United States: State AGs In The News - January 22nd, 2015

Last Updated: February 2 2015
Article by Bernard Nash and JB Kelly

Hot News

Hawaii Governor Appoints Doug Chin as New Attorney General

Consumer Protection

Missouri Attorney General Settles With Credit Card Issuers Over Allegedly Misleading Payment Protection Services

  • Missouri AG Chris Koster settled with Discover Financial Services, Inc., HSBC Finance Corp., and Capital One Financial Corp. over allegations that they deceptively enrolled credit card customers into "payment-protection plans" that provided little or no benefit to the customer.
  • The investigation centered on allegations that consumers were unaware they had been signed up for the plans, were misleadingly upsold after calling on another matter, or were automatically enrolled if they failed to read and respond to a notice sent by mail. In addition, cardholders claimed that when they requested the suspension of payments due to injury or disability, a benefit to which they were entitled under the plan, the companies failed to comply.
  • The settlement requires the three companies to pay a total of $2.235 million (Discover, $760,000; Capital One, $740,000; and HSBC, $825,000) to a specialized fund, previously established to provide consumer protection education and enforcement. The three companies also agreed to cease selling payment protection and other related add-on products (such as identity theft protection) in a way that misleads Missouri consumers.

Data Privacy

Nineteen Attorneys General Investigate Data Breach at JPMorgan

  • A group of 19 AGs is asking for more information about the October 2014 data breach of JPMorgan Chase & Co.
  • The group of AGs, led by Illinois AG Lisa Madigan and Connecticut AG George Jepsen, has requested that JPMorgan clarify the number of customers in each of the states affected by the breach, whether there has been any fraudulent activity stemming from the breach, how JPMorgan discovered the breach, how it will protect against future breaches, and the evidence on which JPMorgan based its assertion that customer passwords and Social Security numbers were not compromised.
  • According to the New York Times, JP Morgan has until January 23, 2015, to respond to the offices of the Illinois and Connecticut AGs.

New York Attorney General Seeks to Strengthen Data Protection Regime

  • New York AG Schneiderman announced that he will propose legislation to the New York legislature to strengthen and expand state data privacy and breach notification laws.
  • AG Schneiderman's bill would make the following changes: expand the legal definition of private information to include email addresses and passwords, medical and biometric information, and health insurance information; require companies that store data to have physical, technical and administrative safeguards; provide a presumption of lawfulness when a company demonstrates compliance with third-party certification standards; create a safe harbor for companies employing heightened security measures like encryption; and establish incentives for breached companies to share information with law enforcement.


Incoming Nebraska Attorney General Establishes Bureau for Environmental Issues

False Claims Act

Washington State Recovers $3.35 Million for Allegedly Overbilled Dental Treatments

  • Washington AG Bob Ferguson settled with Sea Mar Community Health Centers (Sea Mar) over allegations that Sea Mar had submitted false claims to Medicaid in connection with patients receiving certain dental treatments between 2010 and 2014.
  • The dispute arose out of Sea Mar's alleged practice of billing fluoride treatments as a stand-alone appointment or "encounter" with a dentist or hygienist with a requisite fee of $180, when instead they should have been billed as an add-on service connected to the patient's regular checkup.
  • Sea Mar agreed to pay $3.35 million to resolve this dispute. As part of this settlement, Sea Mar also agreed to dismiss with prejudice a lawsuit it had filed in federal court naming AG Ferguson, the Director of the State Health Care Authority, and the Secretary of the Department of Social and Health Services as defendants. In its complaint, which came in response to a May 2014 letter from the AG seeking over $72 million in damages associated with the above-referenced billing practices, Sea Mar had requested reimbursement of all encounters since 2006 under the Medicaid Act and the Supremacy Clause.

Massachusetts Attorney General Settles With Hospital Over Alleged Kickbacks

  • Massachusetts AG Martha Coakley, together with the U.S. Department of Justice and the Inspector General for the Department of Health and Human Services, entered into a consent judgment with South Shore Physician Hospital Organization, Inc. (SSPHO). The settlement resolves allegations that the hospital and its member organizations violated the False Claims Act.
  • AG Coakley alleged that for a ten-year period starting in 2001, SSPHO provided cash grants to recruit new member physicians, who in return were required to make patient referrals to participating providers. As such conduct allegedly violates the federal anti-kickback statute, it thus forms the basis for a False Claims Act violation when SSPHO and member organizations submit invoices for Medicaid reimbursement.
  • SSPHO, which initially disclosed the program in 2012, cooperated with the investigation and agreed to pay $1.77 million to resolve all allegations. Massachusetts will keep more than $620,000 of the settlement amount, with $310,625 going directly to Massachusetts' Medicaid program.

Mortgages and Forclosures

Massachusetts Attorney General Secures $2.7 Million to Close Out Claims for Unlawful Foreclosures

  • AG Coakley reached a settlement with Bank of America, N.A.; JPMorgan Chase Bank, N.A.; Citibank, N.A.; and Wells Fargo Bank, N.A. (collectively "banks"), resolving claims that the banks failed to adhere to statutory requirements while seeking to foreclose on Massachusetts residents during 2008 and 2009.
  • The lawsuit alleged that the banks violated the Massachusetts Consumer Protection Act and as state foreclosure law by foreclosing upon residents' homes without possessing the legal authority to do so, by misrepresenting to homeowners that the banks held the relevant mortgages when they did not, by omitting information regarding loan modification programs, and by engaging in false documentation to facilitate their foreclosure efforts.
  • Under the terms of the settlement, the banks will assist consumers who indicate problems with legal title due to an unlawful foreclosure attempt, provide curative documents where necessary, release junior liens held by the banks, and pay reasonable costs associated with curing the title. In addition, the banks will pay $700,000 to the AG's Consumer Aid Fund and $2 million to the Commonwealth's General Fund.


Massachusetts and New York Settle With Standard & Poor's Over Poorly-Disclosed Ratings Methodology

  • Massachusetts AG Coakley and New York AG Schneiderman together with the U.S. Securities and Exchange Commission (SEC), reached a settlement with Standard & Poor's Financial Services, LLC, (S&P) to resolve allegations that S&P made false and misleading public statements when describing its ratings methodology for commercial mortgage-backed securities (CMBS).
  • The investigation centered on representations S&P allegedly made to investors in 2011—that it had tightened the standards it used to provide credit ratings for CMBS and had adopted strict analytical independence, free from commercial considerations. The AGs alleged, to the contrary, that by not providing proper disclosure S&P had actually departed from its published criteria in a manner that was less conservative, provided less investor protection, and made its ratings more attractive to fee-paying issuers.
  • According to the settlement, S&P will pay $7 million in penalties to Massachusetts, $12 million to New York, and $35 million in penalties plus $7 million in disgorgement and interest to the SEC. In addition, S&P will refrain from rating any new CMBS conduit/fusion transaction for a period of twelve months.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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