United States: State AGs In The News - January 14, 2015

Consumer Protection

West Virginia AG Sues Drug Distributor

  • West Virginia AG Patrick Morrisey filed a lawsuit alleging that McKesson Corporation violated the state consumer protection and controlled substances acts, and committed unfair and deceptive acts or practices by distributing large quantities of highly profitable prescription pain medication to pharmacies throughout West Virginia, contributing to an epidemic of drug abuse in the state.
  • The eight-count lawsuit relies on a core theory of liability that McKesson, as a distributor, was "uniquely situated to perform due diligence in order to help support the security of controlled substances [it] delivered," and that McKesson failed to implement a system to identify and stop suspicious numbers of prescribed doses. The complaint specifically argues that McKesson distributed 99.5 million doses of hydrocodone and oxycodone to West Virginia consumers over a five-year period, and that it should have known, based on each pharmacy's population base, that the resulting oversupply could not have been purely for legitimate medical purposes.
  • In addition to restitution, disgorgement, and civil penalties of $5000 for each violation of the unfair and deceptive practices and consumer protection acts, AG Morrisey also seeks injunctive relief that would require McKesson to create a system for determining suspicious orders, and to submit that system to the state for prior approval.

FTC and Florida AG Add Payment Processor to Debt Relief Lawsuit

  • The Federal Trade Commission (FTC) and Florida AG Pam Bondi added CardReady, LLC, and its executive officers, to a debt relief lawsuit filed last July, alleging that CardReady substantially assisted the debt relief defendants in violating the FTC Act and Telemarketing Sales Rule (TSR).
  • The amended complaint, filed in federal court for the Middle District of Florida, alleges that CardReady facilitated credit card payments for the debt relief companies, helping them to continue to process payments even though they had been identified by credit card networks as not meeting underwriting criteria—either because of a high risk of illegal activity or a high rate of chargebacks. CardReady allegedly laundered those payments by routing them through shell companies it created before submitting them to the financial institution for processing, thus hiding the identity of the merchant for which it was processing payment.
  • In addition to the allegations of credit card laundering and factoring ("factoring" is a separate offense under Florida law), the FTC and AG Bondi charged CardReady with facilitating the deceptive and abusive acts that formed the alleged violation of the TSR by the debt relief defendants.

Data Privacy

States' Investigation Gestoppt-ed by German Privacy Laws

  • Highlighting an additional challenge faced by State AGs conducting international investigations, Volkswagen has allegedly refused to produce emails and other executives communications occurring in Europe to the State AGs investigating. Volkswagen has claimed that the German Federal Data Protection Act, or Bundesdatenschutzgesetz, and other European laws prevent the company from turning over the communications stored in Germany to investigators outside the E.U.
  • New York AG Eric Schneiderman and Connecticut AG George Jepsen, as lead counsel in the 48-state investigation, voiced frustration with Volkswagen's efforts, indicating that the company publicly claims to be cooperating with the investigation, but has not fulfilled what would otherwise be standard investigative requests under U.S. law. Yet, German law may require employee consent that comes from a "free decision" before an employer can access and transfer worker emails and other communications—even in connection to an internal investigation.


FCC Settles With Radio Station Over Sponsorship Silence

  • The Federal Communications Commission (FCC) reached an agreement with Cumulus Radio Corporation and its subsidiary Radio License Holding CBC, LLC to resolve the FCC's investigation into whether the radio station violated sponsorship identification laws.
  • The investigation stemmed from allegations that a New Hampshire radio station owned by Cumulus broadcast a series of announcements supporting a hydroelectric power project without properly identifying the sponsor of the announcements, which was a company financially connected to the project.
  • On entering into the consent decree with the FCC, Cumulus agreed to pay a penalty of $540,000 and to introduce a compliance plan for its 195 stations nationwide.

False Claims

Rehab Provider Settles FCA Suit for $125 Million

  • The Department of Justice (DOJ) reached an agreement with Kindred Healthcare, Inc., and subsidiaries RehabCare Group, Inc. and RehabCare Group East, Inc. (together, "RehabCare"), to resolve allegations that the rehabilitation therapy provider violated the False Claims Act by seeking Medicare reimbursement for unreasonable and unnecessary services.
  • The amended complaint alleged that RehabCare strategically scheduled its therapy services to achieve the highest level of Medicare reimbursements, without regard to patients' clinical needs, including: shifting minutes of planned therapy between different disciplines to ensure targeted amounts were achieved; planning higher amounts of therapy at the close of a measurement period to reach the threshold for a higher reimbursement level; and placing patients in the highest therapy category as a default, instead of using evaluations to match the patient with a proper level of care.
  • The complaint also alleged that RehabCare continued to schedule therapy even after treating therapists indicated that the patients had completed the necessary amount, and reported therapy services provided during a time when patients were either sleeping or otherwise unable to participate in the therapy.
  • RehabCare agreed to pay $125 million, and four nursing homes using RehabCare's services agreed to pay an additional $8.225 million, to resolve the lawsuit, which was brought in the District of Massachusetts under the name United States ex rel. Halpin and Fahey v. Kindred Healthcare, Inc. The two whistleblowers will receive a combined $24 million from the settlement.


SEC Makes Its New Year's Resolutions – ETFs and Liquidity Come Into Focus

  • The Securities and Exchange Commission (SEC) announced the agency's priorities for 2016, which it presented under the broad categories of protecting retail investors, assessing marketwide risks, and using data analysis to detect violations.
  • In Examination Priorities for 2016, the SEC identified 20 specific topics that the agency would focus on in 2016. The list included topics present in previous years' priorities, including advisors' fee arrangements and sales practices, as well as broker dealers' internal fraud and anti-money laundering controls. New to the agency's priorities for 2016 are the specific topics of Exchange-Traded Funds (ETFs) and Liquidity Controls. There is also a larger emphasis on cybersecurity.
  • For ETFs, the SEC indicated that it will be investigating whether they are operated in compliance with their "exemptive relief" applications, as well as the process used by each ETF for creating and redeeming shares.
  • On the topic of liquidity, the SEC indicated that it will focus on risk management, pricing, and redemption controls for ETFs and funds that deal in potentially illiquid securities. Some of the SEC's policy ideas on this topic—which have been criticized by industry groups—can be seen in the proposed rule on liquidity management published last fall.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions