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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.

				

			

			
						
					
			

	
		
		

			

				
				
February 25, 2017

				 New York announced the arrest of Kester Atumonyogo, 43, of Valley Stream, N.Y., and his company Monack Medical Supply, Inc. (鈥淢onack鈥�) for allegedly stealing over $1.5 million from Medicaid and Healthfirst, a Medicaid managed care organization. The defendants are accused of using a false Social Security number to enroll Monack as a participating medical supply provider in Medicaid.  Thereafter, the company allegedly filed false claims that misrepresented to Medicaid and Healthfirst that Monack dispensed a highly specialized, expensive enteral, nutritional formula to needy pediatric patients. Enteral nutritional formulas are prescribed by physicians for patients who must obtain nutrients via a feeding tube and cannot metabolize dietary nutrients from substantive food.  The Medicaid reimbursement rate for specialized enteral, nutritional formula is substantially higher than off-the-shelf or over-the-counter nutritional supplements.  The Attorney General鈥檚 investigation conducted by the Medicaid Fraud Control Unit (MFCU) revealed that Medicaid and Healthfirst, relying on Monack鈥檚 false claims, paid Monack for specialized enteral, nutritional formula, but that Monack only dispensed 鈥淧ediasure鈥� or similar over-the-counter nutritional supplements to Medicaid patients, when it dispensed anything at all. 				 					 

						
Tagged in:
													  Healthcare Fraud, 
													  Managed Care, 
													  Medicaid, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
February 21, 2017

				 Florida, the Federal Trade Commission and nine other state attorneys general announced the entry of the last consent judgment shutting down an illegal robocalling scheme used to sell Florida cruise line vacations. The unlawful telemarketing campaign flooded consumers from across the country with billions of unwanted robocalls, averaging 12 to 15 million illegal calls a day, and generated millions of dollars for the companies. In 2015, Florida, in partnership with the FTC and other state attorneys general, filed a lawsuit against Caribbean Cruise Line, Inc., a marketing company, as well as seven other companies, for alleged involvement in a scheme that used political survey robocalls to illegally sell cruise vacations. The complaint alleged that the defendants鈥� robocalls violated both Florida and federal law by unlawfully using political surveys as a pretext to place sales calls pitching Bahamas cruises and related vacation packages to individuals on do-not-call lists and other individuals they were prohibited from calling. FL				 			
	
		
		
	


 			




	
		
		

			

				
				
February 17, 2017

				 A Wellesley-based dental provider and its billing agent have agreed to pay $1.5 million to Massachusetts鈥� Medicaid program (MassHealth) to resolve allegations of improper billing for visits to MassHealth members living in nursing homes. The settlement resolves allegations that dental provider Alec H. Jaret, DMD, PC d/b/a HealthDrive Dental Group and its billing agent, HealthDrive Corporation, overbilled MassHealth for nursing home visits. The AG鈥檚 Office filed a complaint against the defendants in March 2014 alleging that between July 2010 and September 2013, HealthDrive, on behalf of HealthDrive Dental Group, overbilled MassHealth for nursing home visits by charging a separate 鈥渉ouse call鈥� fee for multiple patients treated at the same facility on the same day.  An investigation by the AG鈥檚 Office revealed that HealthDrive was paid for more than 34,700 excessive claims on a per-patient per-day basis, contrary to MassHealth鈥檚 regulations on dental house calls established in 2010. The parties have reached a civil settlement agreement pursuant to which HealthDrive and HealthDrive Dental Group will pay MassHealth $1,500,756 to resolve all claims. 				 					 

						
Tagged in:
													  FCA State, 
													  Medicaid, 
													  Medical Billing Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
February 17, 2017

				 New Jersey announced that the state鈥檚 largest healthcare provider, Horizon Healthcare Services, Inc., has agreed to pay $1.1 million and improve data security practices to settle allegations it failed to properly protect the privacy of nearly 690,000 New Jersey policyholders whose personal information was contained on two laptops stolen from the insurer鈥檚 Newark headquarters. The insurance giant, which does business as Horizon Blue Cross Blue Shield of New Jersey (鈥淗orizon BCBSNJ鈥�), agreed to the settlement after a Division investigation concluded that the company鈥檚 failure to comply with federal healthcare data security standards threatened to expose private information of its members 鈥� including their names, addresses, birthdates, insurance identifications and, in some instances, Social Security Numbers and limited clinical data. The State alleges that the policyholder data on the stolen laptops was password protected, but not encrypted, as required under these circumstances by the federal Health Insurance Portability Accountability Act, as amended by the Health Information Technology for Economic and Clinical Health Act (鈥淗IPAA/HITECH鈥�). 				 			
	
		
		
	


 			




	
		
		

			

				
				
February 14, 2017

				 Illinois announced a settlement with Delaware-based BNSF Railway Company (BNSF) following a train derailment that caused a crude oil spill near the city of Galena. The settlement resolves environmental concerns that arose in 2015 when a BNSF train derailed, spilling a large amount of crude oil that ignited near Galena, Ill. Following the spill, Madigan鈥檚 office obtained an agreed court order to require BNSF to clean up the crash site and monitor it for crude oil contamination. To clean up the site, BNSF spent more than $10.5 million, including reimbursements to state and local authorities for costs incurred. BNSF has continued to monitor the site, and to date, there is no evidence of groundwater contamination. 				 					 

