

C. The Evidence Was Sufficient to Establish Sarpas and Fasela Violated the UCL and FAL.

Sarpas and Fasela argue the evidence was insufficient to establish either one actively participated in, or aided and abetted, a scheme to deceive in violation of section 17200 or 17500. Liability under the UCL and FAL must be based on the defendant's participation in or control over the unlawful practices found to violate section 17200 or 17500. (Emery v. Visa Internat. Service Assn. (2002) 95 Cal.App.4th 952, 960.) Although a UCL claim cannot be predicated on vicarious liability (Emery v. Visa Internat. Service Assn., supra, at p. 960), liability under the UCL may be imposed against those who aid and abet the violation (Schulz v. Neovi Data Corp. (2007) 152 Cal.App.4th 86, 88, 93). Liability may be imposed if the defendant "'"knows the other's conduct constitutes a breach . . . and gives substantial assistance or encouragement to the {Slip Opn. Page 29} other to so act."'" (Schulz v. Neovi Data Corp., supra, at p. 93; see People v. Toomey, supra, 157 Cal.App.3d at p. 15 ["if the evidence establishes defendant's participation in the unlawful practices, either directly or by aiding and abetting the principal, liability under sections 17200 and 17500 can be imposed"].)

Sarpas and Fasela argue the evidence at trial showed only that Sarpas was an owner and manager of SFGI and USHA and failed to show "any active involvement or participation on his part whatsoever." The trial court found otherwise: "The evidence at trial established that Sarpas and Nazarzai were each active participants in the day-to-day operations of USHA, managed the business, jointly owned USHA, and split the profits from USHA. They are thus directly liable for the actions of the company and liable for their failure to present the deceptive, illegal, and unfair acts of their agents, independent contractors, and employees. Substantial evidence also established that Sarpas and Nazarzai aided and abetted each other, [Fasela], and other employees, independent contractors, and agents of USHA in the violation of the UCL and the FAL."

Sarpas testified at his deposition, portions of which were read into the record at trial, he formed SFGI in 2005, was a 50 percent owner of SFGI, and, starting in 2005, served as its operations manager. In that capacity, he ran and "oversaw" the company's day-to-day operations. When, in 2008, SFGI started the loan modification business through USHA, Sarpas was "there pretty much every day," kept track of what was going on, and continued to manage the company. Sarpas and Nazarzai split the profits from SFGI. Nazarzai testified at his deposition that "[Sarpas] was in charge of every particular department like some of the processing department managers and things like that."

This evidence supported the trial court's findings and is sufficient to impose liability against Sarpas under the UCL and FAL. An analogous case is People v. First Federal Credit Corp. (2002) 104 Cal.App.4th 721 (First Federal). There, one of the defendants, Ida Lee Hansen, argued the finding she violated section 17500 was not {Slip Opn. Page 30} supported by substantial evidence as her role was merely as a notary, office manager, and receptionist for the defendant company. (First Federal, supra, at pp. 734-735.) The Court of Appeal rejected that argument because the evidence showed that Hansen was one of the two principals of the company, in a position of control over daily operations, and aware of the company's unlawful practices. (Ibid.) "In view of Hansen's position as one of the two principals of First Federal, she was in a position of control, yet permitted the unlawful practices to continue despite her knowledge thereof." (Ibid.)

Sarpas, like Hansen in First Federal, tries to downplay his role in the unlawful practices. But Sarpas formed SFGI, was one of the two principals of SFGI, split its profits with Nazarzai, and, as operations manager, was in a position of control over its daily operations. Sarpas was in a position of control and permitted the known unlawful practices to continue.

Sarpas and Fasela argue that, with the exception of three potential violations, liability against Fasela was predicated entirely on vicarious liability. Sarpas and Fasela argue no evidence was presented to show Fasela participated in or aided and abetted UCL violations by others.

The trial court found: "The evidence at the trial established that [Fasela] was an active participant in the violations of the UCL and FAL. She was the office manager and sales manager and held a number of other roles at the company. She had been a key player in USHA's loan modification business from its inception, and in fact suggested that USHA cease working with the Firm and offer its own loan modification services. She also came up with the deceptive assertion that USHA had a '97% success rate' in its loan modification business. Substantial evidence established that she aided and abetted Sarpas, Nazarzai, and other employees, independent contractors, and agents of USHA in the violation of the UCL and the FAL."

Substantial evidence supported the trial court's findings, and they are sufficient to impose liability against Fasela under the UCL and FAL. Fasela testified at {Slip Opn. Page 31} her deposition (portions of which were read into evidence at trial), she suggested USHA go into the loan modification business, was present when USHA was created, and, among other things, served as its office manager. As the sales floor manager, Fasela monitored the sales force, and made sure the sales representatives "followed policy and procedure," called leads, and met their quotas, answered customers' questions, and handled customers' complaints. Fasela also received leads and made sales calls herself. She communicated between the processing department and the sales force because she understood how both sides operated. Fasela oftentimes ran the company meetings held every Wednesday and distributed the scripts for sales representatives to use. Fasela was a compliance officer for USHA and in that capacity had to approve new customers. She closed completed files, maintained records of loans modified according to her definition of modification, and came up with the 97 percent success figure used in USHA marketing and promotion. fn. 7

When asked to describe her role at USHA, Fasela testified at her deposition (read into evidence at trial): "I was administration. I was helping the processing team. I was . . . helping with the sales floor, managing. I helped with the receptionist. I'd help with gathering payroll for agents. I was helping with complaints if they came in."

Sarpas and Fasela argue that Fasela, at most, can be held liable for restitution "to the 3 consumers who testified as to potential violations committed by her." This argument ignores Fasela's role in participating in, and aiding and abetting, Sarpas, Nazarzai, and USHA in their overall scheme, which harmed hundreds of people. As compensation for participating in, and aiding and abetting, the scheme constituting the UCL and FAL violations, Fasela received $147,869 from USHA. Although Fasela did {Slip Opn. Page 32} not receive funds directly from USHA customers, she did receive compensation from USHA's income from victims of the scheme in which Fasela participated. Thus, Fasela received $147,869 from USHA customers, and is responsible, jointly and severally with USHA, Sarpas, and Nazarzai, for restitution up to that amount.

