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States Flex Prosecutorial Muscle

Attorneys General Move Into What Was Once Federal Territory

By Brooke A. Masters
Washington Post Staff Writer
Wednesday, January 12, 2005; Page A01

Are drug companies using deceptive marketing? Connecticut is investigating.

Did mortgage financing giant Fannie Mae mislead investors? Ohio has filed suit alleging securities fraud.

Did mutual funds make improper payoffs to brokers? California brought a complaint against giant broker Edward D. Jones & Co. last month.

Are power plants contributing to global warming? Eight states have combined to sue to force big utilities to cut their emissions of carbon dioxide.

Americans once relied primarily on an alphabet soup of federal agencies -- SEC, FTC, EPA -- to protect investors, consumers and the environment. But state regulators and attorneys general are bringing legal action and launching investigations in these and other areas where they say federal regulators have fallen down on the job.

"Our action is the result of federal inaction," said Connecticut Attorney General Richard Blumenthal, who has brought actions against drug companies, polluters and the Environmental Protection Agency. "The [Bush] administration has not just failed to enforce the law, it has sought to undercut it and gut it. . . . States are filling the vacuum."

The trend is likely to accelerate in Bush's second term, analysts said, as Democratic state officials attempt to counter market-oriented approaches to issues such as drug safety, antitrust enforcement and the environment.

"If the administration's new appointees are perceived as being soft or less aggressive, it will encourage the state regulators to step in," said Henry T.C. Hu, a University of Texas law professor.

The motivation of state officials, analysts say, is both principle and politics -- 43 of the state attorneys general are elected, and analysts routinely refer to the nationwide attorneys general group as the National Association of Aspiring Governors.

In fact, New York Attorney General Eliot L. Spitzer, whose aggressive investigations of Wall Street and other industries have kept him in the spotlight, has announced that he is running for governor of New York. Critics call the recent spate of state actions "the Spitzer effect," arguing that other state officials are hoping to duplicate his success.

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