Current Events in October 2009

A chastened Disney is offering refunds to consumers who own a copy of the companys Baby Einstein video, bowing to pressure from a parents group that says the video is more likely to turn children into Baby Alfred E. Neumans.

Disneys move allows anyone who bought a Baby Einstein video between June 5, 2004 and September 4, 2009 to get their money back. Alternatively, consumers can trade their DVD in for a Baby Einstein book or CD, or redeem it for a 25 percent discount on future Baby Einstein purchases. The offer is good through March 4, 2010.

For years the Campaign for a Commercial-Free Childhood (CCFC), a group fighting to reclaim childhood from corporate marketers, has said the videos dont live up to Disneys promises.

In 2006, the CCFC filed a complaint with the Federal Trade Commission (FTC), alleging that Disneys claims about the videos supposed educational benefits amounted to false and deceptive advertising. The complaint pointed out that the American Academy of Pediatricians recommends no TV at all for children under two, regardless of content. The CCFC thus reasoned that the videos may in fact damage, rather than promote, childrens intellectual development.

In response to the CCFCs complaint, Baby Einstein agreed to overhaul its marketing materials to eliminate any unsubstantiated claims about the videos potential benefits. The company also removed parent testimonials from its website. In light of these actions, the FTC declined to pursue the matter further, a development that left the CCFC deeply troubled.

Susan Linn, a CCFC director and psychologist, said Disneys latest move is an acknowledgment that baby videos are not educational. The groups website calls the turn of events another CCFC victory and reemphasized the lack of credible evidence that any screen media is educational for children under two.

Not going quietly

While the CCFC clearly won the day, Disney isnt going quietly. Susan McLain, the general manager of Baby Einstein, released a statement choc full of sour grapes, framing the refund arrangement as a last-resort tactic in a war against propaganda groups taking extreme positions. McLain focused her venom on Linn, asserting that the matter should have been settled after the previous FTC complaint was put to rest, but that the Linns attacks continued and escalated despite the fact that her assertions have no merit.

The statement closed with the obligatory labeling of the CCFCs actions as a smear campaign.

The CCFC, based in Boston, operates under the notion that most problems facing children including obesity, substance abuse, and violence can be traced back to the rampant commercialization of society. The group seeks to fight the me first attitude promoted by corporate marketing.

Disney bought Baby Einstein in November 2001, when the company was already a multi-million dollar franchise. Julie Aigner-Clark, who founded the company in 1997, made headlines two years ago when President Bush pointed her out during his State of the Union Address. The recognition seemed arbitrary at best, given that Clark shared the moment with, among others, Wesley Autrey, who leapt in front of a subway train to save a homeless man languishing on the tracks. It was later revealed that Clarks husband contributed over $5,000 to Bushs 2004 reelection campaign.

Mindful of the nation's concern with its collective waistline, fast food restaurants have in recent years sought to entice a more health-conscious group of customers through their front doors. Along with salads and fruit parfaits, almost every fast-food menu contains that staple of relatively healthful eating: grilled chicken.

Alas, grilled bird might pose a menacing risk of its own, according to a lawsuit filed in Hartford, Connecticut on Wednesday. The class action complaint, brought by the nonprofit Cancer Project on behalf of two Connecticut residents, alleges that McDonald's, Burger King, and Friendly's knowingly sold grilled chicken containing "substantial levels" of PhIP, a known carcinogen.

Daniel Kinburn, a Cancer Project lawyer, says that "Dozens of studies show even relatively small amounts of PhIP can increase the risk of various forms of cancer." McDonald's, Burger King, and Friendly's disagree; spokespeople for all three companies say that there is no evidence that small amounts of PhIP pose any appreciable risk.

The Cancer Project, based in Washington, D.C., focuses on preventing cancer and extending longevity in cancer survivors by promoting healthy lifestyles.

The complaint alleges not only that the defendants knew the chicken contained PhIP, but that they actively concealed this fact to prevent chicken sales from plummeting. The companies "concealed the presence of a known carcinogen in their grilled-chicken products to retain profits that would be lost, in whole or in part, as a result of properly informed consumers choosing other food products."

Maybe, but it's unclear which foods properly informed consumers would choose, at least if they still had to eat fast food. Even without considering the meteoric calorie levels and fat content of most fast food products, lately it seems that certain doom lurks around every greasy corner. Last month, a Chicago man sued Denny's, accusing the diner chain of hiding the fact that some of its foods contain sodium levels four times the recommended daily dosage. (Never mind that Denny's posts all nutrition information, including sodium content, right on its Web site.)

In July, the Cancer Project filed a suit in New Jersey demanding that hot dogs carry warnings similar to those found on cigarette packages. That suit cited clinical findings that two ounces of processed meat -- the amount in a typical hot dog -- increases the risk of colorectal cancer by a full 21 percent. The Cancer Project wants hot dogs labeled with a warning that "consuming hot dogs and other processed meats increases the risk of cancer."

The Cancer Project may end up seeking a similar remedy in this case. Kinburn said that, rather than preventing the sale of grilled chicken, his organization thinks the product "should be sold with a warning, like a chainsaw." Burger King already settled a similar suit in California, agreeing to post warnings in all restaurants in that state.

With all this talk of cancer, perhaps consumers should stick with a Big Mac? Maybe, but remember that the number one cause of death in America is heart disease, exacerbated by poor diet and inactivity. A recent study found that annual medical expenditures related to obesity have doubled in less than a decade, and might be as high as $147 billion every year.

And ground beef poses its own, uniquely terrifying risks: hamburger meat remains susceptible to E. Coli infection, which can be fatal. A recent New York Times expose detailed the struggle of a young dance instructor paralyzed by infected beef, and suggested that food inspection processes aren't much better than they were when The Jungle was published over 100 years ago.

So while statements like, "Even a grilled-chicken salad increases the risk of developing some cancers," -- offered by Cancer Group President Neal Barnard -- might be true (or they might not), the same can be said of a lot of things. It's very hard to live a normal life when you're constantly calculating the odds that today's lunch will land you in your deathbed. Consumers' best bet is to examine their diet as a whole, and consistently make the healthiest choices available to them.

Besides, we've heard that excessive worrying can lead to hypertension, which in turn can cause heart disease. So don't lose too much sleep over that grilled chicken sandwich.

The number of bank closings for 2009 has officially passed the milestone of 100 today, hitting a new total of 106. 2009's bank failures are the most since 1992, during the savings-and-loan crisis, and will cost the Federal Deposit Insurance Corporation (FDIC) $25 billion to shore up.

Regulators working with the FDIC, the Office of Thrift Supervision (OTS), the Comptroller of the Currency (OCC), and state officials closed three banks in Florida, one in Georgia, one in Illinois, one in Minnesota, and one in Wisconsin. The seven banks closed today include:

• Flagship National Bank, Bradenton, Florida. The FDIC entered into a purchase and assumption agreement with First Federal Bank of Florida, Lake City, Florida, to assume all of the deposits of Flagship National Bank. As of August 31, 2009, Flagship National Bank had total assets of $190 million and total deposits of approximately $175 million. In addition to assuming all of the deposits of the failed bank, First Federal Bank of Florida agreed to purchase essentially all of the assets. Total cost to the FDIC: $59 million.

