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Earlier this year, we reported on a California-based adoption firm accused of defrauding dozens of would-be parents. Our story spurred California lawmakers to take action, and late last month, Governor Arnold Schwarzenegger signed a bill to curb adoption fraud. Michael Montgomery of American RadioWorks reports.

MICHAEL MONTGOMERY: At about this time last year, we went to Napa, California to interview the president of Yunona, a company billing itself as a specialist in international adoptions.

(Soundbite of American RadioWorks interview)

MONTGOMERY: I'm a reporter. I'm looking for Mr. Jerdev.

Unidentified Woman: He is busy right now.

MONTGOMERY: Ivan Jerdev advertised foreign orphans, mainly from the former Soviet Union, on the company's Web sites. The parents who signed contracts with Yunona told us the orphans were often not available or had serious medical conditions. In some cases the problems were so severe that orphans adopted through Yunona were put in institutions or returned to their native countries. Parents and former employees told us Yunona ignored complaints and pocketed thousands of dollars in fees. Jerdev denied the allegations.

(Soundbite of American RadioWorks interview)

Mr. JERDEV: No, no, never. I can, you know, put my life on it.

MONTGOMERY: But within months, his business collapsed. After our report was broadcast, Napa police closed Yunona's headquarters. Jerdev was arrested in his native Russia, where he had fled, and in Sacramento, State Senator Liz Figueroa held hearings.

State Senator LIZ FIGUEROA (Democrat, California): It was so emotionally charged, because we had people that had put all of their hopes and dreams and really felt that they were going to be a part of a family, and all of a sudden this did not happen.

MONTGOMERY: Figueroa was struck by the numbers. Fraud allegations against Yunona touched as many as 160 families across the nation, with losses approaching $2 million.

State Sen. FIGUEROA: And, yeah, you might say one, two families, but when it comes to these number of families, you know that people were going out to get them. It was intentional theft, actually, in many instances.

MONTGOMERY: Figueroa says Yunona's use of the Internet was especially troubling, giving the case national and international implications. Adoption fraud has proliferated as more families seek orphans abroad. One factor: so-called adoption facilitators, like Yunona, that use loopholes in state and federal laws. In some places, facilitators can offer the same kind of services as a licensed adoption agency, but they need little more than a business license.

State Sen. FIGUEROA: We could not believe it. We could not believe the lack of adequate oversight or regulation on this particular group of facilitators, and we felt the state really had an obligation to do something about it.

MONTGOMERY: Figueroa sponsored legislation, now signed into law, that puts new safeguards on adoption facilitators operating in California. The law requires facilitators to post bonds and to undergo background checks and training in social work. It also bans the advertising of orphans, including posting their photos on the Internet. Advocates say the legislation is an important step in stamping out abuses. Beth Hall directs Pact, a nonprofit alliance of adoption groups.

Ms. BETH HALL (Director, Pact): Well, this legislation makes it so that you - that children cannot be dangled in front of people in order to get them to plunk down money. That's what they're trying to address, and I think it's a beginning.

MONTGOMERY: Still, at least 16 states continue to permit adoption facilitators to operate with minimal oversight, according to the federal government, and Beth Hall says adoption has become a lucrative industry that attracts a few unsavory players. She says this is an issue not addressed in the California legislation.

Ms. HALL: Remember, there's a supply and demand, if you will, and I use quotes here which you can't see on the radio. The supply is babies, the demand is adoptive - pre-adoptive parents who are eager to become parents. And a marketplace mentality can easily take over.

MONTGOMERY: The Yunona case was compounded by lack of federal laws. The United States has signed the Hague Convention on Intercountry Adoption. The Convention sets a tough accreditation process for adoption groups. But the U.S. has waited 12 years to implement the accord. U.S. officials are hopeful this will final happen next year. Maura Harty is the assistant secretary of state for consular affairs.

Ms. MAURA HARTY (Assistant Secretary of State for Consular Affairs): The agencies who seek to be accredited under the convention are agencies that will essentially have a very, very high bar that includes a very, very strict disclosure on fees. It will call for professional credentials for their employees. There are strong internal controls required for both their records-keeping as well as their finances.

MONTGOMERY: But the Hague Convention will apply only if countries providing orphans for adoptions also ratify the treaty, and so far Russia has not. Russian authorities, meanwhile, have accused Ivan Jerdev of fraud and child trafficking, and they've linked Yunona to the adoption of a Russian boy murdered by his mother in Illinois. So far they've not set a date for Jerdev's trial. For NPR News and American RadioWorks, I'm Michael Montgomery.

LYDEN: American RadioWorks is a documentary unit of American Public Media.

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