United States: State AGs In The News - August 28th, 2014

Hot News

States and Federal Government Reach Record $16.65 Billion Settlement With Bank of America

  • Following multiple state and federal investigations, the U.S. Department of Justice and the AGs of California, Delaware, Illinois, Kentucky, Maryland, and New York settled for $16.65 billion with Bank of America Corporation and its current and former subsidiaries, including Countrywide Financial Corporation and Merrill Lynch, (collectively, Bank of America) to resolve state and federal claims. This is the largest civil settlement with a single entity in U.S. history.
  • The settlement resolves allegations related to Bank of America's packaging, marketing, sale, arrangement, structuring, and issuance of residential mortgage-backed securities (RMBS) and collateralized debt obligations and the underwriting and origination of mortgage loans. In the agreed upon statement of facts, Bank of America admits to selling RMBS without disclosing material facts about the quality of the loans to investors, originating risky mortgage loans, and making misrepresentations to Fannie Mae, Freddie Mac, and the Federal Housing Administration.
  • Of the $16.65 billion, Bank of America will pay almost $9.2 billion to the state and federal governments, $7 billion in consumer relief, and $490 million to a tax relief fund. The consumer relief will include principal reduction loan modifications and donations to communities recovering from the financial crisis. Pursuant to the settlement, California and New York will each receive $300 million and Illinois, Maryland, Delaware, and Kentucky will receive $200 million, $75 million, $45 million, and $23 million, respectively.

2014 Election

Arizona Primary Election Results

  • Incumbent AG Tom Horne was defeated by Mark Brnovich in the Republican primary by a margin of 53.2% to 46.4%. Brnovich will face 2010 Democratic AG nominee Felecia Rotellini, who ran unopposed in the Democratic primary.

Florida Primary Election Results

  • Incumbent AG Pam Bondi received her party's nomination after running unopposed in the Republican primary. In the Democratic primary, George Sheldon defeated Perry Thurston by a margin of 60.7% to 39.3%.

Vermont Primary Election Results

  • Incumbent AG Bill Sorrell received his party's nomination after defeating H. Brooke Paige in the Democratic primary by a margin of 80.4% to 18.9%, with 89% of precincts reporting. AG Sorrell will face Liberty Union party candidate Rosemarie Jackowski in November's general election. There is no Republican candidate. If reelected, this will be AG Sorrell's 10th term.

Antitrust

Acting New Jersey Attorney General Settles With Hotel to Resolve Price Gouging Allegations Related to Superstorm Sandy

  • As part of a larger enforcement initiative following Superstorm Sandy, acting New Jersey AG John Hoffman announced a settlement with Amy Hotels, LLC, doing business as Econo Lodge, to resolve allegations that it engaged in unlawful price gouging during a declared state of emergency.
  • The state price gouging statute prohibits excessive price increases during a declared state of emergency. Amy Hotels allegedly increased its room rates by as much as 150 percent following the declaration of the state of emergency.
  • Under the settlement, the hotel will pay almost $65,000, including almost $25,000 in consumer restitution, $25,000 in civil penalties, and almost $15,000 in costs and fees.

Consumer Financial Protection Bureau

Consumer Financial Protection Bureau Takes Action Against Auto Finance Company for Alleged Inaccurate Reporting of Consumer Credit Information

  • The Consumer Financial Protection Bureau took action against auto finance company First Investors Financial Services Group Inc. for allegedly violating the Fair Credit Reporting, Dodd-Frank, and Consumer Protection Acts.
  • First Investors allegedly failed to fix known flaws in its computer systems that were used to report consumer credit information to credit reporting agencies, which caused reporting of inaccurate information and potential harm to its customers.
  • Pursuant to a consent order, First Investors will pay a civil penalty of $2.75 million, correct any errors on credit reports, help consumers obtain free copies of their credit reports, and establish new consumer safeguards.

Consumer Protection

Indiana Attorney General and State Lawmakers Propose State Servicemembers Civil Relief Act

  • Indiana AG Greg Zoeller and state lawmakers proposed the Indiana Service Member's Civil Relief Act to increase consumer protections for military servicemembers.
  • The act would complement and provide state remedies for violations of the federal Servicemembers Civil Relief Act, which allows individuals that are serving to suspend or postpone certain obligations. Those obligations include debt collections, foreclosures, evictions, judicial and administrative proceedings, and certain lease or service terminations.
  • Illinois and Kentucky already have similar laws and we previously blogged about Delaware's similar proposed legislation.

Airbnb Produces Host Information to New York Attorney General

  • Pursuant to an agreement with NY AG Eric Schneiderman and as part of an ongoing investigation into potential violations of state tax and hotel laws, Airbnb, which provides an online accommodations marketplace, will produce unredacted information on 124 of its hosts to the AG.
  • In May, to comply with a subpoena issued by the AG, Airbnb agreed to provide information about approximately 16,000 of its hosts, redacted of personal information, to the AG. Under that agreement, the AG reserved the right to follow up and request unredacted information on any of those hosts. The production of unredacted information on 124 Airbnb hosts is in response to such a request.
  • In a blog post, Airbnb stated that the AG might still request additional information.

Employment

Illinois Attorney General and State Department of Labor Jointly Investigate Chinese Restaurants for Alleged Wage Violations and Discriminatory Practices

  • Illinois AG Lisa Madigan and the state Department of Labor announced a joint investigation into potential wage violations and discriminatory practices against minority and immigrant workers at Chinese restaurants.
  • Chinese restaurants across the state allegedly require immigrant and minority workers to work long hours without breaks, live in restaurant-owned housing with substandard conditions, work for less than minimum wage, and work under threats of abuse and violence.
  • As part of the investigation, the AG and the state Department of Labor jointly issued subpoenas regarding the workers' claims.

