The State AG Report Weekly Update May 7, 2015

Breaking News

Georgia Enacts Bill Incorporating Office of Consumer Protection into the Department of Law

  • Governor Nathan Deal signed Senate Bill 148, which will incorporate the Office of Consumer Protection into the Office of the Attorney General on July 1, 2015.
  • Until now, Georgia was one of a few states (such as Hawaii) in which primary responsibility for consumer protection was vested not in the AG office, but in a separate agency, and this change brings consumer protection investigation and enforcement authority directly under the AG.
  • Georgia AG Sam Olens applauded the move as an opportunity “to educate Georgia consumers and to ensure that Georgia’s consumer protection laws are enforced.”  AG Olens further stated that he intends “to work with both consumers and businesses to ensure that Georgia has a fair and equitable consumer protection framework.”

Shining the Light on State AGs and the Solar Industry

  • In a blog post, Cozen O’Connor Members Lori Kalani and Ann-Marie Luciano discuss recent AG investigations into the solar industry.

Consumer Financial Protection Bureau/CFPB

Maryland Attorney General Partners With CFPB Against “Pay-to-Play” Mortgage Kickback Scheme

  • Maryland AG Brian Frosh and the Consumer Financial Protection Bureau (CFPB) filed a complaint against seven companies and six individuals for allegedly participating in a mortgage-kickback scheme that violated the Real Estate Settlement Procedures Act (RESPA), which prohibits giving a “fee, kickback, or thing of value” in exchange for a referral of business related to a real estate settlement service.
  • AG Frosh and the CFPB alleged that executives of Genuine Title, LLC, a Maryland-based title company, developed and operated schemes to give loan officers marketing services and cash payments in exchange for referrals of mortgage business.
  • In addition to the Complaint, AG Frosh and the CFPB filed consent orders with respect to five of the six individual defendants and Genuine Title, LLC that, if approved by the Court, would require the individual defendants to pay $662,500 in fines and ban them from the mortgage industry.

Consumer Protection

Illinois Attorney General Continues Crackdown on Suspected Student Loan Scammers

  • Illinois AG Lisa Madigan filed five lawsuits against companies that allegedly targeted people struggling to repay student loan debt, including Consumer Financial Resources LLC, based in Texas, Federal Student Loan Alliance, LLC, based in California, Interactive Education LLC, based in Florida, Nationwide Student Aid, based in Illinois, and Student Consulting Group Inc., based in Georgia.
  • AG Madigan alleged that the companies violated the Illinois Consumer Fraud and Deceptive Business Practices Act, the Credit Services Organizations Act, and the Debt Settlement Consumer Protection Act by charging borrowers hundreds of thousands of dollars in upfront fees with the false promise that they can relieve borrowers’ debt loads or have them forgiven entirely under programs endorsed by the Obama Administration.
  • AG Madigan stated:  “These scams are proof that the rate of student loan debt in this country has skyrocketed, and it has already destabilized the financial security of millions of people across the country.”

North Carolina Attorney General Bars Alarm Company from Making Illegal Robocalls

  • North Carolina AG Roy Cooper settled with ISI Alarms NC, Inc. to resolve allegations that the company made unlawful sales calls to thousands of North Carolina consumers over a two year period.
  • The settlement resolved a lawsuit filed by AG Cooper in 2013 after more than 1,000 consumers complained about misleading robocalls that used reports of recent crimes to pitch alarm systems.
  • As part of the settlement, ISI Alarms NC and its principal officer, William Jayson Waller, must pay $136,000 to the AG’s Office over two years.  They also will owe $1 million in civil penalties if they do not comply with the judgment or if it is determined that they misrepresented their monetary holdings.


California Attorney General Settles With Cement Plant for Alleged Environmental Violations

  • California AG Kamala Harris partnered with the Environmental Protection Agency, the Department of Justice, and the San Francisco Bay Regional Water Quality Control Board, to reach a $7.5 million settlement with Lehigh Cement and its owner, Hanson Permanente Cement Inc., and its operator, Lehigh Southwest Cement Co., to resolve alleged environmental violations.
  • The Consent Decree alleged that Lehigh Cement violated the Clean Water Act and the California Porter-Cologne Water Quality Control Act by discharging millions of gallons of industrial wastewater into the San Francisco Bay.
  • As part of the settlement, Lehigh Cement must pay more than $5 million to install a wastewater treatment facility and $2.55 million in civil penalties.