IV.The Award of Civil Penalties Imposed Against Sarpas Was Supported by the Law and the Evidence; the Amount of Civil Penalties Against Fasela Must Be Recalculated.
A. Background and Relevant Law

Pursuant to sections 17206 and 17536, the trial court imposed civil penalties against USHA, Sarpas, and Nazarzai, jointly and severally, in the amount of $2,047,041, and imposed additional civil penalties against Fasela, USHA, Sarpas, and Nazarzai, jointly and severally, in the amount of $360,540. In setting the amount of civil penalties, the court considered (1) the purpose of civil penalties to punish and deter; (2) Defendants' targeting of the elderly and the disabled; (3) the "enormous" number of UCL and FAL violations committed by Defendants; and (4) evidence establishing there were 1,259 "payors" checks deposited into USHA accounts.

Section 17206, subdivision (a) states in part that "[a]ny person who engages, has engaged, or proposes to engage in unfair competition shall be liable for a civil penalty not to exceed two thousand five hundred dollars ($2,500) for each violation." Section 17536, subdivision (a) states in part that "[a]ny person who violates any provision of this chapter shall be liable for a civil penalty not to exceed two thousand five hundred dollars ($2,500) for each violation." UCL penalties may be increased by up to $2,500 per violation if the victim is elderly or disabled. (§ 17206.1.) Under both section 17206, subdivision (b) and section 17536, subdivision (b), the court should consider, in assessing the amount of civil penalties, one or more of the following: "the {Slip Opn. Page 33} nature and seriousness of the misconduct, the number of violations, the persistence of the misconduct, the length of time over which the misconduct occurred, the willfulness of the defendant's misconduct, and the defendant's assets, liabilities, and net worth."

For the purpose of calculating civil penalties, what constitutes a violation of the UCL or the FAL depends on the circumstances of the case, including the type of violations, the number of victims, and the repetition of the conduct constituting the violation. (People v. JTH Tax, Inc., supra, 212 Cal.App.4th at p. 1251; Kennedy, supra, 111 Cal.App.4th at p. 129.) We review the trial court's imposition of civil penalties under the UCL and FAL under the abuse of discretion standard. (People v. JTH Tax, Inc., supra, at p. 1250.)

B. The Evidence Supported Imposition of Civil Penalties.

Sarpas and Fasela challenge the imposition of civil penalties on the same grounds on which they challenge restitution: They contend the evidence showed they violated the UCL or FAL at most only three times and there was no evidence that either of them was an active participant in or aided and abetted any violations by others. We rejected those contentions when addressing restitution, and we reject them again now. As we have emphasized, individualized proof of each and every UCL and FAL violation is not required; from the evidence presented at trial, the trial court could draw the reasonable inference Sarpas and Fasela committed hundreds, if not thousands, of UCL and FAL violations. In this regard, the trial court found: "Defendants made false and misleading statements to each and every consumer who entered into a contract with Defendants. Further, Defendants used deceptive telemarketing scripts and other false and misleading marketing materials, and therefore civil penalties are appropriate for each consumer who spoke with a USHA representative and/or received USHA marketing materials, even if they never became a client of USHA."

Sarpas and Fasela argue the amount of civil penalties is excessive in light of their respective financial situations. A court should consider a defendant's assets, {Slip Opn. Page 34} liabilities, and net worth in calculating the amount of civil penalties. (§§ 17206, subd. (b), 17536, subd. (b).) But, "evidence of a defendant's financial condition, although relevant, is not essential to the imposition of the statutory penalties, making the issue of a defendant's financial inability a matter for the defendant to raise in mitigation." (First Federal, supra, 104 Cal.App.4th at p. 726.) Sarpas did not testify at trial. Fasela testified some about her financial situation, but she presented no documentary evidence in support, and the trial court found her testimony on the subject was not credible. As to Sarpas, all the civil penalties are affirmed.

C. Amount of Civil Penalties Against Fasela

Fasela alone argues there was no legal basis for imposition of $360,540 in civil penalties against her. Sarpas does not make this argument. The only explanation for that amount, she claims, is "[t]he Trial court found Fasela complicit in defendant Nazarzai's failure to turn over $360,540 to the Receiver." The Attorney General does not address this argument. The trial court offered no explanation or computation for coming up with $360,540, despite requests from Fasela to make factual findings. We agree the amount of civil penalties imposed against Fasela does not appear to be tethered to sections 17206 and 17536. She is, however, subject to civil penalties. We therefore will strike the civil penalties awarded against Fasela only and remand with directions to recalculate the amount of civil penalties under sections 17206 and 17536.

V.Sarpas and Fasela Were Not Denied Their Due Process Rights to Confront and Cross-examine Witnesses.
Sarpas and Fasela contend the imposition of civil penalties and restitution in the amounts set forth in the judgment violated their due process rights to confront and cross-examine witnesses and to receive notice of the charges against them. In civil actions, the right to confront and cross-examine witnesses is found in the due process {Slip Opn. Page 35} clause rather than the confrontation clause. fn. 8 (People v. Otto (2001) 26 Cal.4th 200, 214; In re Malinda S. (1990) 51 Cal.3d 368, 383, fn. 16.) Sarpas and Fasela were not denied the right to confront and cross-examine witnesses. They appeared at trial with counsel and cross-examined witnesses. They were provided lawful notice of the depositions, but chose not to attend them and cross-examine the deponents, either in person or by telephone. They were provided the names of hundreds of USHA customers, yet chose not to call any of them to testify at trial.

Sarpas and Fasela contend their due process rights were violated because they were ordered to pay restitution to and civil penalties for hundreds of USHA customers who did not testify at trial. The right to confront and cross-examine witnesses applies only to "'witnesses'" who "'bear testimony.'" (Crawford v. Washington, supra, 541 U.S. at p. 51; see Davis v. Washington (2006) 547 U.S. 813, 823.) The USHA customers who did not testify were not witnesses bearing testimony. Restitution was not dependent on their testimony because, as we have emphasized, the UCL and FAL permit restitution without individualized proof of harm (e.g., People v. JTH Tax, Inc., supra, 212 Cal.App.4th at p. 1255; Fremont Life, supra, 104 Cal.App.4th at p. 532), and the testimony and evidence presented at trial was sufficient to draw an inference of classwide deception and injury.

