Settlements would fund consumer protection position

By Heidi Bell Gease, Journal staff | Wednesday, December 03, 2008

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Gov. Mike Rounds has proposed the state hire a fourth consumer protection investigator, with funding for the position to come largely from drug company settlements.

Attorney General's Office spokeswoman Sara Rabern said the state has recovered $3.23 million in drug settlements from about a half-dozen companies since February. That is far more than in a typical year, when the state might recover a few hundred thousand dollars.

Rabern said those settlements, with companies including Merck and Pfizer, are generally earmarked for specific uses such as consumer education or fraud investigators.

"It's not money that's coming out of our budget," she said. "It's money that is new to the budget."

Drug settlements like these usually involve more than one state, Rabern said. Unlike class actions, which seek damages for individuals directly harmed by a product or procedure, state settlements involve more general complaints such as misrepresentation and deceptive advertising.

The Consumer Protection Division already has three investigators. State statute currently limits the number of full-time employees the division can have, Rabern said. Rounds is proposing to increase that number, which would allow for the additional investigator.

Rabern said the workload justifies another investigator because scams have evolved.

"I don't know if there are necessarily more, but I think they have become more sophisticated," she said. "The Internet has just made it harder."

In 1998, the Consumer Protection Division didn't even list "Internet fraud" as a category of complaint. In 2002, there were 19 complaints of Internet fraud. It is now one of the top 10 complaints the office receives, Rabern said.

In 2008, the "top 10" complaint list included telemarketing, retail sales, credit reporting, telecommunications/slamming/cramming, auto advertising practices, Internet goods and services, health fraud, predatory lending/mortgages, home repair/construction, and, in 10th place, a tie between landlord-tenant/mobile home issues and subscriptions complaints including magazines and videos. Telemarketing and telecommunications statistics are combined with Public Utilities Commission statistics.

In 2006, the Consumer Protection Division opened 2,569 cases, closed 2,564, and recovered $3,075,992, according to information provided by the Attorney General's Office. In 2007, the office opened 2,435 cases, closed 2,583, and recovered $2,022,069.

"Recoveries" include diverse judgments such as simple $20 magazine subscriptions and complex multi-state settlements with drug companies, Rabern said.

Contact Heidi Bell Gease at 394-8419 or heidi.bell@rapidcityjournal.com.

Title: Gov. Rounds' budget address Date: December 2nd, 2008 Gov. Mike Rounds presented his proposed budget for 2010. Read who it will affect and how it will affect them. VIEW PRESENTATION »