Original URL: http://www.azcentral.com/arizonarepublic/news/articles/0215protectors15.html
State strains to aid consumers
The Arizona Republic
Feb. 15, 2004 12:00 AM
Amanda J. Crawford

Budget cuts hamper agencies' ability to fight fraud

Several thousand bright yellow folders are stacked in the Arizona Attorney General's Office.

The consumer-fraud complaints from across the state will sit up to four months before being seen by an attorney.

They include allegations about swindlers and cheats, false advertisements, broken deals and scams. Some are from people who have lost money and even homes and want the state to help.

But short-staffed after years of hiring freezes and layoffs, the office's consumer protection section has a hard time even reviewing the complaints, let alone prosecuting them.

It is a problem that has become common among state agencies. From the Department of Agriculture to the Department of Weights and Measures, the ability of the state to protect the public may have reached a modern low.

"I think everyone is feeling the pinch, but consumers are feeling it the worst," said Cecilia Esquer, chief counsel of the attorney general's public advocacy division "They are losing their homes and they are going without because the state does not have the resources to protect them."

Many state agencies charged with protecting consumers are facing steep odds.

Arizona's population has grown swiftly in the past decade: more than 40 percent. More advanced technologies, like the Internet, are making scams more rampant and sophisticated, albeit somewhat easier to report. And the weak economy has some families more financially vulnerable.

Staffing has shrunk

But staffing at many agencies has shrunk in recent years as the Legislature held the line or cut spending. Which means there are fewer protectors - investigators, inspectors, compliance officers, attorneys and regulators - to pursue the interests of Arizona citizens.


Bad real estate agents and brokers could be practicing longer, as investigations in the Real Estate Department take twice as long to complete as they did a year ago.

In a slow economy, merchants may try to cut corners, officials warn. But there are fewer than half the inspectors in the Department of Weights and Measures than there were a decade ago to make sure a gallon of gas is really a gallon or that a cereal box weighs the amount advertised.

Imported red fire ants and exotic fruit flies are among the pests that may be more likely to wreak havoc in Arizona since some agricultural inspection stations are no longer open 24 hours a day and several are understaffed.

Internet sales gone bad, predatory lending practices that cost families their homes and bad credit-repair schemes are among the more than 15,000 written complaints filed with the attorney general's consumer protection and advocacy section every year. Attorneys are about four months behind reviewing those complaints for fraud.

Identity theft is growing in Arizona, affecting thousands of residents every year. But with half the staff it had 15 years ago, the attorney general's criminal unit is unable to keep up.

Budget cuts hurt

The budgets of many of the agencies charged with some consumer-protection functions have not kept pace as complaints and workloads have increased.

Jack Gillis, director of public affairs for the Consumer Federation of America, said this is happening across the country as states face high deficits and lower revenues. Agencies that protect consumers are often some of the first to get cut because they are not revenue producers and sometimes their services are taken for granted, he said.

"We consumers have come to assume that these agencies are doing their jobs," Gillis said. "We assume that every time we pump a gallon of gas that we are getting a gallon and every time we buy a pound of hamburger we get a pound of hamburger. Because these assumptions are so ingrained, the role of the agencies is critically important."

Republican Sen. Bob Burns, chairman of the Appropriations Committee, said that in some cases "the onus falls back on the consumer to do more to protect themselves."

While he said he is concerned about agencies' ability to protect the public, the state has only so much money to go around without raising taxes or accumulating more debt.

"That is one of our primary functions, to protect the public, but there is always the bottom line of need," he said. And differentiating between the wants and critical needs of an agency can be difficult for the Legislature, he said.

During a bad economy, though, is when citizens need the government's help the most, said Phyllis Rowe, president emeritus of the Arizona Consumer Council.

As next year's budget cycle is beginning, several state agencies warn that they cannot sustain further cuts.

The Attorney General's Office has seen $5.4 million in budget cuts in the past two years. Those cuts resulted in the loss of 133 positions, including 29 percent of its attorneys and many investigators, mostly in the criminal, civil rights and consumer protection divisions, said Richard Travis, special assistant attorney general. Though a one-time infusion of $1.5 million last summer allowed 23 positions to be filled in the criminal division for this fiscal year, staffing remains low.

And officials say this has affected their ability to protect the public.

"We are severely short-staffed in those areas," Attorney General Terry Goddard said, noting that the state has a high number of more vulnerable groups, like non-English speakers and the elderly. As the agency's responsibility extends to areas like the Internet, he said, "I don't feel satisfied that we have the resources to really make a difference."

This problem is not unique to Arizona. In California, for example, the Attorney General's Office is also facing hiring freezes. Still, cuts have not been as deep as in Arizona - yet. If California voters do not approve a $15 billion bond issue in the spring, layoffs are almost guaranteed, said Nathan Barankin, communications director.