Sarpas and Fasela rely on Goldberg v. Kelly (1970) 397 U.S. 254 to support their claim of a due process violation. In that case, the United States Supreme Court addressed the narrow issue whether the due process clause required an evidentiary hearing before a state terminates a recipient's welfare benefits. (Id. at p. 260.) The court held that before welfare benefits can be terminated, "a recipient have timely and adequate {Slip Opn. Page 36} notice detailing the reasons for a proposed termination, and an effective opportunity to defend by confronting any adverse witnesses and by presenting his own arguments and evidence orally." (Id. at pp. 267-268.)

Goldberg v. Kelly is inapplicable to this case, except for the broad and indisputable proposition that in government enforcement actions a person has a due process right to notice, and the opportunity to confront and cross-examine witnesses and to present evidence and argument. (Goldberg v. Kelly, supra, 397 U.S. at p. 270 ["'where governmental action seriously injures an individual, and the reasonableness of the action depends on fact findings, the evidence used to prove the Government's case must be disclosed to the individual so that he has an opportunity to show that it is untrue'"].)

Sarpas and Fasela were not denied those rights. Their claim they did not receive adequate notice of the charges against them borders on the absurd. fn. 9 The Attorney General filed a lengthy complaint apprising Defendants of the charges and of the fact the Attorney General was seeking injunctive relief, restitution, and civil penalties. Attached to the complaint were declarations from 19 USHA customers. Sarpas and Fasela received lengthy interrogatory responses and were given the names of hundreds of USHA customers. The Attorney General disclosed the names of 16 potential trial witnesses, of whom five were called to testify at trial. Properly noticed depositions were taken, but Sarpas and Fasela chose not to participate in them. Nothing prevented Sarpas and Fasela from conducting their own investigation, interviewing witnesses, taking depositions, and calling witnesses to testify at trial. "In light of the foregoing we are satisfied that the UCL as applied to this case did not violate the federal procedural due process notice requirement." (Fremont Life, supra, 104 Cal.App.4th at p. 520.) {Slip Opn. Page 37}

Sarpas and Fasela also contend the judgment violates their due process rights because it allows the Attorney General to pay claimants "at its own discretion" and "affords no requirement that the claimant present its evidence before a Constitutional tribunal and no opportunity for Appellants to confront and cross-examine that claimant in a judicial or judicially supervised manner." The judgment delegates to the Attorney General's Office the authority to administer and oversee the restitution process and provides: "[The Attorney General] is authorized to take any reasonable measure to insure the payment of restitution, including, without limitation: (1) hiring a third party administrator for the restitution process; (2) writing letters, e-mails, and telephone scripting to be used in contacting the Eligible Consumers; (3) sending correspondence to the Eligible Consumers; (4) calling the Eligible Consumers; and (5) sending payment to the Eligible Consumers."

Sarpas and Fasela filed objections to the proposed statement of decision and the proposed judgment. Although they objected that the amount of restitution ordered in the judgment was improper and without factual support, they did not object to the portion of the judgment addressing the Attorney General's authority to administer the restitution process. Accordingly, the objection has been forfeited.

VI.The Trial Court Did Not Err by Receiving in Evidence Checks Deposited into USHA's Bank Account.
A. Introduction

The trial court received in evidence the Attorney General's exhibit No. 1, which consisted of the front and back sides of over 1,900 checks deposited into a USHA account at Bank of America. The court received the exhibit in evidence for the limited purpose of establishing "Bank of America deposited into the account of the payee defendant in this action the amount of money that appears on the face amount of the {Slip Opn. Page 38} check based on his testimony of their business practice with respect to how they handle the checks." The court stated it was not receiving exhibit No. 1 under the business records exception to the hearsay rule.

Elizabeth Mason, an associate governmental program analyst employed by the Attorney General's Office, testified she conducted a review of exhibit No. 1 and, from the information contained in it, created a spreadsheet showing a total of $2,224,113.86 was deposited into USHA's Bank of America account and USHA had 1,259 customers.

B. The Checks Were Authenticated.

Sarpas and Fasela argue the trial court erred by receiving exhibit No. 1 in evidence because the checks were hearsay and did not fall within the business records exception to the hearsay rule, the ground on which they objected at trial.

The Attorney General does not contend the checks comprising exhibit No. 1 were Bank of America business records. Instead, the Attorney General argues the checks were authenticated for the purpose for which the court admitted exhibit No. 1. We agree.

"Authentication of a writing is required before it may be received in evidence." (Evid. Code, § 1401, subd. (a); see Continental Baking Co. v. Katz (1968) 68 Cal.2d 512, 525 ["Generally speaking, documents must be authenticated in some fashion before they are admissible in evidence"].) "Authentication of a writing means (a) the introduction of evidence sufficient to sustain a finding that it is the writing that the proponent of the evidence claims it is or (b) the establishment of such facts by any other means provided by law." (Evid. Code, § 1400.) "As long as the evidence would support a finding of authenticity, the writing is admissible. The fact conflicting inferences can be drawn regarding authenticity goes to the document's weight as evidence, not its admissibility." (Jazayeri v. Mao (2009) 174 Cal.App.4th 301, 321.) {Slip Opn. Page 39}

The Attorney General authenticated the checks with testimony from a representative of Bank of America about how the checks were processed and the bank's custom and practice in accepting and negotiating the checks. The trial court accepted this testimony as sufficient to authenticate the checks for the purpose for which they were received in evidence. Sarpas and Fasela do not challenge this testimony.

C. The Checks Were Used for the Proper Purpose.

Sarpas and Fasela argue exhibit No. 1 was used for a purpose other than the limited purpose for which it was received; that is, showing that Bank of America deposited into USHA's account the sums appearing on the faces of the checks. Sarpas and Fasela argue the trial court improperly used exhibit No. 1 in arriving at the total number of USHA customers, the total amount received from USHA customers, the amount of restitution, and the amount of civil penalties. They argue, "[a]ll the Trial Court knew was that Bank of America processed a number of checks: not the payor of the check, whether the payor was a customer; whether the payor was a victim, nor anything of relevance to the action."

