The State AG Report Weekly Update February 4, 2016

Campaign Finance

Washington Attorney General Sues State Labor Council for Alleged Campaign Finance Violations

  • Washington AG Bob Ferguson filed a complaint against the Washington State Labor Council (“WSLC”) for allegedly failing to report contributions in violation of state campaign finance laws.
  • According to the complaint, the WSLC allegedly failed to report cash contributions of $133,345 and in-kind contributions made to its political action committees and other political action committees in the state.  The investigation against WSLC began in response to a Citizen Action Complaint from the Freedom Foundation.
  • AG Ferguson separately reached a settlement with the Service Employees International Healthcare 775NW and its political action committee after filing a complaint last year for allegedly failing to report cash and in-kind contributions.

Consumer Financial Protection Bureau

CFPB and DOJ Settle with Another Indirect Auto Lender for Alleged Discriminatory Loan Pricing

  • The Consumer Financial Protection Bureau (“CFPB”) and Department of Justice (“DOJ”) reached a settlement with Toyota Motor Credit Corporation, the financing unit for Toyota Motor Corporation, over allegations that it charged African-American, Hispanic, and Asian and Pacific Islander borrowers higher interest rates than non-Hispanic white borrowers for their auto loans in violation of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
  • The complaint alleges that Toyota Motor Credit’s practice of allowing dealers the discretion to charge higher interest rates, known as “dealer markup,” to consumers regardless of their creditworthiness resulted in minority borrowers paying higher interest rates than non-Hispanic white borrowers.
  • The settlement requires Toyota Motor Credit to change their pricing and compensation system by August 2016 and pay up to $21 million in restitution to affected borrowers. The CFPB has reached similar settlements with American Honda Finance Corp. and Ally Financial Inc. and Ally Bank over their pricing and compensation systems.

Consumer Protection

Illinois Attorney General Sues Tax Preparation Company for Alleged Unlawful Fees

  • Illinois AG Lisa Madigan filed a lawsuit and motion for a temporary restraining order against Individual Income Tax Service (“IITS”) and its operators for alleged violations of the Illinois’ Tax Refund Anticipation Loan Reform Act and the Consumer Fraud and Deception Business Practices Act.
  • According to the AG’s office, IITS allegedly misled consumers into believing that payment of tax preparation fees could only be made through refund anticipation checks and charged illegal and higher fees to customers who paid through refund anticipation checks.


California Attorney General Sues Gas Company Over Natural Gas Leak

  • California AG Kamala Harris filed a lawsuit against Southern California Gas Company (“SCGC”) for alleged violations of state unfair competition laws and health and safety laws over the still uncontained natural gas leak at its Aliso Canyon natural gas storage facility that led the Governor of California to declare a state of emergency.
  • According to the complaint, SCGC allegedly failed to promptly control the leak and report it to authorities when it discovered the leak three days before it was reported. The AG’s complaint further alleges, among other things, that the leak has harmed the state’s efforts to control greenhouse gas emissions and has caused health problems, including nausea and trouble breathing, for area residents.
  • AG Harris’ lawsuit seeks an injunction, civil penalties, and restitution.

Maryland Attorney General Hires Outside Counsel to Pursue Groundwater Contamination Claims

  • Maryland AG Brian Frosh will partner with three outside firms to pursue claims against gasoline manufacturers who used a chemical additive that allegedly contaminated groundwater in the state.
  • According to AG Frosh, the chemical additive methyl tertiary butyl (“MTBE”), a suspected carcinogen according to the Environmental Protection Agency, was used by gasoline manufacturers between 1995 and 2001 to make fuel burn cleaner but allegedly caused groundwater contamination when it leaks from underground storage tanks.
  • The state, according to AG Frosh, has identified more than 12,000 leaking underground storage tanks and 900 contaminated wells and water systems.

False Claims Act

Massachusetts Attorney General Settles with Dentist for Alleged False Claims Act Violations

  • Massachusetts AG Maura Healey reached a settlement with Everett Dental Management Corporation, Sameka Dental Management Corporation in South Boston, and Malden Dental Management Center, Inc. and the dentist-owner (collectively “DMC”) for allegedly improper billing practices.
  • According to the AG’s office, DMC allegedly used multiple oral examination codes to bill the state’s Medicaid program for services received by the same patients on the same day.
  • Under the terms of the settlement, DMC will pay $650,000 in restitution to the Commonwealth.

New York Attorney General Settles with Transportation Company for Alleged Overbilling

  • New York AG Eric Schneiderman reached a settlement with Advantage Transit Group, Inc. for alleged violations of the state False Claims Act.
  • According to AG Schneiderman’s office, ATG submitted claims for reimbursement to Medicaid for transportation services and received payment for services that were not rendered.
  • Under the terms of the settlement, ATG will reimburse the state $1 million.


New York Attorney General and SEC Settle with Two Investment Banks over Alleged Misrepresentations Regarding “Dark Pools”

  • New York AG Eric Schneiderman and the Securities and Exchange Commission (“SEC”) reached settlements with Barclays Capital Inc. and Credit Suisse Securities (USA) LLC to resolve investigations into alleged false statements and misrepresentations in their marketing of private exchanges for trading securities (commonly known as “dark pools”).
  • According to the AG’s office and the SEC, Barclays Capital and Credit Suisse allegedly misrepresented to investors their safeguards against and monitoring of predatory and high-frequency trading in dark pools by, among other things, allegedly not conducting monitoring activities as promised or by making exceptions for certain high-frequency trading firms.  Credit Suisse, according to the SEC, also allegedly executed 117 million illegal sub-penny orders out of one of its dark pools.
  • Under the terms of the settlements, Barclays Capital will pay $35 million in penalties to the SEC and the New York AG for a total of $70 million, and Credit Suisse will pay $30 million in penalties to the SEC and the New York AG, and $24.3 million in disgorgement and prejudgment interest to the SEC for a total of $84.3 million.

State AGs in the News

Former West Virginia Attorney General Seeks Spot on State Supreme Court

  • Former Democratic West Virginia AG Darrell McGraw filed with the West Virginia Secretary of State to run for a seat on the state’s Supreme Court of Appeals, which consists of five justices who serve 12-year terms.
  • AG McGraw served as West Virginia’s AG for five-terms before losing his bid for reelection in 2012 to current Republican AG Patrick Morrisey.  AG McGraw previously served one term on the Supreme Court from 1976 to 1988.
  • The election for state judges will be non-partisan for the first time this year and will be held during the primary elections on May 10th. The race includes four other candidates, including Incumbent Justice Brent Benjamin.

Texas Ethics Commission Fails to Adopt Opinion Allowing Attorney General’s Office to Accept Out-of-State Gifts

  • The Texas Ethics Commission (“TEC”) failed to adopt a draft advisory opinion, requested by an anonymous employee in the Texas AG’s office, seeking clarification of a state law which prohibits agency officials from accepting a “benefit” from someone under the agency’s oversight.
  • According to reports, the draft opinion would have permitted public employees in the AG’s office to accept out-of-state gifts from donors, as long as the donors had no ties to Texas and were not under the jurisdiction of the AG’s office. TEC failed to reach the five vote threshold required to approve the opinion.

Virginia Attorney General Creates New Unit to Stop Bad Faith Patent Lawsuits

  • Virginia AG Mark Herring announced that that his office is establishing a new Patent Troll Unit in an effort to combat bad faith assertions of patent infringement, also known as “patent trolling.”
  • According to AG Herring, the unit will investigate and prosecute violations of a 2014 law that prohibits bad faith assertions of patent infringement. That law also gives the AG’s office the authority to obtain financial penalties and injunctions for violations of the law.