The State AG Report Weekly Update December 20, 2018

2020 AG Elections

Democrat Kimberly Dudik Announces Candidacy for Montana Attorney General

  • State Representative Kimberly Dudik, a Democrat, has declared her candidacy for Montana AG in 2020.
  • Representative Dudik is serving her fourth term in the state House, is an attorney in private practice, and previously served as an assistant attorney general in the Montana AG’s office, a deputy county attorney in Gallatin County, and law clerk for the Montana Supreme Court.
  • Current AG Tim Fox, a Republican who is serving his second term, is term-limited.

Charities

Michigan Attorney General Settles with Medical Research Charity Over Allegations of Deceptive Solicitations

  • Michigan AG Bill Schuette reached a settlement with medical research charity National Emergency Medicine Association—which fundraises under the names National Heart Council, National Stroke Council, National Alzheimer’s Council, and Kids Do Matter—and its president (collectively, “NEMA”) to resolve allegations that NEMA deceived donors about the intended use of charitable donations in violation of the state Charitable Organizations and Solicitations Act.
  • According to the AG’s Notice of Intended Action, NEMA allegedly misrepresented to donors that it would use funds raised to provide grants for medical research and equipment but actually spent donations almost exclusively on sweepstakes fundraising campaigns and administrative expenses; solicited funds for nonexistent charities; and submitted false expense reports to state regulators.
  • According to the AG’s office, under the terms of the settlement, NEMA and its president must pay $192,655 and $127,950 in civil penalties respectively, NEMA must cease operations and dissolve, and its president is prohibited from serving as an officer of a charity in the state.

New York Attorney General Obtains Stipulation in Ongoing Litigation Against Charitable Foundation Over Alleged Misuse of Charitable Funds

  • New York AG Barbara Underwood obtained a stipulation from the Donald J. Trump Foundation (“Trump Foundation”) in an ongoing lawsuit over allegations that the Trump Foundation engaged in political activity and self-dealing transactions in violation of state laws governing charities.
  • Under the terms of the stipulation—which follows a court decision allowing AG Underwood’s lawsuit against the Trump Foundation to proceed—the Trump Foundation will be dissolved under judicial supervision and the Trump Foundation and the AG’s office will create a list of charities that will receive distributions from the Trump Foundation’s remaining assets with approval by the AG’s office.
  • AG Underwood initially filed this lawsuit in June 2018, and the AG’s office has stated that it will remain ongoing as the office continues to seek restitution, penalties, and an injunction against President Trump from serving in any leadership position in a charitable organization in the state for a period of ten years.

Consumer Protection

Florida Attorney General and FTC Obtain Judgment Against Owner of Debt Relief Company Over Alleged Robocalling and Misrepresentation of Services

  • Florida AG Pam Bondi and the Federal Trade Commission (“FTC”) obtained a judgment against Kevin Guice, owner of debt relief company Loyal Financial & Credit Services, LLC (“Loyal”) over allegations that Loyal and related entities engaged in a telemarketing scheme that sold consumers fraudulent debt relief services in violation of the FTC Act, the FTC’s Telemarketing Sales Rule, and the state Unfair and Deceptive Trade Practices Act.
  • According to the complaint, Loyal allegedly made hundreds of thousands of robocalls to consumers—including consumers listed on the national Do Not Call Registry—promising consumers lower interest rates or debt relief in exchange for upfront fees and did not deliver the promised services, among other things.
  • Under the court order and permanent injunction, Guice—the only defendant among the common enterprise who did not settle—must pay over $23 million in restitution, is enjoined from participating from telemarketing or other forms of advertising, must destroy all consumer information obtained from the scheme, and is enjoined from collecting outstanding payments from consumers.

New York Attorney General Settles with Internet Providers Over Alleged Misrepresentations to Subscribers

  • New York AG Barbara Underwood reached a settlement with internet providers Charter Communications, Inc. and Spectrum Management Holding Company, LLC (collectively, “Charter”) to resolve allegations that it denied internet subscribers the reliable and fast internet service they were promised in violation of state consumer protection laws.
  • According to the AG’s office, Charter allegedly leased deficient modems and wireless routers to subscribers, charged more for faster download speeds but failed to deliver those high speeds, guaranteed but did not deliver seamless access to internet content, and falsely represented that internet speeds would be the same through wired or Wi-Fi connections.
  • According to the AG’s office, Charter will pay $62.5 million in refunds to subscribers, provide $100 million worth of streaming services and premium channels to subscribers, and reform their marketing and business practices with regard to, for example, advertising internet speeds and providing subscribers with quality equipment, among other things.