The trial court could properly infer, from the totality of evidence presented at trial, the checks comprising exhibit No. 1 were payments from USHA customers, and the total amount received by USHA from those customers was $2,224,113.86. In considering Sarpas and Fasela's objection to exhibit No. 1, the trial court stated: "[I]f [the Attorney General] establish[es] through the[] evidence this business model of how your clients' company operated and allegedly defrauded 2 million plus dollars from people in a mortgage modification scam, if they establish that this was--how their business model worked, I, as the factfinder, can say I find it to be more likely to be true and not true that these people gave them this money to get loan modification services. [¶] Now, I don't know what the evidence will be. But I've got a sneaking suspicion a big part of it's going to be the only thing they provided as a service to people was loan modification services and maybe A, B or C. If that's the only business they're in and {Slip Opn. Page 40} they're getting checks from people, a natural inference to be drawn from those facts is . . . they were conducting business; these people were trying to retain their services."

As the trial court suspected, the evidence at trial established that, during the relevant time frame: (1) USHA's business was primarily, if not exclusively, providing supposed loan modification services; (2) customers retained USHA to provide those services; (3) customers paid USHA by check for those services; and (4) $2,224,113.86 in checks were deposited in USHA's Bank of America account. Sarpas and Fasela presented no evidence to show that any of USHA's income--i.e., the deposits made into the Bank of America account--came from a source other than the loan modification business. From the evidence, the trial court could draw the reasonable inference, which it expressed in the statement of decision, that "[a]s a result of [Defendants'] deceptive and misleading practices, USHA procured over $2 million in up-front payments from consumers." It was equally reasonable for the trial court to set the maximum amount of restitution at $2,047,041.86. It could be true, as Sarpas and Fasela assert, that many of the payors on the checks were not victims, but those payors will not be able to obtain restitution, and Sarpas and Fasela's potential liability will be reduced correspondingly. (See Kraus v. Trinity Management Services, Inc. (2000) 23 Cal.4th 116, 137 [fluid fund recovery not permitted in UCL actions].)

Mason testified USHA had 1,259 different customers. Sarpas and Fasela objected to Mason's worksheets (exhibit No. 558), but did not object to or move to strike Mason's testimony of the number of USHA customers. Responding to the objection to that exhibit, the trial court stated: "[T]his is the backup for the grand total numbers as described, which have been testified to. So that testimony's in evidence as to what the numbers are." Based on Mason's testimony of the number of USHA's customers, to which Sarpas and Fasela posed no objection, the trial court properly calculated the amount of civil penalties. {Slip Opn. Page 41}

DISPOSITION
The civil penalties in the amount of $360,540 as to Fasela, and Fasela only, are stricken, and the matter is remanded to the trial court with directions to recalculate the amount of civil penalties for which she may be liable. In all other respects, the judgment is affirmed. Respondent shall recover costs on appeal.

Aronson, Acting P.J., and Thompson, J., concurred.

FN 1. Her legal name is Fasela Sheren, but we will use the name by which she was named in the complaint.

FN 2. We refer to plaintiff and respondent as the Attorney General.

FN 3. Further code references are to the Business and Professions Code unless otherwise noted.

FN 4. For example, Sarpas and Fasela argue: "Fasela and Sarpas proceeded to trial believing that sixteen customers would testify adversely about defendants in general, and perhaps, some about them. They entered trial knowing that at one violation per customer, civil penalties were limited to 16 x $2,500 as was restitution, per court order, only 16 consumers could testify against them." They also argue: "Three alleged violations and three only were proven. Even were the award of civil penalties [c]onstitutional . . . , it must be reduced to $7,500."

FN 5. The eight interrogatories were:

"1. As to [name of USHA customer], do you contend that this propounding party violated any Code(s)/Statute(s)?

"2. As to [name of USHA customer], if you contend that propounding party violated any Code(s)/Statute(s), set forth the Code(s)/Statute(s) allegedly Violated.

"3. As to [name of USHA customer], if you contend that propounding party violated any Code(s)/Statute(s), and for each alleged violation, describe in detail all conduct allegedly committed.

"4. As to [name of USHA customer], if you contend that propounding party violated any Code(s)/Statute(s), and for each alleged violation, state the date of each violation.

"5. As to [name of USHA customer], if you contend that propounding party violated any Code(s)/Statute(s), and for each alleged violation, describe in detail the damages allegedly suffered.

"6. As to [name of USHA customer], if you contend that propounding party violated any Code(s)/Statute(s), and for each alleged violation, set forth all facts which support your contention.

"7. As to [name of USHA customer] what fact(s) specific to this propounding party does this individual possess as a potential witness?

"8. As to [name of USHA customer] if you contend that this propounding party owes restitution, set forth the amount allegedly owed."

FN 6. They were: Jerry Walton, Cheryl Hollis, Edith Johnson, John Otero, Larry Lee, and Brenda Miller.

FN 7. Fasela claimed that loan modifications, under her definition of the term, were in fact completed by USHA; however, the trial court found not credible her "denials, explanations, assertions regarding purported statements made to and benefits purportedly provided to USHA's customers, and similar self-serving testimony."

FN 8. The confrontation clauses in the federal and state Constitutions are limited to criminal prosecutions and do not apply in civil proceedings. (Crawford v. Washington (2004) 541 U.S. 36, 42; People v. Allen (2008) 44 Cal.4th 843, 860-861; People v. Sweeney (2009) 175 Cal.App.4th 210, 221.)

FN 9. Sarpas and Fasela make the exaggerated and patently incredible claim that they "walked into trial on the first day without any inkling of what they were alleged to have done, to whom, when, and what."