• Hillcrest Bank Florida, Naples, Florida, was closed by the Florida Office of Financial Regulation. The FDIC entered into a purchase and assumption agreement with Stonegate Bank, Fort Lauderdale, Florida, to assume all of the deposits of Hillcrest Bank Florida. As of October 1, 2009 , Hillcrest Bank Florida had total assets of $83 million and total deposits of approximately $84 million. Stonegate Bank will pay the FDIC a premium of 0.50 percent to assume all of the deposits of Hillcrest Bank Florida. In addition to assuming all of the deposits of the failed bank, Stonegate Bank agreed to purchase $28 million of the failed bank's assets. The FDIC will retain the remaining assets for later disposition. Total cost to the FDIC: $45 million.

• Partners Bank, Naples, Florida, was closed by the Office of Thrift Supervision. The FDIC entered into a purchase and assumption agreement with Stonegate Bank, Fort Lauderdale, Florida, to assume all of the deposits of Partners Bank. As of September 30, 2009, Partners Bank had total assets of $65.5 million and total deposits of approximately $64.9 million. Total cost to the FDIC: $28.6 million.

• American United Bank of Lawrenceville, Georgia, whose deposits will be assumed by Ameris Bank, of Moultrie, Georgia. As of August 11, 2009, American United Bank had total assets of $111 million and total deposits of approximately $101 million. Ameris Bank will pay the FDIC a premium of 1.02 percent to assume all of the deposits of American United Bank. In addition to assuming all of the deposits of the failed bank, Ameris Bank agreed to purchase essentially all of the assets. Total cost to the FDIC: $44 million.

• First Dupage Bank, Westmont, Illinois, was closed today by the Illinois Department of Financial & Professional Regulation -- Division of Banking. To protect the depositors, the FDIC entered into a purchase and assumption agreement with First Midwest Bank, Itasca, Illinois, to assume all of the deposits of First Dupage Bank. The sole branch of First Dupage Bank will reopen on Saturday as a branch of First Midwest Bank. As of July 31, 2009, First Dupage Bank had total assets of $279 million and total deposits of approximately $254 million. In addition to assuming all of the deposits of the failed bank, First Midwest Bank agreed to purchase essentially all of the assets. Total cost to the FDIC: $59 million.

• Riverview Community Bank, Otsego, Minnesota, was closed today by the Minnesota Department of Commerce. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Central Bank, Stillwater, Minnesota, to assume all of the deposits of Riverview Community Bank. As of August 31, 2009, Riverview Community Bank had total assets of $108 million and total deposits of approximately $80 million. In addition to assuming all of the deposits of the failed bank, Central Bank agreed to purchase essentially all of the assets. Total cost to the FDIC: $20 million.

• Bank of Elmwood, Racine, Wisconsin, was closed today by the Wisconsin Department of Financial Institutions. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Tri City National Bank, Oak Creek, Wisconsin, to assume all of the deposits of Bank of Elmwood. Bank of Elmwood had total assets of $327.4 million and total deposits of approximately $273.2 million. Tri City National Bank did not pay the FDIC a premium for the deposits of Bank of Elmwood. In addition to assuming all of the deposits of the failed bank, Tri City National Bank agreed to purchase essentially all of the assets. Total cost to the FDIC: $101.1 million.

Worst still to come?

While the world's largest banks were able to avail themselves of bailout money provided at taxpayer expense, many regional and community banks were left to fend for themselves. Crushed under the weight of delinquent loans due to unemployment and crashing home values, and overextended with too much easy credit, smaller local banks have simply been unable to cover their assets.

The cascading bank failures have also severely depleted the FDIC's deposit insurance fund, which chairwoman Sheila Bair said would be in the red through 2012 at least. She also predicted that the U.S. would see more bank failures through the remainder of 2009 and into 2010.

Your eyes could be in for some dirty tricks and potentially serious risks if you use unregulated decorative contact lenses this Halloween.

That's the warning issued today by the U.S. Food and Drug Administration (FDA), which said unauthorized decorative contact lenses can cause corneal ulcers, corneal abrasion, vision impairment, and blindness.

"Although unauthorized use of decorative contact lenses is a concern year-round, Halloween is the time when people may be inclined to use them, perhaps as costume accessories," said James Saviola, the Ophthalmic and Ear, Nose and Throat Devices network leader in FDA's Center for Devices and Radiological Health. "What troubles us is when they are bought and used without a valid prescription, without the involvement of a qualified eye care professional, or without appropriate follow-up care."

Decorative contact lenses -- which can change the color of eyes or give them such weird appearances as "eye-of-the-tiger" or zebra looks -- are regulated by the FDA. But the agency has learned some beauty salons, video stores, flea markets, records stores, convenience stores, beach shops, and online vendors have sold those types of lenses to consumers without valid prescriptions.

The over-the-counter sale of decorative contact lenses, however, is now illegal under recent legislation, according to the FDA.

The agency said consumers who want to safely use decorative contact lenses -- without fears of damaging their eyes -- should:

• Get an eye exam from a licensed eye care professional, even if you feel your vision is perfect;

• Get a valid prescription that includes the brand and lens dimensions;

• Buy the lenses from an eye care professional or a vendor who requires that you provide prescription information for the lenses;

• Follow directions for cleaning, disinfecting, and wearing the lenses, and visit your eye care professional for follow-up eye exams.

Consumers should report any problems with decorative contact lenses to their local FDA consumer complaint coordinator and the FDA's MedWatch Program.

The Federal Communications Commission (FCC) voted unanimously today to begin the process of crafting formal rules for "net neutrality," the principle that all content on the Internet should be equally accessible to all users, and that companies cannot discriminate or block one set of content in favor of another.

The Commission agreed at its monthly open meeting to publish a "Notice of Proposed Rulemaking" that would solicit public comment on how best to create rules for ensuring net neutrality, while enabling Internet service providers and telecom networks to continue policing their systems for spam and illegal content.

"Any rules we adopt must preserve our freedom to connect, to communicate, and to create that is the wonder of the open Internet," said FCC chairman Julius Genachowski in prepared remarks. "Each and every user of the Internet must have access to an unlimited online universe of ideas and commerce."

Under the proposed rulemaking, net neutrality rules:

• would not be allowed to prevent any of its users from sending or receiving the lawful content of the users choice over the Internet;

• would not be allowed to prevent any of its users from running the lawful applications or using the lawful services of the users choice;

• would not be allowed to prevent any of its users from connecting to and using on its network the users choice of lawful devices that do not harm the network;

• would not be allowed to deprive any of its users of the users entitlement to competition among network providers, application providers, service providers, and content providers;

• would be required to treat lawful content, applications, and services in a nondiscriminatory manner; and

• would be required to disclose such information concerning network management and other practices as is reasonably required for users and content, application, and service providers to enjoy the protections specified in this rulemaking.

Not a clean sweep

Commissioner Michael Copps praised the ruling. "The Internet must never be about powerful gatekeepers and walled gardens," he said. "It must always be about the smoothest possible flow of communications among people."

