Jessica M. Karmasek Jun. 20, 2013, 5:00pm

RICHMOND, Va. (Legal Newsline) -- Virginia Attorney General Ken Cuccinelli reportedly is pressing the U.S. Treasury Department to release the remaining $105 million due to the state for the attorney general's office's role as the lead investigator into a 2012 Medicaid fraud settlement.

In a letter to Cuccinelli earlier this month, the department said it would release a total of $115 million.

The office received the initial $10 million Wednesday, a spokesman for Cuccinelli told The Associated Press.

The Treasury's Executive Office for Asset Forfeiture, or TEOAF, said in its June 5 letter it would give Cuccinelli's office an initial check for $10 million, but would need more information on how the attorney general planned to use the money before releasing the rest, the AP reported.

A deputy attorney general for Cuccinelli, in a letter last week, told TEOAF that the office wants the entire $115 million, and that the department's demand for information is inconsistent with its guidelines and past practice.

According to the AP, John Childrey wrote that special authorization is required only when the attorney general plans to use the money on something other than law enforcement.

But the department argues that TEOAF has followed the same guidelines in the case that it adheres to in all asset forfeiture cases.

"The Treasury Department's authority to make sharing payments is discretionary, and it has decided to share forfeited funds in this case," a Treasury spokesman said in an email Thursday.

"TEOAF has informed the Virginia Attorney General's office that its share of proceeds in this case will represent the largest equitable share in the history of the Treasury Forfeiture Fund -- an amount that will likely exceed $100 million. This is a very significant sum of money and we have an obligation to the American taxpayers, including those in Virginia, to ensure that these funds are used in an appropriate manner."

The attorney general says he has been fighting for months to obtain the money from the fraud settlement.

During a press conference held earlier this month, Cuccinelli said Treasury officials originally told his office they wouldn't turn over the money because of the sequestration -- a set of automatic federal spending cuts that were triggered March 1.

"This is despite the fact that it's not federal money, but money that a private defendant paid to settle a case -- money which was to be turned over shortly thereafter to our office and the other agencies involved in the investigation," he said.

"Now the hold-up is the IRS, which, according to the Treasury Department, refuses to complete its paperwork so the money can be properly distributed.

"The exact amount of the forfeiture was known since September 2011 and finalized in a May 2012 plea agreement. It doesn't take a year to complete the paperwork."

The $1.5 billion settlement reached with Abbott Laboratories in May 2012 was divided into $800 million in civil settlements with the federal government and the states, and $700 million in criminal fines and forfeitures.

Abbott allegedly promoted the prescription drug Depakote to control agitation and aggression in elderly dementia patients and to treat schizophrenia, even though the federal Food and Drug Administration never approved the drug for those uses.

The drug was approved by the FDA to treat epileptic seizures, bipolar mania and migraines.

Under the criminal portion, Abbott paid the federal government a criminal fine of $500 million, it paid $1.5 million to the Virginia Medicaid Fraud Control Unit for investigative costs, and it forfeited assets of $198.5 million to go to the investigative agencies for law enforcement purposes.

Virginia's $115 million comes from that asset forfeiture money, which is required by federal regulations to be used for law enforcement purposes.

Cuccinelli says he plans to use the money for law enforcement equipment and training.

From Legal Newsline: Reach Jessica Karmasek by email at

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