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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 31, 2017

				 鈥� New York announced a settlement with for-profit education company DeVry Education Group, Inc. and its subsidiaries DeVry University, Inc. and DeVry/New York, Inc. (collectively, 鈥淒eVry鈥�).  The settlement resolves an investigation that revealed that DeVry lured students with ads that exaggerated graduates鈥� success in finding employment at graduation and contained inadequately substantiated claims about graduates鈥� salary success.  Many of DeVry鈥檚 advertisements centered on a claim that 90% of DeVry graduates who are actively seeking employment obtain employment in their field of study within six months of graduation.  The Attorney General鈥檚 investigation revealed that the 90% claim was misleading because a substantial number of the graduates included in the 90% figure were graduates who were already employed prior to graduating from DeVry.  In fact, many of the graduates included in the 90% were employed before they even enrolled at DeVry. Pursuant to the agreement, DeVry will pay $2.25 million in consumer restitution and $500,000 in penalties, fees and costs. 				 					 

						
Tagged in:
													  Education Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
January 30, 2017

				 Florida announced a $1.5 million life claim settlement agreement reached with subsidiaries of the Ameriprise Group, RiverSource Life Insurance Company and RiverSource Life Insurance Company of New York. The settlement agreement focuses on the one-sided use of the Social Security Administration鈥檚 Death Master File to stop paying a deceased person鈥檚 annuity, but not using the same information to find and begin paying the deceased鈥檚 family or other beneficiaries for life insurance policies. Florida, California, New Hampshire, North Dakota and Pennsylvania conducted the examination into the companies that led to this agreement.  Florida鈥檚 allocation of the multi-state settlement payment by Ameriprise is more than $111,000, which covers the costs of the investigations and future compliance monitoring. To date, state insurance regulators have either reached settlements or concluded the investigation of 28 of the top 40 companies constituting 80 percent of the total market. Efforts continue to be focused on the examination of the remaining 12 insurers. FL				 					 

						
Tagged in:
													  Financial and Investment Fraud, 
													  Financial Institution Fraud, 
													  Private Insurance Whistleblower Reward Programs, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
January 30, 2017

				 Scott Rookus was sentenced by Judge Jon Hulsing of the 20th Circuit Court in Ottawa County to 7 to 20 years for racketeering and 57 months to 10 years for fraudulent sales of securities. Judge Hulsing is also requiring Rookus pay $4,393,420 in restitution to the victims of his million dollar Ponzi scheme that ran from 2010 to 2015. Between 2010 and 2013, Rookus solicited and obtained investments of approximately $1.5 million for his holdings company, New Haven Holdings. His customers, many of whom were senior citizens, were told that earnings from their investments would come from the profits of Rookus鈥� enterprises, when in fact the money he took resulted in a Ponzi-scheme from which he was the primary beneficiary. To cover his tracks, Rookus issued fraudulent returns to some investors using money from newer investors. He used the investor funds to pay personal expenses such as his children鈥檚 private school education and to pay off tax liens against him. The scheme was uncovered after Rookus filed for personal bankruptcy in March 2015 and his investors found out that they had lost everything they invested. 				 					 

						
Tagged in:
													  Ponzi Schemes, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
January 26, 2017

				 New Jersey filed two separate actions against home improvement companies and their owners alleging they used deceptive business practices in order to obtain $1.4 million in federal relief funds from 51 homeowners who paid them to repair and elevate their storm-damaged properties. Named in the first Complaint are father and son contractors Paul Zaidinski, Sr., and Paul Zaidinski, Jr., and their Point Pleasant-based company, Shore HL, Inc., which does business as 鈥�Shore House Lifters.鈥� Named in the second Complaint are contractor George Rex and his Pleasantville-based companies, Atlantic Coast Housing Lifting, LLC and George Rex Construction, LLC. The defendants engaged in 鈥渦nconscionable consumer practices鈥� that include taking money from consumers to renovate, rebuild, and/or elevate Sandy-damaged homes and then failing to begin work, performing the work in a substandard manner, and/or abandoning unfinished projects without returning for weeks, months, or at all, according to the State鈥檚 Complaints. 				 					 

						
Tagged in:
													  Flood Insurance, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
January 26, 2017

				 New York announced a lawsuit against STAR Exemption Advisor, YCA Corp. and its business owner Arie Gal, for allegedly scamming thousands of new homeowners out of at least $1.5 million by charging them excessive fees to enroll them in the Basic STAR Exemption Program, which is otherwise free.  The lawsuit, filed in Nassau County Supreme Court, seeks to provide full restitution to all those affected, and a complete accounting to identify all consumers who are entitled to such refunds. The lawsuit also seeks additional costs, damages, and to permanently enjoin the respondents from marketing any Basic Star rebate or property tax reduction services within the State of New York. The Attorney General鈥檚 office also secured a temporary restraining order enjoining the defendants from continuing doing business in New York State, to pay full restitution and damages to all injured consumers and to render a full accounting of all victims to the office. The temporary restraining order also froze all of the defendants鈥� assets. 				 					 

