State AG Monitor

State AGs in the News

By Bernard Nash , Divonne Smoyer , and Christopher J. Allen on Posted in Antitrust, Consumer Protection, Data Privacy, Medicaid Fraud, Mortgages/Foreclosures, State AGs in the News, States v. Federal Government

AG Practice Group Leader Bernie Nash Speaks on Mortgage Foreclosure Investigation

  • On October 6, Bernie Nash discussed the ongoing 50-State mortgage foreclosure investigation at a conference organized the by the investment bank Keefe Bruyette & Woods in Washington, DC. Among the topics he addressed were the history of the investigation, the issues being investigated by the AG and federal government, and the current state of negotiations with the five largest U.S. mortgage servicers.
  • Mr. Nash also provided his unique insight into the motivations and objectives of the major players involved in the investigation, including the removal of New York AG Eric Schneiderman from the multistate investigation’s Executive Committee and the recent statements of California AG Kamala Harris and Massachusetts AG Martha Coakley (see below).
  • A link to his presentation can be found here.

Mortgage and Foreclosure Abuses

Massachusetts AG Voices Doubt About Multistate Foreclosure Probe

  • Massachusetts AG Martha Coakley issued a statement that she has “lost confidence that the banks will bring to the table an agreement that properly holds them accountable for wrongful foreclosures.”
  • AG Coakley went on to explain that her office has begun “preparing for litigation.” “We will, as we have in the past, use our resources to hold the big banks accountable to fully protect homeowners and restore a healthy economy.”

California AG Pulls Out of Multistate Foreclosure Probe

  • California AG Kamala Harris announced that she was pulling out of a nationwide investigation by state and federal authorities into alleged foreclosure abuses committed by major U.S. banks, dealing a major blow to the settlement process.
  • According to AG Harris, the proposed settlement was not adequate for California residents, who had been severely impacted by the crisis. AG Harris also expressed concern over the scope of the proposed liability release.
  • AG Harris stated that California would undertake its own investigation.

Indiana AG Sues Two Credit Repair and Foreclosure Consultant Companies

  • Indiana AG Greg Zoeller sued Florida-based Marucci Law Firm and Illinois-based E.A.C. Financial for collecting upfront fees and then failing to render services or provide refunds. Both companies were allegedly operating in Indiana illegally.
  • AG Zoeller is seeking injunctions against the companies, restitution for the victims, civil penalties, and attorneys’ fees.

States vs. Federal Government

EPA Eases Rules on Power Plant Emissions

  • In response to pressure from States, industry and Congress, the Environmental Protection Agency (EPA) proposed changes to the Cross State Air Pollution Rule (CSAPR), easing some of the regulation’s requirements, including state budget increases in 10 States and unit level allocations in six states. The rule is aimed at limiting the amount of sulfur dioxide (SO2) and nitrogen oxides (NOx) emissions levels in 27 states.
  • Georgia AG Sam Olens joined a list of other State AGs who have filed suit to challenge the EPA’s CSAPR rule, including those of Texas, Kansas, Nebraska, Alabama, Florida, Oklahoma, South Carolina, and Virginia.
  • Texas AG Greg Abbott criticized the EPA’s proposed changes as merely “minor technical corrections.”

New Hampshire AG Argues that Federal Medicaid Law Cannot Trump State Laws

  • In July 2011, 10 of New Hampshire’s 13 largest hospitals sued the State after the Legislature passed a budget that included a $115 million cut in Medicaid funding over two years. The hospitals contend that the cuts violate federal law requiring health care access for the poor because they would be forced to lay off hundreds of employees.
  • New Hampshire AG Michael Delaney has filed a motion to dismiss the case, arguing that federal Medicaid law cannot overrule the State’s laws and the hospitals have not shown irreparable injury.

Michigan AG and 13 Colleagues Support Alabama in Medicaid Dispute with CMS

  • 14 State AGs, led by Michigan AG Bill Schuette, filed an amicus brief in the U.S. Court of Appeals for the 11th Circuit in support of Alabama’s lawsuit against the federal government over monies earned in Medicaid lawsuits.
  • In a 2008 letter to the States, the Center for Medicare and Medicaid Services (CMS) announced that it would begin claiming a percentage of civil penalties collected by the States in settlements and verdicts, in addition to a portion of Medicaid funds recovered.
  • Alabama subsequently filed suit to protect monies collected from lawsuits filed against 79 pharmaceutical companies in 2005.
  • “Because CMS is only the ‘sorcerers apprentice,’ it can only require the states to repay the ‘medical assistance percentage’ of the Medicaid payments they recover.” AG Schuette’s brief says, “CMS has no authority to require a state to pay a share of recoveries other than for medical assistance, shielding civil penalties collected under state law from CMS.”
  • The other States joining the amicus brief include: Delaware, Idaho, Kansas, Kentucky, Louisiana, Mississippi, Nebraska, Nevada, New Mexico, Oklahoma, Utah, and Washington.

