The State AG Report - Volume 7, Issue 42

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New York Attorney General Sets Enforcement Sights on Cryptocurrency Platforms

  • New York AG Letitia James directed two cryptocurrency lending platforms to cease sales of unregistered virtual or cryptocurrency lending products, which allegedly violate New York’s Martin Act that is intended to protect the investing public, and ordered three other platforms that sell similar products to provide information about their activities and products.
  • The cease-and-desist letters allege that the two cryptocurrency lending platforms are serving as dealers, brokers, or salespersons of securities because their crypto-based products are openly available to New York residents and promise a fixed or variable rate of return to investors. The letters further note that dealing in bitcoin and other virtual currencies within New York without registration is also unlawful. The information-seeking letters request information about the three platforms’ products, clients, how cryptocurrency is handled by these platforms, due diligence policies and procedures, and agreements and contracts, among other things.
  • Cozen O’Connor State AG Practice Group Member Meghan Stoppel and Associate Keturah Taylor were quoted in a recent Banking Info Security article about AG James’s cryptocurrency-related enforcement actions, stating that the AG is sending a clear message that crypto companies are not above the law and noting that state AGs are frequently on the front lines of consumer protection issues arising with emerging technologies or industry disruptors.

DuPont Reaches $3.35 Million Settlement over Allegations of Environmental Violations at Its Texas Chemical Plant

  • Texas AG Ken Paxton and the U.S. Department of Justice reached a settlement with chemical companies E.I. du Pont de Nemours and Co. and Performance Materials NA, Inc. (collectively “DuPont”) to resolve numerous allegations of violations of hazardous waste, air, and water environmental laws, including the federal Resource Conservation and Recovery Act, the Clean Water Act, the Clean Air Act, as well as Texas environmental laws.
  • The complaint, filed concurrently with the consent decree, alleged that DuPont was responsible for numerous environmental violations at its Sabine River Works Chemical Manufacturing Complex in Orange, Texas, including the storage and disposal of hazardous waste without necessary permits, unauthorized discharge of process wastewater, failure to meet land disposal restrictions, and failure to comply with the national emission standards for hazardous air pollutants for benzene and other organic chemical manufacturing, among other things.
  • Under the terms of the consent decree, DuPont will pay $3.35 million in civil penalties and attorneys’ fees to be divided equally between Texas and the federal government. In addition, DuPont will monitor and control benzene emissions and pH levels in wastewaters, conduct soil, sediment, and groundwater sampling to determine the extent of any contamination, and perform any necessary clean up. DuPont further will retain an independent third party to conduct compliance audits to ascertain the chemical plant’s compliance with environmental laws and regulations.

Republican Attorneys General Oppose Proposed IRS Reporting Rules

  • A group of 20 Republican AGs, led by Georgia AG Chris Carr, Idaho AG Lawrence Wasden, and Utah AG Sean Reyes, sent a letter to President Joe Biden and Treasury Secretary Janet Yellen in opposition to the administration’s proposed new Internal Revenue Service (“IRS”) reporting requirements for financial institutions.
  • The letter argues that the administration’s proposed policy, under which all financial institutions will be required to report information to the IRS on every bank account that has a balance of at least $600 and exceeds $600 per year in transactions, is unconstitutional because it disregards protections against illegal searches.
  • The letter also argues that financial institutions will have to transform their business practices to comply with the proposed reporting requirements and will likely pass the costs of this transformation onto consumers. In addition, the letter warns that the implementation of the proposal will lead to the centralized storage of sensitive financial information, which would create a new target for cyber criminals with the possibility of accessing the data of nearly every American.

