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State Enforcement Actions

Each state enforces its laws and defends its interests, and states often work with the federal government in investigating and prosecuting corporate frauds.  Whistleblowers with knowledge of fraud or wrongful conduct that involves state or local funds or programs may be able to bring a claim under a state or local False Claims Act, and may be eligible to receive a monetary reward and protection against retaliation.

Below are summaries of recent settlements, successful prosecutions, and enforcement actions by states. If you believe you have information about fraud which could give rise to a claim under a State or Local False Claims Act or other whistleblower reward provision, please contact us to speak with one of our experienced whistleblower attorneys.

October 17, 2019

Johnson & Johnson and its subsidiary, Ethicon, Inc., have agreed to pay $116.9 million to 41 states and the District of Columbia for endangering the health of women nationwide by deceptively marketing transvaginal surgical mesh devices and failing to adequately disclose possible serious complications.  A multistate investigation found that both Johnson & Johnson and Ethicon knew of the risks—including chronic pain and inflammation, fistula formation, incontinence, and mesh extrusion and erosion into the body—yet failed to warn consumers or their physicians.  As part of the settlement, the companies must refrain from falsely describing the mesh as “FDA approved,” as well as provide full disclosure of the device’s risks.  DE AG; PA AG; MI AG; NY AG; SC AG; TX AG

October 2, 2019

Brokerage firms BGC Financial LP and GFI Securities LLC will pay $15 million and $10 million, respectively, to the CFTC, and $7.5 million and $5 million, respectively, in penalties under New York's Martin Act based on the admitted practices of their brokers in posting sham bids and offers on foreign exchange options in emerging markets currencies referred to as EFX options.  This so-called "flying" of prices was done to create a false appearance of greater liquidity in the EFX options market. In addition, the brokers engaged in the "printing" of fake trades on EFX options, falsely representing that trades had occurred at particular levels and prices in an effort to induce follow-on trades at the same levels.  In addition to the monetary penalties, the brokerage firms have agreed to additional compliance, monitoring, and oversight.  CFTCNY

September 5, 2019

Dentist Santa Maria McKibbens has agreed to pay North Carolina $375,000 to resolve allegations that she submitted false claims to the North Carolina Medicaid Program by billing for dental restorations that were not medically necessary, had no supporting clinical documentation, or were otherwise performed in violation of Medicaid policy.  NC

September 4, 2019

Google and its subsidiary, YouTube, will pay a record $170 million to the FTC and New York for allegedly violating the Children’s Online Privacy Protection Act (COPPA) Rule, which requires that websites and services directed at children under 13 obtain parental consent prior to collecting personal information.  According to the complaint, YouTube allegedly monitored, tracked, and served targeted ads to children under 13 without parental consent.  FTC, NY AG

August 1, 2019

The United States and 15 states have settled with Cisco Systems, Inc. for $8.6 million in the first cybersecurity whistleblower case ever successfully brought under the False Claims Act.  Cisco was accused of selling a video surveillance software to the U.S. government and state purchasers – including the military, FEMA, Homeland Security, and the Secret Service -- that could be easily exploited by hackers, and doing nothing to resolve or report the issue for years after the vulnerability was identified.  AG NY; AG VA

July 25, 2019

Douglas MacKinnon of Buffalo, New York, and associated individuals and entities in the debt collection business, including Northern Resolution Group, LLC, Enhanced Acquisitions LLC, Delray Capital, LLC, and Mark Gray, will pay more than $66 million in restitution and penalties in a settlement reached with New York state and the Consumer Financial Protection Bureau.  The companies routinely engaged in unlawful and predatory debt collection practices, including: misrepresenting to consumers that they owed sums they did not owe or were not obligated to pay, or that the companies did not have a legal right to collect; falsely threatening consumers with legal action that the collectors had no intention of taking; and, impersonating law enforcement and other government officials.  The settlement permanently bans MacKinnon and Gray and their defendant companies from the debt collection industry. CFPB, NY

July 22, 2019

Credit reporting company Equifax has agreed to pay up to $700 million to resolve claims related to its 2017 data breach in a global settlement with the FTC, the CFPB, and 50 U.S. states and territories.  The settlement will be entered as a stipulated judgment in civil action pending against Equifax, alleging that Equifax failed to take adequate steps to secure its network and consumer data, despite being warned of network vulnerabilities, resulting in a hack that exposed the private information of almost 150 million people.  The settlement provides that defendant will pay between $300 million and $425 million to compensate affected consumers, in addition to a $100 million penalty to the CFPB and $175 million to the states.  Equifax also agreed to take specified steps to improve information security, subject to review by an independent third party.  FTC; CFPB; AG CA; AG NY; AG PA

July 11, 2019

Reckitt Benckiser Group plc, which marketed and sold the opioid addiction treatment drug Suboxone until 2014 through its then-subsidiary Indivior Inc., will pay a total of $1.4 billion in a global settlement resolving criminal, civil, and administrative claims.  In marketing Suboxone Film, Indivior allegedly made unsupported claims that the drug was less-divertable and less-abusable than other buprenorphine drugs, and steered patients to doctors known to have a history of over-prescribing Suboxone and other opioids.  In addition, Indivior was alleged to have discontinued its tablet Suboxone for pretextual reasons, claiming a concern for pediatric exposure when, in fact, the company was seeking to delay FDA approval of a generic form of tablet Suboxone.  In a non-prosecution agreement, RB Group will forfeit $647 million in proceeds it received from Indivior, will cooperate with ongoing investigations, and will not manufacture or market controlled substances in the U.S. for three years.  In resolution of civil claims with the U.S. and states, including six lawsuits filed by whistleblowers under the False Claims Act, RB Group will pay $700 million to resolve claims that the marketing of Suboxone caused false claims to be submitted to government healthcare programs.  Finally, RB Group has agreed to pay $50 million in a settlement with the Federal Trade Commission to resolve claims that it engaged in unfair competition in seeking to impede generic equivalents of Suboxone.  DOJ; USAO W.D.Va.; FTC; VA

July 10, 2019

Overstock.com has been ordered by a Delaware court to pay $7.3 million following a jury verdict against it on claims that the online retailer misrepresented its disposition of abandoned gift card balances to Delaware's revenue agency in order to avoid obligations under the Delaware escheat law, which requires that Delaware-chartered companies turn over unclaimed assets to the state.  The case was brought by whistleblower William Sean French, a former employee of a gift card company, under the Delaware False Claims and Reporting Act. DEL

July 2, 2019

To settle a qui tam suit by a former employee, LexisNexis Risk Solutions and its affiliates have agreed to pay $5.8 million to resolve their liability under the Illinois, Massachusetts, New Jersey, New York, and Tennessee False Claims Acts.  LexisNexis had signed a contract with law enforcement agencies to access automobile crash reports that they then sold to individuals, insurance companies, and law firms for claims adjustment purposes.  According to the contract, LexisNexis would pay the agencies each time a report was sold; however, it allegedly paid the agencies for the first report only but not for each subsequent report.  AG IL; AG NJ; AG NY
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