Medicaid Fraud

Massachusetts AG Announces 118 Indictments in Medicaid Fraud Cases

  • Massachusetts AG Martha Coakley announced that 10 individuals and three companies have been indicted in four separate Medicaid fraud schemes totaling $10 million.
  • According to the charges, these schemes allegedly involved billing the State for care provided to deceased patients, widespread kickback schemes, or grossly mischaracterizing the level of care needed for patients in order to overbill the MassHealth system.

Consumer Protection

Senate Banking Committee Approves Former Ohio AG for CFPB Director

  • The U.S. Senate Banking Committee approved former Ohio AG Richard Cordray’s nomination to be the first Director of the new Consumer Financial Protection Bureau in a 12-10 party-line vote, setting up a confirmation showdown in the full Senate.
  • Mr. Cordray served as AG of Ohio between 2009 and 2011, where he developed a reputation for aggressively pursuing consumer protection claims against a variety of industries. He also was among the first AGs to investigation allegations of “robo-signing” and other foreclosure improprieties at the nation’s largest mortgage servicers and brought a number of securities lawsuits on behalf of state pension funds.
  • Mr. Cordray had been appointed to run the Enforcement Division of CFPB by Elizabeth Warren and was later nominated by President Obama to head CFPB. However, Senate Republicans have threatened to block his confirmation unless Congress approves significant changes to CFPB’s structure and composition.

Tennessee AG Announces Settlement for Sales of Bogus Health Insurance

Massachusetts AG Obtains Insurance Refunds for Motorcycle Owners

  • Massachusetts AG Martha Coakley announced that 3 additional insurance companies have agreed to refund $5.6 million in insurance premiums for allegedly overcharging Massachusetts customers by using “inflated and un-depreciated” motorcycle values to calculate insurance premiums.
  • AG Coakley’s Office reached similar settlements with twelve other insurance companies last year. The total restitution from all of the settlements to date is approximately $40 million.

Data Privacy

AGs Warn Consumers About Sale of Personal Data

  • In the wake of the Borders bankruptcy, the book seller is planning on selling its customer information to competitor Barnes & Noble.
  • Approximately 45 million Borders customers will have an opportunity to opt-out and have their information deleted.
  • Several AGs, including Massachusetts AG Martha Coakley and Pennsylvania AG Linda Kelly, are urging consumers in their States to review the privacy information and instructions in the e-mail notice and be aware of their rights.
  • “Customers of Borders bookstores need to know that their information is being sold and that they have a limited amount of time to opt-out,” said AG Coakley. “We urge consumers who have concerns about the use of their private data to take action.”

Parens Patriae Claims Treatment Under Class Action Fairness Act

Ninth Circuit Rules that State AG Parens Patriae Suits are Not Class Actions

  • The AGs of California and Washington had brought parens patriae suits against thin-film liquid crystal display manufacturers, alleging a price-fixing conspiracy. The defendants argued that the suits were essentially disguised class actions and, as such, should be treated as class actions under the Class Action Fairness Act.
  • A three-judge panel of the Ninth Circuit ruled that although the suits were representative actions, they were not class actions and remanded the suits back to state courts in Washington and California, respectively.

State Pension Funds

New York AG Sues Bank for Defrauding Pension Funds in Foreign Currency Trading

  • New York AG Eric Schneiderman sued the Bank of New York Mellon (BNYM) for allegedly misrepresenting over a 10-year period the rates it would give foreign currency transactions.
  • According to the complaint, the alleged victims include public and private pension funds, including the New York City Employee Retirement System, the Teachers Retirement System of the City of New York, and the State University of New York.
  • The suit seeks to recover the profits BNYM made from these trades, which amounts to nearly $2 billion.

Internet Sales Taxes

Tennessee AG Concludes that Online Retailers Must Collect Sales Taxes

  • Tennessee AG Robert Cooper issued an opinion in which he concluded that online retailers, such as Amazon, have to collect sales taxes if they open warehouses in the state.
  • According to the opinion, in cases where nexus, or physical presence, can be established, the fact that the retailer accepts purchase orders electronically will not affect the retailer’s liability for collecting and remitting state sales taxes.
  • Amazon is building distribution centers in Tennessee, and former Gov. Phil Bredesen last year granted Amazon a waiver on collecting sales taxes from Tennessee customers, which has angered “traditional” retailers in the State.

Antitrust

25 States Concerned About Medco/Express Scripts Deal

  • Twenty-five States, including Connecticut, Iowa, and Pennsylvania, have formed a group to probe the $22 billion merger of the two large pharmacy benefits managers (PBM). The combined entity would control nearly a third of the PBM market.
  • Community and specialty pharmacists have expressed concern over the negotiating power that the new entity would have.
  • The FTC is also conducting an antitrust review.

Public Utilities

Massachusetts AG Files Complaint with the Federal Energy Regulatory Commission

  • Massachusetts AG Martha Coakley filed a complaint with the Federal Energy Regulatory Commission (FERC) alleging that current electric transmission rates are excessive and that transmission companies are “making unreasonable profits at the expense of ratepayers.”
  • AG Coakley is seeking to have the 11.14 percent profit for transmission companies, which was set by FERC in 2006, reduced to 9.2 percent based upon the current economic climate, which would reduce New England ratepayer bills by $113 million in 2012.