Each week, Crowell & Moring’s State Attorneys General team highlights significant actions that State AG’s have taken. Here are this week’s updates.

Friday, December 11, 2020:

  • California Attorney General Becerra announced that California is joining the DOJ in the antitrust lawsuit against Google, which alleges that Google entered into exclusionary business agreements in order to illegally maintain its monopoly on search-based advertising and internet searches at consumers’ expense. California’s motion to join the lawsuit is here.

Monday, December 14:

  • Several attorneys general, the Federal Trade Commission (“FTC”) and other federal, state and local law enforcement entities announced “Operation Income Illusion,” which will target scams across the U.S. that involve false promises of income and financial independence. According to the press release, “the crackdown encompasses more than 50 law enforcement actions against the operators of work-from-home and employment scams, pyramid schemes, investment scams, bogus coaching courses and other schemes that can end up costing consumers thousands of dollars.”
  • Indiana Attorney General Hill announced the resolution of a case against a Florida-based abortion clinic for falsely claiming that it operated abortion services in Indiana. The company has entered into an Assurance of Voluntary Compliance with the Attorney General’s Office, requiring it to cease advertisements that reference Indiana abortion clinic locations and to cease claiming affiliations it does not actually have with Indiana abortion clinics.
  • A bipartisan coalition of 51 attorneys general is asking Congress in a letter addressed to the House and Senate Judiciary Committees to pass legislation that will protect the safety of federal judges and their families. The bill the attorneys general are supporting, the Daniel Anderl Judicial Security and Privacy Act, would protect confidentiality of personal identifying information and limit the distribution of that information.
  • A bipartisan coalition of 29 attorneys general is urging the U.S. Department of Health and Human Services (“HHS”) in a letter to hold drug makers accountable for illegally refusing to provide discounts to qualified health providers that serve vulnerable populations through the 340B Drug Pricing Program.

Wednesday, December 16:

  • Texas Attorney General Paxton led a multistate coalition in a lawsuit against Google for alleged violations of federal and state antitrust and consumer protection laws through its monopolization of online display advertising. The complaint alleges that Google attempted to or did monopolize products and services advertisers and publishers use in online display advertising as well as engaged in false and deceptive acts while buying, selling, and auctioning online display ads.
  • Pennsylvania Attorney General Shapiro announced that his office shut down an illegal student loan forgiveness scheme by Student Education Center (“SEC”). Under the settlement, the company is required to cease operating in Pennsylvania, refund $74,000 to consumers, and pay $50,000 in costs and penalties. The company allegedly used false advertising and posted fraudulent reviews as well as stated that once a consumer was approved they were set up with a new servicer when in fact SEC did not typically change a consumer’s servicer and was not itself a servicer. SEC also tricked consumers into paying high fees to enroll into Income Driven Plans which are free to enroll in.
  • North Carolina Attorney General Stein and Florida Attorney General Moody announced that a bipartisan group of Attorneys General secured over $10 million from Royal Pharmaceuticals LLC and Seton Pharmaceuticals LLC after an investigation into these companies’ underpaid Medicaid drug rebates across the U.S. from 2013 to 2017.

Thursday, December 17:

  • An executive committee of attorneys general from Arizona, Colorado, Iowa, Nebraska, New York, North Carolina, Tennessee, and Ohio co-led a bipartisan coalition of 38 attorneys general in suing Google for alleged anticompetitive conduct to maintain its monopoly control over the general search services and search advertising markets. The attorneys general accuse Google of depriving consumers of competition which would have led to greater innovation and choice and better privacy protections, and well as of using its market position to accumulate and leverage data to consumers’ detriment in an attempt to make a profit.
  • A coalition of 19 attorneys general has filed an amicus brief in Syracuse v. ATF in the Southern District of New York urging the Bureau of Alcohol, Tobacco, Firearms and Explosives (“ATF”) to properly regulate “ghost guns.” The attorneys general are arguing that the ATF’s 2015 interpretation of the Gun Control Act was illegal and incorrect and allowed unlicensed online sellers to sell almost-complete firearms that can easily be converted into functional guns, which endanger the public and impede law enforcement’s investigative and prosecutorial abilities.

Friday, December 18:

  • Seven attorneys general reached a $2 million settlement with CafePress, an online seller of stock and user-customized products. The settlement, which resolves a 2019 data breach which compromised 22 million consumers’ personal information, requires CafePress to pay $2 million to Indiana, New York, Connecticut, Kentucky, Michigan, New Jersey, and Oregon, as well as agree to protocols designed to protect consumer information from cyberattacks, including information security programs, notification programs, and other safeguards.
  • Colorado Attorney General Weiser announced he is working with Ticketmaster, LiveNation, and event organizer Kroenke Sports & Entertainment to ensure Colorado consumers receive refunds for events that were canceled due to the pandemic.
  • Minnesota Attorney General Ellison announced that his office filed two lawsuits against restaurants that were operating inside dining in violation of Governor Walz’s executive order prohibiting this conduct. The lawsuits seek declaratory and injunctive relief as well as civil penalties of up to $25,000 per violation or threatened violation of the executive order, costs, restitution, and disgorgement.

