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CALA: W.Va. deputy AG should be fired over Medicaid dispute

By John O'Brien | Jul 8, 2011



CHARLESTON, W.Va. (Legal Newsline) - A West Virginia legal reform group says Attorney General Darrell McGraw's top deputy should be fired for orchestrating two settlements that may lead to the federal government withholding Medicaid funds.

Two days after a federal appeals court ruled McGraw should have given more than $400,000 from a 2004 settlement to the federal government, West Virginia Citizens Against Lawsuit Abuse says Chief Deputy Attorney General Fran Hughes should take the blame.

"Clearly, the Attorney General's office did not come up with a lawful method of preventing the federal government from seeking reimbursement," CALA executive director Richie Heath said.

"To the contrary, the Attorney General's scheme was unambiguously improper and has caused unnecessary waste of taxpayer resources. Chief Deputy Fran Hughes should be fired for authorizing such a ridiculous scam."

The U.S. Court of Appeals for the Fourth Circuit ruled Wednesday 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 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.

"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."

CALA says federal prosecutors should investigate any potential Medicaid/Medicare fraud, and that acting Gov. Earl Ray Tomblin should hold McGraw's office accountable for any lost Medicaid funds and taxpayer dollars spent defending the settlements.

"For years now, McGraw's office has perpetrated a fraud on the Medicaid program, all so his office could keep millions of dollars in lawsuit settlements to itself," Heath said. "It's finally time for state lawmakers and the public to say enough is enough."

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.

"We find no merit in this argument," the Departmental Appeals Board wrote.

"It is not evident from the record that the State was, at the time of settlement, seeking damages on behalf of individual consumers."

McGraw recently announced his intention to run for a sixth term.

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