W.Va. GOP: Attorney general is an embarrassment

John O'Brien Jul. 11, 2011, 2:18pm


CHARLESTON, W.Va. (Legal Newsline) - The West Virginia Republican Party is calling Darrell McGraw an "expensive embarrassment" in the wake of a federal appeals court ruling against him.

GOP chairman Mike Stuart said Friday that McGraw is wasting taxpayer dollars by continuing to pursue his case against the federal Department of Health and Human Services, which is withholding Medicaid funds from the state because of a pair of 2004 settlements crafted by McGraw.

The settlements stemmed from lawsuits in which McGraw alleged harm caused to the state's Medicaid program by a pharmaceutical company. Even though the federal government supplies most of the state's Medicaid budget, the settlements did not provide for any funds to be returned to it.

The Departmental Appeals Board and a federal judge ruled for the federal government before the U.S. Court of Appeals for the Fourth Circuit joined them Wednesday, though Chief Deputy Attorney General Fran Hughes promised to fight the decision.

"The people of West Virginia deserve to know who is representing the state in this case and the exact costs to continue this embarrassing action," Stuart said.

"How many taxpayer dollars have been wasted and how many more will be wasted in what is clearly an effort by McGraw to evade accountability for his actions? Hundreds of thousands of dollars are being burned in this effort - money that could fund schools or other critical programs."

A three-judge panel of the Fourth Circuit ruled that a "straightforward application of the Medicaid Act" shows that the feds had the right to withhold $446,607 in Medicaid funds from the state because of a settlement with Dey, Inc. and that the amount was properly decided. The decision should have an impact on a similar case in which McGraw is protesting a $2.7 million withhold.

In 2004, the year of the settlement, the federal government supplied 78 percent of the money West Virginia used on Medicaid. The federal Centers for Medicare and Medicaid Services noted that McGraw and the private attorneys he hired to represent the State estimated that Dey caused more than $950,000 of damage to the state Medicaid program. Dey settled for $850,000.

"West Virginia did not reimburse HHS for the federal share of its Medicaid overpayments or inform HHS of its settlement with Dey," the federal government's attorneys wrote in a brief.

"Instead, the State gave $750,000 to (the Public Employees Insurance Agency) -- i.e., roughly five times the State's own damages estimate for PEIA -- and gave the remaining $100,000 to the Consumer Protection Fund of the West Virginia Attorney General's Office."

The private attorneys hired by McGraw also received $250,000 for their work in the settlement.

The feds are claiming $2.7 million of McGraw's 2004 settlement with Purdue Pharma, worth $10 million, should have gone to them, since the lawsuit alleged harm to the state's Medicaid program. A stay was ordered in that case until the Dey issue was resolved.

Hughes has admitted to the state Legislature that the Purdue Pharma money was not given to the state DHHR, which administers the Medicaid program, because the federal DHHS would then be able to claim a share -- "We have arranged a methodology that has prevented the federal government from coming back and seizing money," Hughes said.

Hughes formerly served as general counsel for a national consulting firm that specialized in Medicaid financing. She says the Attorney General's Office will fight Wednesday's decision by requesting a rehearing before the entire roster of Fourth Circuit judges.

"This is a battle and you don't always win every skirmish in the battle," Hughes told MetroNews. "This is not going to stop us."

West Virginia Citizens Against Lawsuit Abuse said Friday that Hughes should be fired.

Rather than give the Purdue Pharma settlement funds to the state agencies named as plaintiffs, McGraw used the money from the settlement on substance abuse programs around the state, as well $500,000 to the University of Charleston for a pharmacy school. Private attorneys received more than $3 million in the settlement.

McGraw argued that there was a fourth plaintiff -- the affected individuals in his state he was representing in his parens patriae capacity.

McGraw, a Democrat, recently announced his intention to seek a sixth term. His last two election victories have come by less than a percentage point.

Stuart also wants acting Gov. Earl Ray Tomblin, a Democrat running in a special election this year, to take action.

"Tomblin needs to call on McGraw to stop this ridiculous action immediately," Stuart said. "Being Governor is about providing leadership and West Virginia deserves a Governor that is not afraid to protect taxpayers' wallets and the reputation of this incredible state."

From Legal Newsline: Reach John O'Brien by e-mail at jobrienwv@gmail.com.

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