Saturday, December 19:

  • New Jersey Attorney General Grewal filed a lawsuit against service animal charity Merlin’s Kids and related for-profit company United K9 Professional Inc. as well as their owner for unlawfully raising millions of dollars since 2008 without registering Merlin’s Kids as a charity. The entities’ fundraising also allegedly included false and misleading claims about the services Merlin’s Kids offers, and the entities and their owner allegedly charged consumers for dog training and certification programs they did not ultimately provide.

Each week, Crowell & Moring’s State Attorneys General team highlights significant actions that State AG’s have taken. Here are this week’s updates.

Monday, December 7, 2020:

  • A coalition of 51 attorneys general, state mortgage regulators, and the Consumer Financial Protection Bureau reached an $86.3 million settlement with mortgage servicer Mr. Cooper, formerly known as Nationstar Mortgage Holding, Inc., which provides $79.2 million in restitution for those who took out 55,814 loans across the U.S. between January 1, 2011 and December 31, 2017. The settlement resolves allegations of consumer protection violations, such as that the company did not properly oversee or implement transferred mortgage loans or properly identify loans with pending loan modification applications, and that it failed to adequately review borrower complaints.
  • Washington Attorney General Ferguson issued a press release with guidance for third-party restaurant delivery services in response to consumer complaints. The guidance highlights conduct that is likely to violate the Washington Consumer Protection Act, such as charging consumers fees without clearly and conspicuously disclosing them, listing restaurants without their permission, misrepresenting the source of food or safety precautions, or listing fake contact information for restaurants. It is also a violation to charge more than 18% of the order price in fees, up to 15% of which may be delivery fees, after a November emergency proclamation.
  • New York Attorney General James announced that her office secured $4.7 million from supermarket chain Food World for an alleged tax avoidance scheme where the company underreported cash sales, issued fake merchandise returns, and paid its employees off the books.
  • A bipartisan coalition of 30 attorneys general wrote an amicus brief in AMG Capital Management v. FTC before the Supreme Court, arguing in support of the FTC’s ability to recover money from defendants for victims and saying this restitution collecting authority is essential to deter illegal conduct and help states protect consumers. The brief is available here.

Tuesday, December 8, 2020

  • Washington Attorney General Ferguson announced that Washington’s top magazine subscription company Synapse Group must return the money it charged over 2,000 consumers for deceptive auto-renewals after they bought magazine subscriptions at a $2 promotional rate. Synapse must refund the consumers around $125,000 and also pay $750,000 to the Attorney General’s Office.
  • New Jersey Attorney General Grewal announced a lawsuit against Yellowstone Capital LLC, its parent company Fundry.US LLC, and six associated merchant cash advance providers, alleging these companies targeted small businesses with predatory lending and abusive collection practices that caused financial harm. These alleged practices included, among other things, aggressive collection calls, unauthorized withdrawals, excessive interest rates, failing to disclose all fees, and advertising “No Personal Guarantee” when one was actually required. The complaint seeks injunctive relief, restitution, disgorgement, and civil penalties.
  • Massachusetts Attorney General Healey announced a lawsuit against HealthMarkets, Inc. and its subsidiaries The Chesapeake Life Insurance Company and Insphere Insurance Solutions, Inc. alleging that the companies misled consumers into purchasing supplemental health insurance products they did not want, cheating over 15,000 residents out of over $43.5 million since 2011. The complaint seeks injunctive relief, restitution, civil penalties, and attorneys’ fees and costs.
  • Indiana Attorney General Hill announced a settlement with Blue Lake Inc., the former owner of a mobile home park, for 2019 conduct that forced residents out of their homes when the park closed with no way to legally move since they were never given titles. The settlement includes a $29,000 suspended judgment and injunctive relief.
  • Missouri Attorney General Schmitt announced a default judgment against Hammond Floors and Construction, which allegedly violated the Missouri Merchandising Practices Act by receiving upfront payments for real estate, construction services, and residential appliances and failing to provide the promised items and services. The judgment includes injunctive relief as well as an award of $43,280.77, including $24,800 in restitution and $19,020.77 in costs, fees, and penalties.
  • Kentucky Attorney General Cameron led a 12-state bipartisan coalition of attorneys general in an amicus brief asking a California District Court to reject a request for $87.73 million in attorneys’ fees for class counsel in the Apple throttling settlement. The coalition is joining Apple in arguing that the amount is excessive and will reduce the recovery available to class members.