						
Tagged in:
													  Tax Credit and Deduction Fraud, 
													  Tax Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
January 24, 2017

				 Florida and the Federal Trade Commission announced a settlement with several related debt relief and credit repair services companies and their principal. The settlement resolves allegations that Chastity Valdes and her companies, Consumer Assistance LLC, Consumer Assistance Project Corp. and Palermo Global LLC, engaged in unlawful debt relief operations targeting student loan holders. Among other things, the settlement bans the defendants from operating in the debt relief and credit repair industries. In 2016, Attorney General Bondi鈥檚 Office and the FTC filed a joint lawsuit against Valdes and her companies, alleging the defendants took illegal up-front fees in return for their purported debt relief and credit repair services. According to the complaint, the defendants allegedly falsely claimed these services reduced consumers鈥� student loan debt and repaired consumers鈥� credit. The complaint also asserted violations of the Florida Deceptive and Unfair Trade 91吃瓜网 Act, the FTC Act, the Telemarketing Sales Rule and the Credit Repair Organizations Act. As part of the settlement, the defendants are banned from selling debt relief and credit repair services and prohibited from making material misrepresentations about any products or services. The order also imposes a judgment of more than $2.3 million, which will be suspended upon the surrender of virtually all of the defendants鈥� assets. FL				 					 

						
Tagged in:
													  Financial and Investment Fraud, 
													  Regulatory Violations, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
January 18, 2017

				 New York announced a joint settlement with four other states and the Federal Trade Commission with Mallinckrodt plc and its U.S. subsidiary, formerly known as Questcor Pharmaceuticals (鈥淨uestcor鈥�), a drug manufacturer. The complaint and settlement, filed jointly, alleges that Questcor unlawfully acted to prevent competition for its drug H.P. Acthar Gel, which is typically used as a last resort to treat certain life-threatening diseases, including infantile spasms and multiple sclerosis.  In 2001, Questcor bought the rights to Acthar, known as an adrenocorticotropic hormone (ACTH)-based therapeutic drug, which are used to treat certain life-threatening diseases, and is the standard of care for infantile spasms. It is the only such drug sold in the United States. Since then, Questcor has increased the price of Acthar 85,000%, from $40 per vial to over $34,000 per vial. The complaint alleges that Questcor monopolized the market for ACTH drugs by purchasing the rights to Synacthen, which was being sold by Novartis Pharma A.G. in 2012. Synacthen is used to treat patients with the same life-threatening conditions as Acthar, but is sold in Europe and Canada at a fraction of the price. , 				 					 

						
Tagged in:
													  Pharma Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
January 18, 2017

				 Illinois filed a lawsuit against Navient Corporation, its subsidiaries Navient Solutions Inc., Pioneer Credit Recovery Inc. and General Revenue Corporation and Sallie Mae Bank, over widespread abuses across all aspects of its business, including student lending, student loan servicing and student loan debt collection. Madigan鈥檚 complaint alleges that Navient鈥檚 practices harmed borrowers and put the company鈥檚 profits before the interests of millions of student borrowers across the country. For decades, Navient and Sallie Mae have been involved in the business of student lending 鈥� from the origination of loans, to the servicing of those loans for repayment, and the collection of loans that enter into default. In this time, Madigan alleged that Navient grew its student loan company into one of the country鈥檚 largest by engaging in practices that repeatedly harmed borrowers. 				 					 

						
Tagged in:
													  Education Fraud, 
													  Financial Institution Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
January 11, 2017

				 Ireland-based Shire Pharmaceuticals LLC and certain subsidiaries agreed to pay $350 million to settle charges that Shire and the company it acquired in 2011, Advanced BioHealing violated the False Claims Act and Anti-Kickback Statute by using kickbacks and other unlawful methods to induce clinics and physicians to use or overuse their 鈥淒ermagraft鈥� skin product. It is the largest False Claims Act recovery in a kickback case involving a medical device, and resolves claims brought by the federal government along with 37 states and the District of Columbia. The States will receive $6,104,000 for the State share of the Medicaid program. According to the government, Dermagraft salespersons unlawfully induced clinics and physicians with lavish dinners, drinks, entertainment and travel; medical equipment and supplies; unwarranted payments for purported speaking engagements and bogus case studies; and cash, credits and rebates. The allegations originated in six lawsuits filed brought by whistleblowers in, or transferred to, the United States District Court for the Middle District of Florida. Two of the qui tam actions named New York and other states and included allegations that Shire submitted or caused to be submitted false claims to the Medicaid program under federal and state False Claims Acts. The whistleblowers will receive a yet-to-be-determined whistleblower award from the proceeds of the government recovery. Whistleblower Insider, , FL				 					 

						
Tagged in:
													  Anti-Kickback and Stark, 
													  FCA Federal, 
													  FCA State, 
													  Healthcare Fraud, 
													  Medical Devices and DME, 
													  Multiple Whistleblowers and First-to-File, 
													  Pharma Fraud, 
													  Whistleblower Case, 
													  Whistleblower Rewards, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
January 13, 2017

				 Illinois, the Department of Justice, and 21 other states announced an $864 million settlement with Moody鈥檚 Corporation, Moody鈥檚 Investors Service Inc. and Moody鈥檚 Analytics Inc. to resolve allegations that the credit ratings agency compromised its independence and objectivity in assigning its highest ratings to risky mortgage-backed securities and other structured finance securities in the lead up to the 2008 economic collapse. According to the settlement, Moody鈥檚 consistently made misrepresentations about the processes it used to assign credit ratings to structured finance securities. While publicly promising independent, objective analyses, the company privately relaxed its ratings criteria to ensure its clients鈥� residential mortgage-backed securities (RMBS) and collateralized debt obligations (CDOs) would achieve higher ratings than the actual quality of the assets supported. Structured finance securities, including RMBS and CDOs, derive their value from the monthly payments consumers make on their mortgages. The alleged misconduct began as early as 2001 and became particularly rampant between 2004 and 2007. , , PA, 				 					 

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

					
	
							
	
		
		
	


 			


											

						

								

									
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