West Virginia Attorney General Darrell McGraw at the opening of a Sesame Street health exhibit he helped to fund.

CHARLESTON, W. Va. - Despite promises and a federal investigation, West Virginia Attorney General Darrell McGraw on Wednesday handed out even more of the settlement funds gained in a 2004 agreement with Purdue Pharma.

McGraw gave $75,000 to the Kanawha Valley Fellowship Home, which will use the money for its drug treatment and education program. He says the program will affect 20 counties.

In February, Chief Deputy Attorney General Fran Hughes promised the Legislature that McGraw's office would stop appropriating the settlement funds on its own, and the federal agency that governs Medicaid recently sent a letter to the state's Bureau for Medical Services seeking information on why it has not been paid its share of the settlement.

"Kanawha Valley Fellowship Home is a public refuge for citizens that need guidance and support to stand on their own two feet. This program is a civil service and reinforces the stability of the community. It provides a long term solution to the rippling effects of alcohol and drug abuse," McGraw said.

KVFH is a transitional home for male recovering alcoholics and drug abusers and woks in conjunction with Prestera Center, the state's Department of Corrections and Highland Hospital with the goal of enabling its residents to return to society sober.

While McGraw's cause may appear noble, some have been questioning his methods.

His settlement with Purdue Pharma provided $10 million over four years. Part of his argument in his lawsuit against the company was that the drug's addiction capabilities put a strain on the state's partially federally funded Medicaid program by creating addicts that needed care.

The federal government is responsible for 73 cents of every dollar the state spends on Medicaid, and Hughes claims the settlement was drawn up to avoid any legal stake the federal government could claim to its share of the money.

Meanhile, McGraw distributed the proceeds to organizations of his choice instead of letting the Legislature appropriate the money. Controversy kicked in when he gave the University of Charleston $500,000 for a pharmacy school.

At a February hearing where the Legislature showed its concern, Hughes said that if the money had been turned over to the state's Department of Health and Human Resources (the agency McGraw claimed was harmed by Purdue Pharma), then the federal government would have been able to retain the portion it contributed through Medicaid -- 73 cents of every dollar.

"We have arranged a methodology that has prevented the federal government from coming back and seizing money," Hughes said.

That statement didn't thrill the federal Centers for Medicaid and Medicare Services, which recently sent a letter to BMS Commissioner Leonard Kelley.

"The State of West Virginia's methodology in arranging its settlement does not change the nature of the settlement nor the (DHHR) Secretary's obligation to account for overpayments," the letter says.

"Please advise CMS of any reason you may offer for which it should not issue a disallowance against the Medicaid program of the State of West Virginia in the amount of the settlement."

So far, there has been no answer. DHHR spokesman John Law did not return messages seeking comment.

"We haven't heard anything yet," CMS spokesperson Mary Kahn said Wednesday.

Since charges were made against Purdue Pharma other than the Medicaid fraud charge, Hughes -- formerly general counsel for Human Services Management, a national consulting firm specializing in Medicaid financing -- recently told the Charleston Daily Mail that the money is West Virginia's.

"There were so many counts and we didn't want to (dedicate) to Medicaid a portion (of the money) because we knew that CMS would attempt to do this," Hughes said, according to the report. "And we are avoiding CMS having any entitlement to this money.

"The money that we recovered, we fashioned the remedy that the money would be used for purposes of fighting substance abuse in our communities."

And a statement like that doesn't sit well with the state's Senate Finance Committee, which was told by Hughes in that February hearing that the Attorney General's office would stop doling out funds itself.

"This is not going to repeat itself in the future," Hughes assured committee chair Sen. Walt Helmick during the Feb. 12 meeting. "We are not interested in being the center of controversy."

But since that promise, McGraw has handed out more than $1 million of the settlement. The bulk of that has gone to day report centers, checkpoints that are alternatives to jail for non-violent offenders.

Also last December, McGraw gave $40,000 from a $1.7 million settlement with the manufacturer of Hytrin, a blood pressure medication, to open a Sesame Street health exhibit at Charleston's Clay Center.

At the opening, McGraw boasted that his office is financially self-sustaining.

"This money is the result of the work-product of the Attorney General's office," McGraw said at the press conference. "Our product always exceeds the cost of the operation of our office."

More News