 Wednesday, December 9, 2020

  • Iowa Attorney General Miller is warning consumers to be on alert for scams related to their Amazon accounts. For example, Attorney General Miller is advising consumers not to respond to calls asking them to confirm Amazon purchases, not to call the customer service number given in an unsolicited email or call, and not to respond to messages asking if they have an Amazon account or asking them to pay in Amazon gift cards.

December 10, 2020

  • Virginia Attorney General Herring intervened in lawsuit Grano v. Rappahannock Electric Cooperative, defending Virginia’s new policies which make it easier to expand broadband into rural areas using “easements for the location and use of electric and communications facilities.”
  • Virginia Attorney General Herring spoke about the importance of legal cannabis use in Virginia as part of summit “Legalize It: The Path to Cannabis Equity in Virginia,” discussing his office’s unique role in helping with the cannabis legalization process. He stated that his office “has been charged with protecting consumers and the knowledge that role brings can be leveraged to make sure that the industry is safe through proper regulations, make sure that products are being advertised accurately, and make sure that Virginians know what they are getting” as well as noted that his “role as counsel to state agencies will also benefit and guide any new agencies that are created to handle the cannabis industry.”
  • The Consumer Financial Protection Bureau (“CFPB”) issued final rules related to qualified mortgage (“QM”) loans. To issue QM loans, lenders must determine that consumers are able to repay them. The two CFPB rules related to QM loans (1) replace the current requirement that the consumer’s debt-to-income ratio does not exceed 43%, limited based on the loan’s pricing, and (2) create a new category for QMs, Seasoned QMs, for which a loan “must be a first-lien, fixed-rate loan with no balloon payments and must meet certain other product restrictions.” These two rules will take effect 60 days after their publication in the Federal Register.

 

 

Each week, Crowell & Moring’s State Attorneys General team highlights significant actions that State AG’s have taken. Here are this week’s updates.

Tuesday, December 1, 2020

  • Washington DC Attorney General Racine announced a settlement with waste disposal company Bates Trucking Co. Inc., requiring the company to pay $78,702 for illegally collecting garbage in residential neighborhoods. The company allegedly collected trash before 7:00 a.m., violating DC noise regulations, operated without a valid license, ignored enforcement notices from the Department of Consumer and Regulatory Affairs, and refused to pay fines.
  • New York Attorney General James announced the adoption of final rules that modernize securities registration and filing with her Office’s Investor Protection Bureau. The press release states that these rules, which will be implemented in 2021, will “streamline and enhance the oversight of the securities industry in New York by moving filings and payments to standardized federal and multi-state systems” and that they “will better conform to the federal securities registration regime, cure industry confusion when it comes to certain registration requirements, and better track exam requirement compliance and disciplinary disclosures for thousands of investment advisers who provide investment advice to New Yorkers.”
  • Several attorneys general released advisory press releases about charitable giving for Giving Tuesday, warning consumers against deceptive solicitations. California Attorney General Becerra’s, which tells consumers to take steps such as checking organizations’ registration status, being cautious of fraudulent websites, and being wary of fundraising on social network websites, is here. Texas attorney General Paxton’s, which tells consumers to research organizations, be careful when actually making the donations, and being cautious of scammers’ tricks, is here.
  • A coalition of 23 attorneys general filed a comment letter asking the Department of Education to reject the Accrediting Council for Independent Colleges and Schools’ (“ACICS”) request to regain its federal recognition. The coalition is arguing that ACICS’s institutional failures and its lack of compliance with federal regulations have enabled predatory schools, like ITT Tech, to impose crushing student loan debt on students across the U.S.
  • The Consumer Financial Protection Bureau (“CFPB”) filed a lawsuit against DMB Financial, LLC, a debt-settlement and debt-relief company, for allegedly violating the Telemarketing Sales Rule and the Consumer Financial Protection Act of 2010 in connection with its services. Among other things, DMB allegedly requested and received fees before it performed its services and before consumers started payments under debt settlements, as well as collected fees based on increased debt amounts after enrollment rather than the amount of debt at the time of enrollment. The CFPB’s complaint seeks injunctive relief, restitution, disgorgement, and civil penalties.