Although the commission -- 3 Democrats and 2 Republicans -- voted unanimously to support it, several members offered some dissent. "Freedom is best served if we promote abundance, collaboration and competition over regulation and rationing," said Republican commissioner Robert McDowell. "No government has ever succeeded in mandating innovation and investment."

McDowell emphasized that he was voting in favor of the rulemaking process, as opposed to the overall principle, and quoted former President Bill Clinton's support of limited government intervention in the communications marketplace as support for his position..

"Before imposing new rules, we need to carefully think through all potential unintended consequences that could harm consumers by increasing prices, impeding innovation, eliminating choices, and/or reducing quality of service," said new commissioner and former National Telecommunications and Information Administration (NTIA) head Meredith Atwell-Baker.

But Baker's fellow new commissioner Mignon Clyburn used her story of running a small weekly newspaper in her hometown of Charleston, South Carolina -- which eventually closed down -- to illustrate the need for net neutrality. "To me, that is what this proceeding is all about: preventing barriers to entry and ensuring that Americans have access to the best and most useful information and services," she said.

No easy victory

Supporters and opponents of net neutrality alike were already marshaling forces in advance of today's decision. Ben Scott, director of consumer advocacy group Free Press, hailed the vote as "an important step toward securing the open Internet and a victory for the public interest."

Free Press and its opponents, such as AT&T, have been dueling it out in the marketplace over whether or not net neutrality would hamper or spur innovation and investment in America's Internet industry.

AT&T recently circulated a letter among its employees urging them to write the FCC and media outlets with those claims, while Free Press fired back with a report claiming that an open Internet would encourage investment from new companies.

The rules also face a rocky road in Congress. Several Senators have introduced legislation that would codify net neutrality into law, while others are ramping up opposition to the new rules.

Senator John McCain (R-AZ), who opposed net neutrality regulations in his 2008 presidential bid, promptly introduced legislation in the Senate to block the FCC from making its proposed rules law. In a Washington Times editorial, McCain compared the rules to the government's bailouts of the auto and financial industries, as another "power grab" for control.

"These new rules should rightly be viewed by consumers suspiciously as another government power grab over a private service provided by private companies in a competitive marketplace. Does that sound familiar? It should," he wrote.

The Sunlight Foundation and the Center for Responsive Politics recently published a joint report documenting the massive amounts of money donated by telecom companies and their political lobby groups to members of Congress in order to influence their votes -- totaling $9.4 million dollars between January 2007 and June 2009.

The top recipient of donations was Senator McCain.

A toxin produced by mold on nuts and grains can cause liver cancer if consumed in large quantities. Now, University of California Irvine researchers for the first time have discovered what triggers the toxin to form, which could lead to methods of limiting its production.

Because of lax or nonexistent regulation, 4.5 billion people in developing countries are chronically exposed to vast amounts of this toxin, called aflatoxin -- often hundreds of times higher than safe levels. In places such as China, Vietnam and South Africa, the combination of aflatoxin and hepatitis B virus exposure increases the likelihood of liver cancer occurrence by 60 times, and toxin-related cancer causes up to 10 percent of all deaths in those nations.

While U.S. inspectors are supposed to carefully screen the toxin, recent food safety lapses plus an increasing reliance on imported food ingredients is cause for concern, scientists say.

"It's shocking how profoundly these molds can affect public health," said Sheryl Tsai, UCI molecular biology & biochemistry, chemistry, and pharmaceutical sciences associate professor and lead author of a study appearing Thursday, Oct. 22, in the journal Nature that reports the finding.

Contamination occurs in the field

Aflatoxin can colonize and contaminate nuts and grains before harvest or during storage. The U.S. Food & Drug Administration considers it an unavoidable food contaminant but sets maximum allowable limits.

The researchers say the toxin wreaks havoc on a cancer-preventing gene in humans called p53. Without p53 protecting the body, aflatoxin can compromise immunity, interfere with metabolism, and cause severe malnutrition and cancer.

Tsai, graduate student Tyler Korman and undergraduate Oliver Kamari-Bidkorpeh, along with Johns Hopkins University researchers, found that a protein called PT is critical for aflatoxin to form in fungi. Previously, scientists didn't know what prompted the toxin's growth.

"The protein PT is the key to making the poison," Tsai said. "With this knowledge, perhaps we could kill the PT with drugs, inhibiting the mold's ability to make aflatoxin."

Destroying the mold -- rather than just the PT -- is the traditional method of decontamination, but it's expensive, costing hundreds of millions of dollars worldwide.

"This finding will lead to an increased understanding of how aflatoxin causes liver cancer in humans," said Dr. Frank Meyskens, Daniel G. Aldrich Jr. Endowed Chair and director of UCI's Chao Family Comprehensive Cancer Center. "It should allow for the development of inhibitors and, hopefully, a new chemoprevention approach to this deadly cancer."

Aflatoxin belongs to a class of organic compounds called polyketides.

October 22, 2009
Investors looking for a safe and profitable place to put their money still face the risk of fraud, unless they carefully select their broker or investment advisor. In the wake of the Bernard Madoff swindle, law enforcement officials continue to level charges against investment brokers they say violate not only the law, but investors' trust.

In Pennsylvania, Attorney General Tom Corbett has filed criminal charges against a Beaver County man accused of operating a $2 million "Ponzi scheme," defrauding credit unions in Armstrong, Westmoreland and Luzerne counties.

Corbett identified the defendant as Eugene D. Miley. Corbett said that Miley allegedly served as a financial broker for clients, including three credit unions operating in southwestern and northeastern Pennsylvania, offering to locate and purchase various high interest rate certificates of deposit (CD's) for those institutions. Instead of purchasing CD's, Miley allegedly diverted the funds for his own personal use, depending on new credit union purchases to pay-off older fictitious "investments."

Investments an 'illusion'

"Miley claimed to be helping his clients earn a good return on their investments, but this was simply an illusion," Corbett said. "As with other ponzi schemes, the money received from new clients was used to pay-off older investors, or siphoned off for personal use, until the flow of new money stopped -- causing the operation to collapse and leaving victims with nothing more than empty promises."

According to the criminal complaint, Miley sold $2,080,000 in fictitious certificates of deposit between 2006 and 2008, including $1,387,000 to Moonlight Credit Union, located in Worthington, Armstrong County; $594,000 to VANtage Trust Credit Union, in Wilkes-Barre, Luzerne County and $99,000 to Stanwood Area Credit Union, in New Stanton, Westmoreland County.

'Misappropriated client funds'

In Massachusetts, meanwhile, a Barnstable County Grand Jury has returned indictments against a former financial broker in connection with the alleged theft of hundreds of thousands of dollars from his former clients. Shane Selewach of Hyannis is charged with six counts of larceny over $250, six counts of securities fraud, and transacting business as an unregistered broker/dealer.

In 2007 Massachusetts Attorney General Martha Coakley's Office began an investigation after Selewach's alleged activities had been referred by the Massachusetts Securities Division (MSD) in the Secretary of State's Office. The MSD's investigation concluded that while working as a securities broker-dealer agent for a major financial company, Selewach had misappropriated client funds he had been entrusted to invest. As a result, Selewach was fired from his former employer and his registration was terminated in April 2006. The MSD subsequently suspended Selewach for three years, beginning in May 2006.

