State AGs In The News - January 3rd, 2014

STATE AGs IN THE NEWS

New Utah Attorney General Appointed and Sworn into Office

• Utah Governor Gary Herbert named Sean Reyes to serve as Attorney General to replace John Swallow who recently resigned from office. AG Reyes was sworn into office on December 30, 2013 and will serve through 2014. A special election will be held in November 2014, and AG Reyes stated that he will run.
• Reyes, who ran for AG against Swallow in 2012, practiced law for 14 years with Utah's largest law firm, Parsons Behle & Latimer. He later went on to start Reyes Legal Management and to partner with Accelerate Ventures, both companies involved in overseeing legal strategy and execution for venture capital funds.
• In 2008, Reyes was named the American Bar Association's "National Outstanding Young Lawyer" and in 2006, the Utah State Bar recognized him as "Utah Young Lawyer of the Year."

CONSUMER FINANCIAL PROTECTION BUREAU (CFPB)

CFPB Settles with American Express for Credit Card Add-Ons

• The Consumer Finance Protection Bureau (CFPB) settled with American Express Co. for $75.7 million over allegedly unfair billing practices and deceptive marketing, affecting more than 335,000 consumers.
• The company allegedly misrepresented the costs and benefits of add-on products including its "Account Protector" and "Lost Wallet" payment protection products, and also billed customers for services they did not receive.
• $59.5 million of the total settlement amount is for customer restitution and $16.2 million is assessed as penalties.

CONSUMER PROTECTION

Idaho Attorney General Bans E-commerce Training Company for Consumer Protection Violations

• Idaho AG Lawrence Wasden settled with eCommerce Support, LLC resolving allegations that the company misrepresented the written materials and coaching services purportedly designed to help consumers develop Internet businesses.
• The settlement stems from allegations that eCommerce Support falsely represented that consumers were investing in a business, would earn a specific sum of money within a short amount of time, only had to work 10 hours per week to make money, could deduct the cost of the program from their taxes, and would receive a professional, functioning website.
• As part of the settlement, eCommerce Support is prohibited from doing business in Idaho and will pay $90,000 in restitution, $10,000 for the AG's investigation costs, and $50,000 civil penalties that will be held in abeyance.

New Mexico Attorney General Sues to Oppose Opening of Horse Slaughterhouse

• New Mexico AG Gary King filed a lawsuit seeking an injunction to prevent Valley Meat Co. from starting operations due to allegations that its plant violates state laws related to food safety, water quality, and unfair business practices.
• According to the complaint, Valley Meat allegedly has a history of violating state and federal environmental and safety laws while operating a beef slaughterhouse, has failed to monitor and test water samples as part of its past discharge permits, and has been accused of disposing of carcasses illegally.
• AG King announced that he "took this action because horse slaughter presents a genuine risk to New Mexicans' health and to our natural resources," and because "[c]ommercial horse slaughter is completely at odds with our traditions and our values as New Mexicans."
• The court issued a temporary restraining order and Valley Meat has filed a motion arguing that the AG lacks jurisdiction over the federally regulated plant.

Arkansas Attorney General Announces Default Judgment for Alleged Telemarketing Violations by Company Offering Interest Rate Reductions

• Arkansas AG Dustin McDaniel obtained an order against Associated Accounting Specialists Inc. of Port St. Lucie, Florida, and its owner, Jason Page, for violating state and federal telemarketing laws.
• Associated Accounting Specialists was one of five companies sued last year over accusations that the company deceptively advertised interest rate reductions on consumer credit cards.
• The federal court judge's order prohibits the company from placing unsolicited "robocalls" or live telemarketing calls to consumers, enjoins them from owning, operating, or managing any business that purports to offer credit card interest rate reductions or debt relief services, and imposes $90,000 in civil penalties, $4,500 in attorneys' fees, and $988 in restitution.
• The order follows prior payments of $107,895.90 and $24,500 in penalties, restitution, and costs from Financial Ladder, Inc. and Consumer Global Services LLC, respectively.

New York Attorney General Announces $330,000 Settlement with Food Distributor

• New York AG Eric Schneiderman reached a settlement with US Foods, Inc., for overcharging 67 New York state and local institutions by failing to pass on cost savings it received from manufacturers.
• The AG investigation allegedly found that since April 2009, US Foods had failed to disclose and pass through to New York institutions the cost-saving discounts it received when it met certain sales goals as required by its contract with the New York State Office of General Services.
• The settlement follows an $18 million recovery from Compass USA in 2012, a $1.6 million recovery from Whitson's Food Corporation in 2011, and a $20 million recovery from Sodexho, Inc.

DATA PRIVACY

Attorneys General Investigate Data Breach Affecting 40 Million Target Consumers

• The nationwide retailer Target reported the thefts of credit and debit card information for 40 million accounts taking place for over 20 days in 2013.
• On December 23rd, Target's general counsel Tim Baer held a conference call with several AGs to provide details on the type of data stolen and the company's internal investigations of the data breach. Another call has been scheduled for January.
• Several AGs have requested additional information from the company. U.S. Senators Menendez, Warner, and Schumer have requested a congressional hearing on safeguarding consumer data and possible legislative action on strengthening national data breach laws.
• Target has agreed to provide one year of free credit monitoring to affected customers.