Thursday, December 3, 2020

  • Arizona Attorney General Brnovich announced his office filed a lawsuit against auction companies Auction Nation, LLC and Auction Yard, LLC and their principals for allegedly deceiving online bidders by bidding in their own auctions, deceptively driving up prices when the terms and conditions assured participants that the business was not involved in the auctions. The lawsuit “seeks consumer restitution, up to $10,000 in civil penalties for each violation of the Arizona Consumer Fraud Act, injunctive relief, and attorney’s fees and costs.”
  • Pennsylvania Attorney General Shapiro announced an Allegheny County Common Pleas Court order directing Vision Property Management tenants to stop paying rent and other amounts payable under their contracts because the company failed to place a portion of consumer rent money into escrow as a prior injunctive order required. The injunctive order came from allegations that Vision Properties was luring consumers into “rent to own” agreements on poorly maintained and foreclosed homes, failing to tell consumers that the agreements provided no ownership rights unless consumers exercised an overpriced option, illegally forcing consumers to make repairs to make their homes habitable, and immediately ejecting those who fell behind on payments.
  • Washington DC Attorney General Racine became the 2021 President of the National Association of Attorneys General (“NAAG”) and announced his initiative to counter hate across the U.S. According to the press release, the initiative “aims to work with Attorneys General to raise awareness of hate and bias, prevent hate from taking root in our communities, support residents who have experienced hate, and develop and share best practices on improving hate crime data.”

Friday, December 4, 2020

  • The FTC and the California, Illinois, North Carolina, and Ohio Attorneys General settled with Dish Network in a $210 million settlement, ending an 11-year legal dispute over the company’s alleged violation of telemarketing laws through unwanted telemarketing and robocalls, including calls to those registered on the Do Not Call registry. The settlement is here.
  • New Hampshire Attorney General MacDonald announced that Camps for Grownups, LTD, a company that manages and markets adult activity camps, was indicted by the New Hampshire Multicounty Grand Jury on a felony count of violating the New Hampshire Consumer Protection Act. The company allegedly deceptively marketed a Jazz Camp as though it would occur as scheduled though the company lacked sufficient funds or a reasonable anticipated source of funding to hold the camp. If found guilty, the company could face an up to $100,000 fine.
  • New Jersey Attorney General Grewal announced that New Jersey’s Bureau of Securities within the Division of Consumer Affairs issued a cease and desist order against an online investment scheme targeting LinkedIn users. The scheme, which was led by online companies VertexTrade Options, Zolarex Ltd., and IBPC Corp., allegedly violated New Jersey securities law by using fake social media profiles in order to obtain investments in fraudulent financial products. The press release also warns New Jersey residents against “investment opportunity” scams offered on social networking and dating websites.
  • New York Attorney General James led a coalition of 13 attorney generals in a letter urging Congress to allocate funding and codify coverage protections so that it is guaranteed all people in the U.S. are able to obtain a COVID-19 vaccine for free.
  • The Consumer Financial Protection Bureau (“CFPB”) sued online lender LendUp Loans, LLC for allegedly violating the Military Lending Act with its extensions of credit. LendUp allegedly overcharged borrowers covered by the Military Lending Act, which caps total costs at 36%, as well as failed to make the loan disclosures the Military Lending Act requires and illegally required borrowers to submit to arbitration agreements. The CFPB’s complaint, which alleges that LendUp made over 4,000 loans in violation of the Military Lending Act since 2016, seeks injunctive relief, damages, restitution, disgorgement, and civil penalties.

Sunday, December 6, 2020

  • President-elect Biden has selected California Attorney General Becerra to serve as Secretary of Health and Human Services in Biden’s administration. If Becerra is confirmed, California Governor Newsom will choose a new Attorney General to fill his position until the next election.

On December 2, 2020, the Maine Office of the Attorney General announced that Aaron M. Frey was re-elected by a joint convention of the Maine Legislature to a second two-year term.

Following the election, Attorney General Frey issued a statement in which he identified issues he will focus on during this term,

“As Attorney General, I am sworn to defend the Constitution and to ensure that the rule of law is protected. I also will continue to work with the Legislature and the Mills administration to ensure that our state does everything in its power to address the pandemic, to combat the opioid crisis and obtain accountability for opioid manufacturers, to engage productively in the process of creating substantial reforms in the states relationship with Maine’s tribal nations, and to find meaningful ways to make our criminal justice system more equitable.”

Each week, Crowell & Moring’s State Attorneys General team highlights significant actions that State AG’s have taken. Here are this week’s updates.

