Consumer Protection

New York Attorney General Settles with National Financial Advisory Firm for Allegedly Overcharging Consumers

  • New York AG Eric Schneiderman reached an agreement with Citigroup subsidiary Citigroup Global Markets, Inc. (“CGMI”) to resolve allegations that the company violated the state’s securities law, the Martin Act, by overcharging customers on their managed investment accounts.
  • According to the AG’s office, CGMI allegedly overcharged customers for management and other fees on certain investment accounts and charged inflated fees when those accounts were frozen during inactive periods.
  • Under the terms of this settlement, CGMI will pay approximately $4.6 million in restitution to 15,000 customers allegedly overarched during periods of inactivity and will pay a $1 million penalty to the state. The settlement also requires CGMI to provide the AG’s office with detailed quarterly reports on any fee overcharging issues that arise over the next three years.
  • This settlement follows a 2014 interim agreement in which CGMI agreed to pay nearly $17 million in restitution to 31,000 customers allegedly overcharged during periods of inactivity.

West Virginia Attorney General Sues Residential Housing Landlord for Alleged Unlawful Fees

  • West Virginia AG Patrick Morrisey filed a lawsuit against residential housing company Biafora’s Incorporated, d/b/a Metro Property Management, for allegedly violating the state’s Consumer Credit and Protection Act by charging tenants illegal fees.
  • According to the AG’s office, the company allegedly charged tenants non-refundable fees, including convenience and processing fees, and returned and late-check fees, in addition to standard damage deposits to prepare residences for their next tenants.
  • The lawsuit seeks a court order requiring the company to refund all affected consumers, zero-balance any outstanding related accounts, and notify credit bureaus to delete information concerning these accounts from the consumers’ credit records. It also seeks a $5,000 civil penalty for each violation of the state’s Consumer Credit and Protection Act.

New Jersey Attorney General Reaches Consent Order with Motor-Fuel Refiner for Allegedly Selling Unbranded Gasoline

  • New Jersey AG Chris Porrino and the New Jersey Division of Consumer Affairs (“Division”) reached an agreement with CITGO Petroleum Corporation (“CITGO”) to resolve allegations that the company violated the state’s Motor Fuels Act, Consumer Fraud Act, and Advertising Regulations.
  • According to the AG’s office, a number of CITGO’s retail-dealers allegedly sold unbranded or off-brand gasoline as CITGO motor fuel.
  • Under the terms of the consent order, CITGO will pay a $456,610 fine, implement a compliance program, hold a Motor Fuel Brand Integrity training session with its distributors and the Division, conduct quarterly audits of retail-dealers for brand integrity, and designate a corporate brand integrity monitor.

Data Privacy

Kansas Attorney General Sues Document Management Company for Failing to Safeguard Consumer Information

  • Kansas AG Derek Schmidt filed a lawsuit against Searchtec, Inc. and employees Samantha Milner and Candace Littich (collectively “Searchtec”) for allegedly violating the state’s Consumer Protection Act by not properly safeguarding consumers’ personal information.
  • According to the lawsuit, Searchtec allegedly disposed of documents that contained consumers’ personal information, such as social security and credit card numbers, in public trash receptacles rather than shredding or destroying the documents.
  • The lawsuit seeks civil penalties, costs, and an injunction requiring the company to properly safeguard personal information.

Mississippi Attorney General Files Complaint Against Technology Company Regarding Handling of Student Information

  • Mississippi AG Jim Hood filed a complaint against Google Inc. (“Google”) for allegedly violating the state’s Consumer Protection Act by collecting and using personal information and search history data from Mississippi public school students.
  • According to the complaint, Google allegedly collected data from public school students who had “G Suite for Education” (“GSFE”) accounts; used the data to build advertising profiles; and failed to properly disclose the types of information it collected, maintained, and used, as well as how that information was shared with third parties.
  • AG Hood is seeking a permanent injunction that requires Google to fully disclose its collection, processing, and use of such information; to clearly state and abide by the limitations established in its agreements with Mississippi GSFE customers and users; and to pay investigative costs and civil penalties of $10,000 for each GSFE account associated with a violation of the state’s Consumer Protection Act.

False Claims Act

39 Attorneys General and DOJ Reach Agreement with Pharmaceutical Company over Alleged False Claims and Kickbacks

  • 39 AGs, led by New York AG Schneiderman, and the U.S Department of Justice (“DOJ”) reached an agreement in principle with Shire Pharmaceuticals LLC, certain subsidiaries of Shire plc, and Advanced BioHealing, a company Shire acquired in 2011 (collectively “Shire”), to settle allegations that Shire violated federal and state laws, including the False Claims Act and the Anti-Kickback statute, by unlawfully inducing clinics and physicians to use or overuse “Dermagraft,” a bioengineered human skin substitute approved by the FDA for the treatment of diabetic foot ulcers.
  • According to AG Schneiderman, Shire allegedly employed kickbacks and other unlawful methods to persuade doctors and clinics to promote Dermagraft; marketed the product for uses not approved by the FDA; and made false statements to inflate the price of the product, among other things.
  • Under the terms of the settlement, Shire will pay the federal government $350 million, of which $14.5 million will go to the Medicaid program and $6.1 million to states for their respective share of the Medicaid program.