FINANCIAL INDUSTRY

Mississippi Attorney General Files Suit Against JPMorgan Chase Over Debt Collections

• Mississippi AG Jim Hood filed suit against investment bank JPMorgan Chase related to its now defunct credit-card debt collection operations. Mississippi ex rel. Hood v. JPMorgan Chase & Co., Chancery Court of the First Judicial District of Hinds County, Mississippi, No. G2013-1939.
• The lawsuit, filed after an 18-month probe, alleges that the company used pressure tactics to get customers to pay for debts they did not actually owe and seeks civil penalties of up to $10,000 per violation.

HEALTHCARE

UnitedHealthcare Under Scrutiny by New York and Connecticut Attorneys General

• Connecticut AG George Jepsen has filed an appellate brief in support of state medical associations suing UnitedHealthcare, a managed health care and insurance company, over the decision to drop doctors from its Medicare Advantage network. Former AG and current U.S. Senator Richard Blumenthal also filed a brief in support of the associations.
• In December, a U.S. District Court judge issued a preliminary injunction, stopping the doctor cuts for members of the two associations bringing the suit. UnitedHealthcare appealed to the Second Circuit, U.S. Court of Appeals seeking to stay the injunction.
• New York AG Eric Schneiderman is also reported to have started an investigation of the company after 2,000 doctors in New York were removed from the Medicare Advantage plan.

Attorneys General Express Concerns about Legality of Affordable Care Act Changes

• West Virginia AG Patrick Morrisey and 10 other AGs have jointly written a comment letter to the U.S. Department of Health and Human Services regarding a proposed federal rule change for implementing the Affordable Care Act (ACA) that they say would allow certain insurance companies to issue plans not technically in compliance with the ACA.
• The AGs are concerned that the Obama Administration is making unilateral adjustments to the ACA, calling this practice "flatly illegal under federal constitutional and statutory law." The AGs argued that Congressional action is required to change the law.
• "We are deeply concerned that this Administration is consistently rewriting new rules and effectively inventing statutory provisions to operationalize a flawed law," the attorneys general wrote. "And the irony, of course, is that the changes being put forth to fix the disastrous exchanges will ultimately destroy the market and increase health insurance premiums for customers who played by the rules."

MORTGAGES/FORECLOSURES

Subprime Loan Servicer Settles with 49 States, CFPB for over $2 Billion 

• Ocwen Financial Corporation has settled with 49 states and the CFPB over allegations of mishandling homeowner loans after the nationwide mortgage and financial crises in violation of the states' Unfair and Deceptive Acts and Practices laws and the Consumer Financial Protection Act of 2010. Ocwen is the fourth-largest mortgage service provider in the U.S. and is considered a "non-bank," making it subject to the CFPB's jurisdiction.
• The company is alleged to have charged unauthorized fees, used robo-signing for documents, provided false or misleading information, and failed to accurately credit payments among other practices. The company will pay $2 billion in "loan modification relief" and $125 million in refunds to consumers whose homes were foreclosed.
• The consent judgment will be in effect for three years and establishes servicing standards that the company must implement and abide.

Massachusetts Attorney General Settles with Countrywide Securities Over Mortgage Crisis Role

• AG Martha Coakley has reached a settlement with Countrywide Securities Corp. (now part of Bank of America Corp.) over the company's residential mortgage securitization practices, in a case that is part of the her office's industry-wide review of these practices in Massachusetts.
• The $17.3 million settlement includes $11.3 million to be paid to the state Pension Reserves Investment Management Board and $6 million to be paid to the state.

42 Attorneys General Urge Congress to Extend the Mortgage Forgiveness Tax Relief Act Through at Least 2014

• 42 state and territorial AGs sent letter to congressional leaders from both houses on December 19, 2013, seeking Congress to once again extend the Mortgage Forgiveness Tax Relief Act to help financially-strapped homeowners.
• The Act, which expired on December 31, would have prevented homeowners from paying taxes as income on any mortgage debt forgiven by the mortgage holder.
• The letter states that even though the AGs have "made significant headway and seen real results achieved for our citizens through the National Mortgage Settlement and other programs . . . this assistance will be less meaningful if the very homeowners that receive mortgage debt relief are hit with tax bills they cannot afford."
• As of the date of this posting, Congress has declined to extend the Act through 2014.

PHARMACEUTICALS

Maryland and New Mexico Attorneys General Recover Millions from Pharmaceutical Company

• Maryland AG Doug Gansler and New Mexico AG Gary King have independently settled with GlaxoSmithKline, LLC (GSK) over allegations that the company improperly marketed prescription drugs, including Avandia, which treat diabetes and allegedly dramatically increase a patient's chances of suffering a heart attack or other serious adverse events.
• AG Gansler announced that the state has recovered $15 million for GSK's "distorted promotion of these drugs [that] put diabetes patients at serious risk by misrepresenting the facts concerning their safety and usefulness."
• AG King announced that GSK will pay $24 million, including $15 million related to consumer claims and about $3.8 million to offset Medicaid expenditures by the state for the drug.

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