United States: State AGs In The News - October 16th, 2014

Last Updated: October 22 2014
Article by Bernard Nash and JB Kelly

2014 Election

ACC Webcast: Post-Election Analysis of the New Attorney General Landscape

  • Dickstein Shapiro and the Association of Corporate Counsel (ACC) are partnering for a webcast on Wednesday, November 5 at 3:00 PM EST for a post-election analysis of the new Attorney General landscape.
  • Bernie Nash, head of Dickstein Shapiro's State AG practice will lead an interactive discussion about that new landscape and its implications for the business community.
  • This webcast is free and open to the public. Register here.


Texas Attorney General Settles Investigation of Municipal Advising Firm

  • Texas AG Greg Abbott reached an agreement with R. Craig Rathmann and his financial advising firm, Rathmann & Associates, L.P., regarding an investigation into Rathmann's alleged anticompetitive conduct.
  • According to AG Abbott, Rathmann had an agreement with his former employer, RBC Capital Markets, LLC (RBC), whereby Rathmann and RBC allocated municipal utility clients, and Rathmann agreed to direct his clients to RBC for bond underwriting in exchange for RBC not soliciting Rathmann's financial advisory clients.
  • The settlement agreement requires Rathmann to pay $450,000 "in lieu of civil penalties," and to reimburse the AG for investigative costs and attorneys' fees. It also requires, for a period of three years, that Rathmann notify clients that they can select their own bond underwriter and that the rate of reimbursement for bond underwriting services is negotiable.

Consumer Protection

National Rent-to-Own Chain Settles California Privacy and Consumer Protection Lawsuit

  • Aaron's, Inc., the second largest national chain of rent-to-own furniture and home electronics stores, has agreed to settle a lawsuit brought by California AG Kamala Harris for $28.4 million.
  • The complaint alleged violations of the Karnette Rental-Purchase Act for charging improper late fees and for overcharging customers who satisfied contracts early. It also alleged violations of California privacy laws for installing spyware on rented computers that allegedly allowed Aaron's to monitor keystrokes, take screen shots, and geo-locate the compute without customer consent.
  • As per the terms of the settlement, Aaron's will provide up to $25 million in restitution, in the form of refunds to over 100,000 customers. It will also pay a civil penalty of $3.4 million to the state.
  • Aaron's settled similar spyware-related allegations with the Federal Trade Commission last year.

New York Attorney General Recovers $16 Million for Citi Customers

  • New York AG Eric Schneiderman reached an agreement with Citigroup Global Markets, Inc. (CGMI), to close an investigation into claims that CGMI charged customers excess advisory fees.
  • Customers with CGMI accounts pay a fee for advisory services – usually ranging from 1% to 1.5%. However, some customers had negotiated a lower fee when they opened their account, yet were unknowingly charged the higher rate.
  • As a result of the agreement, CGMI will provide approximately $16 million in refunds to more than 31,000 customers nationwide.

Vermont Attorney General Seeks Input on New Labeling Law

  • Vermont AG William Sorrell is planning to hold public meetings to obtain feedback from producers, retailers, and consumers regarding how to implement Act 120, the new law requiring food products to list genetically engineered ingredients.
  • Under Vermont law, AG Sorrell is responsible for promulgating rules for the implementation of Act 120, which is scheduled to go into effect on July 1, 2016.  AG Sorrell will later solicit official public comments on the proposed draft rule.
  • Earlier this year the Grocery Manufacturers Association and three other food industry groups filed a lawsuit to enjoin Act 120. This lawsuit remains pending in federal court in the District of Vermont.


Pennsylvania Clamps Down on Fracking Fluid Leaks

  • Pennsylvania AG Kathleen Kane and Department of Environmental Protection (DEP) are investigating EQT Corporation in connection to a discharge of fracking fluids into waterways from a natural gas drill site in 2012.
  • The DEP is seeking a $4.5 million civil penalty from EQT Corporation – the largest fine in Pennsylvania for a fracking-related environmental incident.
  • The state recently entered into a consent order with Range Resources Corporation over environmental damage from leaked fracking fluids, resulting in a $4.15 million civil penalty. Meanwhile AG Kane is also pursuing criminal charges against XTO Energy Inc., in connection to a fracking-related spill in 2010.

Fourteen States Oppose Broader Definition of "Waters" Under the Clean Water Act

  • West Virginia AG Patrick Morrisey, joined by AGs and governors from thirteen other states, submitted a letter commenting on a proposed rule to broaden the definition of "waters of the United States" as used in the U.S. Clean Water Act (CWA) to include smaller streams and wetlands. The proposed rule was put forth earlier this year by the Environmental Protection Agency (EPA) and the Army Corp of Engineers.
  • AG Morrisey's letter argues against redefining the term "waters" in the manner proffered. The AGs and governors indicate that the proposed rule would expand the jurisdiction of the EPA beyond what was intended by Congress when it passed the CWA. The letter iterates that such a broad definition would infringe on states' abilities to effectively regulate the use of land.
  • As we have previously reported, there are also AGs who are in favor of the proposed rule, broadening the definition of "waters," and thus, broadening the jurisdictional scope of the CWA.

False Claims Act

Skilled Nursing Home Chain Settles Multistate Investigation Into Claims of Substandard Care

  • Extendicare Health Services, Inc. (Extendicare) has agreed to pay $32.3 million to the federal government and $5.7 million to eight states in order to resolve claims that it violated the False Claims Act by billing Medicare and Medicaid for substandard nursing services.
  • The AGs alleged that Extendicare and its subsidiary Progressive Step Corporation failed to staff an adequate number of skilled nurses, and did not follow appropriate protocols to protect residents from risks like ulcers and falls. Extendicare denied all allegations.
  • According to the U.S. Department of Justice, this is the largest ever "failure of care" settlement in the skilled nursing industry. In addition to the monetary penalties, Extendicare is required to enter into a five-year corporate integrity agreement and provide for an independent monitor selected by the U.S. Office of the Inspector General.

New York Attorney General Settles with Specialty Pharmacy

  • New York AG Eric Schneiderman settled allegations that Sorkin's Rx Ltd d/b/a CareMed Pharmaceutical Services (Sorkin's) made false claims to the New York State Medicaid program.
  • According to AG Schneiderman, Sorkin's contacted insurance companies claiming to be from a prescribing physician's office in order to obtain expeditious authorizations for certain specialty drugs. In addition, Sorkin's allegedly restocked and resold unused dosages of specialty drugs Rituxan and Procrit without crediting back Medicaid and Medicare Part D plans for the initial purchase.
  • The AG's investigation resulted from a qui tam lawsuit filed by a Sorkin's employee. The settlement requires Sorkin's to pay $846,224 in restitution to Medicaid, with New York receiving $465,423 of the restitution funds.

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