McGraw, CALA turn to editorials to state cases

By John O'Brien | Sep 24, 2008



CHARLESTON, W.Va. (Legal Newsline) - West Virginia Attorney General Darrell McGraw's controversial 2004 settlement with a pharmaceutical company is the subject of dueling editorials by his office and a legal reform group.

An editorial written by Chief Deputy Attorney General Fran Hughes and Deputy Attorney General Barbara Allen was published in the Charleston Gazette Friday. It was titled, "Time to clear up misconceptions about OxyContin suit."

Citizens Against Lawsuit Abuse submitted its own op-ed to the Gazette on Wednesday as a rebuttal.

"The (U.S.) Chamber of Commerce and Citizens Against Lawsuit Abuse have but one purpose -- to take on any elected officials who regulate Chamber/CALA members, and to replace them with individuals who will not enforce consumer credit and protection laws," McGraw's piece says.

"Your readers should consider this fact in determining the credibility of Chamber/CALA spokespersons and their submissions to your newspaper."

Hughes has maintained that CALA is run by out-of-state business interests like the U.S. Chamber, owner of Legal Newsline, but CALA executive director Steve Cohen says it is a non-profit watchdog organization with more than 30,000 members statewide.

"Clearly it is the Attorney General's office... that suffers from a credibility standpoint," Cohen said. "Nearly every statement that office has made regarding the OxyContin settlement is refuted by one source or another."

McGraw settled his 2001 suit against Purdue Pharma, the manufacturer of prescription painkiller OxyContin, in 2004. The settlement was worth $10 million, with more than $3 million going to the outside counsel McGraw hired to represent the State.

The rest of the money has been given by McGraw, a Democrat running for re-election in November against Charleston attorney Dan Greear, to substance abuse organizations, angering some members of the state Legislature who feel only they should be able to appropriate state funds.

Hughes admitted before the Legislature that the settlement was structured in a way that prevented the federal government from getting a share. Nearly 75 cents of every dollar the State spends on Medicaid, one of the programs allegedly affected by OxyContin, is provided by the federal government.

The three state agencies named as plaintiffs never received a share of the settlement, and the federal Centers for Medicaid and Medicare Services is planning to withhold funds from its next Medicaid appropriation to the State.

The editorial written by McGraw's staff said it would "set the record straight." A number of issues are disputed by both sides in the dueling editorials:

-Who was represented in the lawsuit?

Hughes wrote that there were four plaintiffs in the suit, not three. Listed on the complaint were the state's Department of Health and Human Resources (which oversees the Medicaid program), the Public Employees Insurance Agency and Workers' Compensation.

She said the fourth is, "the group of West Virginia citizens who became addicted to OxyContin as a result of its manufacturer's criminal conduct. This plaintiff proved to have the vast majority of damages. The other three plaintiffs' share of the established damages were minimal in comparison. "

Cohen countered by noting that the McDowell County judge forced McGraw to re-file his complaint with the three agencies listed as plaintiffs because the original claimed millions of dollars were lost by the agencies.

"(T)he complaint that (Hughes) signed stated that the agencies' losses were at least $6 million," Cohen said.

-Who benefited from the settlement?

Hughes said the Attorney General's office did not keep a cent of the settlement and did not use it to pay the outside counsel it hired.

"The court determined the amount of the fee and ordered Purdue Pharma to pay it," Hughes wrote. "Instead, settlement money was used to fund projects for the benefit of the main victims in the OxyContin case, namely, people who became addicted to OxyContin. Every penny of the OxyContin money has been spent in accordance with the court order."

Among those given funds are day report centers and the University of Charleston, which was given $500,000 for a new pharmacy school.

"For every $1 spent on a day report center, a county saves $7 in regional jail costs," Hughes wrote. "Money was provided to fund a pharmacy school at the University of Charleston. Pharmacists are the main line of defense against doctor shopping for pain medication."

Cohen did not focus so much as who benefited, but who he says was harmed.

"The State Journal quoted Tom Susman, the head of PEIA at the time of the settlement, that he believed that 'financial losses incurred by PEIA members should go back to PEIA,'" Cohen wrote.

"And Greg Burton, who headed Workers Compensation at the time, said 'the attorney general, who was representing us in that lawsuit, did not check with us on the final agreement. We found out about it after the fact... And we anticipated getting some money back.'"

Cohen added that the CMS originally planned a $4.1 million withhold, but a judge has ruled that figure is too high. Negotiations for a settlement are still ongoing.

"In order to show that the state owes the federal government less of the $10 million, (McGraw) would have to argue that PEIA and Workers compensation are due more - but he refuses to acknowledge these agencies are entitled to anything," Cohen wrote.

"In her op-ed, Hughes has implicitly acknowledged the validity of the federal government's claim, and says that the Attorney General's office has set aside some funds to reimburse the state for its loss in Medicaid money. How much and from what account?

"If the federal Medicaid office is entitled to part of the OxyContin settlement - when its claim is only secondary - PEIA and Workers' Compensation should be owed money as well. Has McGraw set aside funds to pay their claims against his office?"

Hughes wrote that the DHHR was paid $250,000 from the settlement. Cohen contends that McGraw did spend settlement funds on himself, purchasing trinkets with his name on them. The trinkets are part of McGraw's effort to publicize his Consumer Protection Division.

-Why were the firms that were chosen to represent the State picked?

Hughes said by hiring outside firms on a contingency basis, the State can "reap all the benefits of litigation while avoiding any of the risks." The firms hired were DiTrapano, Barrett and DiPiero; Cohen, Milstein, Hausfield and Toll; Law offices of William Druckman; and David G. Brumfield.

"Attorneys fees are paid by the individuals or companies who break the law, not taxpayers," Hughes said. "Attorney General McGraw does not determine the amount attorneys are to receive. This amount is determined by the court."

Hughes also said some of the outside counsel that has been hired by McGraw did not contribute to his campaign, and that contributions to attorney general races are not large because of contribution limits for individuals.

"The big money in political campaigns comes from business interests and 527s, which always support pro-business candidates designated as 'reformers' by the Chamber of Commerce," Hughes said.

She adds that firms are selected if they are experienced in the appropriate area, have access to at least $500,000 and have "the technical and infrastructure support to handle litigation where a voluminous amount of documents are generated."

Cohen said Hughes is downplaying the frequency of McGraw's lucrative no-bid contracts, and that three of the four firms that worked on the Purdue Pharma case accounted for nearly one-third of McGraw's large contributions in 2004.

"The Attorney General's office defends its questionable hiring practices by arguing that the State is never required to pay attorneys' fees or expenses as a result of Darrell McGraw's outside counsel appointments," Cohen wrote.

"That statement is not only false, but it is directly contradicted by Chief Deputy Hughes' own appearance during the OxyContin settlement hearing, where she asked that 'the court order...not preclude us from paying the attorneys' fees out of that money that's provided to the State.'

"In fact, Hughes' request was granted - more than $3.3 million of the State's total $10 million OxyContin settlement went to McGraw's appointed outside counsel."

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

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