Data Privacy

New York Attorney General Settles with Five National Companies Over Alleged Failures to Secure User Information Transmitted Over Mobile Apps

  • New York AG Barbara Underwood reached settlements with Western Union Financial Services, Inc., Priceline.com, LLC, Equifax Consumer Services, LLC, Spark Networks, Inc., and Credit Sesame, Inc. to resolve allegations that the companies provided mobile applications (“apps”) that failed to keep sensitive user information secure when transmitted over the internet.
  • According to the AG’s office, the companies allegedly represented to consumers that they implemented reasonable security measures to protect user information, but certain versions of the companies’ apps failed to properly authenticate Transport Layer Security (“TLS”) certificates—which establish a secure connection between a mobile device and another computer by verifying the computer’s identity—and the apps could have allowed sensitive information entered by users to be intercepted by unauthorized third parties, potentially leading to identity theft or credit card fraud.
  • According to the AG’s office, under the terms of the settlement, the companies will implement comprehensive security programs to protect user information.

Gaming/Gambling

District of Columbia Enacts Law Legalizing Sports Betting

  • The District of Columbia Council has passed a law allowing residents and visitors to bet money on professional sports teams and contests.
  • Under the law, wagers can be placed using a mobile application operated by the D.C. lottery, at sports venues or licensed facilities at arenas, and at licensed private establishments.
  • The District is the eighth U.S. jurisdiction to enact a law legalizing sports betting following the U.S. Supreme Court’s decision in Murphy v. National Collegiate Athletic Association, 584 U.S. __ (2018), which struck down a federal ban on sports betting.
  • The law will go into effect once it is signed by D.C. Mayor Muriel Bowser, who supported the bill.

Health Care

17 Democratic Attorneys General File Brief Seeking Clarification and Expedited Review of Court Order Finding Affordable Care Act Unconstitutional

  • 17 Democratic AGs led by California AG Xavier Becerra filed a brief in the U.S. District Court for the Northern District of Texas as Intervenor-Defendants in the matter of Texas v. United States, No. 4:18-cv00167-O, seeking clarification and expedited appellate review of the Court’s December 14, 2018 Order declaring the Affordable Care Act (“ACA”) unconstitutional following the passage of the Tax Cuts and Jobs Act of 2017.
  • In their brief, the AGs ask the Court to clarify that its order does not affect any party’s rights or obligations under the Affordable Care Act (“ACA”) until trial court proceedings and appellate review are complete, and the AGs seek to expedite appellate review by asking the Court either to enter partial final judgment or certify its Order for interlocutory appeal.
  • As previously reported, in April 2018 AG Becerra led the coalition of AGs in moving to intervene as defendants in the suit, which was initially filed by a coalition of 20 Republican AGs and Governors.

Florida Attorney General Settles with Hospital Chain Over Alleged Payments to Physicians for Patient Referrals

  • Florida AG Pam Bondi reached a settlement with hospital chain Health Management Associates, LLC (“HMA”) to resolve allegations that HMA paid remuneration to physicians for referral of services to two of HMA’s hospitals, and HMA improperly billed the Florida Medicaid program for those services.
  • According to the AG’s office, HMA’s hospitals provided physicians and physician groups with free office space and staff and covered overhead and administrative costs to induce patient referrals and improperly billed the state Medicaid program for services referred by those physicians.
  • According to the AG’s office, HMA will pay $5.54 million in restitution and other recoveries to the state.

Washington Attorney General Obtains Judgment Against Company Over Allegedly False Medicaid Claims

  • Washington AG Bob Ferguson obtained a judgment at a nonjury trial against residential care facility operator Relationship Toward Self-Discovery and two of its officers (collectively, “RTS”) over allegations that RTS submitted false Medicaid claims for employee wages not actually paid in violation of the state’s Medicaid False Claims Act.
  • According to the judgment, RTS allegedly paid employees a small amount of overtime pay for staying overnight at one of its facilities to provide care to residents but billed Medicaid as if employees were paid a much higher “sleep rate” for their overnight stay.
  • The judgment requires RTS to pay over $2.7 million in damages to the state and to the plaintiff who original brought the qui tam action related to the conduct, a $5,500 civil penalty, and costs and fees.

Marijuana

Alabama Attorney General Updates Public Guidance on Possession, Use, Sale, and Distribution of Cannabidiol Following Federal Legalization of Certain Industrial Hemp

  • Alabama AG Steve Marshall issued a Public Notice providing updated guidance on the current state of Alabama law regarding the possession, use, sale or distribution of Cannabidiol (“CBD”) after Congress passed legislation legalizing CBD derived from industrial hemp with a Tetrahydrocannabinol (“THC”) concentration of not more than .3%.
  • In the Public Notice, the AG concludes that selling, delivering, or distributing CBD derived from marijuana or hemp with THC concentration above .3%—other than the epilepsy treatment Epidiolex—is illegal under Alabama law because the affirmative defenses under the law only protect certain research institutions from being prosecuted for marijuana-related crimes arising out of the prescription of CBD to those with debilitating epileptic conditions.
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