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104 Comments

buzlightening's picture

Ole yellen the fellen

Hate being right about the SOP of the elite fed fuds but: 

To wit, at exactly 10:00 AM EST, Yellen’s prepared remarks were released as always, stating absolutely nothing incremental – and most certainly, nothing different than what was published in last week’s FOMC policy statement.  Gold, of course, was instantaneously smashed below the Cartel’s ten-month “line in the sand” at the key round number of $1,300/oz.; as always, so rapidly, even the world’s fastest HFT algorithms wouldn’t have had time to actually read them before reacting.  And this, following the comically blatant waterfall decline at the 8:20 AM COMEX open in “preparation” for this planned drive-by paper shooting.

24hr Gold 5-7-2014http://blog.milesfranklin.com/2-6-nuff-said

YOU'D THINK AFTER 3 YEAR OF THE SAME BS THAT SOME ENTITY WOULD STEP IN AND SAY ENOUGH.  nOW BACK TO READING CL's piece.  Venting complete!

pm_newbie's picture

2nd

whew, this one is going to take more than 1 glass of wine to get through.....

Dr Jerome's picture

Barney?

Are you calling ole Barney Frank a "Dolt?"  --the same guy who saw no problems in the housing market in 2007, as stated on public record?

Have you no shame, CaLawyer?  Barney is not simply a "Dolt," as you claim. Instead, he is a first class criminal, sociopath, TFA who ought to be impeached (for the public record) and then incarcerated (personal punishment) for something he's hiding (take your pick) for the rest of his useless life. Stringing him up is too easy.

In this clip, a person asks his a simple, reasonable question here and he immediately goes on the attack--classic tactic of the sociopath with something to conceal.

Great topic and post. Now, I am going to read of your post instead of grading my stack of final papers for my classes.

Dagney Taggart's picture

I'm Blind Now

Consequences will never be the same. Thanks CL.

I wonder what Canada will look like 10 years from now in response to the imminent implosion. At least there's a chance my little corner of heaven gets annexed by the American Redoubt (Restored united states of America).

dgstage's picture

CL

You are on a roll, if I ever need legal advice I am going to contact you.

Thanks

AlienEyes's picture

Frank and Burnake

Frank and Burnake should be hanged by the 'nads until dead. Afterwards, a nice fair trial would be optional. 

Fred Hayek's picture

How do they sleep?!?

Seriously, how do you do things like that, offer people a service that you have no intention of making the slightest attempt to deliver? 

How do you do that?

My f---ing god!  I couldn't go into law because I figured at some point I'd end up representing someone I thought was in the wrong.  These people know they're contributing to ruining the lives of their victims and when caught, put up an aggressive defense which seems as though the point of it was to create grounds for appeal.   They didn't cut a corner when things got tough.  They didn't get lazy over time or gradually succumb to the lure of temptation.   They started out with an intention to go from point A to point B in a straight line of fraud.  And they did.  Wow.  

Jesus, imagine the karmic retribution for this kind of shit.  Wow.

sierra skier's picture

7th

Oh yes, it looks like a loooong read.

Mr. Fix's picture

Unintended consequences?

I call bull shit! Nobody could be that stupid, they know exactly what they're doing, this is the biggest theft in the history of mankind, courtesy of our federal government, and our Federal Reserve.

Destroying America, destroying the world economy, is exactly the intended outcome, so a new world order can be ushered in, out of the chaos created intentionally.

Far too many people are calling our government stupid, they just don't get it, this is pure evil in play.

sierra skier's picture

What a scam

The folks running this scam are no better or worse than many of our politicians, bankers and leaders. They got caught running a complete and planned scam with no intention to provide any kind of service while yet taking money from solicited unsuspecting folks.

If it sounds too good to be true it is probably not true. Even if you are not a good salesman after you solicit enough people you will make a sale. These crooks were selling hope for folks who had overextended themselves, whether innocently or intentionally well beyond their ability to manage their debt.

The owners of USHA deserve everything the courts can throw at them including fines and incarceration, even death would be acceptable in my mind.

Now if we could only get the courts and regulatory agencies to proceed with those elected, appointed and employed who are committing fraud, corruption and graft we might be able to get our worldwide issues resolved and move ahead.

Thanks CL.

DayStar's picture

Harvey's Up! (TFMR)

