The State AG Report Weekly Update February 18, 2016

State Attorneys General in the News

Pennsylvania Attorney General Not Seeking Re-Election

  • Pennsylvania AG Kathleen Kane will not run for re-election after her term expires in 2017, despite surviving a recent attempt by the Pennsylvania Senate to remove her from office. This past September, Kane’s law license was temporarily suspended by the state’s Supreme Court, and she faces charges of perjury and obstruction and impeachment by the Pennsylvania House of Representatives over allegations that she leaked confidential information to retaliate against a rival.
  • A number of candidates have declared their intent to run to replace AG Kane, including Democrats Northampton County District Attorney John Morganelli, Montgomery County Commissioner Josh Shapiro, and Allegheny County District Attorney Stephen A. Zappala, Jr; and Republicans state Senator John Rafferty and Joe Peters, a veteran prosecutor from Cumberland County.


DOJ, New York and Illinois Attorneys General Settle with Morgan Stanley over Residential Mortgage-Backed Securities

  • The U.S. Department of Justice (“DOJ”) reached a settlement with Morgan Stanley over alleged violations of federal laws in connection with its packaging, marketing, sale, structuring, arrangement and issuance of residential mortgage-backed securities (“RMBS”).
  • According to the DOJ, Morgan Stanley neglected to disclose key information to potential investors about the quality of the mortgages underlying its RMBS and its due diligence practices. Under the settlement agreement, Morgan Stanley will pay $2.6 billion as a civil monetary penalty to resolve claims under the Financial Institutions Reform, Recovery, and Enforcement Act.
  • In addition to its settlement with the DOJ, Morgan Stanley also entered into separate settlements regarding its sale of RMBS with the Attorneys General of New York and Illinois for $550 million and $22.5 million, respectively. Under the terms of the NY settlement, $400 million will be provided as consumer relief in the form of loan reductions and funds to encourage construction of affordable housing.

Consumer Protection

Florida Attorney General Settles with Home Builder for Alleged Deceptive and Unfair Trade Practices

  • Florida AG Pam Bondi reached a settlement with KB HOME and its Florida subsidiaries (“KB”) for alleged violations of the Florida Deceptive and Unfair Trade Practices Act.
  • According to the complaint, KB allegedly failed to disclose that certain homes sold by the company were not built in accordance with applicable building codes, nor built to meet design plans and specifications, resulting in water intrusion issues and the need for repairs. KB also allegedly improperly denied warranty coverage to certain homeowners.
  • Under the terms of the stipulated consent decree, KB will provide the AG’s office $6.5 million in restitution, which will pay for, among other things, out-of-pocket costs of consumers affected by KB’s conduct, as well as the costs of the AG’s investigative and settlement administration activities. KB will also be required to repair certain homes affected by the alleged conduct and spend approximately $17 million in the next five years to improve its construction practices.

50 Attorneys General Reach Agreement with Money Transfer Company to Enhance Anti-Fraud Measures

  • The AGs of 49 states and the AG of the District of Columbia entered into an Assurance of Voluntary Compliance with MoneyGram Payment Systems, Inc. (“MoneyGram”) regarding the strength of its measures to prevent consumers from being defrauded into using its service to wire money.
  • According to the AGs, third parties used a variety of schemes to fraudulently induced consumers to utilize MoneyGram’s wire transfer service to wire transfer money.
  • Under the Assurance of Voluntary Compliance, MoneyGram will pay $13 million in restitution to the states to establish a nationwide consumer restitution program and to cover associated costs, and the company also will enhance its anti-fraud program so that consumers are warned of schemes and so future schemes can be detected and prevented.

Florida Attorney General and FTC Settle with Technical Support Operators for Alleged Misrepresentations

  • Florida AG Pam Bondi and the Federal Trade Commission (“FTC”) reached a joint settlement with Amit Mehta; Boost Software, Inc.; Success Capital, LLC; Elliot Loewenstern; Jon Paul Holdings, LLC; and Jon-Paul Vasta (collectively, the “operators”) regarding allegations that the operators violated the Telemarketing Sales Rule, the FTC Act, and Florida’s Deceptive and Unfair Trade Practices Act by misrepresenting consumers’ technical support needs.
  • According to the complaint, the operators utilized software that misled consumers into believing that their computers needed technical support, and then directed the consumers to salespersons who deceptively pitched technical support products and services.
  • Under the terms of the settlement, the operators will, among other things, pay over $200,000 of more than $37 million in suspended judgments, and surrender certain corporate assets.

Data Privacy

California Attorney General Releases Report on Data Breaches

  • California AG Kamala Harris released a report on the data breaches that have been reported to her office under a California law mandating that businesses and government agencies that have been subjected to certain types of data breaches must notify the AG and affected California residents of those breaches.
  • According to the report, 657 data breaches, representing over 49 million records of Californians’ personal information, were reported between 2012 and 2015. Social security numbers, payment card data, and medical information were the three most common types of data to be breached.