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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. 聽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.聽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.

				

			

			
						
					
			

	
		
		

			

				
				
January 17, 2018

				 California announced that Jeong Kim, the owner and operator of Fashion Q and Q retail clothing stores throughout Southern California, was sentenced to two years in prison for sales tax evasion, false income tax returns, failure to pay taxes and workers鈥� compensation fraud. Attorney General Becerra filed a felony complaint against Kim in the Los Angeles Superior Court on June 19, 2017. Jeong Kim owned and operated more than fifty retail clothing stores in Los Angeles, Orange, San Diego, San Bernardino and Ventura counties. From 2010 through 2016, Kim failed to report more than $29 million in taxable sales to the Department of Tax and Fee Administration, more than $39 million in taxable income to the Franchise Tax Board, more than $8 million in wages to the Employment Development Department, and evaded payment of $5.6 million in sales, income and payroll tax. Kim also failed to report more than $7 million in wages to his insurance carriers and evaded payment of $353,792 in workers鈥� compensation insurance. 				 					 

						
Tagged in:
													  Employment Tax Fraud, 
													  Tax Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
January 11, 2018

				 Illinois announced that consumers will soon begin receiving payments from an approximately $190 million settlement with manufacturers of liquid crystal display (LCD) manufacturers. The payments are part of settlements Madigan鈥檚 office has reached over the last several years with manufacturers of LCD monitors installed in electronic devices including TVs, notebook computers, cell phones and MP3 players. Madigan鈥檚 lawsuit alleged the companies illegally fixed prices for LCD screens used in electronic devices, causing consumers who purchased devices between 1998 and 2006 to pay significantly more than if the prices had been set through normal competition. According to Madigan, the Circuit Court of Cook County has approved the distribution of more than $190 million in settlement payments to Illinois residents who filed claims on or before Oct. 6, 2016. Illinois residents, businesses and government entities such as counties, municipalities and schools submitted approximately 18,500 valid claims for a total of nearly 5 million LCD products purchased during the relevant time period. 				 			
	
		
		
	


 			




	
		
		

			

				
				
January 11, 2018

				 California announced a $102 million settlement with BP Energy Company and affiliates (BP) over allegations that it intentionally overcharged the State of California for natural gas that the State purchased under three successive contracts from March 2003 to August 2012. The contracts allowed the California Department of General Services, which buys natural gas for numerous state agencies and political subdivisions, to cap the price it would pay BP for specific volumes of gas. BP regularly quoted and charged the State of California prices that violated this cap and concealed its overpricing by providing false and misleading information. These acts constitute violations of the California False Claims Act. 				 					 

						
Tagged in:
													  Contract Non-Compliance, 
													  FCA State, 
													  Government Procurement Fraud, 
													  Whistleblower Case, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
January 10, 2018

				 New Jersey announced that a lawyer from Ocean County who formerly practiced in Jersey City was convicted at trial on charges that he stole approximately $1.5 million from five clients over a period of more than a decade. Joseph J. Talafous Jr., 55, of Toms River, N.J., was found guilty by a Hudson County jury of three counts of theft by unlawful taking (2nd degree), three counts of theft by failure to make required disposition of property received (2nd degree), five counts of misapplication of entrusted property (four 2nd degree and one 3rd degree), two counts of theft by deception (2nd degree and 3rd degree), and four counts of filing fraudulent state income tax returns (3rd degree). The verdict followed a six-week trial before Superior Court Judge Mirtha Ospina in Jersey City. The second-degree charges carry a sentence of five to 10 years in state prison. Talafous is scheduled to be sentenced on Feb. 16. 				 					 

