State AG Monitor

State AGs in the News

Posted in Antitrust, Consumer Financial Protection Bureau, Consumer Protection, Data Privacy, Employment, Environment, False Claims Act, Health Care, Mortgages/Foreclosures, State AGs in the News, States v. Federal Government

Antitrust

Settlement to Resolve Allegations of Unlawfully Restrained Competition Obtained by New York Attorney General

  • New York AG Eric Schneiderman settled with waste hauling company Casella Waste Systems, Inc. to resolve allegations that it unlawfully restrained competition by combining restrictive contracting practices with market dominance and a pattern of acquiring smaller competitors.
  • The company’s contracts allegedly required it to be an exclusive provider, had long terms and severe early termination penalties, and allowed the company the right to match any competing offers. The AG alleged that long and restrictive contracts could entrench the market position of a dominant firm. The AG also alleged that the company had further strengthened its position through a pattern of acquiring smaller companies in key markets.
  • The settlement requires Casella to change its contracts, report any acquisitions of competitors to the AG, and pay the state $100,000. According to the AG, Casella entered into similar settlements with the Vermont AG in 2002 and 2011.

Consumer Financial Protection Bureau

Consumer Financial Protection Bureau Enforcement Action Against Financial Services Company Results in $10 Million Recovery

  • The Consumer Financial Protection Bureau (CFPB) took enforcement action against Ace Cash Express for alleged use of illegal debt collection practices, resulting in a consent order that requires Ace to pay $5 million in consumer restitution and a $5 million civil penalty.
  • The CFPB alleged that Ace engaged in unfair, deceptive, and abusive practices to collect consumer debt by threatening litigation or criminal prosecution, threatening to charge extra fees and report consumers to credit agencies, and harassing consumers with collection calls. The CFPB further alleged that these practices created a false sense of urgency to pressure borrowers into taking additional loans that they could not afford.
  • The order requires Ace to refund $5 million in consumer payments, including fees and finance charges; pay a $5 million civil penalty; not engage in any unfair or deceptive collection practices; not use any abusive practices; submit a compliance plan to the CFPB; and be subject to further reporting and recordkeeping requirements.

CFPB Sues Law Firm for Allegedly Wrongful Debt Collection Practices

  • The CFPB sued Frederick J. Hanna & Associates and three of its principal partners for allegedly using illegal tactics to intimidate consumers into paying debt that they may not owe.
  • The CFPB alleges that the firm filed hundreds of thousands of debt collection lawsuits, often relying on deceptive court filings and faulty or unsubstantiated evidence.
  • The complaint alleges violations of the Fair Debt Collection Practices Act, which prohibits misrepresentations to consumers, and the Dodd-Frank Act, which prohibits deceptive acts or practices in the consumer financial marketplace. The CFPB seeks injunctive relief, damages, restitution, disgorgement, civil penalties, and costs.

Consumer Protection

Illinois Attorney General Sues Two Student Loan Debt Relief Companies

  • Illinois AG Lisa Madigan filed a lawsuit against First American Tax Defense LLC and Broadsword Student Advantage LLC alleging that they violated the state Consumer Fraud and Deceptive Business Practices Act, the Credit Services Organizations Act, and the Debt Settlement Consumer Protection Act. AG Madigan claims that these lawsuits are the first in the nation of their kind because they involve an allegedly new industry of student loan debt fraud that exploits those struggling to repay debt.
  • The companies allegedly were not licensed, engaged in deceptive marketing, illegally charged upfront fees, and offered fraudulent services or charged for services that are free through the government.
  • The AG seeks declaratory and injunctive relief, damages, to revoke or suspend all licenses, to void the company’s contracts with consumers, consumer restitution, civil penalties, and costs.

New York Attorney General Seeks to Delay Launch of Ridesharing Service

  • New York AG Eric Schneiderman and the state Superintendent of Financial Services sought a temporary restraining order against Lyft, a ridesharing service, to delay its scheduled launch in New York City.
  • The AG and Superintendent alleged that Lyft’s business practices do not comply with state law because among other things, the company does not use drivers that have commercial insurance or are licensed by the city’s taxi commission.
  • According to a news report, Justice Kathryn Freed did not issue the restraining order after Lyft’s lawyers said at a hearing that the service won’t start until “the i’s are dotted and t’s are crossed.” Justice Freed stated, “I’m extending what is essentially a status quo.”

New York Attorney General Settles With Beverage Company to Resolve Allegations of Misleading Advertising

  • New York AG Eric Schneiderman settled with the Varas Group to resolve allegations that it engaged in misleading advertising and social media campaigns to promote its Chicha Limeña soft drinks.
  • Varas allegedly advertised its soft drink as containing an ingredient (purple maize) that fights cancer, obesity, and diabetes, and has other health benefits. According to the AG, while purple corn/maize is touted as containing high levels of antioxidants, the health benefits have not been established in scientific literature.
  • Pursuant to the settlement, Varas will not make health related claims in its marketing materials and will pay $5,000 in penalties, costs, and fees.

Data Privacy

Vermont Attorney General Fines Small Business for Failing to Notify Consumers of Alleged Security Breach

  • Vermont AG Bill Sorrell, pursuant to an assurance of discontinuance, fined Mayfield, Inc., doing business as Shelburne Country Store, $3,000 for allegedly failing to inform online buyers of a security breach that compromised their credit card information.
  • The state’s Security Breach Notice Act requires businesses to notify the AG within 14 days of discovery of a data breach, and to notify consumers in the most expedient time possible, but no later than 45 days after discovery. The AG alleged that the breach happened in late 2013, that Mayfield was informed of the breach on January 9, 2014, but that Mayfield did not notify consumers until March 19, after being contacted by the AG’s office.
  • “At this stage of the game… we will not accept the excuse that a business did not know of its obligations to report a breach,” stated the AG.

New York Attorney General Issues Data Breach Report and Recommendations to Businesses and Consumers

  • New York AG Eric Schneiderman issued a report on the number, complexity, and costs of data breaches in the state. The report, Information Exposed: Historical Examination of Data Security in New York State, looks at an eight-year period from 2006 to 2013.
  • According to Information Exposed, reported data breaches tripled during the examined period and 22.8 million personal records were exposed in nearly 5,000 breaches. The report states that in 2013 alone, 7.3 million personal records were exposed in more than 900 breaches, costing upward of $1.37 billion.
  • The report found that “hacking” intrusions, in which third parties gain unauthorized access to data stored on a computer system, were the leading cause of breaches, accounting for nearly 40 percent of all breaches.
  • The AG also made recommendations on steps that organizations and consumers can take to protect themselves from data loss, including identifying and minimizing data collection practices, taking immediate action in the event of a breach, and creating strong passwords.

Employment

Agreements With Employment Agencies Announced by New York Attorney General

  • New York AG Eric Schneiderman announced agreements with five employment agencies to resolve allegations that the agencies engaged in unlawful discrimination and predatory business practices directed at immigrant job applicants. The five companies are Excellent Employment Agency, United Employment Agency, Patricia Employment Agency, Rivera Employment Agency, and Sunset Employment Services.
  • The agencies allegedly collected nationality, gender, and age information from job applicants to direct them to employers with allegedly discriminatory preferences or to jobs paying less than the applicable state minimum wage. The agencies also allegedly charged excessive referral fees and failed to provide refunds of advance fees.
  • Pursuant to the agreements, the companies must not engage in unlawful discrimination when making job referrals, refer applicants to jobs paying below minimum wage, charge excessive fees, or refuse to refund advance fees. In addition, the companies must pay $20,000 in penalties, fees, and costs; report to the AG any employers that make discriminatory requests or seek applicants for jobs paying below minimum wage; revise their policies and procedures; and obtain training.

Environment

New York Court Dismisses Lawsuits Regarding Hydrofracking

  • New York AG Eric Schneiderman announced that state Supreme Court Justice Roger McDonough issued two decisions dismissing two lawsuits that sought to force the state Department of Environmental Conservation (DEC) to terminate its ongoing review of the environmental impacts related to high-volume hydrofracking.
  • Hydrofracking is a hydraulic fracturing process used to drill for natural gas. The lawsuits, brought by the trustee of bankrupt gas development company Norse Energy and the Joint Landowners Coalition of New York against the state, asked the court to compel the DEC to terminate its environmental review of the practice.
  • The AG represented the state in the cases and asked the court to dismiss the lawsuits. “The court’s decision to allow the state review of hydrofracking risks to continue is an important victory in our effort to ensure all New Yorkers have safe water to drink and a clean, healthy environment,” stated the AG.

False Claims Act

Forty-Five States and the Federal Government Settle With Astellas Pharma for $7.3 Million

  • Forty-five states and the federal government settled with Astellas Pharma US, Inc. for $7.3 million to resolve state and federal false claim allegations related to its product, Mycamine.
  • Mycamine is a sterile, lyophilized antifungal agent approved by the U.S. Food and Drug Administration (FDA) to treat adult patients suffering from serious and invasive infections caused by the Candida fungus and to prevent Candida infections in adults undergoing stem cell transplants.
  • During the relevant period, Mycamine was not approved by the FDA to treat pediatric patients. Astellas allegedly knowingly marketed and promoted the drug during that period to pediatric patients causing false claims to be submitted to state and federal health care programs for uses of the drug that were not approved by the FDA.
  • The settlement stems from a qui tam action that was filed in the U.S. District Court for the Eastern District of Pennsylvania.

Health Care

Attorneys General Investigating Pelvic Mesh Products

  • Texas women claiming alleged injuries from pelvic mesh implants, which are used to correct pelvic organ prolapse, sent a letter to Texas AG Greg Abbott requesting an investigation. A spokesperson for the AG declined comment, but confirmed that the AG’s office is leading a nationwide investigation of mesh products that includes nine other states.
  • According to a news report, the women suggested that the AG pursue legal action against Johnson & Johnson, a maker of the implants, for allegedly engaging in deceptive business practices in violation of consumer protection laws.
  • Representatives of Johnson & Johnson did not respond to requests for comment, but the company’s lawyers have argued in lawsuits that the implants were effective and that the company properly warned consumers about related risks.

Mortgages/Foreclosures

Five Attorneys General and the Federal Government Settle Mortgage-Backed Securities Claims With CitiGroup for $7 Billion

  • Following investigations, the AGs for California, Delaware, Illinois, Massachusetts, and New York and the U.S. Department of Justice (DOJ), settled with CitiGroup, Inc., for $7 billion to resolve claims related to its conduct in the packaging, securitization, marketing, sale, and issuance of residential mortgage-backed securities.
  • The settlement, which includes an agreed upon statement of facts, requires CitiGroup to pay $4.5 billion of the $7 billion to state and federal entities and $2.5 billion to consumers as relief, which will include loan modifications and refinancing for distressed borrowers.
  • The $4.5 billion to state and federal entities will be divided as follows: $4 billion to DOJ as a civil penalty under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA); $208.25 million to the Federal Deposit Insurance Corporation; $102.7 million to California; $92 million to New York; $45.7 million to Massachusetts; $44 million to Illinois; and $7.35 million to Delaware.
  • According to the DOJ, the $4 billion civil penalty is the largest penalty to date under FIRREA.

State AGs in the News

Former Utah Attorneys General Charged on Criminal Allegations  

California Attorney General Convenes Multinational Law Enforcement Summit on Technology and Transnational Crime

  • California AG Kamala Harris will convene officials, including U.S. state AGs, U.S. federal officials, the Mexico AG, the El Salvador AG, and Mexico state AGs, for a multinational summit focused on the use of technology to fight transnational organized crime.
  • The summit, which will take place on July 20, will be held in association with the annual meeting of the U.S. Conference of Western Attorneys General and will focus on intellectual property violations, money laundering, and human trafficking.
  • In March, we blogged about AG Harris and four other AGs signing a letter of intent with Mexico to fight money laundering. The letter and this summit follow a delegation visit, led by AG Harris, to Mexico to enhance efforts to combat transnational crime.

States v. Federal Government

Maine Attorney General Sues Environmental Protection Agency

  • Maine AG Janet Mills filed a lawsuit against the U.S. Environmental Protection Agency (EPA) alleging that it failed to approve the state’s water quality standards under the Clean Water Act.
  • The complaint alleges that the state submitted revised standards, which included standards for waters that are arguably within Indian territories or land, to the EPA more than one year ago. The AG alleges that the EPA had begun in 2004 to limit its approvals to waters outside of Indian territories and land.
  • The AG asserts that the EPA has a duty to either approve the state’s revisions to its standards or identify any necessary changes the state must make to its standards for approval. AG Mills argues that the EPA has not fulfilled either of its duties, which creates uncertainty for state residents.
  • The AG seeks a declaration that the state’s jurisdiction extends to all waters of the state, including waters that are arguably within Indian territories or land; a declaration that the revised standards are deemed approved by the EPA and in effect; and award of attorney fees and costs.

State False Claims Act Analysis: Does Your State Contract Prohibit Offshore Outsourcing?