Tuesday, November 24, 2020

  • 46 attorney generals announced a $17.5 million settlement against The Home Depot after a multistate investigation of a 2014 data breach perpetuated by hackers that exposed about 40 million consumers’ payment card information. In addition to the $17.5 million payment, The Home Depot has agreed to put a series of data security practices in place, such as providing training to employees, participating in a post-settlement information security assessment, employing a Chief Information Security Officer, and using specific security safeguards like two factor authentication.
  • Washington DC Attorney General Racine announced a settlement with DoorDash, Inc. The settlement requires DoorDash to pay $2.5 million to resolve a November 2019 lawsuit accusing it of misleading DC consumers by using tips for employees to subsidize worker payments. As part of the settlement, DoorDash must pay $1.5 million to delivery workers, $750,000 to the District, and $250,000 to two DC charities. DoorDash also must keep a payment model that ensures all tips go to employees without lowering their base pay, and it is required to provide clear and accessible information about its policies and its payment model to employees and consumers.
  • Amazon and the National Intellectual Property Rights Coordination Center (“IPR Center”) are teaming up through Operation Fulfilled Action to help prevent counterfeit goods from entering the U.S. The partnership will rely on Amazon’s Counterfeit Crimes Unit intelligence, logistics company DHL, and the U.S. Customs and Border Protection.

Wednesday, November 25, 2020

  • Kentucky Attorney General Cameron announced that an investigation by Kentucky’s Office of Consumer Protection resulted in the conviction of a businessowner for stealing over $60,000 in a roofing scam. The attorney general investigation revealed that the business, Restore-It USA, entered into roof replacement contracts with 16 victims over four months in 2012 and then used the money for personal gain rather than performing the work. The businessowner has been sentenced to five years for each of the eleven counts and must pay $61,298.98 in restitution. The sentences are to run concurrently and are probated for five years, or until the businessowner pays restitution in full.
  • New Hampshire Attorney General MacDonald announced violation notices issued to two businesses, White Mountain Tavern and Loudon Village Country Store, pursuant to Emergency Order 52 and Food Service Industry Guidance. The two businesses allegedly failed to comply with requirements related to social distancing and face coverings. The violation notices require the businesses to pay civil penalties of $1,000 and $2,000, respectively.

Friday, November 27, 2020

  • New York Attorney General James issued her annual charitable giving report, which found that almost a third of charitable donations end up in professional fundraisers’ pockets. In connection with the report, Attorney General James stated, “Today’s report highlights the high percentage of charitable dollars that are pocketed by outside fundraisers rather than reaching the charity itself. My office will continue to combat charity fraud, and I encourage all New Yorkers to follow our tips to ensure that their money is going to a reputable source this holiday season.” The press release also includes tips for donors, such as researching organizations, not disclosing personal information, donating securely, not being pressured by telemarketers, and reporting suspicious organizations.

Monday, November 30, 2020:

  • Idaho Attorney General Wasden announced a settlement agreement with three Idaho gas sellers, Retailers Maverik, Jacksons Food Stores, Inc, and Stinker Stores, Inc., following an investigation into the businesses’ gas prices during the pandemic. The settlement includes $1.5 million in consumer redress through sales credits which will be applied in 2021. The press release reminds readers of Idaho’s price gouging law, stating, “In March, federal and state emergency orders triggered the implementationof Idaho law governing the sale of food, water, fuel and pharmaceuticals during emergency declarations. Specifically, the statute prohibits selling those items at exorbitant or excessive prices while the declaration is in place.”
  • DC Attorney General Racine led a bipartisan coalition of 12 attorneys general in an amicus brief in Uzuegbunam v. Preczewskibefore the Supreme Court, defending a rule that encourages local governments to amend laws that raise constitutional questions. The rule requires courts to put an end to litigation if the government amends or rescinds a law or policy due to a constitutional issue if the only remaining claims for relief are for harm that already occurred. The coalition is arguing that the rule avoids lengthy litigation and encourages governments to amend problematic laws early.
  • Ohio Attorney General Yost and Iowa Attorney General Miller led a coalition of 49 attorneys general in writing a letter to Congress urging it to extend the December 30, 2020 CARES Act funding deadline. The CARES Act currently limits use of the funding to expenses incurred between March 1 and December 30.
  • Pennsylvania Attorney General Shapiro reminded Pennsylvania citizens of puppy scams as well as that Pennsylvania’s Unfair Trade Practices and Consumer Protection Law includes the Dog Purchaser Protection provision. This provision ensures that consumers who buy a dog in Pennsylvania know their dog is healthy and establishes other basic standards that dog sellers, purchasers, and veterinarians must meet.
  • The Consumer Financial Protection Bureau (“CFPB”) issued its final Advisory Opinions Policy to address regulatory uncertainty. Under the Policy, financial services providers seeking to comply with CFPB policies may submit requests for advisory opinions, which will be published in the Federal Register and on the CFPB website. The CFPB will prioritize open questions that can be legally addressed through an interpretive rule, and it will evaluate requests for advisory opinions based on their “alignment with the Bureau’s statutory objectives; [the] size of the benefit offered to consumers by resolution of the interpretive issue; [the] known impact on the actions of other regulators; and [the] impact on available Bureau resources.” The CFPB also issued two advisory opinions, one regarding wage-advance programs and when they fall into the scope of the Truth in Lending Act and Regulation Z, and one clarifying that some education loan products that refinance or consolidate pre-existing education loans meet the Truth in Lending Act and Regulation Z’s definitions of “private education loan” and therefore their disclosure and other requirements.
  • The FTC took action against debt collection company Midwest Recovery Systems for allegedly placing fake or questionable debts onto consumers’ credit reports through illegal “debt parking” and then waiting for consumers to notice the debts when trying to obtain a car or home, open a credit card, or apply for a job, in order to coerce them into paying. The FTC has alleged that the company collected over $24 million on these false debts, which included medical debt. The settlement includes injunctive relief such as a requirement that Midwest Recovery contact credit reporting agencies and request that debts reported by the company be deleted from credit reports, as well as a monetary judgment of $24.3 million.