Kansas Attorney General Declares Fantasy Sports Leagues Not Illegal

  • Kansas AG Derek Schmidt issued an AG Advisory Opinion concluding that fantasy sports leagues are not illegal under Kansas law because they are games of skill, and therefore do not constitute a lottery.
  • In August 2014, the Kansas Gaming & Racing Commission had issued a statement that “[i]f a fantasy sports league has a buy-in (no matter what it is called) . . . and gives a price, then all three elements of an illegal lottery are satisfied.”
  • AG Schmidt’s Opinion resolves the uncertainty over the legality of fantasy sports leagues in Kansas.

False Claims Act/Medicaid Fraud

Massachusetts Attorney General Settles With Charity for Submitting Alleged False Claims to Medicaid

  • Massachusetts AG Maura Healey announced a settlement with nonprofit charity Life Focus Center of Charlestown, Inc., which provided day habilitation services to individuals with developmental disabilities, for allegedly submitting false claims to the state’s Medicaid program (MassHealth).
  • Life Focus Center allegedly violated the Massachusetts False Claims Act by submitting claims for more hours of service than were actually provided from 2008 through 2011.
  • As part of the settlement, Life Focus Center must pay more than $94,000 and can no longer participate as a MassHealth provider.

Vermont Legislature Passes State False Claims Act

  • The Vermont Legislature passed a bill, H.120, that would create a state false claims act that mirrors the federal law.
  • If H.120 is signed into law by Governor Peter Shumlin, Vermont would join 30 other states and the District of Columbia that have state false claims acts.
  • Like the federal law and an increasing number of state false claims acts, Vermont’s law would allow private parties to file qui tam suits in the name of the state and receive a portion of any recovery.

Intellectual Property

Washington Enacts Patent Troll Prevention Act

  • Washington Governor Jay Inslee signed into law a patent troll bill supported by Washington AG Bob Ferguson that provides AG Ferguson with enforcement authority under the Consumer Protection Act to combat alleged patent trolls.
  • The Patent Troll Prevention Act prohibits purported patent holders from sending demand letters that:  (1) contain false or deceptive information; (2) are sent by parties who do not have a right to license or enforce a patent; (3) baselessly threaten litigation if a fee is not paid; and (4) fail to identify the individual asserting the patent and explain the alleged infringement.
  • Washington is just the latest of more than a dozen states to pass similar laws, which AG Ferguson touted as a means to “protect small businesses and provide my office with enforcement authority to hold these fraudulent trolls accountable.”


Massachusetts Attorney General Files Draft Regulations for Sick Time

  • Massachusetts AG Maura Healey filed draft regulations to implement Earned Sick Time Law, Mass. Gen. Laws ch. 149, § 148C, which was passed by voters in November and will take effect on July 1, 2015.
  • The law states businesses with 11 or more employees must provide up to 40 hours per year of paid sick time and businesses with less than 11 employees must provide earned sick time, but are not required to pay employees for time taken.
  • The draft regulations were promulgated to detail the qualifying conditions to use earned sick time and the employers’ responsibilities in the administration of the Earned Sick Time Law.

New York Attorney General Settles With Franchisee for Allegedly Underpaying Workers

  • New York AG Eric Schneiderman announced a $375,000 settlement with KFC Corporation franchisee Divine Investors, LLC, and its owner Hiren Patel for alleged labor law violations, including, among other conduct, failing to pay overtime, requiring employees to continue to work after they clocked out, and failing to cover the cost of employees’ uniform maintenance.
  • AG Schniederman stated: “This KFC franchisee ignored certain basic laws protecting his low wage workers, and this is simply not acceptable.  In New York, we have one set of rules for everyone, and all employers must comply with our labor laws. I will continue to do everything in my power to protect fast food and other low wage workers in New York from wage theft.”
  • Under the terms of the settlement, Divine Investors, which operates 13 stores in New York City, will owe restitution to more than 700 individuals employed between October 2011 and November 2014.

States v. Federal Government

Florida Attorney General Sues Obama Administration for Withholding Funding

  • Florida AG Pam Bondi sued the United States Department of Health and Human Services (HHS) and the Centers for Medicare and Medicaid Services for allegedly attempting to coerce Florida into expanding Medicaid by withholding Low Income Pool healthcare funding.
  • According to the Complaint, the Low Income Pool program was designed to offset the costs healthcare providers incur when they provide healthcare to uninsured, underinsured, low-income, and other vulnerable populations.
  • AG Bondi stated: “the federal government is trying to do precisely what the U.S. Supreme Court held that the Constitution prohibits it from doing—forcing states to expand Medicaid by threatening to cut off funding for unrelated programs. The President, once again, is overstepping his authority, this time by trying to force Florida to expand Medicaid through the Affordable Care Act.”