Posted in False Claims Act

So your company has been diligently trying to comply with state and federal government contracting regulations. You pay your service employees in accordance with the Service Contract Act, you file your EEO-1s and VETS 100s, you monitor state campaign contributions, and you follow all of the additional requirements in your compliance plan. You think your company is “golden.” Right? Maybe. Are you “offshoring” services under your contract, or the data related to your state and/or Medicaid government contracts? This easily overlooked issue has been percolating to the top of the list for government agencies, state attorneys general, and perhaps, qui tam plaintiffs’ attorneys.

Offshoring, or “the import from abroad of goods or services that were previously produced domestically,”[1] is a major part of today’s business landscape, and government contracting at both federal and state levels is no exception. The issue of offshore outsourcing of services first drew attention in the world of government contracts in 2004, when the media reported that call centers in India were answering customer service calls from Food Stamp recipients.[2] The controversy faded from the public spotlight, but in response to public outcry some states passed legislation or issued executive orders prohibiting or limiting the practice.

A recent (April 11, 2014) report[3] from the Department of Health and Human Services (DHHS) Office of the Inspector General (OIG) resurfaced the issue of offshoring restrictions in the context of Medicaid contracts. The report reminded contractors that offshoring prohibitions and limitations remain in full force today, and government contractors need to be aware of them. Government contractors must review each individual state contract to ensure compliance with any offshore outsourcing prohibition or restriction. Running afoul of an offshore outsourcing prohibition could have serious consequences. Noncompliance could expose a contractor to suspension, debarment, or even liability under the state’s version of the False Claims Act under the theory that the contractor implicitly certified compliance with a material term of the contract.[4]

The varying levels of prohibitions on offshore outsourcing that exist throughout the United States and U.S. territories underpin the importance of carefully reviewing each state’s requirements and each individual contract. Some states, such as Alaska, Arizona, Missouri, New Jersey, Ohio, and Wisconsin, have broad prohibitions against offshore outsourcing of services. For example, Ohio’s standard solicitation includes a Standard Affirmation and Disclosure Form Governing the Expenditure of Public Funds on Offshore Services, which states, “If awarded a contract, both the Service Provider and any of its subcontractors shall perform no services requested under this Contract outside of the United States.”[5] Similarly, Wisconsin’s standard solicitation warns offerors that their “inability to perform all services in the United States shall be grounds for disqualifying your Proposal for this contract.”[6]

Even if a state does not have a statute, regulation, or Executive Order directly impacting the offshoring of services, it is still necessary to review all solicitations closely for language regarding offshoring. For example, Delaware contains no statutory or regulatory prohibition on offshore outsourcing, yet a recent Delaware solicitation states, “The State will not permit project work to be done offshore.”[7] The solicitation makes clear that this prohibition extends to subcontractors. For the most part, Pennsylvania frames the offshoring issue as a preference for “Domestic Workforce Utilization” by awarding bonus points to nonoutsourcing offerors, but the Commonwealth exercises strict border patrol when it comes to offshoring of customer service. A recent Pennsylvania RFP involving customer service support provided that the “Commonwealth requires that there be no offshoring of calls for participants.”[8]

Other states require the disclosure of services to be performed offshore without prohibiting offshoring. South Carolina has no offshoring prohibition on the books but does use the standard solicitation clause “Offshore Contracting,” requiring offerors to identify any work to be performed offshore, including work by subcontractors. Offerors in South Carolina must disclose (1) the type of work being contracted offshore; (2) the percentage of the total work being contracted offshore; (3) the percentage of the total value of the contract being contracted offshore; and (4) a Service Level Agreement between the contractor and offshore contractor. The “Vendor Disclosure Statement” in Colorado solicitations not only asks offerors to identify any planned offshoring but also to justify it: “If it is anticipated that services under the contract, or any subcontracts, will be performed outside of the United States or the State of Colorado, explain why it is necessary or advantageous to go outside the United States or the State of Colorado to perform the contract or any subcontracts.”

The recent DHHS OIG Report canvassed state Medicaid agencies and reported their policies on offshore outsourcing. According to the report, Medicaid contract provisions in Montana and New Mexico prohibit direct offshore outsourcing, highlighting the importance of consulting the solicitation closely, especially if the scope of work involves handling patient health information (PHI). The OIG cautions Medicaid agencies that if they “engage in offshore outsourcing of administrative functions that involve PHI, it could present potential vulnerabilities.”[9] The Health Insurance Portability and Accountability Act (HIPAA) requires Medicaid agencies to enter into Business Associate Agreements (BAAs) with contractors who offshore administrative functions to safeguard PHI.[10] However, the OIG believes that sending PHI offshore limits the effective enforcement of BAA provisions and therefore the BAAs themselves provide insufficient protection of PHI.[11]

One should not conclude from these restrictions that individual states are inward-focused and unengaged in the global market place; in fact the opposite trend is taking place. The offshore outsourcing prohibitions that exist are only directed at the location of the services performed, not the contractor’s country of origin. States want their contractors to employ Americans, but they welcome the business of favored international trading partners. Indeed, 37 U.S. states have signed the World Trade Organization (WTO) Government Procurement Agreement (GPA). The states’ positions on offshore outsourcing did not appear to have any bearing on their willingness to join the WTO GPA: Arizona and Wisconsin are among them. The WTO GPA requires its 43 member countries to afford one another equal treatment on acquisitions above a certain threshold. The current threshold for goods and services for the 37 states is $558,000.[12]

Nonetheless, the April 2014 DHHS Report coincides with a significant increase in states adopting and expanding False Claims Acts. Thirty-six states and the District of Columbia now have FCAs, which empower state attorneys general to file false claims actions, as well as review qui tam suits filed by relators to determine whether the state should intervene and assume primary responsibility for prosecuting the action. Further, states, mirroring action at the federal level, are expanding False Claims Acts to incorporate new theories of liability. Particularly relevant to the issue of offshoring is the implied certification theory, whereby a defendant submitting claims for payment is found to have implicitly certified that it has complied with all statutory, regulatory, and contractual provisions that are a precondition for payment—including state prohibitions on offshore outsourcing. The prospect of state action on such theories becomes only more likely as state attorneys general face pressure to recover funds for their states, and they—as well as qui tam relators, with whom state attorneys general increasingly work—are given ever more expansive tools with which to do so.

As with any procurement, but perhaps more so with the variety and flux across state acquisitions, a close reading of the solicitation is paramount. If your services involve sensitive client data (particularly PHI) or call centers, meticulously examine the RFP for any offshore outsourcing prohibitions.

  • Review the solicitation closely. A state solicitation can contain offshoring prohibitions even where the state has no statutory or regulatory prohibition on offshoring.
  • If your solicitation contains an offshoring provision, is it a total prohibition, a partial limitation, or just a disclosure requirement? Understand what is required for compliance.
  • Do the services to be performed involve sensitive client data, like PHI? If offshoring such data, establish controls to appropriately safeguard the information.

[1] U.S. Gov’t Accountability Office, GAO-06-342, Offshoring in Six Human Services Programs: Offshoring Occurs in Most States, Primarily in Customer Service and Software Development (2006).

[2] See id.

[3] Dep’t of Health and Human Servs. Office of Inspector General, OEI-09-12-00530, Offshore Outsourcing of Administrative Functions by State Medicaid Agencies (2014) (“OIG Report”), available at http://oig.hhs.gov/oei/reports/oei-09-12-00530.pdf.

[4] Neither the Department of Defense nor the Department of Veterans Affairs has any offshore prohibitions, only requirements that individuals certify they meet certain criteria.

[5] Ohio’s Executive Order 2011-12K prohibits all Executive Agencies from entering into any contract using public funds to purchase services provided outside the United States.

[6] Wis. Stat. § 16.705(lr).

[7] Del. RFP No. HSS-14-021 for Electronic Case Management/Client Record System for the Division of Developmental Disability Services, § 4.1.3.

[8] Penn. RFP 6100029521 for PA State Police Health Reimbursement Arrangement Benefits, VI-4(G).

[9] OIG Report at 7.

[10] Id. at 1.

[11] Id. at 7.

[12] Procurement Thresholds for Implementation of the Trade Agreements Act of 1979, 78 Fed. Reg. 76,700 (Dec. 18, 2013) (threshold for calendar years 2014 and 2015 updated by U.S. Trade Representative).

State AGs in the News

Posted in Consumer Protection, Data Privacy, Employment, Environment, Health Care, Insurance, Medicaid Fraud, Mortgages/Foreclosures, State AGs in the News, Utilities

Consumer Protection

New York Attorney General and Uber Announce Agreement to Cap Pricing During Emergencies and Natural Disasters

  • New York AG Eric Schneiderman and Uber, the provider of a mobile application that connects riders with for-hire vehicles, have announced an agreement to cap prices for all services within the state during abnormal disruptions of the market, such as an emergency or natural disaster.
  • Uber uses a dynamic rate model that allows rates to rise and fall with demand rather than setting a single, fixed price. Pursuant to the agreement, Uber will limit its pricing during abnormal disruptions of the market to the range of prices it charged in the preceding 60 days, excluding the three highest prices charged on different days during that period. Uber is expected to announce a national policy that incorporates changes to its pricing model similar to those in this agreement.
  • The AG celebrated the agreement, stating that it “serves as a model for the kind of effective collaboration that should exist between government and technology companies like Uber.” The chief executive officer and co-founder of Uber similarly said, “This policy intends to strike the careful balance between the goal of transportation availability with community expectations of affordability during disasters. Our collaborative solution with [AG] Schneiderman is a model for technology companies and regulators in local, state and federal government.”

Washington Attorney General Sues Company for Allegedly Misleading Solicitations

  • Washington AG Bob Ferguson sued Mandatory Poster Agency, doing business as Corporate Records Services, and its officers (collectively, Mandatory Poster) for allegedly unfair and deceptive business practices in violation of the state Consumer Protection Act.
  • Mandatory Poster allegedly mailed forms that were preprinted with the recipients’ company name, labeled “important,” listed several state laws, and requested $125 dollars from each company to satisfy annual minutes requirements. There is no state requirement for corporations to prepare minutes of their shareholder meetings.
  • AG Ferguson requests restitution totaling $362,500, civil penalties of $2,000 per violation, and any available additional penalties for violations of a prior agreement that the AG and Mandatory Poster entered into in 2008 after Mandatory Poster allegedly made similar solicitations. That agreement prohibited any misleading words or terms that implied that the solicitations were from a government agency or required immediate or mandatory responses.

Wyoming Attorney General Fines Company for Alleged Violations of Telephone Solicitation, Promotional Advertising, and Consumer Protection Laws

  • Wyoming AG Peter Michael and FHNC, Inc., doing business as Silver King International, entered into an assurance of voluntary compliance that requires FHNC to pay a civil penalty of $15,000 to resolve allegations that it violated state telephone solicitation, promotional advertising of prizes, and consumer protection laws.
  • FHNC allegedly called consumers on federal and state do-not-call lists and used misleading surveys and prize offers to arrange in-home solicitations without providing the required disclosures.
  • In addition to the penalty, FHNC must offer restitution to consumers who purchased the company’s product through an in-home solicitation by allowing them to indefinitely exercise the three-day right to cancel purchases. FHNC denies that it violated any laws.

Rhode Island Attorney General Settles With Gym for Allegedly Deceptive Practices

  • Rhode Island AG Peter Kilmartin filed a lawsuit against Gable Fitness, Inc., doing business as Gold’s Gym, and its owner (collectively, Gable Fitness) for alleged violations of the state Deceptive Trade Practices Act and the state Health Club Act.
  • Gable Fitness closed one of their Gold’s Gym locations and allegedly offered customers membership to another of their locations, which was within 15 miles of the original location. State law does not require refunds of prepaid gym memberships if there is another gym within 15 miles that will accept the contract. A little more than a month later, Gable Fitness sold the Gold’s Gym at the replacement location. The new owner allegedly began charging maintenance fees for membership.
  • The AG alleges that, in violation of state law, Gable Fitness solicited and accepted membership fees for services that they could not and would not provide.

Kansas Elder Abuse Law Goes Into Effect

  • Kansas AG Derek Schmidt announced that a new state law that protects the elderly from financial abuse went into effect on July 1.
  • Senate Bill 256 makes mistreatment of an elder person a crime. Among other things, the law makes it illegal to take the personal property or financial resources of an elderly person, including through a violation of the state Power of Attorney Act or the Uniform Trust Code.
  • “In the past, the penalties for taking financial advantage of a senior did not fit the crime. If cases were able to be prosecuted at all, the punishment was usually very small. That is about to change,” stated AG Schmidt.