Each week, Crowell & Moring’s State Attorneys General team highlights significant actions that State AG’s have taken. Here are this week’s updates.

Monday, November 23, 2020

  • New Jersey Attorney General Grewal announced complaints against four doctors and revoked the license of a fifth for writing “off-label” prescriptions for high dosages of a strong and highly addictive opioid and cancer pain medication for non-cancer patients. The doctors allegedly wrote the prescriptions after receiving payments from the drug’s manufacturer Insys Therapeutics, Inc. through a sham speaker program.
  • Missouri Attorney General Schmitt announced that his office resolved lawsuits against homeowners associations Country Club Homes and Crestwood Club Homes Association for failing to remove racially restrictive covenants from their governing documents. The Attorney General’s Office filed a notice of voluntary dismissal after it received documentation that the two associations removed the racially restrictive covenants.
  • Law360 reported that the U.S. Consumer Financial Protection Bureau (“CFPB”) pushed back on a motion for default judgment based on settlement negotiations and inability to pay, asking a California district judge to make student loan business GST Factoring Inc. and its owner pay over $53 million for the business’s role in an alleged student debt relief scheme. This CFPB’s request comes after a July 13 complaint which alleged that from 2015 to the present the defendants violated the Telemarketing Sales Rule by collecting $11.8 million in illegal advance fees from about 2,600 clients.

Friday, November 20, 2020

  • Ohio Attorney General Yost announced a consumer protection lawsuit against car dealership Worldwide Auto Sales after receiving around 80 complaints that the company was failing to deliver vehicle titles to consumers. The lawsuit also alleges that the company failed to deliver vehicle warranties and misrepresented details of sales, and it seeks restitution, declaratory relief, injunctive relief, and civil penalties.
  • Florida Attorney General Moody’s office announced an agreement with radiology practice Mori, Bean and Brooks, P.A. to resolve allegations of health care fraud. According to the press release, an investigation found that the company “knowingly submitted false claims to the Medicaid program for the interpretation of radiological images that were ineligible for reimbursement.” The company has agreed to pay $161,694 to resolve the lawsuit.
  • Law360 reported that many tech companies are urging the DC Federal Court handling the Google antitrust suit to only allow Google’s outside counsel to access sensitive confidential information that the companies shared as part of the DOJ’s investigation. Google has proposed a protective order to allow its in-house attorneys to access the information, but the companies are arguing that Google’s plan is not enough, that “the unique risks of inadvertent disclosure and improper use of their highly confidential materials ‘substantially outweighs any need identified by Google,’” and that “[d]isclosing these particularly sensitive documents to any Google employee risks serious harm to the non-parties and to the strong public interest in competition.”
  • Law360 reported that a Consumer Financial Protection Bureau lawsuit has accused Illinois debt relief and credit repair services company FDATR Inc. and its former owners of abusive telemarketing from 2011 until at least April 2019, charging disproportionately high fees, and making claims about reducing or eliminating student loan payments and improving credit scores when it was really just filing loan-consolidation paperwork.