The Real Deal at:  http://www.tfmetalsreport.com/comment/404288#comment-404288

  • Harvey: Today was Fedspeak and the boys did not want to upset Janet Yellen's testimony before Congress, so they decided to raid gold and silver which is their usual and customary modus operandi. This is becoming a farce beyond comprehension. The markets got a lift with some diplomacy on the part of Putin as he wants dialog on the Ukraine crisis. He stated that he was going to pull his troops back from the border but NATO saw no evidence of that. China got into the fray by ramming a Vietnamese vessel inside Viet Nam's territorial waters. The Chinese placed an oil rig in the disputed waters much to the anger of the Vietnamese. It is as if they wished a confrontation to bring in the Americans into a showdown. In the USA student loans/car loans are again on the rise. For the 21th day out of the last 22 trading days, GOFO rates are negative and thus we have backwardation. 
  • Mark O'Byrne (GoldCore): The Financial Express of Dhaka, Bangladesh, today reports on a huge increase in customs seizures of smuggled gold into Bangladesh over the last year. Last March, 107kg of gold was seized by officials at the international airport in Chittagong. Then more recently, 106kg was impounded at the international airport of the capital city Dhaka. The biggest seizure, however, was in July last year, at the same airport in Dhaka when 124kg of smuggled gold was discovered. The National Board of Revenue have compiled statistics showing that while only 25kg of smuggled gold was seized in 2012 in Bangladesh, this rose to 520 kgs last year. Similar figures for the first three months of this year hit 220kg just from these two international airports.
  • GoldCore on gold smuggling: Bangladeshi law enforcement officials say that the smuggling operations are meticulously planned and they suspect that some corrupt staff from the Civil Aviation Authority and customs agencies may be involved, since otherwise the smuggling operations would be very difficult to execute. This is why they are viewing the smuggling as a potential national security issue. This elaborate network of gold smuggling operations into Bangladesh and India shows yet again that in the Middle East, South Asia and East Asia, gold is not a ‘barbarous relic’, and is not ‘tradition’, it is in fact something much more fundamental, money.
  • The Doc: It now appears the status quo is moving to destroy any last semblance of privacy with regard to your personal brokerage accounts. Yep, in the name of “stopping fraud” and the practices of unscrupulous brokers, the Financial Industry Regulatory Authority (FINRA) wants to launch a program called Cards, or the Comprehensive Automated Risk Data System. This electronic system sounds a lot like the so-called metadata the NSA is collecting on everyone’s internet usage. This “robocop” would collect a weekly “record of activity at all of the more than 4,100 brokerage firms nationwide.” For your own good of course. Oh, and yeah, to stop terrorists or something.
  • Chris Powell: Gold's long-term outlook is less likely to be influenced by the conflict over Ukraine, Tocqueville Gold Fund manager John Hathaway said, than by the light shed on the relationship between real gold and paper gold by lawsuits against the bullion banks participating in the daily London gold fix.
  • Harvey: India imports 32 tonnes of gold, the official way. However they do not know how much is smuggled. With respect to silver they imported officially, 486 tonnes or 15.6 million oz which is very good for India. Silver amounts imported in India are also rapidly increasing.
  • SRSrocco: While industrial silver consumption remained virtually flat since 2007, demand in another sector grew substantially. In just six years, the demand for Official Silver coins increased from 39.7 million oz in 2007 to 136 million oz in 2013. The 136 million oz figure was provided by the CPM Group in a press release of their 2014 Silver Yearbook. Demand for Official Coins (Silver Eagles, Maples, Philharmonics, Pandas and etc) is in an upward trend, increasing nearly 100 million oz (240%) since 2007, while growth in the industrial sector is dead as a doorknob. Total world mine supply increased from nearly 600 million oz in 2003 to an estimated 783 million oz in 2013. 
  • SRSrocco on the BRICS:  BRIC countries will now hold onto and possibly increase their government silver stocks for strategic industrial and economic purposes in the future. Americans continue to invest in the biggest Ponzi Scheme in history… many are completely clueless. Due to the Fed’s QE – Quantitative Easing policy, a great deal of perceived wealth made its way into the stock and bond markets. Silver investment demand will be one of the key factors that will push the value of silver to new highs. As more Americans realize they have invested in increasingly worthless paper assets, more will be motivated to move into physical assets such as silver to protect their wealth. The huge increase of official silver coin demand over several years is just one clue that this trend is gaining speed.
  • Pater Tenebrarum: Countries have no 'flexible currency' and no central planning of money. They are at the root of the boom-bust cycle, the very reason for the various crises that have beset Western economies in recent decades. Switzerland would be far better off if no-one had the power to meddle with its money supply. As it is, there has been plenty of meddling already, and quite a bit of suspension of disbelief would be necessary to conclude that there will be no price to pay. As always in monetary matters, the bill will be presented at an unknown future date, but it could be a very big bill in this case.
  • Bill Holter: Here is the thing, and I hate to be the bearer of bad news but this is all happening at a time when it will be most damaging to Americans. The "markup" is coming, this I believe more than almost anything else. The markup is coming AFTER Americans have sold what little gold that they had to begin with AND after 80 years of constantly being told that gold is not money, it's scary, volatile, a bad "investment" etc. etc. etc.. To me this is very scary because the unsuspecting will be massacred by no fault of their own. You can argue that it is their fault, I however don't think so. Gold was taken out of circulation, it has been smeared, the price suppressed and portrayed as "scary" almost anywhere one looked. Getting and keeping gold out of the hands of Americans has been a full time job. Anyone who has gone against this campaign really had to think, research and deduce for themselves whereas the Indian people learned this from birth and the Chinese even have their own government cajoling them. I do want to point out that the "cajoling" from China was a smart policy in my opinion. This "suggestion" by the government kills several birds with one stone. It certainly does allow wealth available to a middle class that is now being created. I am sure that China has known for quite some time (as did Mr. Putin) that gold would be remonetized and marked up as the dollar gets re(de)valued downwards. This policy puts gold in hand to the people and there are LOTS of them. The "lots" part means many buyers and many buyers means "tonnage" which has been stripped away from the West. The population has merely augmented official purchases by China and is putting more pressure on the West to come up with metal.
  • Bill Holter on China: China sponsoring citizen purchases of gold in my opinion was a very well thought out strategy and one that will allow China to emerge as "the winner", maybe without even firing a single shot? If you understand the above and agree with it then there is no reason for you to be blindsided when it happens. If you are currently part of the 99%, there is still "some" time left to exit this category and protect your family. This concept is well known all over the world, it has been purposely muzzled in the U.S. to keep the dollar alive and on life support. It is so much easier to believe what you "want" to believe, especially when your view is "helped" each and every day. This is a very dangerous situation and one where it is imperative to think for yourself to form your own beliefs. Just remember the saying "I am from the government and I'm here to help you", they have helped us for over 80 years put our life savings in something that has done nothing but devalue and will die a bloody death in the end.
  • James Burgess: Over the weekend of May 3 and 4, China sent an oil rig into disputed waters of the South China Sea to begin oil exploration. The rig is near the Paracel Islands, inside the 200-mile exclusive economic zone of Vietnam, which angrily protested the decision. The Vietnamese government insists that the waters, as well as the oil and gas reserves held beneath, belong to Vietnam. VIETNAM CANNOT ACCEPT AND STRONGLY OPPOSES CHINA RIG PLACEMENT.
  • Andras Gergely and Natasha Doff: Investors tempted to Ukraine by the prospect of a foreign bailout are sounding the retreat as deadly clashes between government forces and separatists threaten to overwhelm efforts to prop up the nation’s finances. JPMorgan Chase & Co., which advised clients earlier this year to increase Ukrainian bond holdings on expectations that a civil war was an “extreme” scenario, is now warning of the risk of “huge” economic fallout as the former Soviet Republic’s territorial integrity crumbles. Barclays Plc said it’s urging caution on anything but the shortest maturities in Ukraine’s debt, with Capital Economics Ltd. anticipating a deeper selloff.
  • Daisy Luther: You do your research and you choose a retreat property far off the beaten path. You spend time and money developing it, making it your own. Maybe it is a vacation home, or maybe you’re a prepper and this is your bug-out location. Regardless of the reason you chose it, it’s yours, so maybe you plant some perennial vegetables and some fruit trees. You dig a well or locate a spring. You make it your own. Then the government comes along and says, “Nope, we want this land – you’re out.” And they just take it, evicting you like they are the landlord and you are merely a tenant, despite your name on the deed. That’s exactly what happened to a couple in Colorado. Andy and Ceil Barrie fought the government and the government won. The government used many different bizarre strategies to get the Barries off of their land. Pay close attention, because precedents are being set that could affect hunters or those creating bug-out retreats.
  • Daisy Luther on the Federales' rationale for seizing the land: #1 ATV ACCESS THREATENED AN ENDANGERED SPECIES. The government’s first line of attack against the Barries was forbidding them to use a motorized vehicle to reach the property. This will sound familiar to anyone who has been following the Cliven Bundy case in Nevada: Summit “county officials issued a report that stated “public motorized access” to the property threatened the alpine tundra and the habitat for the lynx, an endangered species.” (source) County officials took a vote in October of 2013, and in order to save the lynx threatened by the Barries’ occasional access, agreed that their property should be seized. (In the case of the Bundy ranch, his cattle were massacred by the government while they claimed to be concerned about the fate of the desert tortoise.) #2 THE COUNTY DEMANDED THAT “VARIOUS COMMERCIAL ACTIVITIES” BE HALTED. And exactly what nefarious money-making schemes were the Barries up to? Why, Andy Barry had the audacity to gather up fallen pine cones and take them home for his Christmas wreath making business. He used a cart attached to the afore-mentioned ATV to take them back to his home, where the wreaths were created. #3 THE COUNTY CONDEMNED THE CABIN BECAUSE OF ELECTRICAL AND PLUMBING ISSUES Umm…it’s an off-grid cabin, so there was no electricity and no plumbing to start with. In their haste to protect the environment, one would think that bringing in electricity or plumbing would be far more of an issue than a low-carbon-footprint place that used no public utilities.This was strictly a day-use cabin, thus requiring no plumbing or power. How many off-grid homes that adjoin national land exist across the country right now? How many hunting and trapping cabins are snugly sitting out there in the wilderness? Are all of those properties next on the government’s list of properties to steal? #4 THE CABIN WAS IN VIOLATION OF ZONING LAWS. A previous owner had expanded the cabin without a permit. Because we have to ask the government’s permission for everything, you see. IN THE END, THE GOVERNMENT WON.

