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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.

				

			

			
						
					
			

	
		
		

			

				
				
May 11, 2017

				 Benefits management company Carecore National LLC agreed to pay $54 million to settle charges of violating the False Claims Act by submitting Medicare and Medicaid claims for medical diagnostic procedures without properly assessing whether they were necessary or reasonable. 聽CareCore provides utilization management services including determinations of medical necessity to New York Medicaid Managed Care Organizations (MCOs). The agreement settles allegations that CareCore instituted a scheme to auto-approve or 鈥淧rocess As Directed鈥� (鈥淧AD鈥�) hundreds of radiology service requests on a daily basis, deeming those diagnostic services as reasonable and medically necessary, even though there had been no evaluation of those cases by the appropriate medical personnel. Of the $54 million, $18 million will go to 20 state Medicaid programs. The allegations originated in a whistleblower lawsuit filed under the qui tam provisions of the False Claims Act.聽 The whistleblower will receive a yet-to-be-determined whistleblower award from the proceeds of the government's recovery.聽; , FL				 					 

						
Tagged in:
													  FCA Federal, 
													  Laboratory and IDTF, 
													  Lack of Medical Necessity, 
													  Whistleblower Case, 
													  Whistleblower Rewards, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
May 25, 2017

				 New Jersey announced that David Lerner Associates, Inc. (DLA), a New York firm with offices in Princeton and Teaneck, has agreed to pay $650,000 to resolve a Bureau of Securities investigation into its sales of non-traded real estate investment trusts (REITs) in New Jersey. In a Consent Order with the Bureau, the Syosset NY-based DLA, agreed to pay civil penalties and other costs to resolve the Bureau鈥檚 findings that agents of the firm sold non-traded REITs to unsuitable investors, that DLA supervisors approved those sales, and that the firm failed to make and keep adequate records for sales of non-traded REITs. The Bureau received complaints from investors regarding DLA鈥檚 sale of three non-traded REITs 鈥� Apple REIT Seven, Inc., Apple REIT Eight, Inc. and Apple REIT Nine, Inc. 鈥� which raised an aggregate of $4 billion between March 2006 and December 2010 to purchase hotels. The Bureau contacted DLA regarding potential failures in the firm鈥檚 compliance system with regard to sales of the three REITs and DLA agreed to undertake a comprehensive review of its NJ sales. 				 			
	
		
		
	


 			




	
		
		

			

				
				
May 25, 2017

				 New Jersey announced that the ConocoPhillips Company has agreed to pay the State $39 million to resolve its liability for damage to the environment and injury to natural resources caused by a gasoline additive known as methyl tertiary butyl ether (MTBE). ConocoPhillips was one of nearly 50 companies named in a June 2007 lawsuit in which the State sued numerous oil and chemical companies for damages to New Jersey鈥檚 ground water as a result of the defendants鈥� manufacture, blending and distribution of MTBE. The defendants include major petroleum refiners, distributors and sellers of gasoline in New Jersey, and independent chemical manufacturers of MTBE. 				 			
	
		
		
	


 			




	
		
		

			

				
				
May 24, 2017

				 Texas announced that the Baylor College of Medicine will receive $2 million from a settlement reached by Texas with Questcor Pharmaceuticals, Inc. Baylor College of Medicine will use the $2 million for funding related to innovative pediatric neurological research projects. In January, Texas, the Federal Trade Commission and four other state attorneys general resolved a lawsuit against Questcor alleging it monopolized the market for Acthar, the only adrenocorticotropic hormone (ACTH)-based therapeutic drug sold in the United States. Acthar is used to treat several diseases, including infantile spasms, a disease in which infants suffer from epileptic seizures that can result in severe injury or death. Questcor blocked competition for Acthar by acquiring the U.S. rights for Synacthen Depot, the only other ACTH-based drug sold in the world. Questcor also increased the price of the drug by 85,000 percent, charging over $34,000 for a vial of the drug that used to cost $40 per vial. The research that demonstrated Acthar was an effective treatment for infantile spasms was conducted by a team lead by Richard Hrachovy at Baylor College of Medicine in the 1970s and 1980s. 				 			
	
		
		
	


 			




	
		
		

			

				
				
May 24, 2017

				 New York announced that 42 states and the District of Columbia have reached a $33 million settlement with Johnson & Johnson and Johnson & Johnson Consumer Inc., resolving allegations that the company鈥檚 subsidiary, McNeil-PPC, Inc., employed deceptive practices to market and promote numerous popular over-the-counter (鈥淥TC鈥�) drugs. In addition to reforming these practices, the corporation has agreed to pay New York State a total of $1.3 million. Between 2009 and 2011, McNeil-PPC, Inc.鈥攖hen a wholly-owned subsidiary of Johnson & Johnson鈥攎anufactured and distributed OTC drugs that purported to comply with federally mandated current Good Manufacturing 91吃瓜网 (鈥渃GMP鈥�). However, an investigation conducted by the FDA and Attorneys General across the country revealed that a number of McNeil manufacturing facilities and the medications they produced did not meet the national cGMP standards. , , , FL				 					 

						
Tagged in:
													  CGMP Violation, 
													  FCA State, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
May 23, 2017