Targeted efforts

After three attorneys were lost to hiring freezes and layoffs, there are now just four attorneys working on consumer fraud in the Arizona Attorney General's Office, Esquer said.

With about 15,000 written complaints filed with the office each year, as many as possible are resolved voluntarily by forwarding them to the merchant. Nearly $2 million in goods and services for consumers was recovered that way in the past year. But when the issue is more difficult to resolve, the attorneys must put "efforts where there is the most good," Esquer said.

That includes major cases like one settled with Qwest last year for $3.75 million and a recent multistate lawsuit against Household/Beneficial Corp. for predatory lending practices that netted $7.1 million for Arizonans.

But Esquer said she is worried about thousands of other complaints that may wait so long to be pursued that viable cases are no longer possible. Those complaints are confidential and are not available for public scrutiny.

"There are major issues that are not being addressed because we don't have the attorneys to address them," Esquer said.

During tight budget years, agencies should look for "creative" ways to accomplish their goals and protect the public without necessarily increasing staff, advises Melanie Chesney, performance audit director for the Arizona Auditor General's Office.

Rene Rebillot, new chief counsel of the attorney general's consumer protection section, said she is looking for ways to get ahead of the backlog of consumer fraud complaints. Through yellow folder "blowout" days and weekly staff work sessions, she has reduced the backlog from six to four months, she said.

Goddard said his office is also beginning to use volunteers and planning more education activities to reach the public before they get caught up in a problem.

Citizens can take some consumer fraud matters into their own hands by hiring an attorney or filing a civil case on their own.

But since the criminal side of the Attorney General's Office is also short-staffed, there are cases that could be criminally prosecuted that are falling to the wayside.

Donald Conrad, chief counsel of the criminal division, said one of his biggest concerns is identity theft, a crime that is growing because of the ability to get credit over the telephone or online without providing proof of identity. Arizona ranked first in the nation last year in identity theft complaints, according to the Federal Trade Commission.

In an e-mail last year, a criminal division attorney told a consumer advocate not to send citizens with identity theft complaints to the office anymore.

"We are now desperately short-handed and are having to close investigations instead of charging the cases," special counsel Gail Thackeray wrote. "Sorry, but it's pretty depressing around here at the moment."

Goddard said things have improved somewhat since last year. There are now two attorneys who work on cybercrimes, including identity thef. But, he acknowledges, his office has "virtually no investigative capacity" even though he said they are the primary prosecutors of identity theft in the state.

Lost opportunity

In the Agriculture Department, officials worry about catching dangerous pests and animal diseases entering the state after budget cuts and staff reductions that began more than a decade ago have forced the department to close some port-of-entry inspection stations and operate others with reduced hours.

Over the past few years, the department has seen its budget cut more than 20 percent and the plant services division has lost 13 percent of its staffing. John Caravetta, associate director of that division, said some inspection stations that should be open 24 hours a day, seven days a week to inspect trucks and other vehicles carrying produce and other goods, particularly from quarantined areas of the United States, are now open as little as 40 hours a week. Three of the seven stations are closed two days a week. And transporters are taking notice, he said. Some now time their arrivals in Arizona to the off hours, so they won't face inspection.

Imported red fire ants, which can kill, can enter the state in a truckload of construction materials. Exotic fruit flies, like those that cost $30 million to eradicate from 186 square miles in Southern California in 2002, can hitchhike in a truck full of melons.

Safeguards slipping

"This is a huge issue," Caravetta said, adding that the department also is responsible for seeking out potential bioterrorism. "It is lost opportunity to safeguard the public."

The Real Estate Department is struggling to deal with complaints that are at an all-time high, while the agency's staffing is lower than it has been in more than a decade. In fiscal 2003, the department received 1,059 complaints, up 62 percent from the previous year. This fiscal year, the department has received almost twice as many complaints as it had at this time last year.

The result: the time it takes for the department to resolve complaints has risen from an average of 105 days in fiscal 2003 to about 200 days now. The department announced recently that it would begin immediately suspending the licenses of any real estate agents or brokers who pose major threats to the public, but otherwise bad practitioners may be in action longer.

The odds are also piling up against inspectors in the Department of Weights and Measures, responsible for inspections - from scales and scanners to packaged goods - at an estimated 70,000 retailers statewide.

A decade ago, the department's inspection staff was chopped in half after an auditor general's report suggested random rather than yearly inspections. But in the decade since, Arizona's economy and population ballooned and Weights and Measures staffing continued to shrink. Directors are especially concerned about their ability to protect consumers and fair commerce in the western and southern parts of the state.

"Our resources need to be in step with that growth in order for us to serve industry and protect consumers," Director Art Macias said.

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