						
Tagged in:
													  Financial and Investment Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
January 4, 2018

				 Kmart Corporation agreed to a $1 million settlement with the California Department of Insurance to resolve a whistleblower claim brought under the California Insurance Fraud Prevention Act.聽 KMart contracted with insurance companies to be reimbursed at a rate based on the company's charges to cash-paying customers, but was alleged to have submitted claims to private insurers in amounts that exceeded the agreed-upon rates.聽 				 					 

						
Tagged in:
													  Drug and DME Pricing, 
													  Pharma Fraud, 
													  Private Insurance Whistleblower Reward Programs, 
													  Whistleblower Case, 
													  Whistleblower Rewards, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
January 3rd, 2018

				 New York announced that 49 states, the District of Columbia and 45 state mortgage regulators reached a $45 million settlement with New Jersey-based mortgage lender and servicer PHH Mortgage Corporation. The settlement resolves allegations that PHH, the nation鈥檚 ninth largest non-bank residential mortgage servicer, improperly serviced mortgage loans from January 1, 2009 through December 31, 2012. The agreement requires PHH to adhere to comprehensive mortgage servicing standards, conduct audits, and provide audit results to a committee of states. The settlement does not release PHH from liability for conduct that occurred beginning in 2013. , FL聽For an earlier federal settlement, see here.				 					 

						
Tagged in:
													  Financial Institution Fraud, 
													  Housing and Mortgage Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
December 22nd, 2017

				 California announced a $125 million settlement with the Royal Bank of Scotland (RBS), an international financial conglomerate, over misrepresentations about residential mortgage-backed securities sold to California鈥檚 public employee and teacher pension funds, CalPERS and CalSTRS, respectively. Mortgage-backed securities are complex investments which include thousands of mortgage loans of potentially varying quality, where the buyer typically relies on assurances that the loans have been carefully screened and are not too risky. An investigation conducted by the Attorney General鈥檚 Office found that the descriptions of these mortgage-backed securities to investors failed to accurately disclose the true characteristics of many of the underlying mortgages, and that due diligence to remove poor quality loans from the investments was not adequately performed. RBS was aware of the misrepresentations but failed to correct them. This resulted in millions in losses to CalPERS and CalSTRS. 				 					 

						
Tagged in:
													  Financial Institution Fraud, 
													  Housing and Mortgage Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
December 20th, 2017

				 California announced a $13.5 million multistate settlement with pharmaceutical company Boehringer Ingelheim Pharmaceuticals, Inc. (BIPI) for its deceptive and misleading representation and off-label marketing of its prescription drugs. California will receive $857,000. The settlement resolves allegations that BIPI misled the public about the uses and efficacy of prescription drugs, including Micardis, Aggrenox, Atrovent, and Combivent. The settlement comes after a multistate investigation found that BIPI engaged in deceptive practices. BIPI represented that its prescription drugs had sponsorship, approval, characteristics, ingredients, uses and benefits that they did not have. For example, BIPI engaged in off-label marketing and promoted its drugs to treat life-threatening conditions, such as heart attacks, congestive heart failure, and strokes, without evidence to substantiate their claims. 				 					 

						
Tagged in:
													  Healthcare Fraud, 
													  Off-Label and Unapproved Use, 
													  Pharma Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
December 13th, 2017

				 Illinois announced a $12 million settlement with a company that manufactures a device used primarily in spinal surgeries. The settlement with Medtronic Sofamor Danek, Inc. and Medtronic Sofamor Danek USA, Inc. (Medtronic) resolves allegations that the company misled consumers about the safety of its Infuse庐 Bone Graft Device. According to Madigan鈥檚 complaint, Medtronic used deceptive company-sponsored scientific literature to make false and misleading claims about Infuse鈥檚 safety, effectiveness and quality. The false marketing created an artificial demand for Infuse in a range of fusion surgeries. The company鈥檚 fraudulent conduct was the subject of a 16-month investigation by the U.S. Senate Finance Committee. 				 					 

						
Tagged in:
													  Defective Products, 
													  Healthcare Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
November 22nd, 2017

				 California announced a $2 million settlement with Cottage Health System and its affiliated hospitals in California resolving allegations that they failed to implement basic, reasonable safeguards to protect patient medical information in violation of state and federal privacy laws. The settlement requires Cottage to maintain security practices and procedures to protect patients鈥� medical information from unauthorized access or disclosure. This settlement follows two separate data breach incidents by Cottage Health where more than 50,000 patients鈥� medical information was made publicly available online. 

				 					 

						
Tagged in:
													  Cybersecurity and Data Breaches, 
													  Healthcare Fraud, 
												
						

					
	
							
	
		
		
	


 			


											

						

								

									
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