Thursday, November 19, 2020

  • Pennsylvania Attorney General Shapiro announced that his office settled with Event Ticket Sales LLC for failing to disclose fees prior to ticket purchases and for its refund policy. As part of the announcement, Attorney General Shapiro stated, “Advertising one price and charging another will roll out the red carpet to an investigation by my office. Consumers need to know how much money their credit cards will be charged before they click to buy a ticket for a concert, show, or event. And promised refunds for canceled events must be honored.” Under the Assurance of Voluntary Compliance, the company has agreed to change its disclosure of fees and provide full refunds for all Pennsylvania consumers who purchased tickets for canceled events.
  • Illinois Attorney General Raoul announced a settlement resolving his lawsuit against Hilco Redevelopment, LLC, following a lawsuit Raoul filed following the release of contaminants as part of the demolition of a smokestack. The consent order requires the company to adhere to dust mitigation plans for the rest of the demolition project and provide funding to support the neighboring community’s long-term health and wellness.
  • Arizona Attorney General Brnovich announced that his office is partnering with CVS Pharmacy on a new consumer fraud awareness program to combat gift card scams in Arizona.  All CVS Pharmacy Stores in Arizona will display the STOP signs at gift displays to prompt customers to stop and think about why they are buying a gift card and remind customers that gift cards cannot be used to pay government agencies.
  • Antitrust Law Daily reported that Senator Mike Lee (R., Utah) proposed the “One Agency Act,” which would consolidate antitrust enforcement authority in the DOJ and remove the FTC’s authority over antitrust matters, though it would not change the FTC’s enforcement powers over unfair and deceptive acts and practices. According to the article, “Lee cited the FTC’s antitrust case against Qualcomm and the differing positions of the two federal antitrust agencies on the case as reasons for consolidating enforcement in one agency.”

Eight months into the COVID-19 pandemic, the U.S. Department of Justice (DOJ) and its law enforcement partners are taking an increasingly aggressive approach to investigating and pursuing allegations of fraud related to federal relief programs designed to aid small businesses and their employees. Over the past week, the DOJ announced charges against 11 individuals in connection with two different COVID-19 relief fraud schemes. In each case, the individuals sought to illegally obtain millions of dollars in relief funds guaranteed by the Small Business Administration (SBA) through the Economic Injury Disaster Loan (EIDL) and the Paycheck Protection Program (PPP).

$16M PPP Fraud in S.D. Texas

On November 17, six individuals from Texas and one from Illinois were charged in an indictment filed by the DOJ for their alleged participation in a scheme to obtain approximately $16 million in forgivable PPP loans by filling out at least 80 fraudulent PPP applications. The defendants submitted these applications on behalf of various businesses, some of which they allegedly owned, and some of which were owned by third parties (and for which they allegedly received large kickbacks). The scheme involved the submission of fraudulent bank records and/or fake federal tax forms. The defendants also falsified the number of employees and the average monthly payroll expenses of the applicant businesses, and then laundered the proceeds of their scheme by writing fake paychecks to fake employees (including some of the defendants and their family members), which were cashed at a check cashing store owned by one of the defendants. A Porsche and a Lamborghini were among the items allegedly purchased and seized by federal agents in connection with the scheme. All seven defendants were charged with conspiracy to commit wire fraud and wire fraud. One defendant was also charged with money laundering.

$5.6M PPP and EIDL Fraud in C.D. California

On November 18, four members of a Los Angeles-based fraud ring were charged in an indictment filed by the DOJ for allegedly submitting at least 35 fraudulent EIDL and PPP loan applications seeking over $5.6 million in COVID-relief funds. In making these applications, the defendants used fictitious business names as well as fake, stolen, or synthetic identities. They submitted fake identity documents, and false payroll records and tax documents. Once their applications were approved by the SBA and federally-insured financial institutions, the defendants directed the funds to be deposited into bank accounts that they controlled. Before the scheme was uncovered, the defendants allegedly used the funds for their personal benefit, including to buy luxury homes. All four were charged with conspiracy to commit bank and wire fraud, bank fraud, and wire fraud. One individual was also charged with aggravated identity theft.

Looking Ahead

As the pandemic continues and these types of schemes grow more sophisticated and coordinated, federal prosecutors will continue to prioritize and prosecute this kind of fraud. Indeed, U.S. Attorney’s Offices across the country have created COVID-19 task forces solely for the purpose of rooting out perpetrators of federal relief fund fraud. Further, the Pandemic Response Accountability Committee (PRAC), in collaboration with Offices of Inspector General and other federal law enforcement partners, remains on high alert in detecting and preventing fraud related to federal coronavirus relief programs. The SBA Office of the Inspector General, which reports to the PRAC regarding the use of pandemic funds, has opened dozens of investigations into suspected fraud and issued various reports warning of the pervasiveness of the issue. To that end, lenders, service providers, banks, and other financial institutions should be vigilant about their continued roles in processing applications for stimulus program loans, following Bank Secrecy Act protocols, and other regulatory or statutory requirements, in order to avoid potential criminal or civil exposure for their unwitting roles in schemes that were recently charged. As the government has demonstrated, their efforts to prosecute COVID-19 fraud will only continue to expand.

Each week, Crowell & Moring’s State Attorneys General team highlights significant actions that State AG’s have taken. Here are this week’s updates.