All this and more on...

The Harvey Report! smileysurprisesmiley

http://www.tfmetalsreport.com/comment/404288#comment-404288

DayStar

Kerbouchard's picture

Fred (and by extension, Cal)

...your comments really hit home.  I agree, the pain and suffering created by such unconscionable actions is beyond measure.  Imagine being one of the victims, so utterly and totally alone -- all the love and compassion sucked out of you by these scumbags.

And it's all so unnecessary.  

It's the monkey mind run amuck. 

Where's the love?

boomer sooner's picture

I am definately NOT

I am definately NOT knowledgeable on legaleeez, but after reading makes me wonder how Corzine did not have to give up ALL the the $ he made from MF Global.  If one huckster has to pay, why not all.  Better representation I guess, that and being buds with the Pres.

Thanks CL 

Dagney Taggart's picture

Dagney Comes Out

Since we may be out of contact for a short while following the NWO's final act of despair and purge, I thought I would come clean.wink

Edit: This has all been a test of our character and commitment to what is decent and just. It had to be this way. Power had to be handed over to the psychopaths for a short time so they would expose themselves. And they have. There are better times ahead for us.

agNau's picture

Amazing....

what a little soap & water can do!
Both interesting!!!!....... And transformational times.

cliff 567's picture

I think that you and I think alike Dagney

I have read a lot of history.

Your direction of views seems harmonic to me.

I depend here on my intuition over your influence, i recognize that your writings provoked me to think at a tangent, however, I add my own knowledge to filter your beliefs.

Don't you?

I am grateful for your inputs on the poor side of the pay wall Dagney.

Hunkered down cliff

flyinkel's picture

It's an Ego thing

What folks want to believe:

The Govt is "too stupid".  If I was in charge things would be so much better.  One can almost feel sorry for them not having the IQ to know how to do it right.

The Reality:

They are brilliant beyond belief to masterfully set in motion a way to rob the average citizen of most of what they have, invade and corrupt the government, gain unlimited control of your finances, make the citizen pay to instigate wars, corrupt the education curriculum, sabotage the medical care and payments system, create a police force with an "Everyone is a terrorist" mindset to violently subdue dissenters, and do this all on the citizen/debt dime while they gleefully reap the benefits; and, AND the citizen to a large degree stands back and says  "They are doing the best they can with what they have.  They just aren't smart enough to know better". 

And once the elite are done draining the Western silos, so to speak, the food, water, and air is poisoned of these very masses they have stripped dollar by dollar through "stimulative QE" dollar devaluation.

See #2 is just too hard on the ego to accept, so blinkers on everybody, back to rationale #1.

And wait, one more thing, because we always go to #1 we always try to solve it at the lowest level where the IQ truly is not the highest.  Things need to be fixed at the top, the lever pullers, for ANY meaningful effect.

Leaders:  Where is that moral compass hiding?  Hit the attic, look behind the cobwebs, pull it out.

El Gordo's picture

Difficult to decide

There is a tax which is applied specifically to stupid people.  People getting in over their head is not uncommon, and I suppose that most of them (us) are always looking for the easy fix.  When they get conned again, that's just the stupid tax being applied.  I look at some of the major crooks of recent times such as Bernie Madoff, Jon, Corsine, the Enron gang, and the like and think how they should swing for their crimes - then I take a look at what our politicians and judges are doing to us and realize just what small time con men they really are.  The government cons do more damage in a day that the rest of them can do in a lifetime, yet they get reelected to go do more of the same.  I've always been a straight up, law and order type person, but in today's environment where we have a President who sneers at the law, and a willing accomplice in the Attorney General, I'd have a hard time convicting anyone of just about anything.  Sad, but that's the way "feel."  Obviously, if I have to "think", then it's still guilty as charged.

nixy's picture

Gold flat ($1290 +/- $2) for

Gold flat ($1290 +/- $2) for unprecedented(?) 16 hours

$index gentle straight line fall to 79.