Texas Attorney General and DOJ Settle with Pediatric Dental Companies for Alleged False Claims and Medicaid Fraud

  • Texas AG Ken Paxton and the DOJ reached two settlements with MB2 Dental Solutions, LLC and 21 affiliated pediatric dental practices (collectively “MB2”) to resolve allegations that the companies violated the federal False Claims Act (“FCA”) and the Texas Medicaid Fraud Prevention Act (“TMFPA”).
  • According to AG Paxton’s office, MB2 allegedly knowingly submitted or caused the submission of claims for pediatric dental services that were not rendered, were tainted by kickbacks to the patients or their families, or falsely identified the person who performed the service.
  • Under the terms of the FCA and TMFPA settlements, MB2 agreed to pay $8.45 million, of which $4.2 million will go to the state, and enter into a five-year corporate integrity agreement with the U.S. Department of Health and Human Services Office of Inspector General that requires the company to undergo an annual independent review to assess whether the company’s federally reimbursed claims were correctly coded, medically necessary, and appropriately documented.

Pharmaceuticals

39 Attorneys General and DOJ Reach Agreement with Pharmaceutical Company over Alleged False Claims and Kickbacks

  • 39 AGs, led by New York AG Schneiderman, and the U.S Department of Justice (“DOJ”) reached an agreement in principle with Shire Pharmaceuticals LLC, certain subsidiaries of Shire plc, and Advanced BioHealing, a company Shire acquired in 2011 (collectively “Shire”), to settle allegations that Shire violated federal and state laws, including the False Claims Act and the Anti-Kickback statute, by unlawfully inducing clinics and physicians to use or overuse “Dermagraft,” a bioengineered human skin substitute approved by the FDA for the treatment of diabetic foot ulcers.
  • According to AG Schneiderman, Shire allegedly employed kickbacks and other unlawful methods to persuade doctors and clinics to promote Dermagraft; marketed the product for uses not approved by the FDA; and made false statements to inflate the price of the product, among other things.
  • Under the terms of the settlement, Shire will pay the federal government $350 million, of which $14.5 million will go to the Medicaid program and $6.1 million to states for their respective share of the Medicaid program.

Securities

22 Attorneys General and DOJ Settle with Credit Rating Agency

  • 22 AGs, led by Connecticut AG George Jepsen, and the DOJ reached a settlement with Moody’s Corporation, Moody’s Investors Service, Inc. and Moody’s Analytics, Inc. (collectively “Moody’s”) over alleged violations of the Financial Institutions Reform, Recovery and Enforcement Act (“FIRREA”), the federal False Claims Act, and various state consumer fraud laws by misleading investors regarding the independence and objectivity of its credit ratings of structured finance securities.
  • According to AG Jepsen, Moody’s ratings for structured finance securities, including those for residential mortgage-backed securities and collateralized debt obligations, allegedly were directly influenced by the fact that it had investment bank clients who issued the securities and paid the company to rate them, contrary to public statements made by Moody’s that its ratings were objective.
  • Under the terms of the settlement, $437.5 million of which is a federal civil penalty and the remainder of which will be distributed among the 21 states and the District of Columbia. Additionally, Moody’s has agreed to a statement of facts acknowledging conduct related to its analysis of structured finance securities and has agreed to implement a set of reforms designed to address conflicts of interest and procedures to protect the integrity and transparency of its rating methodologies.

State v. Federal Government

18 Republican Attorneys General Pen Letter to Vice President-elect Pence and Congressional Leaders Regarding Federal Agencies’ Regulatory Reform

  • 18 Republican AGs, led by West Virginia AG Patrick Morrisey, sent a letter to Vice President-elect Mike Pence and Congressional leadership urging them to adopt recommendations to implement a series of regulatory reforms, including greater Congressional oversight and approval of major changes to federal agency rules.
  • In the letter, the AGs urge Congress to adopt the Regulations from the Executive in Need of Scrutiny Act, which would require Congress and the President to review and approve “major” federal rules and require meaningful cost-benefit analysis for all major rules, among other items.
  • As previously reported, 15 AGs sent a letter on July 11, 2016 to Congressional leadership alleging that federal agencies were violating the Administrative Procedures Act and asking Congress to take action to ensure that agencies engage in “transparent” rulemakings that are consistent with their statutory and constitutional authority.