Data Privacy

New Indiana Consumer Protection Law Goes Into Effect and Offers “Security Freezes” to Protected Consumers

  • Indiana AG Greg Zoeller announced that a new state law that extends “security freezes” to protected consumers went into effect on July 1. Security freezes, which have been in place for years, allow consumers to register with credit reporting agencies to prevent identity thieves from opening lines of credit in the consumers’ names, even if the consumers’ identifying information was stolen.
  • Senate Enrolled Act 394 extends the protection of security freezes to children 16 years old or younger and disabled adults. A parent or legal guardian can register the protected consumer.
  • “Parents must recognize that their children—even those too young to obtain credit cards—can fall victim to identity thieves who can ruin their credit for years to come, so a security freeze is a sensible precaution,” stated AG Zoeller.

Employment

Washington Attorney General Settles With Online Training Provider

  • Washington AG Bob Ferguson settled with eFoodhandlers, Inc., to resolve allegations that it sold invalid food handling certificates to food service workers.
  • Washington requires all food service workers to obtain a food worker card from their local health department. The AG alleges that eFoodhandlers misled workers to believe that its online training and certification satisfied these state requirements when they did not.
  • The consent decree requires the company to pay approximately $120,000 in restitution to more than 11,000 consumers and $40,000 to the state in costs and fees. It also prohibits the company from writing about compliance with state laws on its website.

Environment

Colorado Attorney General Obtains $1 Million in Criminal Fines Against Asbestos Abatement Companies

  • Colorado AG John Suthers obtained over $1 million in fines against two asbestos abatement companies and their owner. Tri State Environmental Group, Aftermath Cleanup & Remediation Services, LLC, and their owner, plead guilty to the felony crime of Causing and Contributing to a Hazardous Substance Incident. The behavior that was subject to criminal charges also allegedly violated state regulations regarding illegal storage of asbestos containing waste matter.
  • The companies and their owner allegedly illegally deposited hazardous asbestos containing waste material and caused or contributed to hazardous substance instances.
  • Each company was sentenced to a fine of $500,000. The owner was sentenced to 500 hours of community service and six years of probation. He also agreed to pay $2,538 in restitution.

Health Care

New York Attorney General Settles With Health Insurer Regarding Behavioral Health Claims

  • New York AG Eric Schneiderman settled with health insurer EmblemHealth, Inc., to resolve claims that it allegedly wrongly denied mental health and substance abuse treatment in violation of state mental health parity laws.
  • EmblemHealth allegedly denied 64 percent more behavioral health claims than medical case claims. According to the AG, this is his office’s third settlement this year involving enforcement of mental health parity laws and this matter was part of a broader, ongoing investigation of these issues.
  • Pursuant to the settlement, the insurer will submit previously denied claims for independent review, which according to the AG could result in the return of more than $31 million to insureds. The settlement also requires the insurer to pay a $1.2 million civil penalty, reform its behavioral health claims review process, cover residential treatment, charge the lower primary care copayment for outpatient visits to mental health and substance abuse treatment providers, be monitored by an external entity, and file an annual parity compliance report.

Insurance

Massachusetts Attorney General Settles With Motorcycle Insurer for Over $14.9 Million

  • Massachusetts AG Martha Coakley settled with Commerce Insurance Company for more than $14.9 million to resolve allegations that it overcharged customers for motorcycle insurance policies.
  • The settlement resulted from a larger investigation that led to settlements with 19 insurance companies. This settlement was the largest of these settlements. Commerce Insurance allegedly overcharged certain customers by using inflated or undepreciated motorcycle values to calculate insurance premiums.
  • Under the agreement, the company will pay $14.6 million in refunds to its customers and will pay $325,000 to the state.

Medicaid Fraud

Idaho Attorney General Files Petition for Writ of Certiorari With U.S. Supreme Court

  • Idaho AG Lawrence Wasden, on behalf of the Idaho Department of Health and Welfare and Idaho Medicaid, asked the U.S. Supreme Court to consider its appeal of a lawsuit that challenges the Medicaid reimbursement rates paid to providers.
  • Five providers brought the lawsuit, alleging that the Medicaid rates paid by the state were too low. A federal district court ruled against the state and the Ninth Circuit U.S. Court of Appeals affirmed the decision. The Ninth Circuit held that precedent and the Supremacy Clause of the U.S. Constitution gives the private party providers the right to enforce Medicaid Act funding conditions against states, even where Congress did not create an enforceable right to do so.
  • AG Wasden argues that the Ninth Circuit erred in allowing providers to rewrite the Medicaid Act and the state’s agreement with the federal government regarding the terms of federal funding. In addition, AG Wasden argues that the Ninth Circuit is the only circuit to require that rates bear a relationship to provider costs.
  • “We’re asking the Supreme Court to take up this case because the 9th Circuit’s decision incorrectly permits private parties to interfere with the administration of the state’s Medicaid program and the Legislature’s choices regarding that program,” stated AG Wasden.

Mortgages/Foreclosures

New York Attorney General Settles Allegations of Misleading Solicitations Regarding Reverse Mortgages

  • New York AG Eric Schneiderman settled with New View Mortgage Corp., requiring it to pay a penalty of $12,500 to resolve allegations that it used misleading direct mail solicitations.
  • The AG alleges that New View advertised reverse mortgages that were designed to look like official government notices from the Federal Housing Administration and only listed the benefits associated with reverse mortgages in its solicitations, but none of the alleged risks.
  • In addition to assessing the penalty, the settlement prohibits New View from making any misrepresentations about reverse mortgages in any of its solicitations.

Utilities

North Carolina Attorney General Appeals Utility Rate Increase

  • North Carolina AG Roy Cooper appealed the North Carolina Utilities Commission’s approval of a proposed rate increase by Aqua North Carolina, Inc., the largest private water utility in the state. The Utilities Commission used an accelerated process for the approval, which is permissible under state law if the rate case for that utility is in the public interest.
  • In the notice of appeal, AG Cooper argues that the rate increase is not in the public interest. He also argues that an accelerated approval in this case would deny public hearings and discovery. Consumers “deserve a chance to weigh in” and the “Utilities Commission should have all the information before making a decision to raise rates,” stated AG Cooper.

Illinois Attorney General Opposes Rate Increases by Utilities

  • In filings with state regulators, Illinois AG Lisa Madigan opposed rate increases by Peoples Gas, Integrys, and Commonwealth Edison.
  • Peoples Gas, the primary natural gas company for Chicago, requested a $129 million rate increase, which would allegedly increase monthly consumer bills by $5 per month, or by 22 percent. AG Madigan argued that the proposed increase should be reduced by $74 million because the company was overestimating the cost of a pipe replacement project and not maximizing efficiencies in its operations.
  • Integrys requested a $7.1 million increase, which would allegedly increase monthly consumer bills by $2.50 per month. AG Madigan argued that instead of a rate increase, current rates should be cut by about $1 million.
  • AG Madigan also asserted that Commonwealth Edison’s attempts to recoup $87.9 million in employee bonuses from consumers through a rate increase is illegal, but according to a news report the company believes that the law supports including employee compensation incentives in its rates.

States AGs in the News

Legal Developments in Kansas and Massachusetts on Casino Issues

  • Kansas AG Derek Schmidt announced that the U.S. Department of the Interior has denied the Wyandotte Nation of Oklahoma’s application to convert its land into a federal trust, which would allow casino gaming on that land.
  • In a federal district court, AG Schmidt defended the state’s legal interest in not allowing a tribal casino. The district court ruled in favor of Kansas on the tribe’s request to force the Department of the Interior to rule in its favor, but urged the Department of the Interior to make a decision on the tribe’s land-into-trust application. In response, the Department of the Interior denied the application in a letter to the tribe.
  • “If there are later efforts by the tribe or others to contest the Department’s denial of the application, we will continue to vigorously defend our state’s legal interests,” stated AG Schmidt.
  • In another state casino matter, the Massachusetts Supreme Judicial Court recently ruled unanimously that voters would decide whether a law allowing casinos in the state should be repealed through a ballot question on the November ballot. The court’s decision overturned a finding by Massachusetts AG Martha Coakley that the proposed ballot question is unconstitutional because it causes casino developers to lose property without compensation.

State AGs in the News

Posted in Antitrust, Charities, Climate Change, Consumer Financial Protection Bureau, Consumer Protection, Employment, Environment, False Claims Act, Financial Industry, For-Profit Colleges, Health Care, State AGs in the News, States v. Federal Government

Hot News

CFPB Exercises Both Supervisory and Enforcement Authority

  • The Consumer Financial Protection Bureau (CFPB) continues to assert itself in the consumer credit card market, exercising both its supervisory and enforcement authority in finding that GE Capital Retail Bank, now operating as Synchrony Bank, allegedly engaged in discriminatory and deceptive practices against consumers.
  • The two-part settlement reached with the CFPB and the U.S. Department of Justice orders GE Capital to pay a record $225 million. To learn more, please read our blog post about this settlement.

Antitrust

Massachusetts Attorney General Reaches Final Agreement With Partners HealthCare

  • Massachusetts AG Martha Coakley reached a final agreement with Partners HealthCare to resolve her antitrust investigation of the organization and its acquisition of South Shore Hospital.
  • A consent judgment was filed in Suffolk Superior Court seeking review and approval of the agreement. The judge denied a motion to intervene filed by Partners’ competitors, but ordered a three-week comment period before ruling on the agreement.
  • The agreement will allow payers to split Partners into separate contracting entities, prevent Partners from contracting with affiliate physician groups that are not part of its owned hospitals, cap health costs at the rate of inflation, cap its physician growth, and block further hospital expansion in the eastern part of the state.
  • We previously blogged about the agreement in principle that AG Coakley had reached with Partners regarding its acquisition of South Shore and Hallmark Health Systems. Review of the Hallmark transaction is still ongoing.

Charities

New York Attorney General Settles With Fundraisers for Record $24.6 Million

  • Following an investigation, New York AG Eric Schneiderman settled with Quadriga Art and Convergence Direct Marketing, two for-profit mail vendors of the Disabled Veterans National Foundation, to resolve allegations of engaging in misleading solicitations and failing to disclose conflicts of interest.
  • Pursuant to the settlement, Quadriga will pay $9.7 million in damages and Convergence will pay $300,000. The money will be used to help support disabled veterans. In addition, Quadriga will pay $800,000 in costs and fees, forgive $13.8 million in debt owed to it by the foundation, and institute reforms to improve transparency and its ethics practices.
  • The settlement is believed to be the largest amount of financial relief obtained in the United States for allegedly deceptive charitable fundraising.

Climate Change

Nine Attorneys General File Amicus Brief Opposing Proposed Power Plant Rules

  • Nine AGs, led by West Virginia AG Patrick Morrisey, filed an amicus brief in the U.S. Court of Appeals for the DC Circuit urging the court to declare the U.S. Environmental Protection Agency’s (EPA) proposed regulations to reduce carbon emissions illegal.
  • “In its proposed rule, EPA is blatantly violating the Clean Air Act,” stated AG Morrisey. He also said that the U.S. Supreme Court’s recent decision in Utility Air Regulatory Group v. Environmental Protection Agency, “rejected another effort by EPA to ‘bring about an enormous … expansion in EPA’s regulatory authority without clear congressional authorization.’ The proposed rule for existing coal-fired power plants at issue in the present lawsuit is even more obviously illegal than the rule the Supreme Court struck down. EPA’s proposed rule here is not just without ‘clear’ congressional authorization, but is directly and unambiguously prohibited by the Clean Air Act.”
  • We previously blogged about Alabama AG Luther Strange’s testimony to Congress on this issue and AGs’ responses to these proposed rules, including West Virginia AG Patrick Morrisey’s letter to the EPA.

Consumer Protection

Attorneys General and the Federal Government Obtain Judgment Against Telemarketers for $255 Million

  • Florida AG Pam Bondi, New York AG Eric Schneiderman, and the Federal Trade Commission (FTC) settled with Tax Club, Inc. (which also does business as Success Merchant Services, Corporate Tax Network, and Corporate Credit) and its owners (collectively, Tax Club) to resolve allegations that they engaged in deceptive business practices and false advertising.
  • Tax Club allegedly called consumers repeatedly, falsely claimed affiliation with companies that the consumers had already done business with, and misled consumers about their home-based business services. Tax Club also allegedly charged a large initial fee and recurring monthly membership payments for their services, but had a restrictive refund policy. The AGs and the FTC asserted that many of the offered services were allegedly unnecessary or never provided.
  • The AGs and the FTC obtained judgments against Tax Club for $255 million, which will be suspended upon surrender of certain assets valued at almost $16 million. The settlement prohibits Tax Club, subject to some exemptions, from selling business coaching services and work-at-home opportunities; misrepresenting material facts; selling or otherwise benefiting from consumers’ personal information; and violating the Telemarketing Sales Rule, which prohibits abusive and deceptive telemarketing acts.