						
Tagged in:
													  Environmental Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
February 8, 2017

				 Georgia announced that the Office of the Attorney General鈥檚 multi-year legal battle against payday lenders Western Sky Financial, LLC, CashCall, Inc. and related entities has concluded in a settlement providing over $40 million in monetary relief to Georgia consumers. The settlement comes on the heels of a October 31, 2016 ruling by the Georgia Supreme Court that out-of-state Internet lenders are subject to the State鈥檚 Payday Lending Act, which prohibits a lender from making loans of $3,000 or less unless the lender is licensed to lend in Georgia or under federal law.  Georgia law caps the interest rate of such loans at 10%; however, Western Sky and its affiliates sold over 18,000 loans to Georgia borrowers bearing interest rates of 140% to 340%, and collected over $32 million in interest and fees from those consumers since 2010. The settlement requires Western Sky and its affiliates to pay $23.5 million in consumer restitution, to cease all collections and to forgive all outstanding loans, which will provide an additional $17 million in loan relief to Georgia borrowers. 				 			
	
		
		
	


 			




	
		
		

			

				
				
February 8, 2017

				 A King County judge ordered the makers of 5-hour ENERGY庐 to pay nearly $4.3 million in penalties, attorneys鈥� fees and costs for multiple violations of the state Consumer Protection Act. Washington filed a lawsuit against the companies in 2014, alleging violations of the state Consumer Protection Act. After a three-week trial last September, Judge Beth Andrus ruled in the state鈥檚 favor, finding that claims in the companies鈥� advertising were deceptive, and therefore violated the Consumer Protection Act. The deceptive claims 鈥� that the popular flavored energy shots is superior to coffee, that doctors recommend 5-hour ENERGY庐, and that its decaffeinated formula provides energy, alertness and focus that lasts for hours 鈥� appeared in press releases, on the internet and in thousands of print and broadcast ads. 				 			
	
		
		
	


 			




	
		
		

			

				
				
February 6, 2017

				 New Jersey Assemblyman Robert Schroeder (R-Bergen) was sentenced to prison for stealing nearly $1.9 million from individuals who loaned him money for a business venture in North Dakota and writing over $3.4 million in bad checks to other creditors who loaned him money or provided goods and services for his various companies, including All Points International Distributors, Inc., which sold tents and prefabricated buildings to the U.S. military. Schroeder, 56, of Washington Township (Bergen County), was sentenced to eight years in state prison by Superior Court Judge Robert Reed in Somerset County.  Schroeder pleaded guilty on Oct. 7 to a charge of second-degree misconduct by a corporate official.  He must pay full restitution of $5,318,150 to his victims, and he is permanently barred from public office and public employment in New Jersey. Four companies that he operated also pleaded guilty in October. Each of those corporate defendants 鈥� All Points International Distributors, Inc.; Hercules Global Logistics, LLC; RS Consultants, LLC; and RGS Bergen, LLC 鈥� pleaded guilty to second-degree issuing bad checks. Each of the companies is jointly and severally liable with Schroeder for paying full restitution to the victims. 				 			
	
		
		
	


 			




	
		
		

			

				
				
February 6, 2017

				 New Jersey announced that Smart TV manufacturer VIZIO, Inc. (鈥淰IZIO鈥�) and its subsidiary VIZIO Inscape Services, LLC, (鈥淚nscape鈥�) have agreed to pay the State and the Federal Trade Commission (FTC) $2.5 million and change their business practices to settle allegations they violated consumer protection laws by surreptitiously tracking consumers鈥� television viewing habits and selling the information to marketing companies and data brokers. The settlement ends parallel investigations conducted by the Division and the FTC into the use of data-collecting technology installed on VIZIO鈥檚 鈥淪mart TVs.鈥� The State obtained $1 million and the FTC obtained $1.5 million in the settlement. In a joint Complaint filed in the United States District Court for the District of New Jersey, the State and the FTC alleged that VIZIO and Inscape violated state and federal laws by failing to effectively inform consumers that VIZIO smart televisions were continuously collecting and storing information about their viewing habits, and that the data was being sold to third parties for marketing purposes. 				 			
	
		
		
	


 			




	
		
		

			

				
				
January 31, 2017

				 All 50 states and the District of Columbia announced a joint settlement with Colorado-based The Western Union Company, resolving a multistate investigation which focused on complaints of consumers who used Western Union鈥檚 wire transfer service to send money to third parties involved in schemes to defraud consumers. The settlement requires Western Union to develop and put into action a comprehensive anti-fraud program designed to help detect and prevent incidents where consumers who have been the victims of fraud use Western Union to wire money to scam artists. Western Union also has agreed to pay a total of $5 million to the states for the states鈥� costs and fees. In addition to this settlement with the states, Western Union also settled claims related to fraud-induced transfers with the Federal Trade Commission and U.S. Department of Justice, as announced on January 19, 2017.  As part of those related settlements, Western Union has agreed to pay $586M to a fund that the Department of Justice will administer to provide refunds to victims of fraud induced wire transfers nationwide. , FL, , , 				 					 

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

					
	
							
	
		
		
	


 			


											

						

								

									
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