A federal judge dismissed a lawsuit brought against Craigslist by Cook County, Illinois sheriff Thomas Dart, who claimed the classified-ad site's "adult services" section was contributing to prostitution. The judge cited federal law protecting Web sites from liability based on comments or posts made by readers.

U.S. District Judge John Grady reaffirmed that Web sites like Craigslist were protected under Section 230 of the Communications Decency Act (CDA), which classifies them as third parties that do not directly facilitate or enable actions their readers take. Users of Craigslist who post comments soliciting prostitution should be held responsible for their acts -- but not the site, the judge said.

"Craigslist does not 'provide' that information, its users do," Grady wrote. "'Facilitating' and 'assisting' encompass a broader range of conduct, so broad in fact that they include the services provided by intermediaries like phone companies, ISPs, and computer manufacturers. Intermediaries are not culpable for 'aiding and abetting' their customers who misuse their services to commit unlawful acts."

"Sheriff Dart may continue to use Craigslist's Web site to identify and pursue individuals who post allegedly unlawful content...but he cannot sue Craigslist for their conduct," the judge added.

The ruling is a victory for Craigslist, which has been rocked by numerous lawsuits and threats against it by law enforcement officials in multiple states. Dart's initial lawsuit emboldened Attorneys General in other states, such as South Carolina's Henry McMaster, to demand that Craiglist shut down its "erotic services" section.

Craigslist made numerous changes to its site in response, including renaming the "erotic services" section as "adult services," increasing the fees to post ads, and stepping up its cooperative efforts with law enforcement to catch predators and sex traffickers using the site.

Craigslist CEO Jim Buckmaster traded potshots with McMaster in the press, accusing him and other state officials of capitalizing on sensational stories like the "Craigslist killer" to get headlines by going after his site.

Section 230 of the CDA does not protect against federal or state criminal charges, which critics claim gives ambitious politicians a way to make easy victories by appearing "tough on crime."

MoneyGram International, Inc. will pay $18 million in consumer redress to settle FTC charges that the company allowed its money transfer system to be used by fraudulent telemarketers to bilk U.S. consumers out of tens of millions of dollars.

The second-largest money transfer service in the United States, MoneyGram also will be required to implement a comprehensive anti-fraud and agent-monitoring program.

The FTC charged that between 2004 and 2008, MoneyGram agents helped crooked telemarketers and other con artists who tricked U.S. consumers into wiring more than $84 million within the United States and to Canada -- after these consumers were falsely told they had won a lottery, were hired for a secret shopper program, or were guaranteed loans.

The $84 million in losses is based on consumer complaints to MoneyGram - actual consumer losses likely are much higher.

The FTC charged that MoneyGram knew that its system was being used to defraud people but did very little about it, and that in some cases its agents in Canada actually participated in these schemes.

According to the FTC's complaint, MoneyGram knew, or avoided knowing, that about 131 of its more than 1,200 agents accounted for more than 95 percent of the fraud complaints it received in 2008 regarding money transfers to Canada; a similarly small number of agents was responsible for more than 96 percent of all fraud complaints to the company in 2006.

"Money transfer services have a responsibility to make sure their systems don't become conduits to rip people off," said David C. Vladeck, Director of the FTC's Bureau of Consumer Protection. "In this case, MoneyGram not only ducked this responsibility, but also looked the other way while its agents took part in the scams."

Minneapolis, Minnesota-based MoneyGram operates through a worldwide network of approximately 180,000 agent locations in 190 countries and territories. In its complaint, the FTC charged that in recent years this network has increasingly been used by telemarketing scammers to prey on U.S. consumers. Con artists prefer to use money transfer services because they can pick up transferred money immediately, the payments are often untraceable, and victimized consumers have no chargeback rights or other recourse.

In 2007, 72 percent of all complaints received by the FTC involving Canadian-based fraud reported using money transfer services to make payments. According to a recent FTC survey cited in the complaint, at least 79 percent of all MoneyGram transfers of $1,000 or more from the United States to Canada over a four-month period in 2007 were fraud-induced.

The Commission's complaint further stated that based on the more than 20,600 fraud complaints MoneyGram itself received, U.S. consumers lost more than $44 million to cross-border money-transfer frauds between 2004 and 2008 alone. When combined with losses reported by U.S. consumers on money transfers within the United States, that number grows to $84 million.

The most prevalent of these scams were lottery or prize schemes in which consumers were told they had won thousands of dollars and just had to pay a fee for "taxes," "customs," or "insurance" to a third-party to collect their winnings. Consumers paid the fee using MoneyGram, but received nothing.

Barbara of Gaffney, S.C., got caught up in one of the scams. She tells ConsumerAffairs.com that she was contacted and told she was a multimillion-dollar winner. According to Barbara, the caller "stated that they were going to deliver the money to me personally. That changed when she said that they were having problems with that, so the transaction would have to made from bank to bank. I gave her my account number and all the bank information. In the meantime, I was still having to send money through the Western Union and MoneyGram. I sent a lot of money to them, so much so that I have been banned from using the Western Union or MoneyGram because they feel that I was involved in some type of illegal doings." She says she and her husband are on the verge of filing for bankruptcy. "Everything that we have is in jeopardy of being lost," she concludes. "All our savings is gone."

In another scheme, telemarketers told consumers they were guaranteed loans, regardless of their credit score. All they had to do was pay "insurance," "paperwork," or "processing" fees to complete the transaction. Consumers who sent funds using a money transfer service got nothing in return.

The FTC's complaint contends that MoneyGram ignored warnings from law enforcement officials and even its own employees that widespread fraud was being conducted over its network, claiming that proposals to deal with the problem were too costly and were not the company's responsibility. The company even discouraged its employees from enforcing its own fraud prevention policies or taking action against suspicious or corrupt agents. Some employees who raised concerns were disciplined or fired, the FTC charged.

In addition, at least 65 of MoneyGram's Canadian agents have been charged by Canadian or U.S. law enforcers with, or are currently being investigated for, colluding in fraud schemes that used the MoneyGram system.

The complaint charges MoneyGram with violating both the FTC Act and the FTC's Telemarketing Sales Rule by helping sellers or telemarketers who it knew -- or consciously avoided knowing -- were violating federal law, and for not taking adequate steps to prevent fraud.

The agreed-upon court order settling the FTC's charges bars MoneyGram from knowingly providing substantial help or support to any sellers or telemarketers that are violating the Telemarketing Sales Rule and requires it to implement a comprehensive anti-fraud program. Under the anti-fraud program, MoneyGram must conduct background checks on prospective agents; educate and train its employees about consumer fraud; institute agent monitoring; and discipline agents who don't comply with the rules.

The order also requires MoneyGram to provide a clear and conspicuous fraud warning on the front of all its money transfer forms. The order's conduct provisions apply to all MoneyGram money transfers sent worldwide from either the United States or Canada.

Finally, MoneyGram will pay the Commission $18 million, which will be used to provide redress to consumers.

The makers of Super PoliGrip have apparently caved to consumer pressure, adding a zinc-related warning to packages of the popular denture cream. The move by GlaxoSmithKline (GSK) comes after dozens of lawsuits and a prominent medical article outlined the danger of zinc poisoning resulting from overuse of denture adhesives.