Indiana Attorney General Settles Tobacco Dispute

  • Indiana AG Greg Zoeller settled a longstanding dispute with major tobacco companies resulting in a net amount of approximately $217 million to be paid to the state during this year and next.
  • An arbitration panel had ruled that six states had not diligently enforced laws in 2003 requiring escrow payments from tobacco companies that did not participate in a 1998 master settlement agreement. The six states, including Indiana, had not settled their cases during the arbitration. The arbitration panel had ordered that those six states were responsible not only for their own share of the loss, but also for the shares of the states that had settled their cases.
  • AG Zoeller filed a motion to vacate in state court objecting to the arbitration panel’s decision. Relatedly, we recently blogged about a Missouri state court decision that partially vacated this arbitration panel ruling.

North Dakota Attorney General Suspends Activity of Door-to-Door Salespeople

  • North Dakota AG Wayne Stenehjem suspended all sales and installations of satellite television services in the state by Dish One Satellite, LLC, due to alleged aggressive and misleading sales tactics.
  • The company allegedly violated state consumer fraud laws by not carrying identification, making false and misleading statements, using contracts without proper cancellation notices, and not providing written copies of contracts.
  • “I am reserving a decision on issuing a Cease & Desist Order or other formal legal action, pending the outcome of the investigation and a determination on the cooperation,” stated the AG.

Employment

Settlement With Film and Television Production Industry Labor Organization by New York Attorney General

  • New York AG Eric Schneiderman recently settled with International Alliance of Theatrical & Stage Employees, Local 52, a labor organization representing employees in the film and television production industry over allegations regarding discriminatory admissions processes.
  • Local 52 allegedly used nepotism in admissions processes and inconsistently applied its application procedures, which the AG asserts had a discriminatory effect on minority applicants.
  • Under the agreement, Local 52 will pay $475,000 in costs, fees, and restitution. It will also restructure its processes, implement new policies, hire a diversity consultant, hire staff to manage these policies and processes, develop relevant trainings, and establish new recordkeeping requirements.

Environment

Michigan Attorney General to Co-Chair Multi-Agency Pipeline Task Force

  • Michigan AG Bill Schuette announced that he will co-chair a multi-agency government task force with Michigan Department of Environmental Quality Director Dan Wyant to examine the pipelines transporting petroleum products around the state.
  • Formal oversight for interstate gas and oil pipelines comes from the federal Pipeline and Hazardous Materials Safety Administration, but the task force believes that the pipelines have the potential to affect Michigan’s environment and communities.
  • We recently blogged about a formal inquiry that AG Schuette and Director Wyant sent to Enbridge Inc. and Enbridge Pipeline Inc. in May regarding their pipelines. A response to the inquiry is pending and will be reviewed by the task force.
  • The task force will also focus on emergency preparedness for spills, coordination of permitting for pipeline upgrades and replacement, and the creation of a state website.

False Claims Act

New York Attorney General Alleges False Claims Act Violations

  • New York AG Eric Schneiderman sued Continuum Health Partners, Inc., Beth Israel Medical Center, and St. Luke’s-Roosevelt Hospital Center for allegedly failing to return improperly obtained money to the state Medicaid program in violation of the state False Claims Act and other statutes.
  • Beth Israel and St. Luke’s-Roosevelt allegedly submitted improper claims to Medicaid. Continuum, which operated these organizations during the relevant period, allegedly failed to take steps to repay improperly submitted claims after identifying those claims.

Financial Industry

New York Attorney General Sues Bank for Alleged Wrongful “Dark Pool” Practices

  • Following an investigation, New York AG Eric Schneiderman sued Barclay’s Capital Inc. and Barclays PLC regarding alleged wrongful practices related to its operation of its “dark pool.” Dark pools are a type of privately owned and operated trading venue, as opposed to a public stock exchange.
  • The AG alleges that Barclays increased the market share of its dark pool through false statements to clients and investors about the extent and type of high frequency trading in its dark pool and its use of a surveillance system and services to detect alleged predatory traders.
  • The complaint alleges violations of the state Martin Act and persistent fraud and illegality. The AG seeks damages, disgorgement, restitution, injunctive relief, and costs.

For-Profit Colleges

Massachusetts Finalizes New For-Profit and Occupational School Regulations

  • Massachusetts published final regulations, which were proposed and filed by Massachusetts AG Martha Coakley, intended to enhance consumer protections governing the for-profit and occupational school industry.
  • The new regulations state that they are intended to promote accurate information for the public, prohibit misleading advertising practices, and address unfair lending practices.
  • Under the regulations, schools are required to disclose in their advertising accurate information regarding their tuition, fees, employment statistics, graduation rates, and program completion time. Schools are also prohibited from using any high-pressure sales tactics or deceptive practices related to student loans or financial aid.

Judge Affirms Sanctions on National College for Failing to Respond to an Attorney General’s Subpoena

  • A state circuit court affirmed a previous order for National College and its attorneys to pay civil penalties for their alleged failure to comply with a subpoena issued by Kentucky AG Jack Conway.
  • The subpoena sought information regarding potential violations of Kentucky’s Consumer Protection Act. After approximately three years of litigation and an allegedly incomplete production of documents in response to the subpoena, the circuit court ordered sanctions against National College and its attorneys for failing to comply and their delay in responding.
  • After further proceedings, the circuit court affirmed the penalties that it had imposed and ordered National College to pay $147,000 and its attorneys to pay $10,000.

Health Care

U.S. Supreme Court Rules on Religious Exemptions for Contraception Coverage Under the Affordable Care Act

  • The U.S. Supreme Court, in a 5-4 opinion in Burwell (Sebelius) v. Hobby Lobby Stores, Inc., held that, as applied to closely held corporations, U.S. Department of Health and Human Services (HHS) regulations promulgated under the Patient Protection and Affordable Care Act, which imposes a mandate for employers’ group health plans to cover contraceptives, violated the Religious Freedom Restoration Act (RFRA). The court affirmed a Tenth Circuit judgment involving Hobby Lobby and Mardel, and reversed a Third Circuit judgment involving Conestoga Wood Specialties Corp.
  • The RFRA prohibits the government from substantially burdening a person’s exercise of religion unless the government can demonstrate that the burden is in furtherance of a compelling governmental interest and is the least restrictive means. The Court held that RFRA applies to regulations that govern the activities of closely held for-profit corporations and that HHS’s regulation substantially burdens the exercise of religion.  Although the Court found that there was a compelling governmental interest behind HHS’s regulation, the Court held that the mandate was not the least restrictive means for furthering that interest.
  • The Court was careful to state that its decision only applied to the contraceptive mandate and not other insurance coverage mandates and that it cannot be used to cloak illegal discrimination.
  • As we previously blogged, 37 AGs filed amicus briefs with the Court in this case. Twenty AGs, led by Michigan AG Bill Schuette and Ohio AG Mike DeWine, and Oklahoma AG Scott Pruitt in a separate brief, argued that the Court should affirm the Tenth Circuit judgment. Similarly, 18 states filed an amicus brief asking the Court to overrule the Third Circuit. Fifteen states and the District of Columbia, led by California AG Kamala Harris and Massachusetts AG Martha Coakley, argued that the Court should overrule the Tenth Circuit.
  • AG Schuette and AG Pruitt celebrated the decision as a victory for religious liberty, while AG Harris and AG Coakley expressed disappointment in the decision, which they see as a setback in the provision of quality, affordable, preventative health care for women.

States v. Federal Government

U.S. Supreme Court Holds That President Lacked Authority to Make Recess Appointments

  • The U.S. Supreme Court, in National Labor Relations Board (NLRB) v. Noel Canning, held that the U.S. President lacked the authority to make recess appointments during a three-day recess during the Senate’s pro forma sessions. In its opinion, the Court stated that the Recess Appointments Clause of the U.S. Constitution empowers the President to fill any existing vacancy during any recess of sufficient length, but that the U.S. Senate was in session during the pro forma sessions at issue and that three days is too short a time to bring a recess within the scope of the clause. The Court affirmed the DC Circuit on different reasoning.
  • As we previously blogged, 17 AGs had filed an amicus brief with the Court urging it to uphold the DC Circuit. The AGs argued that they had an interest in the case because ultimately it was one involving issues of federalism and the individual freedoms states want their citizens to enjoy.
  • In addition, as we previously blogged, the invalidation of these appointments could call into question some actions by the NLRB and other agencies, like the CFPB, whose officials were appointed during the same recess. Commentators have said, however, that any challenge to the CFPB’s action before the confirmation of its director by the Senate, would likely be unsuccessful.
  • Kansas AG Derek Schmidt and South Dakota AG Marty Jackley, who had joined the amicus brief to the Court, applauded the decision and AG Jackley stressed the importance of Senate oversight of the NLRB.

CFPB Exercises Both Supervisory and Enforcement Authority Ordering GE Capital to Pay Record $225 Million Over Credit Card Practices

Posted in Consumer Financial Protection Bureau, Consumer Protection

The Consumer Financial Protection Bureau (CFPB) continues to assert itself in the consumer credit card market, exercising both its supervisory and enforcement authority in finding that GE Capital Retail Bank (GE Capital), now operating as Synchrony Bank, engaged in discriminatory and deceptive practices against consumers. The two-part settlement reached with the CFPB and the U.S. Department of Justice (DOJ) resolved claims that GE Capital discriminated against Hispanic customers in violation of the Equal Credit Opportunity Act (ECOA), 15 U.S.C. §§ 1691-1691f, by not offering promotions to those whose preferred language was Spanish or had mailing addresses in Puerto Rico, even though they otherwise met the offer criteria. The CFPB cited its authority to supervise very large banks under the Consumer Financial Protection Act of 2010 (CFPA), 12 U.S.C. § 5515, as a basis for its jurisdiction to enforce the ECOA. GE Capital will pay $169 million to approximately 108,000 borrowers who were declined account balance settlement offers. The CFPB and the DoJ stated that the settlement with GE Capital was the biggest settlement in U.S. history over credit card discrimination.

Through the consent order, the CFPB also required GE Capital to pay $56 million, including a $3.5 million fine, to resolve allegations that the company deceptively sold five credit and debt cancellation add-on products in violation the CFPB’s unfair or deceptive acts or practices (UDAP) law contained in the CFPA, 12 U.S.C. §§ 5531(a) and 5536(a)(1)(B). The products were intended to cancel credit card balances or payments upon the occurrence of certain life events like involuntary unemployment or disability. GE Capital was alleged to have misrepresented to customers that the add-on products were free, glossed over certain eligibility requirements, or even made offers to customers who were known to be ineligible. Telemarketers working for the company were alleged to have misled customers by making product purchases seem like routine account updates and to have used false language to create a sense of urgency for the customer. 638,000 credit card customers will be compensated under the deceptive practices portion of the settlement, and GE Capital is required to end all deceptive marketing and discriminatory credit practices. If the company wants to engage in future telephone customer enrollments for credit card product add-ons, then the company must submit a compliance plan to the CFPB for approval.

CFPB Director Richard Cordray remarked that this was the latest of six significant Bureau enforcement actions regarding credit card add-on products that have netted roughly $1.5 billion for consumers. Financial institutions must be closely attentive to the CFPB exercising its supervisory and enforcement authority due to the possible risk of wide-ranging investigations or enforcement actions.

State AGs in the News

Posted in 2014 Election, Antitrust, Climate Change, Consumer Financial Protection Bureau, Consumer Protection, Data Privacy, Environment, For-Profit Colleges, Medicaid Fraud, State AGs in the News, Utilities

2014 Election

Colorado Primary Election Results

  • Don Quick (D) and Cynthia Coffman (R) received their respective party’s nomination after both ran unopposed in the primary. Incumbent AG John Suthers (R) is term limited.

Maryland Primary Election Results

  • Brian Frosh defeated Jon Cardin and Aisha Braveboy for the Democratic nomination by a margin of 49.68 percent to 30.28 percent and 20.04 percent, respectively. Frosh will face Jeffrey Pritzker (R) in November’s general election.

Oklahoma Primary Election Results

  • Incumbent AG Scott Pruitt (R) received his party’s nomination after running unopposed. AG Pruitt is currently running unopposed for November’s general election.

Utah Primary Election Results

  • Incumbent AG Sean Reyes (R) and Charles Stormont (D) received their respective party’s nomination after both ran unopposed in the primary.

District of Columbia Court of Appeals Denies Rehearing of Attorney General Election Decision and Council Passes Legislation to Schedule the Election

  • The DC Court of Appeals denied a motion to recall its mandate that an election for the AG position must be held in 2014 or as soon as practically possible thereafter and denied a petition for rehearing.
  • The order mentions that Chief Judge Washington and Associate Judges Blackburne-Rigsby and Thompson would have voted to grant the petition for rehearing en banc, but that was not sufficient to support a grant to rehear.
  • On the same day, the DC Council passed budget legislation that included language that would schedule the first AG election for a November 4 special election, along with the general election for mayor, some council members, and other offices.
  • According to a news report, current AG Irvin Nathan has previously questioned the legality of a one-stage special election like the one just scheduled by the DC Council. AG Nathan believes that without party primaries the AG could not be elected on a partisan basis, which he thinks is a requirement of the DC Charter. The case is currently on remand to the DC Superior Court.

We will continue to provide updates on AG-related elections. For breaking news, please follow us on Twitter @StateAGMonitor.

Antitrust

Utah Attorney General Investigating Agreement Between Newspapers

  • Utah AG Sean Reyes announced his investigation of a joint operating agreement between the Salt Lake Tribune and the Deseret News for any potential antitrust violations.
  • The U.S. Department of Justice (DOJ) is also investigating the agreement. “We are not trying to duplicate or interfere with the DOJ investigation as it pertains to any area where they have statutory jurisdiction. But, there may be areas of concern outside of or concurrent with that scope, and we have an obligation to look at them more closely,” stated AG Reyes.
  • A representative of the AG’s office stated that the fact of an investigation is not evidence of wrongdoing.

Climate Change

U.S. Supreme Court Rules on Greenhouse Gas Rules

  • The U.S. Supreme Court, in Utility Air Regulatory Group v. Environmental Protection Agency (EPA), affirmed in part and reversed in part a lower court judgment in an opinion holding that the EPA could impose controls on greenhouse gases while warning it not to exceed statutory authority given by Congress.
  • Several states, including Texas and Wyoming, had challenged the EPA’s plan for implementing greenhouse gas regulations through permitting processes in the DC Circuit. The DC Circuit had dismissed some of the petitions for lack of jurisdiction and denied the remainder. In addition, Kansas AG Derek Schmidt had led a group of six states in supporting the challenge led by Texas, and New York AG Eric Schneiderman had led a group of 15 states and New York City in supporting the EPA.
  • Texas AG Greg Abbott and AG Schmidt applauded the decision as a victory. “The bottom line is that the EPA cannot rewrite federal statutes to pursue a regulatory agenda that is beyond its statutory authority,” stated Schmidt. However, AG Schneiderman also applauded the decision and the EPA claimed the decision as a “resounding win,” stating that, “the minor points of disagreement in the ruling will not undermine our ability to protect the environment.”

Alabama Attorney General Testifies Against Proposed Power Plant Rules at Climate Change Hearing

  • Alabama AG Luther Strange testified at a hearing on climate change of the U.S. Senate Subcommittee on Clean Air and Nuclear Safety, opposing the EPA’s proposed rule to cut carbon emissions for existing power plants.
  • AG Strange argued that the proposed rules are misguided and that they usurp regulatory authorities more properly delegated to states.
  • “The defense of this proposal will be that the States have ‘flexibility,’ but providing the States with a narrow range of costly policy choices, which most of the States did not choose for themselves, does not provide any actual flexibility and still produces the same outcome—higher electricity prices and decreased generation,” AG Strange testified.
  • A video transcript of the hearing is available. We recently blogged about AGs’ responses to these proposed rules, including West Virginia AG Patrick Morrisey’s letter to the EPA regarding them.

Consumer Financial Protection Bureau

CFPB Orders Title Company to Pay Penalty for Alleged Kickbacks

  • The Consumer Financial Protection Bureau (CFPB) ordered Stonebridge Title Services Inc. to pay a $30,000 penalty for allegedly paying kickbacks for referrals.
  • Stonebridge allegedly paid commissions to independent salespeople who referred title insurance business to the company in violation of the Real Estate Settlement Procedures Act, which prohibits payment of unearned fees in residential real estate transactions.
  • The act permits payment of a commission to an employee, but Stonebridge allegedly paid commissions to independent contractors, whom the CFPB deemed not to be employees.
  • According to the consent order, in addition to paying the penalty, Stonebridge shall not accept or pay any illegal fees or kickbacks.

Consumer Protection

West Virginia Attorney General Settles With Debt Settlement Company

  • West Virginia AG Patrick Morrisey settled with Legal Helpers Debt Resolution LLC to resolve allegations that it misrepresented debt relief services in violation of state consumer protection laws.
  • AG Morrisey alleged in a lawsuit against the company that it instructed consumers to stop paying creditors and to deposit the payments that would have otherwise been made to creditors into new dedicated accounts with third-party vendors. The AG also alleged that Legal Helpers and its vendors paid themselves from these accounts, but that Legal Helpers did not properly disclose that it would not provide debt relief services until all fees had been paid.
  • Pursuant to the settlement, Legal Helpers will pay the state $135,000, with $50,000 of that amount to be paid to consumers as restitution. The company will also not engage in any future debt negotiation or modification services in the state.

Data Privacy

Florida Governor Signs Information Protection Act

  • Florida Governor Rick Scott signed the Florida Information Protection Act of 2014, which Florida AG Pam Bondi supported. The act provides new protections for personal information and expedites notice of data breaches.
  • For more information on the act, visit our recent blog post on its passage.

Environment

Missouri Attorney General Sues Tyson Foods for Alleged Contamination of State Waters

  • Missouri AG Chris Koster filed a lawsuit against Tyson Foods alleging that it contaminated state waters by unlawfully dumping untreated industrial wastewater.
  • AG Koster alleges that Tyson Foods discharged wastewater containing acidic animal feed supplement into a city sewer system, which caused the biological wastewater treatment system to fail and release contaminated water and ammonia into state waters.
  • The lawsuit alleges violations of state hazardous waste laws. The AG seeks penalties, compensation for any damage, and reimbursement of costs.

Pennsylvania Attorney General and Governor Sue Oil Companies for Alleged Environmental Damage and Misuse of State Fund

  • Pennsylvania AG Kathleen Kane and Governor Tom Corbett’s general counsel filed two separate lawsuits against oil companies for alleged environmental damage and misuse of a state indemnification fund.
  • The first lawsuit seeks to recover money the state allegedly paid to clean up methyl tertiary butyl ether (MTBE) groundwater pollution, monetary damages for loss of groundwater use, injunctive relief, and fines and penalties relating to alleged unfair and deceptive trade practices and marketing of MTBE.
  • The second lawsuit seeks disgorgement of money allegedly disbursed to the defendants from the state Underground Storage Tank Indemnification Fund to clean up gasoline spills. The defendants allegedly collected for the same corrective action costs from both the fund and their insurance policies, in violation of state law.
  • Other states are suing or have sued oil companies for alleged MTBE groundwater pollution. We recently blogged about Vermont’s lawsuit.

Missouri Attorney General Enters Into Amended Agreement With Landfill Owner

  • Missouri AG Chris Koster announced an amended agreement with Republic Services, Inc., owner of the Bridgeton Landfill, to put in place additional measures to control odors and an underground fire at the landfill and prevent the migration of the fire to a nearby landfill containing radioactive material.
  • As we previously blogged, AG Koster sued Republic in 2013 alleging violations of several state environmental protection laws. The parties entered into an agreed order of preliminary injunction that year to establish obligations related to the landfill, including monitoring and response. The lawsuit is expected to go to trial in 2015 to determine whether Republic is subject to civil penalties and damages.
  • The amended order requires increased carbon monoxide testing, a new odor control plan, and increased frequency of landfill gas collection and testing. The order also increases the expense cap from $900,000 to $1.49 million for reimbursements to the state for costs associated with monitoring and oversight of the landfill.

For-Profit Colleges

Florida Attorney General Settles Allegations of Misleading Marketing With For-Profit College

  • After an investigation, Florida AG Pam Bondi settled allegations of misleading marketing with Kaplan Higher Education, Kaplan Higher Education Campuses, and Kaplan University (collectively, Kaplan).
  • During the investigation, Kaplan provided more than $6 million of waived tuition and fees to students.
  • Pursuant to the assurance of voluntary compliance, Kaplan must disclose true and accurate information regarding various aspects of its programs, including accreditation, program costs, financial aid, and employment services. Kaplan will also provide staff training, offer retraining to eligible students, continue its scholarship program for returning students, establish an expedited arbitration process, provide quarterly reports to the AG, and pay attorney fees and costs.

Medicaid Fraud

Maryland Attorney General and the Federal Government Settle With Nursing Home Operator

  • Maryland AG Douglas Gansler and the U.S. Department of Health and Human Services settled with Foundation Health Services, Inc., its affiliated nursing facilities, and its president (collectively, Foundation Health) to resolve allegations that it submitted false claims for payment to Medicaid and Medicare for materially substandard skilled nursing facility services.
  • Among the reasons that Foundation Health’s skilled nursing facility services were claimed to be substandard are that it allegedly failed to follow appropriate protocols, employ a sufficient number and skill-level of nursing staff, and provide a habitable living environment, all of which allegedly resulted in patient injuries including falls, fractures, and infections.
  • Pursuant to the settlement, Foundation Health will pay $750,000, with $173,000 of that amount to be paid to the state. It will also enter into a corporate integrity agreement that requires an independent monitor to oversee the quality of care provided over the next five years.

State AGs in the News

U.S. Supreme Court Rules on First Amendment and Qualified Immunity Issues

  • The U.S. Supreme Court, in a unanimous opinion in Lane v. Franks, ruled that the sworn testimony of a former public employee, who was allegedly fired for testifying in a public corruption trial, is entitled to First Amendment protection and that the supervisor who fired that employee is entitled to qualified immunity.
  • Alabama AG Luther Strange argued for the first time in front of the Court in this case. Consistent with AG Strange’s arguments, the Court ruled that the employee’s sworn testimony outside of the scope of his ordinary job duties is entitled to First Amendment protection under the U.S. Constitution and that the supervisor is entitled to qualified immunity for the claims against him in his individual capacity.
  • “The Court’s decision properly recognizes that a public employee has the right to testify in a public corruption case but that the supervisor who fired this particular employee should not be personally liable for damages,” stated AG Strange.

Florida Attorney General Issues Opinion Regarding Application of the Public Records Law to Government Contractors

  • In response to a request from State Senator Wilton Simpson and in anticipation of amendatory legislation, Florida AG Pam Bondi issued a formal opinion that the state Public Records Law does not automatically apply to private contractors providing services to a public agency.
  • According to the opinion, to be subject to the Public Records Law, a contractor must both contract with a public agency and act on behalf of the public agency in providing those services. AG Bondi interprets “acting on behalf of the public agency” as requiring the contractor to take the place of or stand in the shoes of the public agency. To determine whether a contractor is doing this, one must look at the nature and scope of the services provided by the contractor.

Utilities

Pennsylvania Attorney General Sues Five Electric Generation Suppliers

  • Pennsylvania AG Kathleen Kane filed joint complaints against five electric generation suppliers before the state Public Utility Commission (PUC). The five companies are Energy Services Providers Inc. d/b/a Pennsylvania Gas & Electric, IDT Energy Inc., Respond Power LLC, Hiko Energy LLC, and Blue Pilot Energy LLC.
  • In response to consumer complaints, the AG alleged that the companies promised competitive rates if the consumer switched suppliers, but that the prices charged by the companies were not reflective of the cost to serve residential electricity needs. The AG also alleges that the companies switched suppliers without consumer consent and provided consumers with contracts that did not comply with state law. The AG alleges violations of the PUC’s orders and regulations, the Public Utility Code, the Consumer Protection Law, and the Telemarketer Registration Act.
  • The AG seeks to suspend or revoke the companies’ licenses, impose civil penalties, and provide restitution to consumers.

State AGs in the News

Posted in Antitrust, Consumer Protection, Contingency Fee Counsel, Data Privacy, Employment, Financial Industry, Mortgages/Foreclosures, State AGs in the News, States v. Federal Government

Antitrust

Apple Enters Into Preliminary Settlement of E-Book Antitrust Lawsuit

  • Apple Inc. has agreed to settle the antitrust class action lawsuit brought by 33 AGs and consumers alleging that it conspired with publishers to fix prices for e-books.
  • The terms of the settlement were not released. The settlement is contingent on court approval and the outcome of Apple’s pending appeal of a 2013 ruling by Judge Denise Cote in another case that was brought by the U.S. Department of Justice, finding that Apple colluded with publishers to increase e-book prices.
  • The AGs’ lawsuit was scheduled to go to trial next month. Apple has denied any wrongdoing.

Consumer Protection

Mississippi Attorney General Sues Credit Reporting Agency Alleging Violations of Consumer Protection, Fair Credit Reporting, and Dodd-Frank Acts

  • Mississippi AG Jim Hood sued Experian Information Solutions, Inc., alleging that it failed to maintain reasonable procedures to verify credit information, correct mistakes, and conduct reasonable reinvestigations of consumer complaints in violation of the Fair Credit Reporting Act. AG Hood also alleged that it engaged in deceptive marketing of its credit monitoring services, credit scores, and identity theft protection services in violation of the state Consumer Protection Act and the Dodd-Frank Act. This is only the fourth known lawsuit by a state AG or regulator using Dodd-Frank enforcement authority.
  • AG Hood filed the lawsuit in state court last month, but it was recently removed to the U.S. District Court for the Southern District of Mississippi. The AG seeks declaratory and injunctive relief, statutory and punitive damages, civil penalties, restitution, disgorgement, and costs. The AG also seeks to have Experian provide notice to the public of its alleged violations of Dodd-Frank.
  • According to a representative of Experian, the company has cooperated fully with the AG, but it feels that the “lawsuit is not based on facts” and it intends to vigorously defend itself. A separate investigation of the industry by 32 other states, led by Ohio AG Mike DeWine, is also underway.

