State Attorneys General Defend NAAG
At this week’s Spring National Association of Attorneys General Consumer Protection Conference, State AG staff gathered to discuss multistate investigations, enforcement priorities, and recent challenges. The introductory panel of the public portion of the conference featured State AGs Herbert Slatery (Tennessee), Kwame Raoul (Illinois), and John Formella (New Hampshire) discussing some of their priorities as members of the NAAG Consumer Protection Committee. However, due to recent circumstances we have reported on, they also were asked to to explain and defend the role of NAAG.
Attorney General Slatery noted that NAAG is a nonpartisan organization, with 4 of the last 7 presidents Republicans and 3 Democrats. He explained that during his time working on the administration of settlement funds, discussions and decisions were not partisan. Rather, disagreements within multistates are usually on strategy on how to bring a matter to resolution. He appreciated that NAAG is able to help AGs get things done together.
NAAG Staff Role
Attorney General Formella explained that NAAG staff do not run multistates or control state priorities, even joking that the dedicated AG staff wouldn’t delegate to NAAG staff anyway. NAAG also does not accumulate assets. He explained that is a misunderstanding of what NAAG is and does, because NAAG isn’t a party to actions. NAAG exists to provide resources and coordinate efforts. Formella noted that coming from a smaller state like New Hampshire, coordination is critical, because not every state has the same resources for consumer protection and multistates. New Hampshire for instance is largely a criminal prosecuting agency, but that doesn’t mean consumer protection is less important. He further elaborated that he believes NAAG helps facilitate federalism, because multistate matters are an important supplement to federal actions. Where the FTC and DOJ’s actions are often defined by administration, he explained, NAAG helps coordinate the 50+ different AGs to talk about what the states priorities should be.
As co-chair of the Financial Services Fund, Attorney General Slatery elaborated on the role of it and other NAAG financial funds. That fund was established from national mortgage settlement, which set aside $15 million to be used for state enforcement expenses such as discovery and document review. He explained that without the NAAG funds, states have limited alternatives for expenses such as funding through their budgets or hiring outside counsel. The funds are not allocated to operating expenses at NAAG, but are instead available to AG offices. The members of the fund committee review state requests, and if approved, they are used for that particular purpose and all expenses are tracked and detailed. When the states settle the given case, as part of the grant agreement, funds are repaid out of the settlement. General Slatery compared this to an advance or loan.
Attorney General Slatery highlighted that the use of funds were particularly effective in the opioid matters, where nine states were able to secure outside counsel due to the complexity of the bankruptcy and their disagreement with other states. General Raoul explained the McKinsey settlement in January 2021, which allocated $15 million to NAAG, was used to return funds to the financial services fund as well as reimbursing states for their documented costs and developing a public repository of documents. He directly disputed that NAAG ever received $140 million from a case, as some press had reported, speculating that it was referring to a 2008 Rhode Island case that was overturned, and ultimately no parties received funds.
But questions remain, and perhaps intensify
While these three Attorneys General defended NAAG, eight others wrote a letter to NAAG expressing similar concerns to those previously raised by Alabama, Arizona, Missouri, Montana, and Texas. This new group included Alaska, Kentucky, Florida, Louisiana, Oklahoma, South Carolina, Utah, and Virginia. Unlike prior letters, these AGs have asked for very specific structural reforms including ensuring that the president of NAAG alternate parties. The new letters also calls for greater transparency of funds, again referencing the McKinsey settlement and criticizing the size and use of the payment to NAAG. The AGs further express concern over recent programming choices, which they describe as “increasingly partisan.” The letter asks for specific changes to the grant administration process, including to limit the use of the funds to cases that are pursued by a larger bipartisan group of states.
These new states have given NAAG until June 6 to respond. We will continue to provide updates on how the perception of NAAG shapes the State AG practice landscape.
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