Zinc, a type of metal, is abundant in the earth's crust and is one of the most commonly found elements on the planet. Zinc is an essential human nutrient, and some amount is present in all foods. Indeed, a diet deficient in zinc can ultimately lead to nausea, an inhibited sense of taste, and decreased immune function.

That said, getting too much zinc is no picnic either. Excessive zinc intake over a long period of time can ultimately lead to anemia, pancreatic diseases, and decreased levels of HDL, also known as the "good cholesterol."

Boxes of Super PoliGrip now come with an insert informing consumers of the product's zinc content and warning generally that excessive zinc intake can lead to "serious health effects." The insert advises users who take zinc supplements to talk with their doctor. The insert warns that consumers should not use Super PoliGrip more than once a day, and that a regular-sized tube should last several weeks.

Both Super PoliGrip and Fixodent, another well-known adhesive, have been linked to cases of zinc poisoning. A disturbing 2008 article published in Neurology, a monthly medical journal, described four patients whose use of denture cream caused neuropathy, a nerve disorder affecting the central nervous system. The patients, who all used about two tubes of adhesive every week, suffered copper deficiency, which ultimately caused neurological problems. Neuropathy can cause distinct motor and sensory disturbances; the patients detailed in the article suffered from weakness in the limbs, poor balance, and urinary incontinence, among other things. At least one was confined to a wheelchair.

The U.S. Drug Watchdog, a consumer advocacy group, has taken the lead in warning consumers of the potentially fatal effects of denture-induced zinc poisoning. The group recently warned that inadequately labeled denture creams have the potential to create "the worst case of zinc poisoning in U.S. history." The Watchdog notes that the Food & Drug Administration (FDA) does not require companies to disclose the real danger of zinc poisoning posed by denture creams.

GSK, the manufacturer of Super PoliGrip, has already been hit with a number of lawsuits relating to denture-induced zinc poisoning. And they aren't alone; other denture cream manufacturers have also been served with complaints, most notably Procter & Gamble, which makes Fixodent. About thirty lawsuits against those two manufacturers alone have been consolidated and are being handled by Judge Cecilia Altonaga of the United States District Court for the Southern District of Florida.

Denture cream users should be on the lookout for signs of zinc poisoning. These symptoms include burning sensations, abnormal heartbeat, a metallic taste in the mouth, constipation or urine blockage, tingling in the extremities, poor balance, and slowed movements. Denture users who think they are experiencing zinc poisoning should immediately seek medical attention. The National Poison Control Center (800-222-1222) also has experts on hand who can provide instructions.

The Attorneys General of the 50 United States regularly stay in close contact on major issues, but are acting more and more in concert when it comes to consumer protection these days.

A case in point is what appears to be a coordinated crackdown on abusive debt settlement companies.

Last week New York Attorney General Andrew Cuomo won a lawsuit against against Nationwide Asset Services, barring it from doing business in New York unless its posts a $500,000 performance bond to protect consumers. Over the course of the summer, he took action against a number of New York-based firms that he said were engaging in abusive and illegal debt settlement practices.

Meanwhile, Florida Attorney General Bill McCollum announced his office has filed two lawsuits on behalf of Florida consumers against five debt settlement-related companies. According to the complaints, the businesses promised consumers they could pay off their debts for a fraction of the amount owed, but instead collected large up-front fees and left customers with little or no money to pay creditors.

"These victims were hit with a one-two punch: they paid substantial up-front fees for services not provided as promised, then ended up with increased debt, ruined credit, lawsuits, bankruptcy and more," McCollum said.

One of the lawsuits was filed against Texas-based CSA-Credit Solutions of America, Inc., a self-proclaimed debt settlement industry leader. The lawsuit alleges that CSA unlawfully charges significant advance fees before completing or, in many instances, commencing performance of its debt settlement services. CSA offers to settle consumers debts at approximately 50 percent of their balance within 12-36 months and, according to the lawsuit, falsely represents the success rate of its program.

Under the CSA plan, consumers are instructed to stop paying their creditors and start a savings account, supposedly to accumulate enough funds to allow CSA to negotiate a lump sum payoff of the debt. However, for the first three months, CSA allegedly withdraws 85 percent of the funds for its own fees, leaving the consumers with little or no money to negotiate a settlement with their creditors.

Additionally, while the consumer is trying to save enough for the lump sum payoff, he or she may suffer increased penalties for nonpayment to creditors, lawsuits, damage to credit scores, bankruptcy and more. McCollum's office has over 140 complaints, but estimates the company has thousands of Florida victims.

The second lawsuit filed names Clearwater-based ADA of Tampa Bay, Inc., which does business as American Debt Arbitration. The lawsuit also names the companys principal Glenn P. Stewart, as well as Arizona-based entities Nationwide Asset Services, Inc., Service Star, LLC, and Universal Debt Reduction, LLC.

The lawsuit alleges the defendants promise to help consumers pay off their debts at significant savings, but fail to adequately disclose the true cost of their services. Also allegedly withheld from consumers is the fact that the companies collect at least the first three months of payments as fees, in violation of Florida law, before the consumer can start accumulating any funds for settlement and before any services begin. During the savings period, consumers are counseled to cease all payments to and communications with their creditors. As a result, consumers suffer great financial harm and can be subject to increased penalties and lawsuits.

Because these companies do business nationwide, its not surprising they have attracted the scrutiny of so many attorneys general. In Illinois, Attorney General Lisa Madigan sued Credit Solutions of America in early October. West Virginia Darrel McGraw sued Able Debt Settlement in August.

Debt settlement firms are not new, but have proliferated in recent months as the economy plunged and more consumers struggled to pay credit card bills.

The man who led the auto industry bailout says he couldn't believe the condition in which he found General Motors when he took on the largest restructuring in American history.

Writing in Fortune magazine, Steven Rattner says he was "shocked by the stunningly poor management" he found, particularly at GM. He says what he encountered at the automaker was "perhaps the weakest finance operation any of us had ever seen in a major company."

Rattner says it became obvious very quickly that any management team that had burned through $21 billion of cash in a year and another $13 billion in the first quarter of 2009 could not be allowed to continue.

At GM's Detroit headquarters, Rattner says, the top brass were "sequestered on the uppermost floor, behind locked and guarded glass doors. Executives housed on that floor had elevator cards that allowed them to descend to their private garage without stopping at any of the intervening floors."

He says that in the few interactions he had with chairman and CEO Rick Wagoner, he found him be "likable, dedicated, and generally knowledgeable." But he says Wagoner set a tone of "friendly arrogance" that seemed to permeate the organization.

Rattner writes that Waggoner told him, "I'm not planning to stay until I'm 65 but I think I've got at least a few years left in me. But I told the last administration that if my leaving would be helpful to saving General Motors, I'm prepared to do it."

Rattner concluded, "If ever a board of directors needed shuffling, it was GM's, which had been utterly docile in the face of mounting evidence of looming disaster." He says he and his team decided to recommend, among other things, that Waggoner be replaced by Fritz Henderson as interim CEO, changing at least half of the board, and making an outside director chairman.