New York Attorney General Announces Agreement With Retailers to List Unit Pricing Online

  • New York AG Eric Schneiderman announced a collaborative agreement with six retailers to expand their listing of pricing by unit of measurement, in addition to pricing by item, on their websites and mobile applications. The retailers are Costco, CVS, Drugstore.com, FreshDirect, Walgreens, and Walmart.
  • Nineteen states and the District of Columbia currently require some type of unit pricing in stores, but unit pricing is not typically found online.
  • Walmart commented that it is pleased it could work with the New York AG to expand its unit pricing online and bring consumers “greater transparency as they shop online.” The retailers will complete this initiative by March 2015.

Florida Attorney General Settles With Penny Auction Website

  • Florida AG Pam Bondi settled with Arrow Outlet, LLC, to resolve allegations that it used programming code on its website to deceive consumers who were purchasing and placing bids on consumer goods.
  • Arrow allegedly used an auto-bid script to artificially inflate the number of bids required to win an auction. The script allegedly placed bids at certain intervals to prolong the auction, increase the number of bids purchased, and prevent consumers from winning.
  • Under the agreement, Arrow will pay $425,000 in consumer restitution and will not create, administer, run, or purchase a penny auction website to generate income.

New York Attorney General Settles With Hobby Retailer for Alleged False Advertising

  • New York AG Eric Schneiderman settled allegations of deceptive advertising practices with Hobby Lobby Stores, Inc.
  • Hobby Lobby allegedly misled consumers by advertising its products as sale items for more than 52 weeks. AG Schneiderman alleged that this practice violated state false advertising laws, which prohibit never-ending sales.
  • Under the agreement, the company will change its advertising practices, contribute $138,600 in supplies to public schools near its stores, and pay $85,000 in civil penalties and costs.

Contingency Fee Counsel

South Carolina Court Rules in Favor of Attorney General’s Use of Contingency Fee Counsel

  • The South Carolina Court of Common Pleas for the Fifth Judicial Circuit, in the case of Cephalon v. Alan Wilson, ruled that South Carolina AG Alan Wilson was authorized to hire outside legal counsel on a contingency fee basis to represent the state in an enforcement proceeding against Cephalon, Inc.
  • Cephalon had argued that the enforcement action was akin to a criminal proceeding making any use of contingency fee counsel a per se violation of due process, even if the action was not akin to a criminal proceeding that the AG’s financial interest in the outcome of the litigation invalidates his required neutrality, and the AG’s retention of attorney fees and payment of attorney fees to outside counsel violates that state law requiring separation of powers.
  • In an opinion by Judge G. Thomas Cooper, Jr., issued on June 2, the court disagreed with Cephalon and held that the enforcement action was civil in nature, the AG maintained the required control over and neutrality with outside counsel, the AG may withhold attorney fees for both his office and outside counsel, Cephalon’s due process rights were not violated, and the retention agreement between the AG and outside counsel does not violate laws requiring the separation of powers.

Data Privacy

Maryland Attorney General Settles With Mobile Application Developer

  • Maryland AG Douglas Gansler settled with Snapchat, Inc., to resolve allegations that it engaged in deceptive trade practices and violated the Children’s Online Privacy Protection Act (COPPA).
  • Snapchat developed a mobile application by the same name that allows users to send photographs and video messages called “snaps.” Snapchat allegedly misled consumers by representing that the snaps were temporary and would disappear after being viewed by the recipient, when those snaps could be captured or copied by the recipient for later use. The AG also alleged that Snapchat collected names and phone numbers from consumers’ electronic contact lists without always disclosing that it was doing so or obtaining consent. Finally, the AG alleged that the company failed to comply with COPPA and a corresponding rule, which prevents collection of personal information for children under the age of 13 without parental consent.
  • Snapchat agreed to injunctive relief that prevents it from making any false representations, material omissions, or misrepresentations regarding the nature of a snap; requires compliance with COPPA; and requires affirmative consent from consumers prior to collecting any contact information. The company also agreed to pay $100,000 to the state. Snapchat did not accept liability as part of the settlement.

Employment

New York Attorney General Proposes Legislation for Payroll Cards

  • New York AG Eric Schneiderman, joined by State Assembly Majority Leader Joseph Morelle and State Senator Patrick Gallivan, proposed legislation to regulate the use of payroll cards to protect workers who are paid with those cards.
  • The legislation proposes employee protections, including allowing an employee to select an alternative method of payment, requiring disclosure of payroll card fees, and restricting certain fees.
  • We recently blogged about the Illinois legislature passing a similar bill. According to a news report, legislators in New York could face pressure from financial industry lobbyists who opposed the bill in Illinois.

Financial Industry

New York Attorney General Announces Commitment by Capital One to Modify Its Use of Third-Party Screening System for Opening Bank Accounts

  • New York AG Eric Schneiderman announced that Capital One Financial Corporation has committed to adopt new policies governing its use of ChexSystems, a credit bureau that screens people seeking to open bank accounts. The system allegedly adversely affects lower-income applicants and victims of identity theft. The new policies are aimed at allowing more consumers to open bank accounts.
  • Allegedly, consumers who ChexSystems deems a credit or fraud risk are typically denied the opportunity to open a bank account. As part of the agreement, Capital One will continue to screen customers for past fraud, but will not seek to predict whether customers present credit risks.
  • Under the agreement, Capital One will also expand its support for a New York City agency that provides financial counseling to low-income consumers. The agreed upon changes are anticipated to take effect by the end of the year.

Mortgages/Foreclosures

Fifty Attorneys General and the Federal Government Settle Allegations of Improper Mortgage Practices With SunTrust for $968 Million

  • Forty-nine state AGs, the District of Columbia AG, the U.S. Department of Justice (DOJ), the U.S. Department of Housing and Urban Development, and the Consumer Financial Protection Bureau settled allegations of improper mortgage origination, servicing, and foreclosure practices for $968 million with SunTrust Mortgage Inc.
  • The complaint, filed at the same time as the announcement of the settlement, alleges violations of state and federal unfair and deceptive consumer practices laws for improper loan servicing, foreclosure processing, and loan origination practices. The complaint also alleges violations of the federal False Claims Act and Financial Institutions Reform, Recovery and Enforcement Act and federal bankruptcy laws.
  • Pursuant to the settlement, SunTrust will pay $418 million to the DOJ to resolve its potential liability under the federal False Claims Act and provide $500 million in consumer relief for homeowners. It will also pay $50 million to redress its servicing practices, with $40 million of that amount to be distributed to borrowers and homeowners through a fund administered by the states. SunTrust will also implement changes to its programs and be subject to the oversight of an independent monitor who will oversee compliance with the implementation of servicing standards required under the agreement.
  • The proposed consent judgment is expected to be filed in the U.S. District Court for the District of Columbia. Oklahoma did not participate in this settlement.

Massachusetts Attorney General Settles With Mortgage Servicer for $3.7 Million

  • Massachusetts AG Martha Coakley settled with Ocwen, a mortgage servicer, for $3.7 million to resolve allegations that it failed to provide certain required notices to homeowners and that it unlawfully foreclosed on certain properties.
  • The AG alleged that Ocwen failed to follow state law for notices and mortgage assignments, including that it failed to send notices to homeowners in default; that it failed to execute proper mortgage assignments; and that Litton Home Servicing Limited Partnership, a company acquired by Ocwen, unlawfully initiated foreclosures when it did not hold the mortgage.
  • Pursuant to the settlement, the company agreed to pay $3 million to homeowners and $700,000 to the state, properly execute documents filed in foreclosure proceedings, and mail legally compliant notices to homeowners.

New York Legislation Increases Maximum Allowable Land Banks to 20

  • The New York legislature passed a bill proposed by New York AG Eric Schneiderman that increases the maximum allowable land banks from 10 to 20. Land banks are nonprofit organizations that can acquire vacant, abandoned, or foreclosed properties and choose to rebuild, demolish, or redesign them.
  • Bill A8819-2013 / S6731-2013, sponsored by State Assemblyman William Magnarelli and State Senator David Valesky, amended a law, passed in 2011, that authorized the land banks.
  • AG Schneiderman is currently funding eight land banks. He stated that these land banks will place hundreds of properties “back on the local and county tax rolls over the next 24 months.”

State AGs in the News

Michigan Attorney General Moves to Quash Subpoena Requesting Testimony in Detroit Bankruptcy

  • Michigan AG Bill Schuette moved to quash a subpoena filed by bond insurer Syncora Guarantee Inc. that seeks to depose the AG regarding a formal opinion that he issued last June. The opinion stated that the art collection of the Detroit Institute of Arts (DIA) could not be sold to satisfy its debts because the art is held in charitable trust for the people of Michigan, whom the AG represents.
  • In his brief to the U.S. Bankruptcy Court for the Eastern District of Michigan, AG Schuette argues that the subpoena creates an undue burden, that no extraordinary circumstances exist to allow the deposition, and that the AG’s process in preparing the opinion is protected under the deliberative process and work-product and attorney-client privileges.
  • The AG stated that he has no firsthand knowledge of the facts relevant to the determination of the legal status of the DIA’s art collection and that he is unaware of any case authorizing a party to depose an AG on legal conclusions provided in an official opinion.
  • It is anticipated that Judge Steven Rhodes will consider the AG’s request to quash the subpoena on June 26. A proposed settlement is pending, however. On Tuesday, AG Schuette announced that he supported the proposed settlement, which would transfer ownership of the DIA from the city to an independent trust.

Oklahoma Supreme Court Affirms $47 Million Judgment in Favor of Attorney General

  • The Oklahoma Supreme Court affirmed a lower court grant of summary judgment, in favor of Oklahoma AG Scott Pruitt, that awarded the state $47 million.
  • The AG brought the action against Native Wholesale Supply (NWS) alleging violations of the Oklahoma Master Settlement Agreement Complementary Act, which is meant to maintain the integrity of a master settlement agreement among 46 states and four tobacco product manufacturers in a lawsuit regarding health care expenses that allegedly resulted from cigarette smoking.
  • The act requires all tobacco manufacturers selling cigarettes in Oklahoma to list the cigarette brand names with the AG and certify that they made all required payments into an escrow account. AG Pruitt alleged that NWS brought cigarettes into the state knowing that it was in violation of the act and sought disgorgement of all gross proceeds realized by the sales of these cigarettes.
  • The district court had granted a motion to dismiss for lack of subject matter jurisdiction that the Oklahoma Supreme Court had reversed. On remand, the district court granted summary judgment for $47 million in favor of the AG and NWS appealed. In its decision, the court held that based upon the act, “the settled law of the case, and the undisputed material facts on summary judgment, the summary judgment was proper, and the district court did not abuse its discretion.”

States v. Federal Government

Supreme Court Rules on Gun Sales to “Straw Purchasers”

  • The U.S. Supreme Court, in a 5-4 opinion in Abramski v. United States, held that a misrepresentation by a “straw purchaser,” which is a person who buys a gun on someone else’s behalf and claims it is for himself or herself, is punishable under a statute, regardless of whether the true buyer could have purchased the gun without the straw.
  • Hawaii AG David Louie led eight other state AGs and the District of Columbia in filing an amicus brief supporting federal prosecution of straw purchasers in gun sales. West Virginia AG Patrick Morrisey and 26 other AGs filed an amicus brief asking the Court to protect their citizens’ freedom to legally transfer firearms between individuals.
  • AG Louie applauded the Court’s decision.

State AGs in the News

Posted in 2014 Election, Antitrust, Consumer Protection, Energy, Environment, Financial Industry, Health Care, Medicaid Fraud, Pharmaceuticals, State AGs in the News, States v. Federal Government

Hot News

Attorneys General Discuss Possible Approaches to Prescription Drug Abuse Problem

  • The dangers of prescription drug abuse continue to be a huge concern for regulators at every level, including state AGs. This week at the National Association of Attorneys General summer meeting in Mackinac Island, Michigan, AGs furthered their discussions of such abuse and possible tools to combat the problem.
  • To read about what AGs have been and will be doing to fight prescription drug abuse, visit our recent blog post on this topic.

2014 Election

Arkansas Primary Runoff Election Results

  • Leslie Rutledge defeated David Sterling for the Republican nomination by a margin of 58.94% to 41.06% with all of the precincts reporting. Rutledge will face Nate Steel (D) in November’s general election. Incumbent AG Dustin McDaniel (D) is term limited.

Nevada Primary Election Results

  • Ross Miller (D) and Adam Laxalt (R) received their respective party’s nomination after both ran unopposed in the primary. Incumbent AG Catherine Cortez Masto (D) is term limited.

