The State AG Report Weekly Update August 6, 2015


West Virginia Attorney General Approves Hospital Merger After Reaching Antitrust Agreement

  • West Virginia AG Patrick Morrisey approved the acquisition of St. Mary’s Medical Center by Cabell Huntington Hospital, Inc., which will create the second-largest hospital chain in the state, with conditions to ensure that the merger complies with state and federal antitrust laws.
  • Under the agreement with the AG, St. Mary’s will remain a free-standing, faith-based hospital and both hospitals must maintain service rates that do not exceed benchmark rates set by the West Virginia Health Care Authority, for a seven-year period following the acquisition.
  • The acquisition is still pending approval by the Federal Trade Commission.


Idaho Attorney General Settles with Nonprofit Hospital Over Alleged Misuse of Charitable Assets

  • Idaho AG Lawrence Wasden reached a settlement with Bingham Memorial Hospital, Inc. (“BMH”) over allegations that hospital officials misappropriated charitable assets in violation of state law.
  • According to the AG’s office, hospital officials allegedly misused hospital-issued credit cards and made payments to a third-party for-profit consulting firm that improperly used some of those funds for operating costs.
  • The settlement requires BMH to revise policies and procedures to prohibit the use of charitable assets for purposes “not in the best interest of the hospital,” and pay $50,000 in legal fees and costs to the state.

Consumer Financial Protection Bureau

CFPB Sues Canadian Online Payday Lender for Allegedly Violating U.S. Consumer Protection Laws

  • The Consumer Financial Protection Bureau (“CFPB”) filed a lawsuit against a Canadian online payday lender and its subsidiaries, alleging that the companies violated U.S. consumer protection laws by collecting on money consumers did not owe.
  • According to the complaint, the companies allegedly offered online payday loans to U.S. consumers in states where short-term, high-interest rate loans are prohibited, made false threats to borrowers, and told borrowers they were responsible for fees and loans that were void under state law.
  • The lawsuit seeks, in part, consumer restitution and to stop the companies from continuing the allegedly unlawful practices.

CFPB Settles with National Mortgage Servicer for Alleged Consumer Financial Protection Violations

  • The CFPB reached a settlement with Residential Credit Solutions, Inc. for allegedly engaging in unfair, deceptive, and abusive practices in the servicing of loans in violation of federal consumer financial protection laws.
  • According to the CFPB, the mortgage servicer failed to honor modifications for loans transferred from other servicers, treated consumers as if they were in default when they were not, sent consumers escrow statements falsely claiming they were due a refund, and forced consumers to waive legal rights in order to get a repayment plan.
  • Under the settlement, the company will, among other things, pay $1.5 million in restitution and $100,000 in penalties.

Consumer Protection

California Attorney General and FBI Settle with Software Company for Allegedly Operating an Illegal Gambling Business

  • California AG Kamala Harris and the FBI reached a settlement and a plea deal, respectively, with Capital Sweepstakes Systems, Inc., a major sweepstakes game software provider, over allegations it illegally operated a gambling business in violation of state and federal gambling laws and state consumer protection laws.
  • According to the AG’s office, Capital Sweepstakes designed software and hardware systems that create interactive gambling-themed games for use at internet “sweepstakes cafés,” which it allegedly misrepresented as lawful promotional sweepstakes games and operated outside of state and federal gaming laws.
  • Under the settlement, the company is barred from conducting any kind of sweepstakes operations in the state for 10 years, will pay $700,000 in civil penalties and costs to the state, and will admit that it violated state gambling laws. The company and its president also pled guilty to federal felony gambling charges and agreed to forfeit over $1.5 million in profits to the federal government.

Florida Attorney General Sues to Permanently Shut Down Businesses After They Allegedly Failed To Follow Prior Settlement

  • Florida AG Pam Bondi filed a lawsuit against Federal Safety Compliance, Inc., Federal Compliance Publications, Inc., and their owners for continuing to ship and charge fees for unsolicited, free federal materials to businesses, despite entering an Assurance of Voluntary Compliance with AG Bondi last year agreeing to cease such practices.
  • According to the complaint, the company sent Occupational Safety and Health Act (“OSHA”) materials to companies who had not requested them and then billed companies hundreds of dollars for the documents, available for free on OSHA’s website.  In some instances, the company threatened legal action and used a collection agency to seek payment for the unsolicited materials.
  • AG Bondi, in the complaint, seeks to permanently shut down the company and restitution for affected consumers.

Florida Attorney General and State Commissioner of Agriculture Sue Company for Allegedly Scamming Victims of Previous Scams

  • Florida AG Pam Bondi and the Florida Commissioner of Agriculture filed a complaint against Advocacy and Collections Group, Inc. and its officers for allegedly violating state consumer protection and telemarketing laws.
  • According to the complaint, the company allegedly cold-called consumers, misrepresented their affiliation with the state, and falsely promised victims of previous telemarketing frauds that in exchange for advance fees the company could recover the funds the victims lost in prior scams.
  • The complaint seeks restitution for harmed consumers and to prohibit the company from engaging in the allegedly misleading and deceptive activities.

False Claims Act

20 States and the Federal Government Settle with Home Healthcare Provider for Alleged False Claims Act Violations

  • 20 states and the federal government reached a settlement with Pediatric Services of America Inc. (“PSA”), a provider of home nursing services to children, to resolve allegations it violated the False Claims Act.
  • The company allegedly failed to return overpayments received from state Medicaid programs, as well as other federally-insured health programs, and overcharged for home nursing services by overstating the length of the services delivered.
  • Under the settlements, PSA will pay $6.88 million and will be required to put in place procedures to avoid and promptly detect overpayments and overcharging.
  • According to the federal government, this is the first settlement based in part on a healthcare provider’s failure to investigate credit balances on its books to determine whether they resulted from overpayments made by a federal health care program, as required under the Affordable Care Act.

For-Profit Colleges

Massachusetts Attorney General Reaches Settlements with Two For-Profit Colleges for Allegedly Violating State Consumer Protection Laws

  • Massachusetts AG Maura Healey reached a settlement with two for-profit colleges, Lincoln Technical Institute and Kaplan Career Institute, over allegations their marketing and recruitment practices violated state consumer protection laws.
  • According to AG Healey, the for-profit colleges allegedly inflated job placement numbers and employed unfair recruiting tactics, including harassment, to persuade prospective students to enroll in their programs.
  • Under the settlements, Lincoln Technical Institute will pay $850,000 in federal student loan debt to eligible graduates of the school’s criminal justice program and will forgive $165,000 in private student loans.  Kaplan Career Institute will pay $1.375 million toward federal student loans for graduates of the school’s medical vocational programs.

State v. Federal

Ten Attorneys General Send Letter in Support of Federal Rules to Limit Power Plant Emissions

  • Ten Democratic Attorneys General and the Corporation Counsel of the City of New York, sent a letter to the U.S. Environmental Protection Agency (“EPA”) in support of final rules recently issued by the agency that limit carbon dioxide emissions from new and existing fossil fuel-fired power plants under the Clean Air Act.
  • In the letter, the AGs note their “strong support” for the rule, which they say places reasonable limits on new and existing power plants and mirrors strategies used by states to successfully curb power plant emissions without harming businesses, and pledge to stand with the EPA to defend the rule if it is challenged in court.
  • A coalition of AGs voiced their opposition to the rule in filing an unsuccessful lawsuit last year to preemptively stop the EPA’s proposed emissions rule from being finalized.