Cybercriminals are employing increasingly persuasive online scare tactics to convince users to purchase rogue security software, according to a report from Symantec Corp.

Rogue security software, or "scareware," is software that pretends to be legitimate security software. These rogue applications provide little or no value and may even install malicious code or reduce the overall security of the computer.

"Scareware creators can scam thousands of people for comparatively small amounts of money all at the same time and make huge aggregate profits," said David Wall, PhD. professor, Centre for Criminal Justice Studies, University of Leeds. "This type of fraud works because the fake security software tricks users into believing they have an immediate threat which only their program can resolve. Ultimately, it's a con. I would advise Internet users to be careful while online and only download from trusted sources."

Marci of Wildomar, California, has experience with such sites. She tells ConsumerAffairs.com that a virus software called Anti Virus 2010 invaded her computer. "This program announced my pc had a virus and my computer was going to crash. Then a screen popped up to remove it. I clicked. It took me to a pay $40 site." Marci writes that in a panic, she paid the $40.

She downloaded the program and says it was a hoax. "I contacted them via email. They sent me a generic reply. In the process of paying, they have all of my information including the last 4 digits of my social. My bad!! The result could be identity theft."

To encourage unsuspecting users to install their rogue software, cybercriminals place website ads that prey on users' fears of security threats. These ads typically include false claims such as "If this ad is flashing, your computer may be at risk or infected," urging the user to follow a link to scan their computer or get software to remove the threat.

According to the study, 93 percent of the software installations for the top 50 rogue security software scams were intentionally downloaded by the user. As of June 2009, Symantec has detected more than 250 distinct rogue security software programs.

The initial monetary loss to consumers who download these rogue products ranges from $30 to $100. However, the costs associated to regain one's identity could be far greater. Not only can these rogue security programs cheat the user out of money, but the personal details and credit card information provided during the purchase can be used in additional fraud or sold on black market forums resulting in identify theft.

To make matters worse, some rogue security software actually installs malicious code that puts users at risk of attack from additional threats. As a result, installing these programs can lower the security posture of a computer while claiming to strengthen it.

For example, rogue programs may instruct the user to lower or disable any existing security settings while registering the bogus software or prevent the user from accessing legitimate security Web sites after installation. This, in turn, leaves users exposed to the very threats the rogue software promised to protect against.

Deceptive ads

There are several methods employed to trick users into downloading rogue security software, many of which rely on fear tactics and other social engineering tricks. Rogue security software is advertised through a variety of means, including both malicious and legitimate Web sites such as blogs, forums, social networking sites, and adult sites.

While legitimate Web sites are not a party to these scams, they can be compromised to advertise these rogue applications. Rogue security software sites may also appear at the top of search engine indexes if scam creators have seeded the results.

To increase the likelihood of fooling users, rogue security software creators design their programs so that they appear as credible as possible, mimicking the look and feel of legitimate security software programs. In addition, these programs are often distributed on Web sites that appear credible and enable the user to easily download the illegitimate software.

Some malicious sites actually use legitimate online payment services to process credit card transactions and others return an e-mail message to the victim with a receipt for purchase -- complete with serial number and customer service number.

Middlemen

Cybercriminals are profiting from a highly organized pay-for-performance business model that pays scammers to trick users into installing bogus security programs. According to the study, the top ten sales affiliates for the rogue security distribution site TrafficConverter.biz reportedly earned an average of $23,000 per week during the 12-month study period of the report, or almost three times the weekly salary of the President of the United States.

These practices are similar to the affiliate marketing programs made popular by online retailers. Affiliate marketing programs reward participating affiliates or members for each visitor or directed to the online retailer's website due to the affiliate's marketing efforts. Through this model, affiliates of rogue software scams can earn between $0.01 and $0.55 for every successful installation.

The highest prices are paid for installations by users in the U.S., followed by the U.K., Canada, and Australia. Some distribution sites also offer their affiliates incentives in the form of bonuses for a certain number of installs, as well as VIP points and prizes such as electronics and luxury cars.

"The findings of our Report on Rogue Security Software make it clear that cybercriminals are willing, eager, and well-equipped to prey on today's Internet user," said Stephen Trilling, Senior Vice President, Symantec Security Technology and Response. "To avoid becoming a victim of such predatory practices, Symantec strongly urges Internet users to make sure they are using the latest security protection and always obtain their security software directly from trusted vendors' websites."

What to do

To protect against rogue security software, Symantec recommends that both enterprises and users:

• Avoid following links from emails, as these may be links to spoofed or malicious websites. Instead, manually type in the URL of a known, reputable website.

• Never view, open, or execute email attachments unless the attachment is expected and comes from a known and trusted source. Be suspicious of any emails that are not directly addressed to your email address.

• Be cautious of pop-up windows and banner advertisements that mimic legitimate displays. Suspicious error messages displayed inside the Web browser are often methods rogue security software scams use to lure users into downloading and installing their fake product.

At a time when the cost of many things are actually going down, the price of a college education continues to go up.

Tuition costs at the average four year public college rose 6.5 percent, to just over $7,000, according to a report by the College Board. The board attributed the hike in tuition costs to declines in state support and endowment declines.

The financial difficulties facing households across the nation are putting increased pressure on financial aid budgets, the report said. Although grant aid also rose significantly in 2008-09, the latest year for which data are available, student borrowing continues to increase, as does the gap between available resources and the overall cost of attending college.

Trends in College Pricing 2009 and Trends in Student Aid 2009 provide insight into how colleges and universities and their students are grappling with recent economic pressures.

"It is vital that we assure access to a high-quality college education for all students," said College Board President Gaston Caperton. "While a college education is critical to long-term financial security, it feels out of reach to many students and families in today's economy."

Colleges want more aid

Caperton said states and institutions must increase their efforts to reduce costs and to prevent tuition from rising as rapidly as it has in the past.

"We must provide generous financial aid for those who most need the funds and help students and families to understand the wide array of options available to them in our diverse educational system," he said.

The average published price of tuition and fees for in-state students at four-year public colleges in the U.S. is $7,020 in 2009-10, $429 higher than a year ago. After adjusting for inflation, the average net price paid for tuition and fees by public four-year college students overall is lower in 2009-10 than it was five years ago -- but higher than it was last year.

Like published prices for tuition and fees, expenses for food, housing, books and supplies, and other living costs continue to rise more rapidly than the rate of inflation, and only at public two-year colleges does grant aid for the average student stretch beyond tuition and fees.

Community colleges a better value

Undergraduate tuition and fees at public two-year colleges in 2009-10 average $2,544, compared to $5,930 at public colleges awarding baccalaureate degrees, $6,094 at public masters universities, and $7,797 at public doctorate-granting universities.

In the private not-for-profit sector, tuition and fees average $24,040 at baccalaureate colleges, $23,700 at masters universities, and $32,349 at doctorate-granting universities. About 19 percent of full-time private college students are enrolled in institutions with published prices below $18,000, and 20 percent attend institutions with prices $36,000 or higher.