North Dakota Primary Election Results

  • Incumbent AG Wayne Stenehjem (R) and Kiara Kraus-Parr (D) received their respective party’s nomination after both ran unopposed in the primary.

South Carolina Primary Election Results

  • Incumbent AG Alan Wilson (R) and Parnell Diggs (D) received their respective party’s nomination after both ran unopposed in the primary.

Connecticut Primary Election Candidates

  • The Connecticut filing deadline was on June 10. The candidates for the primary election are incumbent AG George Jepsen (D), Kie Westby (R), and Stephen Fournier (Green).

District of Columbia Court of Appeals Rules in Favor of Attorney General Election in 2014

  • The District of Columbia (DC) Court of Appeals ruled that an election for the attorney general position must be held in 2014 unless it would not be “practically possible” for the board of elections to do so under applicable statutory and regulatory provisions. If DC can establish that an election is not practically possible in 2014, the court stated that the election must be held as soon as practically possible in 2015.
  • Paul Zukerberg, a potential AG candidate, brought the lawsuit to place the DC AG position on the ballot in 2014. Zukerberg argued that the DC Charter, which reads, “[t]he first election for the position of Attorney General shall be after January 1, 2014,” prohibited the DC Council from delaying the election.
  • The DC Court of Appeals stated that the language was ambiguous when considered in isolation and could mean “the following day, any time after that date, or some point in between.” The court held that when examined in the broader context of the D.C. Code, however, that “the far more natural reading” of that language would be that the election “must be held in 2014.”
  • According to a news report, current AG Irvin Nathan stated that he would seek an en banc review of the case. The case is currently on remand to the DC Superior Court.

We will continue to provide updates on AG-related elections. For breaking news, please follow us on Twitter @StateAGMonitor.

Antitrust

Amicus Brief Filed by 23 Attorneys General Regarding Application of Federal Antitrust Laws to State Regulatory Boards

  • Twenty-three AGs, led by West Virginia AG Patrick Morrisey, filed an amicus brief in the U.S. Supreme Court in support of a state regulatory board in the case of North Carolina State Board of Dental Examiners v. Federal Trade Commission.
  • The AGs argue that the state board, which is staffed by professionals in the field, is not a private actor and that the state action exemption to federal antitrust law applies. They also argue that application of federal antitrust laws to state regulatory boards would interfere with the states’ self-governance and sovereign authority to regulate industries within their borders.

Consumer Protection

Missouri Attorney General Settles Pricing Lawsuit With Major Retailer

  • Missouri AG Chris Koster and Walgreens settled a lawsuit brought by the AG alleging false, misleading, and deceptive retail pricing in Walgreens’ Missouri stores.
  • Pursuant to the settlement, Walgreens agreed to use an independent auditor to audit 25 percent of the Missouri stores each quarter for three years and to pay penalties for any failed inspections. In the settlement, the company did not admit any wrongdoing.

Massachusetts Attorney General Settles With Motorcycle Financial Services Company

  • Massachusetts AG Martha Coakley settled with Harley-Davidson Financial Services, Inc., to resolve allegations that it failed to pay required refunds to borrowers under its motorcycle finance agreements.
  • The company allegedly failed to refund all finance contract enrollment fees, which are fees typically paid by borrowers for special loan terms and refunded in a prorated amount if the borrower pays off the loan early.
  • The company will pay $228,000 in restitution to consumers and $25,000 to the state. It has also agreed to follow policies and procedures that ensure borrowers always obtain refunds.

West Virginia Supreme Court Affirms $14 Million Judgment Against Loan Company

Energy

Michigan Attorney General Files Additional Charges Against Energy Company for Alleged Racketeering and Fraud

  • Michigan AG Bill Schuette filed additional criminal charges against Chesapeake Energy Corporation alleging racketeering and fraud. Chesapeake allegedly obtained uncompensated land options from landowners using false pretenses and prevented competitors from leasing the land.
  • In March, the AG had charged Chesapeake and Encana Oil & Gas USA with alleged antitrust violations with regard to private land leasing and the state land auction. In May, Encana settled with the AG for $5 million.
  • The AG is now charging Chesapeake with one count of conducting criminal enterprises and eight counts of false pretenses. Representatives from the company are scheduled to be arraigned on June 25 before Cheboygan County’s 89th District Court.

Environment

Oil Spill Lawsuit Allowed to Proceed

  • A judge for the U.S. District Court for the Eastern District of Arkansas ruled that a lawsuit brought against ExxonMobil by Arkansas AG Dustin McDaniel, on behalf of the Arkansas Department of Environmental Quality, and the U.S. AG, on behalf of the U.S. Environmental Protection Agency, will be allowed to proceed.
  • The lawsuit, resulting from a pipeline rupture and oil spill in March 2013, alleges violations of the state and federal pollution and hazardous materials laws.
  • ExxonMobil argued that the plaintiffs did not state a claim or otherwise establish that the company should have to pay penalties for the spill. The court disagreed.

Vermont Attorney General Sues Gasoline Refiners for Alleged Groundwater Pollution

  • Vermont AG Bill Sorrell sued more than two dozen gasoline refiners, manufacturers, and suppliers of the gasoline additive methyl tertiary butyl ether (MTBE) for alleged pollution of state groundwater.
  • AG Sorrell alleges that the companies promoted, marketed, and distributed gasoline containing MTBE knowing that it was hazardous and posed risk to groundwater. AG Sorrell also alleges that the companies failed to inform state regulators, resellers, or consumers of the hazards or means to mitigate these hazards.
  • The complaint claims violations of the state groundwater protection act, design defect, failure to warn, public and private nuisance, trespass, negligence, and civil conspiracy. The AG seeks compensatory and punitive damages, injunctive and equitable relief, costs, and interest.

Pennsylvania Attorney General Investigation Leads to Criminal Environmental Charges

  • An investigation by Pennsylvania AG Kathleen Kane led to a grand jury recommending criminal charges against Minuteman Towing Inc., Minuteman Spill Response Inc., Minuteman Environmental Services Inc. (collectively Minuteman), Bolus Truck Parts and Towing Services Inc., the owners of these companies, and family members of the owners.
  • Prosecutors charge that Minuteman allegedly violated both the state Clean Streams Law and Solid Waste Management Act by unlawfully disposing of and/or burying waste in the ground. Prosecutors also found that Minuteman and its owner allegedly overbilled businesses, and that several of the owner’s family members were allegedly added to the payroll for Minuteman and Bolus and submitted increased health care premiums for the group health insurance.
  • The company responded that the charges are “baseless and without merit” and that it will defend itself against them.

Financial Industry

Court Remands Lawsuits Against Financial Rating Agency for Lack of Federal Jurisdiction

  • The U.S. District Court for the Southern District of New York remanded lawsuits brought by 17 AGs against Standard & Poor’s Financial Services LLC (S&P) for lack of federal jurisdiction. The decision effectively vacated an order by the U.S. Judicial Panel on Multidistrict Litigation (MDL), closed the MDL proceeding, and dismissed two related lawsuits brought by S&P against South Carolina and Tennessee.
  • The suits, filed in state courts, alleged that S&P violated consumer protection and deceptive trade practices acts by misrepresenting the objectivity of its rating service. S&P had the cases removed to federal court and the AGs moved to remand.
  • California, Connecticut, and Illinois have lawsuits against S&P that remained in state court. The U.S. Department of Justice also has a lawsuit pending in the U.S. District Court for the Central District of California.

Health Care

Kentucky Attorney General Settles for $3.7 Million With Hematology and Oncology Center

  • Kentucky AG Jack Conway , the U.S. Attorney for the Western District of Kentucky, and the U.S. Department of Health and Human Services settled for $3.7 million with Elizabethtown Hematology and Oncology, PLC and its owners (collectively Elizabethtown) to resolve allegations that it submitted or caused to be submitted false claims to health care programs.
  • Elizabethtown allegedly extended chemotherapy treatment times to maximize reimbursements and billed unnecessary office visits for infusion therapies.
  • Pursuant to the settlement, Elizabethtown will also enter into a three-year corporate integrity agreement that requires enhanced accountability and monitoring.

Medicaid Fraud

Louisiana Attorney General Settles with Abbott Laboratories for $9.5 Million to Resolve Allegations of Medicaid Fraud

  • Louisiana AG Buddy Caldwell settled with Abbott Laboratories for $9.5 million to resolve allegations that it misbranded its drug Depakote, an antiepileptic medication, by promoting it to control agitation and aggression in elderly dementia patients and to treat schizophrenia without obtaining approval from the U.S. Food and Drug Administration.
  • Forty-nine other states and the District of Columbia previously settled with Abbott on similar allegations for $1.5 billion.

Pharmaceuticals

Forty-Five Attorneys General Settle for $105 Million With a Pharmaceutical Company to Resolve Unlawful Marketing Allegations

  • Forty-five attorneys general, led by Illinois AG Lisa Madigan and Oregon AG Ellen Rosenblum, settled allegations of violation of consumer protection laws with GlaxoSmithKline, LLC.
  • The AGs alleged that GlaxoSmithKline misrepresented and improperly promoted the uses, qualities, and benefits of its asthma drug, Advair, and its antidepressant drugs, Paxil and Wellbutrin.
  • Pursuant to the settlement, GlaxoSmithKline will pay $105 million, which a multistate executive committee will divide amongst the states and the District of Columbia. In addition, the company agrees not to make any false, misleading, or unapproved claims and will revise some of its practices, including those used for marketing and responding to health care provider questions. It will also continue a program that addresses compensation of sales representatives to reduce any financial incentives to engage in deceptive marketing. The company did not admit to any wrongdoing.

State AGs in the News

Mississippi Attorney General Elected NAAG President

States v. Federal Government

West Virginia Attorney General Writes Letter Objecting to Proposed Carbon Emissions Rule

  • West Virginia AG Patrick Morrisey wrote a letter to the U.S. Environmental Protection Agency (EPA) objecting to the EPA’s proposed rule to cut carbon emissions for existing power plants.
  • Last week we blogged about the AGs’ responses to the proposed rule, including both objections to and support for the proposal. In AG Morrisey’s letter, which is a follow up to his initial response last week, he argues that the proposed rule violates the Clean Air Act. He also describes the EPA’s plan as “legally flawed” and urges it to withdraw the proposal.


AGs Educated on Possible Approaches to Prescription Drug Abuse Problem

Posted in Pharmaceuticals

The dangers of prescription drug abuse continue to be a huge concern for regulators at every level, including State AGs. This week at the National Association of Attorneys General Summer Meeting in Mackinac Island, Michigan, AGs continued their discussions of such abuse and possible tools to combat the problem, including prescription drug monitoring programs (PDMPs) and public education campaigns.

Kentucky AG (and current NAAG Substance Abuse Committee co-chair) Jack Conway led the discussion, during which he highlighted his state’s PDMP as one of only three in the country whose use is mandated by doctors. AG Conway talked about the positive results of mandating doctors’ participation, despite initial pushback from doctors when the legislation was debated. Aaron Haslem, the former director of the State Medical Board of Ohio, focused on the necessity for states to collaborate and share information among their PDMPs. Michael Barnes, the Executive Director of the Center for Lawful Access and Abuse Deterrence (which advocates for market-based solutions to assist the government efforts in prescription drug abuse prevention plans), sounded a cautionary note. While he voiced support for PDMPs, he was concerned about patient privacy, stressing that law enforcement should not have unfettered access to the data in the systems.

During a panel on innovative AG outreach programs, AGs focused on education efforts to combat prescription drug abuse. Indiana Attorney General Greg Zoeller talked about how he used funding from settlements with pharmaceutical companies to jump-start his prescription drug abuse education program (the “Bitter Pill Campaign”), which includes television, radio and the Internet. Mitchel Denham, Assistant Deputy AG to Kentucky AG Conway, discussed how his office and AG Conway have pushed the robust “Keep Kentucky Kids Safe Program,” where Conway and program partners talk to students about the dangers of prescription drugs. Like Indiana, Kentucky uses funds (approximately $20M) from pharmaceutical settlements to pay for its program, as well as to help fund treatment facilities, another important component in combating the prescription drug abuse epidemic.

As laboratories of democracy, states will continue to use a variety of approaches to fight prescription drug abuse. As these discussions highlight, AGs have been, and will be, at the forefront of this fight.

State AGs in the News

Posted in 2014 Election, Antitrust, Charities, Consumer Protection, Contingency Fee Counsel, Employment, Energy, Environment, False Claims Act, For-Profit Colleges, State AGs in the News, States v. Federal Government, Unclaimed Property

Hot News

Alabama Primary Election Results

  • Incumbent AG Luther Strange (R) and Joe Hubbard (D) received their respective party’s nomination after both ran unopposed in the primary.

California Primary Election Results

  • Incumbent AG Kamala Harris (D) will face Ronald Gold (R) in November’s general election after the candidates received 53.1 percent and 12.7 percent of the vote, respectively.
  • California has a nonpartisan blanket primary in which the top two candidates, regardless of party affiliation, receive the nomination for the general election.

