Digest 10.10.2019 The State AG Report Weekly Update


New York Attorney General Sues Online Fundraising Platform Over Alleged Failure to Distribute Charitable Contributions

  • New York AG Letitia James filed a lawsuit against and a related individual (collectively, “NYCharities”) over allegations that it failed to distribute charitable contributions to the intended recipient charities, in violation of state Estates, Powers and Trust Law and other state charities law.
  • According to the complaint, NYCharities allegedly collected contributions on behalf of charities in the state, and has failed to distribute those contributions—ranging from $200 to over $100,000—since May 2019, and failed to respond to inquiries about inaccurate payments, among other things.
  • The complaint seeks injunctive relief, an accounting of all funds collected, and appointment of a receiver to oversee payment of those funds to the appropriate charities.

 Consumer Protection

New York Attorney General Sues Student Loan Servicer Over Allegedly Deceptive Administration of Public Service Loan Forgiveness Program

  • New York AG Letitia James filed a lawsuit against student loan services Pennsylvania Higher Education Assistance Agency, d/b/a FedLoan Servicing and American Education Services (“PHEAA”) over allegations that it engaged in deceptive, unfair and abusive practices in administering the federal Public Service Loan Forgiveness (“PSLF”) program, in violation of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and state consumer protection laws.
  • According to the complaint, PHEAA allegedly failed to accurately track PSLF-qualifying payments resulting in a high rate of rejection for PSLF applications for loan forgiveness, and did not apply lending policies consistently, explain loan determinations to borrowers, or inform borrowers of options to appeal such determinations, among other things.
  • The complaint seeks injunctive relief, restitution and damages to borrowers, civil penalties, and costs.

FTC Settles with Multi-Level Marketers Over Alleged Pyramid Scheme

  • The Federal Trade Commission (“FTC”) reached settlements with multi-level marketing company AdvoCare International, L.P. and a company executive (collectively, “AdvoCare”) and two affiliated distributors over allegations that they operated and engaged in a pyramid scheme in violation of the FTC Act.
  • According to the complaint, AdvoCare allegedly sold business opportunities as distributors of health and wellness products to individuals through false claims of potential earnings and required distributors to recruit additional distributors in order to earn an income, among other things.
  • Under the terms of the settlements, AdvoCare must pay $150 million, cease all multi-level marketing, and notify all distributors of the settlement and restitution options; and a partially suspended judgment of $4 million was imposed on the distributors, among other things.


FTC Issues Orders to 6 E-Cigarette Manufacturers Seeking Sales, Advertising, and Promotion Information

  • The Federal Trade Commission (“FTC”) issued orders to six e-cigarette manufacturers directing them to each submit a Special Report containing information regarding the companies’ sales, advertising and promotional methods.
  • According to the FTC, the orders were issued under the FTC’s authority under the FTC Act, in support of a study intended to assist the FTC, policy makers, and the public in understanding the e-cigarette market.
  • The orders seek annual data on sales and giveaways of e-cigarette products, product information such as flavors, annual advertising expenditures, alternative marketing strategies such as endorsements or social media influencers, and college campus programs, among other things.

Financial Industry

New York Attorney General Settles with Brokerage Firms Over Allegedly Fraudulent Solicitation and Acceptance of Foreign Exchange Option Orders

  • New York AG Letitia James reached settlements with brokerage firms BGC Financial LP (“BGC”) and GFI Securities LLC (“GFI”) over allegations that they used fraudulent practices to solicit and accept orders from traders to buy and sell foreign exchange currency (“FX”) options, in violation of the Martin Act, New York’s securities fraud law.
  • According to the AG’s office, the firms posted fake trades, bids, and offers by brokers of FX options—financial instruments that confer the right to buy or sell a fixed amount of a specified currency at a specified exchange rate on or before a specific date—in order to increase interest in certain emerging market currencies, among other things.
  • Under the terms of the settlements, BGC must pay $7.5 million in penalties, GFI must pay $5 million in penalties, and both firms must remediate their policies and procedures, provide relevant training to employees, and submit to monitoring, among other things.

Labor & Employment

Alaska Attorney General Issues Opinion on Constitutionality of In-State Hiring Requirements

  • Alaska AG Kevin Clarkson issued an opinion regarding the constitutionality of the state’s resident preference employment law, AS 36.10.150 (known as “Alaska Hire”), which required certain private employers to hire a fixed percentage of Alaskans.
  • In the opinion, AG Clarkson concludes that the law violates the U.S. Constitution’s Privileges and Immunities Clause and the Alaska Constitution’s Equal Rights, Opportunities, and Protection Clause, as the state or economically benefitting state residents does not sufficiently justify discriminating against nonresidents, and the law is not sufficiently tailored to that state purpose.