Grant aid increasing 3.4 percent per year

About two-thirds of full-time undergraduates receive grants. In 2008-09, they received an average of $5,041 in grant aid per full-time equivalent student, supplemented by $4,585 in federal loans. Forty-one percent of all grant aid to postsecondary students was provided by colleges and universities, 32 percent by the federal government, 11 percent by states, and 16 percent by employers and other private sources. Over the decade from 1998-99 through 2008-09, grant aid per undergraduate student increased at an average of 3.4 percent per year after adjusting for inflation.

In 2007-08, public four-year institutions distributed about two-thirds of their institutional grant aid without regard to financial circumstances. Students from families with incomes below $32,500 received an average of $700 in non-need-based and $830 in need-based institutional grant aid, compared to $940 and $300, respectively, for those from families with incomes between $60,000 and $100,000. Students at private not-for-profit four-year institutions receive significantly more institutional grant aid than do those at public colleges and universities, and the patterns of that aid differ considerably at institutions with different prices.

A class action lawsuit accuses Gateway of assigning consumers' warranties to an insolvent company, leaving loyal customers with existing warranties out in the cold.

The complaint, filed in federal court in California, says that Gateway pushed extended warranties as a way to distinguish the company in the wake of the dot-com bust of the early 2000s. The company reassigned outstanding warranties to MPC Corporation, a company that was on the brink of insolvency. As part of the arrangement, Gateway acquired a 19 percent ownership stake in MPC and pumped $10 million into the ailing company.

A few months later, MPC, already teetering on the edge of insolvency, went under. When customers with seemingly valid warranties turned to Gateway, the company refused to help.

The suit alleges that Gateway knew -- or, at the very least, should have known -- that MPC was financially troubled when it assigned the warranties. The complaint points out that MPC's financial form for the period ending September 30, 2007 warned that "there can be no assurance that we will be able to continue...due to our significant liquidity constraints, unprofitable operations and negative operating cash flows."

But, according to the plaintiffs, the assignment was part of a struggling Gateway's larger plan to be acquired by Acer, the Taiwan-based electronics conglomerate. The plaintiffs say that Gateway "was a rising star in the 1980s and early 1990s," but that the burst of the so-called technology bubble left the company "unable to regain its star status in the competitive computer marketplace."

Acer ended up acquiring most of Gateway in August 2007, in a $710 million deal that made Acer the world's third-largest PC vendor. Gateway held onto its "Professional Division," however, which it then sold to MPC a week after the Acer acquisition. The Professional Division sold computers mostly to educational institutions and small businesses, and carried a warranty liability of $60 million.

Unloading this division onto MPC, the plaintiffs contend, was an attempt by Gateway to free itself of contractual obligations to consumers. The suit predicts that "discovery will reveal that Gateway's $10 million investment was the pay-off to MPC for assuming liabilities that MPC never intended to honor."

The lawsuit's lead plaintiff, Peter Wilson, bought a Gateway laptop to take to college in 2005 and shelled out over $1,500 for the extended warranty. In February 2009, with a year left on Wilson's warranty, his machine completely stopped working. When he called Gateway, the company gave him the runaround, repeatedly directing him to MPC even though that company had been out of business for well over a year. According to the suit, Gateway told Wilson "that it was no longer responsible to warrant his computer."

The suit contends that thousands of consumers are in the same situation as Wilson. Worse, many of these individuals are students who acquired their machines through Gateway's Professional Division.

Wilson alleges breach of contract, breach of the covenant of good faith and fair dealing, and unjust enrichment.

Seeking to recover more than $200 million in illegal overcharges and penalties, Attorney General Edmund G. Brown Jr. today announced that he has filed suit against State Street Bank and Trust -- one of the world's leading providers of financial services to institutional investors -- for committing "unconscionable fraud" against California's two largest pension funds -- CalPERS and CalSTRS.

The suit, which was unsealed today by a Sacramento Superior Court judge, contends that Boston-based State Street illegally overcharged CalPERS and CalSTRS for the costs of executing foreign currency trades since 2001.

"Over a period of eight years, State Street bankers committed unconscionable fraud by misappropriating millions of dollars that rightfully belonged to California's public pension funds," Brown said. "This is just the latest example of how clever financial traders violate laws and rip off the public trust."

The case was originally filed under seal by whistleblowers -- "Associates Against FX Insider Trading," who alleged that State Street added a secret and substantial mark-up to the price of interbank foreign currency trades. The interbank rate is the price at which major banks buy and sell foreign currency.

Subsequently, Brown launched an independent investigation into the allegations.

Brown's investigation revealed that State Street was indeed overcharging the two funds. Despite being contractually obligated to charge the interbank rate at the precise time of the trade, State Street consistently charged at or near the highest rate of the day, even if the interbank rate was lower at the time of trade.

Additionally, State Street concealed the fraud by deliberately failing to include time stamp data in its reports, so that the pension funds could not determine the true execution costs by verifying when State Street actually executed the trades. Commenting on this deception, one State Street senior vice president said to another executive that "...if providing execution costs will give [CalPERS] any insight into how much we make off of FX transactions, I will be shocked if [State Street] or anyone would agree to reveal the information."

Brown's office estimates that the pension funds were overcharged by more than $56.6 million over eight years. The lawsuit asks for relief in the amount of triple California's damages, civil penalties of $10,000 for each false claim; and recovery of costs, attorneys' fees and expenses. It is estimated that damages and penalties could exceed more than $200 million.

Under California's False Claims Act, anyone who has previously undisclosed information about a fraud, overcharge, or other false claim against the state, can file a sealed lawsuit on behalf of California to recover the losses. They must notify the Attorney General as well.

Such a case is called a "qui tam" case. If there is a monetary recovery, the law provides that the whistleblower "qui tam plaintiff" receives a share of the amount recovered if the requirements of the statute are met.

At the start of the foreclosure crises, personal finance experts urged struggling homeowners to contact their lenders if they started to fall behind on their mortgages. The lenders want to do everything they can, homeowners were told, to avoid a foreclosure.

Now, the experts aren't so sure that's the case.

Consumers who have jumped through a frustrating series of hoops to achieve a mortgage modification a lower interest rates or more manageable payments are convinced that old conventional wisdom is flawed.

Jason, of San Diego, says he's become frustrated trying to complete a loan modification.

"I have gone through the modification process but have been denied, although no clear explanation was provided," Jason told ConsumerAffairs.com. "I have been seeking assistance and guidance from quite a few bank representatives and have only received rude, misguided information."

In the last year ConsumerAffairs.com has received hundreds of complaints from consumers who said they followed loan modification instructions, faxing requested documents repeatedly, only to have their applications disappear into a black hole.

"I faxed papers repeated times and was told that I need to fax more or that they never received them so they can start a modification," Maria, of Sussex, N.J., told ConsumerAffairs.com. "I made payments and they never credited my account. Now they calls in October 2009 and they tell me that they stopped the modification because I never faxed out the papers. Is this a joke!"

The same story

Regardless of the loan servicer, the story seems to be the same. Consumers start down a road they think will lead to a modified mortgage, only to meet a wall of incompetence and indifference at the mortgage company.

"We sent all information requested by certified mail," Regina, of Whitefish Bay, Wisc., told ConsumerAffairs.com. "As the others have described, we have had to make contact. They do not respond. The usual answer is 'Whoever told you that is wrong.' I actually have a tape of one of their agents stating 'I can't be responsible for what someone else told you.' Should not they be required to respond in writing? Is this not a government funded program?"