Private Equity Firm to Pay Almost $20 Million to Settle Allegations of Medicaid Fraud

  • Massachusetts AG Maura Healey reached a settlement with private equity firms H.I.G. Growth Partners, LLC and H.I.G. Capital, LLC (collectively “HIG”), and two former executives of a mental health facility operator, South Bay Mental Health Center, Inc. (“SBMHC”), to resolve allegations that they caused fraudulent claims to be submitted to the state’s Medicaid program, known as MassHealth, in violation of federal and state false claims acts.
  • The amended complaint, filed by the AG’s office and a whistleblower, alleged that SBMHC had a widespread pattern of billing MassHealth for services provided by unlicensed, unqualified, and unsupervised personnel, even though MassHealth regulations require these services to be provided by qualified clinicians and counselors subject to certain licensure and supervision requirements. The amended complaint further alleged that defendants knew of SBMHC’s pattern of fraudulent claims and failed to adopt recommendations to bring SMBHC into compliance.
  • According to the AG’s office, under the terms of the settlement, HIG will pay $19.95 million, while the former SBMHC executives will pay another $5.05 million. In an earlier settlement in February 2018, SBMHC agreed to pay $4 million and to retain an independent monitor to oversee a five-year compliance program.

Republican Attorneys General Urge Congress to Reject New Methane Fees on Oil and Natural Gas Producers

  • A group of 19 Republican AGs, led by West Virginia AG Patrick Morrisey, sent a letter to the leaders of the U.S. Senate Committee on Environment and Public Works and the Committee on Energy and Natural Resources urging Congress to reject legislation that would increase fees on oil and natural gas producers.
  • The letter opposes the Senate’s Methane Emissions Reduction Act, S.645, and certain provisions in the House’s Build Back Better Act, H.R.5376, which would charge oil and natural gas producers $1,500 to $1,800 per ton of methane emissions above certain thresholds, and argues that the fees will increase consumers’ heating bills at a time when heating bills are projected to spike in some markets. The letter also argues that the legislation is unnecessary because oil and natural gas producers are already motivated to capture methane and sell it as a commodity, thereby limiting emissions, and because the Biden administration directed the Environmental Protection Agency (“EPA”) to develop a new Oil and Natural Gas Methane Rule.
  • The letter further argues that the proposed new fees require complex formulas and calculations, and that the legislation does not provide clear guidance to industry. The letter also warns that, even though the legislation is focused on oil and natural gas producers, it will likely open the door to EPA regulation of other major methane emitters, including agricultural operations, landfills, and coal mines.

Amicus Brief Argues that Consumer Reporting Agency Is Not Legally Shielded from Fair Credit Reporting Act by Section 230 of the Communications Decency Act

  • North Carolina AG Josh Stein, the Consumer Financial Protection Bureau (“CFPB”), and the Federal Trade Commission (“FTC”) filed an amicus brief in the United States Court of Appeals for the Fourth Circuit in support of the consumer plaintiffs’ position in Henderson v. The Source for Public Data, L.P. (“Public Data”), No. 21-1678, that Section 230 of the Communications Decency Act (“CDA”) does not bar the application of the Fair Credit Reporting Act’s (“FCRA”) procedural requirements to the consumer reporting agency.
  • In their second amended complaint in the United States District Court for the Eastern District of Virginia, the plaintiffs alleged that Public Data, an online public-record provider, is a consumer reporting agency and that it violated the FCRA by including false and inaccurate criminal information in background check reports that it produced and offered for sales on its website. Public Data raised Section 230 of the CDA as a defense, arguing that it was entitled to Section 230 immunity as the publisher of third-party information.
  • In his opinion, Judge Hudson of the U.S. District Court for the Eastern District of Virginia agreed with Public Data, finding that the FCRA is not listed in the CDA’s list of statutory exemptions from immunity and that Public Data qualified for Section 230 immunity because it did not produce the content of the reports, but the information is derived from other content providers. Plaintiffs appealed.
  • The amicus brief argues, among other things, that Section 230 does not provide immunity to Public Data because the plaintiffs’ FCRA claims do not seek to hold Public Data liable on the basis of the inaccurate data itself but on the basis of Public Data’s failure to follow the process-oriented requirements that the FCRA imposes on consumer reporting agencies. In addition, the brief argues that the plaintiff’s claims sufficiently alleged that Public Data created and developed its reports, including by collecting, sorting, summarizing, and assembling public-records information, and that it was not merely the publisher or speaker of another person’s content.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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