The State AG Report Weekly Update October 15, 2015

Consumer Protection

Technology Companies Partner with Attorneys General, Others to Bring New Technologies Into Fight Against Missing and Exploited Children

  • New York AG Eric Schneiderman announced a partnership with Facebook to use innovative data and analytical methods to aid law enforcement in detecting and identifying missing and exploited children.
  • According to the AG’s office, the initiative will include developing algorithms to identify evidence of sex trafficking and missing children in online advertisements. Earlier this year, the AG’s office, other states and the federal government partnered with Facebook to help find missing children by sending AMBER Alerts to the News Feeds of Facebook users.
  • Other technology companies also are exploring how their products and services can be helpful on this issue, prominently including Uber’s recent partnership with the National Center for Missing & Exploited Children to use the Uber app to push out AMBER Alerts to all its drivers.

Texas Attorney General First to File Complaint Against Car Manufacturer for Emissions Test Manipulation

  • Texas AG Ken Paxton filed two complaints against Volkswagen Group of America Inc. and Audi of America LLC (“Volkswagen”), for allegedly violating the Texas Deceptive Trade Practices Act and Texas Clean Air Act.
  • According to the complaints, Volkswagen allegedly used false advertising and misrepresentations to consumers that their vehicles contained high-standard “clean diesel” technology and were fuel efficient, when they had in fact secretly designed their cars to give inaccurate results during emissions testing.
  • This is the first complaint to be filed by an AG, following the recent announcement that at least 16 AGs were investigating Volkswagen’s alleged conduct. According to AG Paxton, Texas was “compelled” to withdraw from the multistate investigation and file its own complaints against Volkswagen after two counties in Texas filed their own lawsuits against the company.

Consumer Financial Protection Bureau

CFPB Expresses Concern About Impact of Marketing Services Agreements on Anti-Kickback Protections

  • The Consumer Financial Protection Bureau (“CFPB”) issued a bulletin to the mortgage industry regarding the “substantial legal and regulatory risk” of marketing services agreements (“MSAs”) for lenders.
  • According to the bulletin, investigations by the CFPB allegedly have shown that many MSAs are designed to evade the Real Estate Settlement Procedures Act, which prohibits the payment and acceptance of kickbacks and referral fees in the mortgage industry.  The bulletin further states that any agreement that entails exchanging a thing of value for referrals of settlement service business likely violates federal law, regardless of whether a MSA is part of the transaction.

Campaign Finance

Washington Attorney General Separately Sues Union and Its PAC, and a Think-Tank for Alleged Campaign Finance Violations

  • Washington AG Bob Ferguson filed two separate complaints, one against the Service Employees International Union Local 925 (“SEIU 925”) and its political action committee (“PAC”), and another against the think tank Freedom Foundation, for allegedly violating state campaign finance laws.
  • According to the complaint against SEIU 925 and its PAC, the union allegedly failed to report monetary contributions totaling $635,000, as well as in-kind contributions, made to the PAC from 2011 to 2015, and the PAC allegedly failed to properly file reports of any in-kind contributions received from SEIU 925. The complaint filed against the Freedom Foundation alleges that it failed to report, as an independent expenditure, the value of staff time spent on litigation in 2014 to place propositions related to collective bargaining on ballots in three cities.
  • The investigation against the Freedom Foundation began in response to a Citizen Action Complaint from the Committee for Transparency in Elections. The investigation against the SEIU 925 and PAC began in response to a Citizen Action Complaint to the AG’s office by the Freedom Foundation. The AG took similar action, based off of a Freedom Foundation complaint, against a different SEIU chapter and PAC last month.

False Claims Act

43 States and the Federal Government Settle with Pharmacy for Allegedly Engaging in Kickback Arrangements

  • 43 States, through the National Association of Medicaid Fraud Control Units, and the U.S. Department of Justice (“DOJ”) reached a settlement with PharMerica Corp., a nursing home pharmacy, to resolve allegations that the company violated state and federal false claims acts by engaging in kickback arrangements with a pharmaceutical manufacturer to promote off-label uses of an anti-seizure drug, Depakote.
  • According to reports, from January 2001 through December 2008, PharMerica allegedly conspired with the manufacturer of Depakote, through kickback arrangements disguised as rebate agreements, educational grants, and other financial support, to increase and promote off-label uses of the drug, including for treatment of schizophrenia and agitation and aggression in elderly dementia patients when these uses are not approved by the Food and Drug Administration.
  • Under the terms of the settlement, PharMerica will pay the states and the federal government $9.25 million.