Barclays announces sacking of investment 'bankers'.....

sengfarmer's picture

a question, a plan and a story

First the question, do any of you have an opinion on reverse mortgages?

My plan is to do a reverse mortgage and use the proceeds to purchase physical. I think the real estate market and especially homes are due for another major plunge because of the overhang in foreclosures and bankruptcies that have yet to hit the market.

Let's use $200,000 as an appraised value for easy calculations. I can get 43% of the value of the house now ($86,000). I think prices could easily drop by another 30% by the time I want to sell my house in 5 years that would make the value $140,000 so the $86,000 taken now would be 61% of the value then.

Now if the dollar devalues by 5% a year (inflation), that would knock another 25% off that $140,000 in purchasing power making it $105,000 in purchasing power and the $86000 would be 82% of what I could get in 5 years. 

Now if I take half of the $86,000, the amount I can withdraw immediately this year, ($43,000), and purchase silver and the silver price triples in the next 5 years which I believe is highly probable that half would come to $129,000 knock off 25% for loss of purchasing power  would be $96,750.

I will also have the other half, $43,000 to draw one year from now and would make a decision what to do with it then.

Now the story, the reverse mortgage company made me get flood insurance because FEMA said I was in a flood zone according to their maps, never mind that the house has been here 75 years and has never been flooded or even close to being flooded in the 27 years I've been here. It's 6 feet above the river and the highest the river has ever gotten in spring runoff is 2 feet above average. Besides the river grade drops quickly from here and there is no way this house can be flooded.

I go to American Family my insurance company and they sell me a policy based on their maps which put me in Zone (x), a very low risk zone and premium of $400/year.

Fine we are ready to close next week. No hold it their underwriter comes back and says we can't close because the FEMA map has me in Zone (A) and my policy is for Zone (x), they have to match.

I say what to hell, my insurance company is the one taking the risk here and if they are satisfied with Zone (x) why should you guys care? You are going to get paid in case of a flood so what is the problem. They all agree there shouldn't be a problem but some pencil pusher up the line refuses to use common sense.

I'm not sure what is going to happen next, but I think it's going to cost me :).

Groaner's picture

how do they sleep?

Well Barney sleeps with another guy and Bernanke sleeps with his printing press.

Groaner's picture

Again look at this action!

USD below 79!! and metals tanking again..   

Hey Traitor Dan..... read my lips... there is no manipulation..   Duhhh.

Lintltj5's picture

 

 

Lintltj5's picture

What Nads?

"Frank and Burnake should be hanged by the 'nads until dead. Afterwards, a nice fair trial would be optional. "

I would concede to the fact that these people  have balls if they fought fairly and actually faced those they stole/steal from on a daily basis. A thief who robs a house or bank at least faces the possibility of a confrontation by the owners and loss of life or limb either through the prison system or the actions of the homeowner. These idiots live the high life by pillaging the masses in every unseen and easy way they can with no worries of consequences to themselves.

Dont worry....."Vengeance is Mine sayeth the Lord, and I will repay."...and what a repayment it will be.

nixy's picture

POS8-30   ....   

..

erewenguy's picture

Stick save!

Nice stick save on the dollar. Wouldn't want anyone to know it is actually a piece of crap now, would we?

Dr Jerome's picture

Reverse Mortgage?

In 2011 I borrowed fiat to buy some silver. Things didn't work out so well and I have to keep my mouth shut when I am called an idiot. But I did not borrow beyond my ability to repay in a worst case scenario--which is basically what happened. Today the $45 metal metal is "paid off." I have liquidated much of it each December to take a tax write off. Had I borrowed beyond my ability to pay, I would have eaten a huge loss within a year and put my personal finances into a bind.

I don't understand the terms of a reverse mortgage that well, but terms of common sense apply. If the system holds together and silver is capped indefinitely, will the terms of this contract ruin your finances, or can you keep your end of the contract? That seems to be one of several deciding factors.

I am also tip-toeing toward Mr Fix's view that there will be no rise in metals price until the old system is trashed and a new one is in place. We may be facing exorbitant tax rates when selling metals in that new economy. They may be illegal to hold. You may have to barter with metals.  There may be no easy buyers in the USA like the LCS today that will cut you a check  five minutes after walking in. 

In my view, insurance is overpriced and required many places where there is very little risk. I feel your frustration.

Edit: also, the fees for writing the mortgage is rolled into the note and interest due over its life is added and amortized. Surely they calculate their formulas to eat up all equity by the end...the home will be 100% theirs.

Well, that my .o2 in fiat.

foxenburg's picture

Nazarzai, Sarpas, and Fasela

This story makes one sympathise with the Islamic custom of chopping off the hands of thieves. Murphy & Eftekhari could have joined them for their efforts to defeat justice. 

Groaner's picture

Jim Willie

http://www.silverdoctors.com/jim-willie-bombshell-over-40000-tons-of-gold-stolen-by-the-west-shipped-east/

He backs up everything he says with nothing!
Where and how does he come up with all this stuff he rights about with such conviction??
40,000 tons of gold stolen?
He should get involved with book writing.. He can could make a fortune writing fiction.

Dr Jerome's picture

stolen gold

Groaner,

Doesn't Willie mean the 8K held by the US as well as ALL gold held by the Fed for other nations? I thought the leading theory, not just Willie's,  was that all this gold was already gone.  Yeah, nobody can prove that theory. But there is hard evidence to support it, like the US failure to give Germany their gold back.

I admit I don't hang on his every word like I did two years ago. Haven't listened to the last few interviews.

Willie exudes confidence and conviction when he says and writes these things. But so do good liars, and so do those who are wrong but believe they are right. I think we have to weigh all the evidence and right now, we don't have quite enough to tip the scale either direction. I thought that History channel documentary made the strongest case I have heard yet: The Gold Conspiracy. Its worth 45 minutes some evening.

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