False Claims Act

New York Attorney General Settles for $1.56 Million to Resolve Whistleblower Lawsuit Brought Under State False Claims Act

  • New York AG Eric Schneiderman settled with appliance retailer Topline Appliance Center and its owner for $1.56 million to resolve a lawsuit brought by a whistleblower under the state False Claims Act.
  • After an investigation, the AG alleged that Topline knowingly failed to collect and pay state and local sales taxes and corporate franchise taxes over a ten-year period.
  • According to the AG, the state False Claims Act is one of the state's most powerful civil fraud enforcement tools and has been useful in obtaining other tax-related recoveries for the state.

Health Care

Oregon Sues Technology Company Over Health Insurance Exchange Website

  • Oregon AG Ellen Rosenblum sued Oracle America, Inc., several of its executives, and a company that distributes and resells Oracle's products (collectively, Oracle) in state court alleging fraud, breach of contract, and violations of the state False Claims and Civil Racketeer Influenced and Corrupt Organizations Acts.
  • Oracle allegedly failed to timely provide a functional health insurance exchange website. The complaint seeks substantial damages, penalties, interest, rescission, costs, and fees.
  • Earlier this month, Oracle had filed a lawsuit related to the website against the state in federal court alleging breach of contract and seeking $23 million in allegedly unpaid fees, interest, and an unspecified amount of damages.

Insurance

Louisiana Attorney General Sues Automobile Insurer Alleging Violations of Monopoly and Unfair Trade Practices Laws

  • Louisiana AG Buddy Caldwell sued State Farm Fire and Casualty Company, State Farm General Insurance Company, and State Farm Mutual Automotive Insurance Company (collectively, State Farm) alleging that they engaged in a pattern of unfair and fraudulent business practices meant to control the auto repair industry and resulting in unsafe vehicle repairs.
  • The complaint alleges violations of the state Monopolies Law and the Unfair Trade Practices Act. State Farm allegedly entered into service agreements with repairers that required the use of certain State Farm pricing structures for parts and labor. State Farm also alleged artificially decreased labor rates and mandated the use of substandard, inexpensive parts under these agreements. These practices purportedly resulted in unsafe repairs.
  • The AG seeks injunctive relief, restitution, civil penalties, and costs.

Marijuana

Washington Attorney General Files Brief in Support of City Ordinances Prohibiting Marijuana-Related Businesses

  • Washington AG Bob Ferguson filed a brief in MMH, LLC v. Fife supporting a grant of summary judgment to uphold a city's local ordinances prohibiting marijuana-related businesses.
  • Washington passed Initiative 502 (I-502), which decriminalizes the use of marijuana and establishes a state regulated system for the production, processing, and retail sale of marijuana. In his brief, the AG asserts that I-502 does not address its impact on the authority of local governments, rather, that continues to be governed by the state constitution, which allows local governments to make and enforce their own local laws. The AG asserts that state courts have adopted a strong presumption against state preemption of nonconflicting local authority and therefore the city's local ban should be upheld.
  • The AG alternatively argues that if the court rules that I-502 requires the city to allow marijuana-related businesses, the Court should reject the city's claim that such a requirement is preempted by federal law because there is a strong and established presumption against finding that federal law overrides state authority.
  • A hearing on cross motions for summary judgment are scheduled for August 29.

Arkansas Attorney General Rejects Proposed Marijuana Ballot Item

  • Arkansas AG Dustin McDaniel rejected a proposed popular name and ballot title of a potential ballot item to legalize the use of marijuana in the state due to "ambiguities and misleading tendencies."
  • According to formal opinion issued by the AG, the proposed popular name, "The Cultivate Hemp and Regulate Marijuana Amendment," is, among other things, confusing and inconsistent with the text of the proposal. The AG states that multiple additions and changes to the language of the proposal are necessary for further review and possible certification.
  • We blogged last week about two other ballot proposals to legalize marijuana that the AG certified.

Medicaid Fraud

New York Attorney General Settles Medicaid Fraud Allegations With Nursing Home

  • New York AG Eric Schneiderman and the U.S. Attorneys Office announced settlements with nursing home Ralex Services, Inc. and its owner to resolve allegations of Medicaid fraud.
  • Ralex and its owner allegedly submitted claims to the Medicaid program for services that were provided at artificially high rates.
  • Under the agreements, Ralex and its owner will return $2.2 million to the Medicaid program, which is jointly funded by the state and federal governments, with $1.32 million of that amount being returned to New York.

States v. Federal Government

Thirteen State Attorneys General Send Letter to EPA Demanding the Withdrawal of Proposed Carbon Emission Rules

  • Nebraska AG Jon Bruning, Oklahoma AG Scott Pruitt, and West Virginia AG Patrick Morrisey, joined by 10 other state AGs, sent a letter to the U.S. Environmental Protection Agency (EPA) Administrator objecting to the EPA's plan to regulate carbon dioxide emissions from existing and modified power plants.
  • The letter states that the EPA violated the Clean Air Act because it failed to include required information in the regulatory dockets of two recent proposed rules relating to the carbon dioxide emissions for existing and modified sources. According to the AGs, information on which a proposed rule is based must be made available to the public at the time of the proposal to ensure meaningful comment and sound rulemaking.
  • The AGs state that because of the violations, the proposed rules need to be withdrawn because finalizing a rule without meaningful comment would be unlawful.

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