The Treasury Department did, in fact, begin a loan modification program in March 2009 to encourage loan servicers to modify troubled loans to prevent foreclosures. But the process has proved slow, and for many, frustrating. Meanwhile, foreclosures continue unabated.

A new report by the National Consumer Law Center says its no mystery why loan servicers seem to be dragging their feet in modifying troubled mortgages. The report suggests these companies actually stand to profit if the troubled property goes to foreclosure.

The report, "Why Servicers Foreclose, When They Should Modify, and Other Puzzles of Servicer Behavior," reveals that servicers, unlike investors or homeowners, generally dont risk losing money on foreclosures.

"One common sense solution to the foreclosure crisis is to modify the loan terms in more instances," said Diane Thompson, a NCLC attorney and author of the report. "Foreclosures are a costly ordeal for the homeowner, the lender, and the community. Yet they continue to outstrip loan modifications because servicers have no incentive to help borrowers stay in their homes."

Doesn't own loan

In almost every case, the loan servicer doesn't own the loan. It's simply a company -- usually a bank -- hired to collect the money from the homeowner and deliver the funds to the investors who own the mortgage. The investors lose money if the property goes to foreclosure, but the servicer doesn't.

Homeowners seeking to save their homes by modifying unaffordable loans typically deal with servicers. That is why the financial interests of servicers have the potential to hurt homeowners, the report says.

And too many of those financial incentives encourage servicers to ignore the interests of homeowners. For example, the report suggests that servicers often deny homeowners principal and interest rate reductions because as servicers they find it profitable to offer repayment plans or forbearance agreements that do little to reduce homeowners' debt burdens.

"Loan modifications inevitably cost the servicer something," the report says. "A servicer deciding between a foreclosure and a loan modification faces the prospect of near certain loss if the loan is modified, and no penalty, but potential profit, if the home is foreclosed."

The NCLC report also found that the lack of third-party oversight allows servicers to pursue foreclosure instead of effective loan modifications that would benefit homeowners as well as investors. While credit rating agencies and bond insurers do monitor servicers, their oversight too often encourages servicers to foreclose.

The NCLC report includes a detailed examination of loans in foreclosure from 1995-2009 and how components of servicer compensation affected the likelihood and speed of foreclosure. It also looks at the rise of the servicer industry as a by-product of securitization; and the limited, but only effective oversight of servicers by credit rating agencies and bond insurers.

No incentives

The people who could change the way servicers are doing business -- Congress, the Administration, and the Securities and Exchange Commission -- and the market participants who set the terms of engagement -- credit rating agencies and bond insurers -- have failed to provide servicers with the necessary incentives to reduce foreclosures and increase loan modifications, Thompson said.

The report suggests that rule changes remove the financial incentives for servicers to block modifications and mandate loan modifications before a foreclosure as a matter of law. Until it does, the report says, the foreclosure crisis will continue.

"I feel that I have been set up to lose my house," Alesea of Kinston, N.C., told ConsumerAffairs.com. "Where is the justice in this?"

October 20, 2009
Hurricane Katrina devastated the Gulf Coast four years ago, but the impact is still being felt in southern Mississippi. In the wake of the storm's devastation, scam artists spread man-made havoc across the region as well.

Mississippi Attorney General Jim Hood says two out-of-state contractors have been arrested for felony home repair fraud against Katrina victims on Mississippis Gulf Coast.

Carlos Enrique Sanchez of Pearland, Texas (dba Mineo Homes) was arrested on three indictments for felony home repair fraud. Sanchez and his now former business partner, Samuel Mineo were indicted for failing to do work they were paid to do on three homes that were lost due to Hurricane Katrina.

Mineo turned himself in to the Attorney General's Office in October 2008. Sanchez did not turn himself in after agreeing to do so and has since been considered "on the run." The Mississippi Attorney General's Office requested the assistance of the Texas Attorney General's Office after learning Sanchez was in Texas. He was arrested in Austin, TX on September 16, 2009 by the Texas Attorney General's Office and returned to Mississippi last week by the Harrison County Sheriff's Office.

Sanchez was booked into the Harrison County Adult Detention Center. He faces up to 10 years and/or a $10,000 fine, plus restitution to the victims. The case was investigated by the Consumer Protection Division of the Attorney Generals Office and will be prosecuted in conjunction with District Attorney Cono Carannas Office.

"We would like to thank Texas Attorney General Greg Abbott, Travis County Texas Sheriff Greg Hamilton and both of their offices for all of their work in this case," Hood said. "Their teamwork combined with the efforts of Harrison County Sheriff Melvin Brisolara, District Attorney Cono Caranna and their offices will make sure this case reaches a just resolution."

Additionally, Ed Schreader, age 43, from Birchwood, Tenn., working for Hurricane Relief Corp., was arrested on this month following an indictment for one count of Felony Home Repair Fraud.

The Consumer Protection Division of the Mississippi Attorney General's Office investigated the case and obtained the indictment following allegations by a Gulfport homeowner that Schreader obtained $30,000 to fix a home damaged by Hurricane Katrina, but failed to do the work.

The indictment was served by the Harrison County Sheriffs Office and Schreader was booked into the Harrison County Adult Detention Center where he posted $5,000 bond. If convicted, he faces up to 10 years and/or a $10,000 fine plus restitution to the victim.

Many agencies share responsibility for ensuring the safety of the increasing volume of imported food, including the Food and Drug Administration (FDA), the Agriculture Department's Food Safety and Inspection Service (FSIS), and Homeland Security's Customs and Border Protection division.

But in a report made public recently, the Government Accountability Office (GAO) found those agencies' efforts are hampered by what the GAO said are gaps in enforcement and collaboration.

The GAO found that while importers report information about food shipments to the Customs agency, that agency's computer system does not notify FDA or FSIS when shipments arrive at the border, increasing the risk that contaminated food passes through border checkpoints undetected.

The report found that Customs and FDA do not use a unique identification number for importers, making it difficult for FDA to track high-risk imports and importers. The government watchdog also said that FDA lacks the authority to fine importers who don't comply with its regulations. As a result, importers can ignore rules against selling food shipments before they are cleared by FDA.

"A high and growing portion of the American food supply is imported, so it is essential that those foods meet U.S. safety standards," said CSPI food safety director Caroline Smith DeWaal. "Border inspection provides an important -- and sometimes the only -- food safety checkpoint. GAO describes a food safety framework for imports that doesn't keep the regulators 'in the loop' to the extent that they can inspect risky products before they are released to the public."

In July, the House of Representatives passed the Food Safety Enhancement Act with broad, bipartisan support. That measure would give FDA the authority to require food processors to design and implement food safety plans, provide specific safety standards that growers would have to meet, establish and pilot test tracking systems for foods, and require FDA to visit inspect food facilities regularly. It also addresses problems identified in the GAO report.

The House bill calls for closer collaboration between the Customs and Border Protection and the FDA, requires each importer to have and use an unique identification number that is registered with FDA, and gives FDA authority to impose civil fines. In the Senate, similar legislation, sponsored by Sen. Richard Durbin (D-IL), is pending.