A dozen state attorneys general have called upon their national organization to return some $280 million obtained in corporate settlements back to the states, saying it is a “key part of any NAAG reform.”
Conservative critics of the National Association of Attorneys General, including Republican AGs, have long questioned how a professional association controlled by its members can keep money from settlements between the states and large corporations. The practice started in the late 1980s when then-New York AG Robert Abrams put part of a price-fixing settlement with milk producers into a NAAG “milk fund” to finance future antitrust investigations.
But it has expanded dramatically, starting with more than $100 million NAAG kept for itself from the 1998 tobacco settlement and more recent infusions, including $15 million of a $573 million settlement of opioid clams against consulting firm McKinsey & Co.
NAAG has made various justifications for keeping a portion of state settlement proceeds at the national organization, including the need to provide what it calls “grants” to fund state investigations. But the organization also has stated the money belongs to its members, possibly meaning it is subject to state laws controlling how money is held, invested and appropriated.
In a letter to Iowa AG Tom Miller, currently NAAG’s president, AGs of Kentucky, Arizona, Florida and nine other states complimented Miller on what they said were proposed reforms to check “the leftward drift” of the organization. The AGs then noted that NAAG most recently reported $280 million in assets, dwarfing its annual operating expenses.
“While NAAG should continue to maintain a reasonable operating budget to meet its mission, we do not understand how that mission requires that NAAG retain over $280 million in assets,” they said in the Sept. 15 letter. “This money belongs to the States.”
Republican AGs have increased their criticism of NAAG as the organization takes in more money and disburses it to individual states in a process they say favors Democratic AGs. Several AGs have refused to pay annual dues to NAAG. Earlier this year, retiring executive director Chris Toth blamed “misperceptions” and unnamed “Beltway publications” for the controversy.
The American Tort Reform Association announced its support of the AGs attempting to end the practice, with president Tiger Joyce saying it would "ensure that (NAAG is) operating in the interest of the broader public, not as a means to foster additional lawsuits for a select group of personal injury lawyers."
NAAG could face difficult legal questions if more dissident states stop paying dues and push on with their demand to distribute the organization’s war chest, including how to divide it up and whether it was invested in a way that complies with individual state laws. NAAG spent a total of $12.1 million on operations in 2021, according to its annual report, with about $2.7 million representing administrative expenses and the rest various programs for AGs and their staffs.
The group took in $3 million in dues and another $2 million from fees and conferences, including fee income from managing the larger restricted portfolio.
The practice of steering money from state settlements to the professional organization “This action would help ensure that they are operating in the interest of the broader public, not as a means to foster additional lawsuits for a select group of personal injury lawyers.”