MORGANTOWN, W. Va. - It's a little surprising to Hiram Lewis to see West Virginia Attorney General Darrell McGraw involved in a controversy like the current spat with a federal Medicaid agency that may cost the state $4.1 million.

Likely the Republican challenger to McGraw in 2008, Lewis isn't shocked by what he feels is an abuse of power in the office, though. He just didn't expect McGraw to be called on it.

"Generally, he's been getting away with things like this for the past 12 years," said Lewis, a Morgantown attorney who lost the closest Attorney General's race in state history to McGraw in 2004. "I'm surprised one of the settlements actually got questioned."

That settlement is McGraw's 2004 agreement with Purdue Pharma, maker of the prescription painkiller OxyContin. McGraw's office represented three state agencies that claimed they were harmed by Purdue Pharma misrepresenting the drug's addiction capabilities.

Specifically, the state Department of Health and Human Resources claimed the creation of OxyContin addicts put a strain on the state's Medicaid budget, of which nearly 75 cents of every dollar spent is supplied by the federal government.

But McGraw structured the $10 million settlement in a way that stipulated his office keep all of it. Had the DHHR received its share, the federal government would have retained its portion -- $4.1 million, according to calculations.

Recently, the federal Centers for Medicaid and Medicare Services informed the State that it will withhold that amount from its next Medicaid funding. The State plans to appeal, though critics like state Sen. Vic Sprouse, R-Kanawha, feel the State will lose, creating a hole in the Medicaid budget.

"It's sad that it's the actual taxpayers of West Virginia, and in this case the lower income individuals, that will lose out on the benefits," said Lewis, a McDowell County native, former Army Ranger and JAG officer in the Army National Guard. "It's sad for everyone involved if they have to lose any benefits because of the actions of state agencies."

McGraw and Chief Deputy Attorney General Fran Hughes have maintained the legality of the settlement. Hughes formerly worked as counsel for a national consulting firm that specialized in Medicaid financing.

McGraw has appropriated money from the settlement to substance abuse programs, a practice that ticked off the state's Legislature. Lawmakers say it is their job to figure out how to spend the State's funds.

"We have lots of critics, and it's difficult to address their issues," McGraw said while presenting $10,000 from the settlement to the Charleston Black Ministerial Alliance. "What do you say? We're giving these groups this money per court order."

Lewis feels McGraw was more worried with passing out checks and making headlines when he structured the settlement.

"It's a no-brainer that to keep political power in this state, name recognition is the key," Lewis said. "The more trinkets you can buy, the more checks you can distribute and the more pictures you have in the paper, the better you stand to gain politically.

"These settlements are specifically designed to create a slush fund he can distribute at will. That's not America. That's not constitutional."

Lewis feels that access puts him at a monetary disadvantage. McGraw defeated Lewis by 5,000 votes in 2004, though Lewis spent only $70,000 on his campaign. He claims McGraw spent more than $1 million from lawsuit settlements to promote his name in areas around the state.

He agreed with the assessments of Sprouse and fellow state Sen. Andy McKenzie, R-Ohio, that an investigation of McGraw's office is needed.

"Absolutely, but I don't know who's going to investigate," Lewis said. "In other states, the Attorney General's office is the one investigating fraud and corruption. You can't depend on our AG to investigate fraud and corruption, especially when he's the one involved in it."

Another problem Lewis has with the settlement regards McGraw's tactic of hiring private practice attorneys to help represent the state, calling them special assistant attorneys general. Trial lawyers earned nearly $3.4 million in the settlement.

It's a practice Lewis said he will end if elected. McGraw claims it is necessary because of the size of his staff.

"There's a big problem in that there is an opportunity for abuse," Lewis has said. "I believe that it is a de facto violation of campaign finance law. A lot of the special assistant attorneys general are also contributing to the (former West Virginia Trial Lawyers Association), or whatever it is called. I think they spent over $1 million dollars against me last time around.

"That is a definite abuse of the legal system, the campaign finance system, and it's basically bribery at the highest levels of state government."

Lewis called the settlement "a perfect example" of everything he feels has gone wrong in the office during McGraw's four terms. Last week, Sprouse blamed the Legislature for turning a blind eye.

"Fortunately, a federal agency was willing to look into this issue," Lewis said. "Basically, he's gotten away with this for 12 years -- the pandering to the trial lawyer buddies to head cases with him, the cushy settlements to fill up his slush fund.

"We don't have public financing of campaigns in the State of West Virginia and we shouldn't have it. "He's found a way, a loophole, a method to get around that and fund his political campaign on the public's dime."

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