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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.

				

			

			
						
					
			

	
		
		

			

				
				
September 22, 2017

				 Illinois announced a $4.5 million settlement to resolve a lawsuit under the Illinois False Claims Act against 13 Chicago-area gas stations and two gas station owners for sales tax fraud. The lawsuit alleged that since 2002, defendants submitted false monthly sales tax returns to the Illinois Department of Revenue, resulting in millions of dollars of lost tax revenue to the state. The lawsuit alleged defendants operated the scheme by underreporting general merchandise sales and using inaccurate sales tax reporting rates. Ten of the gas stations are currently in operation and are owned by George Nediyakalayil, and Tito Kandarapallil co-owns one of the gas stations with Nediyakalayil. 				 					 

						
Tagged in:
													  FCA State, 
													  Tax Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
September 21, 2017

				 Texas announced that it has obtained a permanent injunction stopping Good Timez Boutique & Smoke Shop, its owners and landlord from selling highly-addictive and dangerous synthetic marijuana to consumers in Houston. The District Court of Harris County entered a judgment that the shop remain closed and defendants pay $9,520,000 in civil penalties. Jose Alfaro, the owner of Good Timez, was arrested in 2014 for selling synthetic marijuana from the same smoke shop to undercover officers, as well as for possession of 鈥榩recursor鈥� chemicals used to manufacture controlled substances and two pounds of synthetic marijuana found inside his vehicle. 				 			
	
		
		
	


 			




	
		
		

			

				
				
September 21, 2017

				 California announced the concurrent filing of a complaint and a settlement involving allegations that The Gatorade Company violated California consumer protection laws by making misleading statements about water in a mobile videogame application it used to promote Gatorade sports drinks to teens and young adults. The complaint filed by the Attorney General alleges that in the videogame "Bolt!"鈥攎ade available free of charge on iTunes鈥擥atorade portrayed its products positively while inaccurately and negatively depicting water as hindering athletic performance. Specifically, users controlled a cartoon version of Olympic Gold Medalist Usain Bolt and ran an endless race to recover gold coins stolen by pirates. Upon touching a Gatorade icon, the Bolt avatar ran faster and the "fuel meter" increased; upon touching a water droplet, he slowed down and the "fuel meter" decreased. Gatorade reinforced this misleading message through the game鈥檚 tutorial, which urged users to "Keep Your Performance Level High By Avoiding Water." 				 			
	
		
		
	


 			




	
		
		

			

				
				
September 7, 2017

				 The Hartford Dispensary will pay $627,000 through a federal-state settlement to resolve allegations that it violated the False Claims Act by falsely certifying to federal and state officials that it had a current medical director that was performing his duties in accordance with federal and state law. In 2014, the Office of the Attorney General commenced an investigation after a whistleblower complaint about the Hartford Dispensary, a private nonprofit behavioral health organization; the investigation was followed by a qui tam lawsuit alleging various violations of the state and federal False Claims Act. The state鈥檚 investigation focused on services that Hartford Dispensary provides as an opioid treatment program 鈥� primarily methadone and detoxification services.				 					 

						
Tagged in:
													  Certifications, 
													  FCA Federal, 
													  Provider Fraud, 
													  Whistleblower Case, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
September 5, 2017

				 Novo Nordisk, Inc. has agreed to $1.1 million to resolve claims that its diabetes drug Victoza was unlawfully promoted for off-label use in violation of the California Insurance Frauds Prevention Act.聽 The claims were brought in a whistleblower action under that act filed by former Novo Nordisk researcher Peter Dastous, who will receive a share of the settlement.聽 				 					 

						
Tagged in:
													  Off-Label and Unapproved Use, 
													  Pharma Fraud, 
													  Private Insurance Whistleblower Reward Programs, 
													  Whistleblower Case, 
													  Whistleblower Rewards, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
September 5, 2017

				 Connecticut joined with 31 other states in a settlement with technology company Lenovo (United States) Inc. to resolve allegations that the company violated state consumer protection laws by pre-installing faulty software on laptop computers sold to Connecticut consumers that made consumers' personal information vulnerable to hackers.				 					 

						
Tagged in:
													  Cybersecurity and Data Breaches, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
August 18, 2017

				 California announced a tentative settlement that provides over $51 million in debt relief for Californians who attended Corinthian Colleges. Corinthian intentionally targeted low-income, vulnerable individuals through deceptive and false advertising that misrepresented job placement rates and school programs. These unlawful activities were enabled by Aequitas Capital Management Inc., a private equity firm currently under U.S. Securities and Exchange Commission-imposed receivership. Federal student loans made up almost 90 percent of Corinthian鈥檚 revenue. To maintain this revenue, Corinthian needed its mostly low-income students to receive these loans. Federal rules require for-profit colleges receive at least 10 percent of their revenue from sources other than federal student aid. To help fill this gap, Aequitas and Corinthian created a financial arrangement whereby Aequitas provided private loans to Corinthian students, and Corinthian guaranteed Aequitas a profit and agreed to buy back all non-performing loans. , FL				 					 

						
Tagged in:
													  Defendants, 
													  Education Fraud, 
													  FCA State, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
August 18, 2017

				 Illinois and other states announced a $465 million settlement between the federal government and states with Mylan Inc. and its wholly-owned subsidiary, Mylan Specialty L.P. (Mylan), to resolve allegations that Mylan knowingly underpaid rebates owed to the Medicaid program for 贰辫颈笔别苍庐 and EpiPen Jr.庐 (EpiPen) dispensed to Medicaid beneficiaries. The settlement resolves allegations that from July 29, 2010 to March 31, 2017, Mylan submitted false statements to the Centers for Medicare and Medicaid Services (CMS) that incorrectly classified EpiPens under terms defined in the Rebate Statute and Rebate Agreement. Mylan also failed to report a "Best Price" to CMS for EpiPens, as directed by the same statute. As a result, Mylan submitted false statements related to EpiPens to CMS and the states for Medicaid rebate purposes and underpaid EpiPen rebates to the state Medicaid programs. , 				 					 

						
Tagged in:
													  Drug and DME Pricing, 
													  Healthcare Fraud, 
													  Medicaid, 
													  Pharma Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
August 18, 2017

				 Illinois announced a $4.45 million settlement with the pharmaceutical company Insys Therapeutics Inc. (Insys) for deceptively marketing and selling a highly addictive opioid drug for an array of treatments that were not approved by the Food And Drug Administration (FDA). The settlement resolves Madigan鈥檚 2016 lawsuit against Insys for its sale of Subsys, which is significantly more powerful than morphine and intended exclusively for the treatment of breakthrough cancer pain. Madigan alleged Insys deceptively promoted and sold Subsys to treat a wide variety of pain, such as back and neck pain, even though the drug was not approved for those uses. 				 					 

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

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
August 17, 2017

				 Under a settlement agreement approved by the state Public Utilities Regulatory Authority (PURA) yesterday, electric supply company Palmco Power CT, LLC will pay $5 million to the state of Connecticut and relinquish its electric supplier license for a period of five years. The settlement resolves an investigation initiated in February 2015 regarding Palmco鈥檚 business practices. Evidence from the PURA proceeding showed that, from January 2011 to October 2015, Palmco systematically and repeatedly deceived consumers by providing false and misleading information about the company鈥檚 rates and engaged in a pattern of abusive sales tactics. Through door-to-door marketing and telemarketing efforts, sales agents often switched consumers to Palmco without authorization, impersonated utility employees and falsely guaranteed savings. In addition, sales agents inaccurately described how the customer鈥檚 variable rate prices were determined. 				 			
	
		
		
	


 			


											

						

								

									
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