Iowa Primary Election Results

  • Incumbent AG Tom Miller (D) received his party’s nomination after running unopposed.  After failing to field a nominee for the primary, the Iowa Republican Party will nominate a candidate at the party’s state convention on June 14. Adam Gregg (R) is currently seeking the nomination.

New Mexico Primary Election Results

  • Susan Riedel (R) will face Hector Balderas (D) in November’s general election after both ran unopposed in the primary.

Kansas Primary Election Candidates

  • The Kansas filing deadline passed on June 1. The candidates for the primary election are incumbent AG Derek Schmidt (R) and A.J. Kotich (D).

Massachusetts Primary Election Candidates

  • The Massachusetts filing deadline was on June 3. The candidates for the primary election are Maura Healey (D), Warren Tolman (D), and John Miller (R).

Minnesota Primary Election Candidates

  • The Minnesota filing deadline was on June 3. The candidates for the primary election are incumbent AG Lori Swanson (D), Sharon Anderson (R),Scott Newman (R), Brandon Borgos (I), Andy Dawkins (G), and Mary O’Connor (L).

Wisconsin Primary Election Candidates

  • The Wisconsin filing deadline was on June 2. The candidates for the primary election are Susan Happ (D), Ismael Ozanne (D), Jon Richards (D), Brad Schimel (R), and Thomas Nelson, Sr. (L).

We will continue to provide updates on AG-related elections. For breaking news, please follow us on Twitter @StateAGMonitor.

2014 Election

District of Columbia Court of Appeals Hears Arguments on Attorney General Election

  • As we previously blogged, Paul Zukerberg, a potential AG candidate for the District of Columbia (DC), sued to place the DC AG position on the ballot in 2014. The DC Superior Court granted a motion to dismiss and Zukerberg filed an appeal with the DC Court of Appeals. Zukerberg argues that the DC Charter, which reads, “[t]he first election for the position of Attorney General shall be after January 1, 2014,” prohibited the DC Council from delaying the election. A three-judge panel recently heard arguments on the appeal.
  • It was reported that two of the three judges said at oral argument that they believed that the “after January 1, 2014” language was ambiguous and were skeptical that it permitted a delay.
  • If the appeals court rules in favor of Zukerberg, it may still remand the matter back to the trial court for further proceedings and the city may still be able to seek review by the full appeals court.

Antitrust

West Virginia Attorney General Settles Allegations of Antitrust Violations With Bank

  • West Virginia AG Patrick Morrisey settled antitrust allegations with JP Morgan Chase for $400,000. Those allegations included bid rigging, price fixing, and manipulation of the municipal derivatives market. The money will go to state agencies that invested in municipal derivatives.
  • JP Morgan was one of 22 banks and financial companies sued by the AG’s office. Royal Bank of Canada, Bank of America, and Morgan Stanley had already settled with the AG. Lawsuits against other banks are still ongoing.
  • JP Morgan Chase denied the allegations during the lawsuit and denied wrongdoing in the settlement.

Charities

Arizona Attorney General Sues School Allegedly Misrepresenting Itself as a Non-Profit

  • Arizona AG Tom Horne sued Rise and Shine Exceptional Services, LLC and its owners for allegedly misrepresenting the school as a non-profit in violation of the state consumer fraud act.
  • Rise and Shine allegedly misrepresented to some parents and donors that the school was tuition-free while it charged some students, including recipients of state scholarships, tuition ranging from $2,000 to over $26,000 per year. Rise and Shine allegedly received donations of goods, services, and money because of these misrepresentations.
  • The suit seeks a permanent injunction prohibiting the school and its owners from unlawful acts and practices, restitution for parents and donors, disgorgement of profits gained through any illegal acts, civil penalties, costs, and attorney fees.

Consumer Protection

Missouri Attorney General Obtains Verdict Against Telemarketer in First “No Call” Trial

  • Missouri AG Chris Koster obtained a verdict against Pure Air, Inc. and its president for alleged violations of the state “no call” and telemarketing laws. The judge ordered Pure Air to pay $35,000 in fines and cease telephone solicitations in the state. If Pure Air fails to comply with the order, the fines could increase to up to $350,000.
  • According to AG Koster, this is the first “no call” case brought to trial in the state and he believes it is the first brought to trial by any state AG in the nation.

New York Attorney General Applauds State Assembly for Passing Consumer Credit Fairness Act

  • New York AG Eric Schneiderman applauded the state assembly for passing the Consumer Credit Fairness Act, which offers due process protections for consumers against debt collectors attempting to collect on debt using the judicial process.
  • The legislation will establish a three-year statute of limitations, establish requirements for a complaint, and require notice to the consumer of their rights in the initial debt collection correspondence and any lawsuit. According to AG Schneiderman, the act will “provide important notice to consumers that a suit has been filed against them, and require collectors to prove that the debt is legally owed to them based on statutes of limitations and other requirements.”
  • The state assembly passed the bill and referred it to the state senate judiciary committee, where it is now pending review. “I urge the Senate to take up this measure and help put an end to the abuse of consumers by debt collectors in our state,” stated AG Schneiderman.

Contingency Fee Counsel

Louisiana Passes Legislation Prohibiting Attorney General’s Use of Contingency Fee Counsel

  • Louisiana recently passed legislation prohibiting the state attorney general from hiring attorneys on a contingency fee basis.
  • House Bill 799 prohibits the attorney general or any state agency, board, or commission (excluding public postsecondary education institutions), from hiring attorneys on a contingency fee basis absent express statutory authority. The bill also requires that preference be given to attorneys licensed in the state and caps attorney fees at $500 per hour.
  • The bill creates an exception to these provisions for attorneys that are retained for purposes of defending the state in tort litigation or matters involving the state self-insurance fund.
  • Both the state house and senate passed the bill and the house recently concurred in senate amendments. The bill has now been sent to the governor for approval.

Employment

Illinois Passes Bill Protecting Workers Paid Through Payroll Cards

  • The Illinois legislature passed a bill crafted by Illinois AG Lisa Madigan, with the assistance of the state department of labor and sponsored by State Representative Arthur Turner and State Senator Kwame Raoul, which protects workers who are paid using payroll cards.
  • House Bill 5622  will:
    • Require employee voluntary consent;
    • Prohibit most fees including those for account balances and point of sale transactions;
    • Prohibit linking of account to any form of credit, including overdraft fees and loans against future pay;
    • Require employer to offer other methods of payment;
    • Require employers to disclose the terms and conditions of the card; and
    • Require employers to give notice that third parties may assess transaction fees.
  • “People shouldn’t have to pay to get their pay,” stated AG Madigan. The bill is now being sent to the governor for approval.

Energy

Attorneys General Respond to Environmental Protection Agency’s Proposed Rule to Cut Carbon Emissions

  • Several attorneys general commented on the Environmental Protection Agency’s recently proposed rule to cut carbon emissions. The proposed rule would cut carbon emissions from power plants by 30 percent from the 2005 levels by 2030.
  • Attorneys general opposing the proposed rule so far include those from Oklahoma, Texas, and West Virginia. Attorneys general who applauded the proposed rule are those from Massachusetts, New York, Rhode Island, Washington, and Illinois.
  • The agency is now taking public comment on the proposed rule. It anticipates releasing a final rule in June 2015. States would likely then be given another year from the release of the final rule to submit compliance plans or apply for extensions.

Environment

Allegations of Transporting Waste From Unregistered Facilities Settled by Massachusetts Attorney General

  • Massachusetts AG Martha Coakley settled with Safety-Kleen Systems, Inc., a company that transports waste in the state, to resolve allegations that it transported waste from unregistered facilities and submitted inaccurate reports to the state environmental protection department.
  • The state requires facilities that generate hazardous waste to obtain an identification number from the U.S. Environmental Protection Agency or the state. Companies transporting hazardous waste must only accept waste from facilities with a valid identification number and must submit monthly operating reports to the state environmental protection department detailing each shipment of hazardous waste. Safety-Kleen allegedly failed to meet these state requirements.
  • The settlement requires Safety-Kleen to pay a penalty of $100,000, of which $40,000 will be suspended if the company complies with environmental laws as outlined in the agreement. The company must also take steps to ensure future compliance, including training employees and instituting penalties and reporting for those employees who do not comply with state environmental laws.

False Claims Act

Medical Center Settles False Claims Act Allegations for $40.9 Million

  • Kentucky AG Jack Conway, the U.S Department of Justice (DOJ), the Federal Bureau of Investigation, and the U.S. Department of Health and Human Services, announced a settlement of $40.9 million with King’s Daughters Medical Center (KDMC) to resolve allegations that it falsely billed federal and state Medicare and Medicaid programs for heart procedures that were not medically necessary in violation of the federal False Claims Act. Kentucky will receive $1,018,380, which is its share of the Medicaid funds recovered as part of this settlement.
  • The federal False Claims Act only allows reimbursement to providers for procedures that are deemed medically necessary. KDMC allegedly billed for unnecessary coronary stents and diagnostic catheterizations performed by its physicians.
  • The settlement also resolves allegations of violations of the Stark Law, which is intended to limit monetary influence on physicians by prohibiting financial relationships between hospitals and referring physicians unless the relationship meets certain exceptions. KDMC also agreed to enter into a Corporate Integrity Agreement, which requires internal compliance reforms and third-party review of its claims for five years.
  • The DOJ is calling this a “landmark settlement” because it represents the largest federal health care fraud claims settlement involving a hospital in the history of the eastern district of Kentucky.

For-Profit Colleges

South Carolina Attorney General Issues Opinion Regarding Purchase and Licensing of Private Law School

  • South Carolina AG Alan Wilson issued an opinion, in response to a request from a state representative, stating that the state Commission on Higher Education, which licenses nonpublic postsecondary institutions, has no discretion to deny a license to a properly qualified applicant. Specifically, the commission lacks authority to consider licensing criteria outside the criteria articulated under South Carolina law, particularly the criterion of whether granting a license is in the best interest of the state.
  • The opinion implies that the commission erred in voting last month against approval of a license application filed by InfiLaw, which is trying to purchase Charleston Law School.
  • The opinion states that it is especially important that the commission, “make its decisions only upon criteria authorized by law because fundamental due process rights of the applicant are at stake. Any licensing decisions based upon criteria outside the law would, of course, be subject to judicial review and possible reversal.”

State AGs in the News

District of Columbia Attorney General Sues Management Company for Allegedly Improperly Diverting Charter School Funds

  • District of Columbia AG Irvin Nathan sued Community Action Partners and Charter School Management LLC and its CEO alleging that they contracted for management services with a non-profit charter school and improperly distributed operating profits from the school to themselves for their own benefit.
  • The complaint alleges that the management company and its owners violated the district’s Non-Profit Corporation Act by distributing the charter school’s operating profits to themselves and causing the charter school to act contrary to its non-profit purpose. The complaint further alleges that these acts caused charter school funds to be diverted from the lawful purpose of providing education and other services to the students of that school so that the funds could be used to benefit and enrich the management company and its owners.
  • The AG seeks a temporary or preliminary injunction to preserve the assets of the management company and a constructive trust for any improperly distributed funds. The AG also seeks to rescind the management agreements, enjoin any further payments, and enjoin any further allegedly improper actions.
  • An attorney for the CEO of the management company responded that the business agreements were legal.

States v. Federal Government

Massachusetts Attorney General Sues Federal Agency and Mortgage Providers Over Alleged Refusal to Engage in Foreclosure Buyback Programs

  • Massachusetts AG Martha Coakley sued the Federal Housing Finance Agency (FHFA), Fannie Mae, and Freddie Mac for alleged violations of the state foreclosure law.
  • The complaint alleges violations of the state non-profit buyback provision of the foreclosure law, which prohibits creditors from conditioning a sale to a legitimate buyback program on the program agreeing not to resell or rent the property to the former owner, and the state unfair and deceptive business practices law.
  • We recently blogged about a letter AG Coakley sent to the director of FHFA encouraging the agency to direct Fannie Mae and Freddie Mac to permit buybacks of homes by non-profits. The complaint requests declaratory judgment, preliminary and/or permanent injunction, penalties of up to $5,000 for each unfair or deceptive act, attorney fees, and costs.

Unclaimed Property

Washington Attorney General Files Charges Against Former State Employee Alleging Theft of Unclaimed Property

  • Washington AG Bob Ferguson filed charges against a former Washington Department of Social and Health Services employee who allegedly used confidential state databases to steal more than $150,000 in unclaimed property.
  • The former employee allegedly used confidential state vital records to create false claims on the state unclaimed property website managed by the state Department of Revenue.
  • The former employee was charged with first degree computer trespassing, money laundering, eight counts of first degree theft, three counts of second degree theft, 16 counts of first degree identity theft, and an unrelated count of unlawful possession of a firearm. He is scheduled to be arraigned on June 11 at the King County Superior Court.