Wednesday, November 18

  • Attorneys General from 34 states announced a $113 million settlement with Apple over its 2016 decision to throttle iPhone speeds to address shutdowns, rather than disclosing the battery issues it discovered to consumers or replacing batteries. The Attorneys General allege that failing to disclose these issues and throttling iPhone performance allowed Apple to profit from selling additional iPhones to consumers whose phone speeds were slowed. The settlement requires Apple to provide consumers with truthful information about iPhone battery health, performance, and power management on its website, in update installation notes, and in the iPhone user interface. The investigation was led by Arizona Attorney General Brnovich, Arkansas Attorney General Rutledge, and Indiana Attorney General Hill. Apple also settled class action litigation related to the same conduct, and will  pay out up to $500 million in consumer restitution.
  • New York Attorney General James announced her support for a relief package that will provide New York City taxi medallion owners with debt forgiveness on outstanding loans for the medallions. The relief package, introduced by the New York Taxi Workers Alliance, will guarantee loans written down to no more than $125,000.
  • Sixteen attorneys general and New York City sued the Department of Energy for failing to meet legal deadlines for reviewing and updating national energy efficiency standards for 25 categories of products and equipment, such as washers and dryers, microwave ovens, and air conditioners and heaters. The coalition argues that the failure to update the standards violates the Energy Policy and Conservation Act.

Friday, November 13, 2020

  • Ohio Attorney General Yost filed a second lawsuit to prevent the annual collection of $150 million in nuclear generation fees from Ohioans which go to Energy Harbor, as part of House Bill 6. The press release states that HB6 “was crafted and approved under corrupt and cloaked actions.”
  • Law360 reported that the U.S. DOJ’s Antitrust Division released new guidance on Thursday, November 12, 2020 regarding when and how arbitration should be used in merger challenges in the future. The guidance states that arbitration should be used when merger challenges brought in the courts would cause an unacceptable delay and when they would not adequately conserve the division’s resources. Arbitration should also be used when the issues are easily enough agreed upon and when the case would benefit from the subject matter expertise of the arbitrator, as well as when the parties want to decide the potential remedies in advance of the proceedings.

Recently, New York enacted a new law against gendered pricing that was included as a key component of the state’s Fiscal Year 2021 budget and Governor Cuomo’s 2020 Women’s Agenda. In a press release announcing the law, Governor Cuomo states, “By abolishing the pink tax, women and girls will no longer be subject to harmful and unfair price discrimination and any businesses who fail to put an end to this despicable practice will be held accountable.” Other state actors are quoted as lauding the new law and comparing the “pink tax” to gender discrimination against women.

The new law, GBS, § 391-U, which went into effect on September 30, 2020, prohibits charging different prices for goods or services that are “substantially similar” but are marketed to different genders. The law applies at all levels of the supply chain. Goods under the law are defined broadly as “any consumer product used, bought, or rendered primarily for personal, family or household purposes.” “Substantially similar” goods are defined as those that “exhibit little difference in the materials used in production, intended use, functional design and features, and brand.”

Similarly, services under the law are described as “any consumer services used, bought or rendered primarily for personal, family or household purposes.” Services that are “substantially similar” are those “that exhibit little difference in the amount of time delivering, difficulty, and cost in providing the service.” Consumers may ask those who provide services for a price list in advance.

The gendered pricing law could impact a wide range of goods and services, including but not limited to:

  • Personal care products such as razors, deodorant, toothbrushes, and body wash
  • Gendered toys and children’s clothing
  • Adult clothing of the same brand
  • Dry cleaning, tailoring, laundry services, and haircuts

The law could also potentially be read to cover sellers like car dealerships or financial service providers if they sell their products or services at different prices to women and men.

On the other hand, businesses whose pricing is based on difficulty, cost incurred, time, labor, or materials involved in manufacturing a good or offering a service, or any other gender-neutral reason for a price differential, should not be concerned about running afoul of the new law. However, these businesses should ensure they are able to document these reasons for the price difference in case they become subject to investigation.

California already has an analogous law, the Gender Tax Repeal Act, which prohibits price discrimination for similar services based on gender. However, this law is limited to services and does not cover goods. California’s law also requires certain businesses, such as hair salons, tailors, and dry cleaners, to clearly and conspicuously post pricing lists for their services, while New York’s law only recommends such disclosures and requires businesses to provide customers with pricing lists upon request.

The press release states that those who violate the gendered pricing law are subject to injunctive relief, consumer restitution, and fines of up to $250 for the first violation and up to $500 for any subsequent violation. To avoid liability under this law and becoming subject to the accompanying fines, any business which sells similar goods or services to different genders should carefully ensure that its pricing system does not violate the law against gendered pricing and that it can support pricing differences with documentation showing legitimate reasons for such variance. Additionally, businesses should be on notice that other states may follow in New York’s footsteps and enact similar laws against gendered pricing of goods and services.

To learn more about Josh Stein, please view Crowell & Moring’s “2020 Attorneys General Election Summary.”