				 New York announced that 47 states and the District of Columbia have reached a $18.5 million settlement with the Target Corporation to resolve the states鈥� investigation into the retail company鈥檚 2013 data breach, which affected more than 41 million customer payment card accounts and exposed contact information for more than 60 million customers. The agreement represents the largest multistate data breach settlement achieved to date and will bring $635,224.33 to New York State. The states鈥� investigation found that in November of 2013, cyber attackers accessed Target鈥檚 gateway server through credentials stolen from a third-party vendor. The credentials were then used to exploit weaknesses in Target鈥檚 system, which allowed the attackers to access a customer service database and to install malware on the system that was used to capture consumer data, including full names, telephone numbers, email and mailing addresses, payment card numbers, expiration dates, CVV1 codes, and encrypted debit PINs. , , 				 					 

						
Tagged in:
													  Cybersecurity and Data Breaches, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
May 11, 2017

				 New York announced settlements with six ticket brokers that illegally purchased and resold hundreds of thousands of tickets in New York State since 2011, including on popular ticket resale platforms like StubHub and Vivid Seats. Five of the companies 鈥� Renaissance Ventures, LLC (d/b/a Prestige Entertainment) of Connecticut, Ebrani Corp (d/b/a Presidential Tickets) of New York, Concert Specials, Inc. of New York, Fanfetch Inc. of New York and BMC Capital Partners, Inc. of New York 鈥� violated New York鈥檚 ticket laws by using illegal software (known as ticket 鈥渂ots鈥�) to purchase large numbers of tickets on websites such as Ticketmaster.com before the tickets could be obtained by consumers.  After obtaining the tickets illegally, resellers then resold them at a large profit to New York consumers, among others. Five of the companies 鈥� Prestige Entertainment, Presidential Tickets, Concert Specials, Fanfetch and JAL Enterprises, LLC (d/b/a Top Star Tickets) of Massachusetts 鈥� each illegally sold tickets to events in New York over the last several years without first obtaining the required license. The settlements require that the companies and their principals maintain proper ticket reseller licenses if they wish to resell tickets to New York events, abstain from using bots, and pay penalties for having operated illegally. The settlements require the six companies to pay a combined total of $4.19 million in disgorged profits and penalties to the State. 				 			
	
		
		
	


 			




	
		
		

			

				
				
May 1, 2017

				 New York announced the sentencing of Keisha Relf Davis, a New York State Department of Education vocational counselor, for taking part in a scheme that stole nearly $2.4 million from New York State. In September 2014, a Bronx County grand jury indicted Relf Davis along with co-defendants, Juan Cabrera and Juani Ortiz, who were already sentenced on Grand Larceny charges. Relf Davis was sentenced to two to six years in state prison by the Honorable Justice Steven Barrett. As part of the scheme, Relf Davis, in exchange for cash bribes, approved students for the Office of Adult Career and Continuing Education Services鈥� Vocational Rehabilitation Program (鈥淎CCES-VR鈥�), although these students never applied to the program. The ACCES-VR program was created to help eligible New Yorkers with disabilities and functional limitations gain self-dependence through education, training, and employment. Relf Davis knew that the students she approved did not have disabilities or functional limitations to qualify for this program. 				 					 

						
Tagged in:
													  Education Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
April 26, 2017

				 New York announced felony charges against Anthony Nyame, 59, of the Bronx, for allegedly stealing $800,000 from multiple victims by fraudulently inducing them to believe his Wall Street based company, General Capital Corporation, had the ability to secure millions of dollars in loans. If convicted, Nyame faces up to 20 years in prison. According to the indictment and statements made by the prosecutor at arraignment, Nyame allegedly solicited unwitting victims into believing that his company could arrange for tens of millions of dollars in loans provided they pay hundreds of thousands of dollars to collateralize the loans. In one case, Nyame allegedly promised to obtain a $30 million loan for a Church located in the Bronx that was seeking to build a multi-family dwelling on its property. Instead of using the deposits to secure the promised loans, Nyame allegedly diverted monies from the Church and other investors for his own personal use 鈥� including $71,000 in cash withdrawals and transfers to his personal bank account, $47,000 to pay for his Wall Street apartment and an additional $26,000 for assorted personal items. Nyame also transferred hundreds of thousands of dollars to multiple companies and people around the world. 				 					 

						
Tagged in:
													  Misrepresentations, 
													  Securities Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
April 24, 2017

				 New York announced that nine individuals have been variously charged with money laundering, mortgage fraud, grand larceny, conspiracy, and other charges related to their participation in a scheme to defraud mortgage lenders that spanned two New York City boroughs and resulted in over $1 million in ill-gotten mortgage loans. According to the indictment, from 2012 to 2015, defendants Defreitas, McKayle, Mackey, and Persaud allegedly engaged in a scheme to defraud mortgage lenders and steal mortgage proceeds. In the course of the scheme, the defendants allegedly used sham corporations to acquire title to four properties in Brooklyn and Queens, and then conspired with defendants Downes, Harmon, Whyte, Gregoire, and Blackwood-Sambury to obtain mortgages to 鈥渂uy鈥� the properties in manufactured resales. The defendants are alleged to have concealed the fact that the buyers couldn鈥檛 afford the homes by submitting fraudulent mortgage applications showing grossly inflated incomes from fake jobs, bank accounts with fabricated balances and other false information. 				 					 

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

					
	
							
	
		
		
	


 			


											

						

								

									
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