Questions arise over McGraw's methods of handling settlement funds

By Chris Dickerson | Feb 24, 2006

Darrell McGraw

Andy McKenzie

CHARLESTON – A state senator says he thinks debate over how Attorney General Darrell McGraw doles out money from his office will end up at the state Supreme Court.

Meanwhile, the state Chamber of Commerce says McGraw's actions have cost the state up to $40 million.

Sen. Andy McKenzie, R-Ohio, and other legislators have taken issue with how McGraw hands out millions of dollars each year from the state's legal settlements, such as the Oxycontin settlement with Purdue Pharma.

The AG's office received a $10 million settlement from a recent lawsuit on behalf the state Department of Health & Human Resources, the Public Employees Insurance Agency and the state Workers' Compensation Commission.

However, none of these dollars from this settlement is being provided to these agencies. McGraw's office has been handing out grants from these settlement dollars to various entities, including $500,000 to the University of Charleston and $200,000 to WVU's Research Corporation.

"My issue has been on the issue of dispersing taxpayer dollars," McKenzie says. "It is my belief that only the legislative body has the ability to appropriate and dispense dollars.

"That's the issue I'm taking. His (McGraw's) argument is that it's not taxpayers' dollars. Their argument is that all of the dollars have been spoken for by a court order. That's really not true."

McKenzie says he has no problems with the agencies that receive money from McGraw's office.

"I'm just taking case on how it's being dispensed," he said. "By law, we're the only body that can disperse money. No executive branch can do that.

"I don't take case with any of the people who have received the money. But illegal is illegal."

Deputy Attorney General Fran Hughes said McKenzie's agenda against the office is "raw politics."

"This money legally does not meet the definition for state revenue," she said. "It doesn't come out of taxpayers' pockets, It's not raised through taxing powers of the state. It's not generated from licensing fees.

"These companies violated the law. And our office held these companies accountable. All of the effort to bring the money here is fully through our office."

McKenzie, who spoke with Hughes about this last week, said her thoughts are that the office and the money are doing so much good, why take issue with it.

"That's not the argument," McKenzie said. "They're getting lost in semantics. I'm trying to go back to the Constitution."

McKenzie said he has no problem with the AG's office – or any state agency, for that matter – coming to the Legislature to request that funds be given to a certain group.

"I'm sure the legislature would be happy to work with them on that," McKenzie said. "If he wants to come to my district and hand out the check, that's fine with me, too."

Hughes said she questions McKenzie's agenda.

"We're supposed to accept the scenario as proposed by Sen. McKenzie that while it doesn't meet the definition for being state revenue, we're supposed to turn over the money and trust they will give it to the victims," she said. "Since the beginning of 2005, we've given $348,000 to his district. Has he brought that kind of money back to his district?

"If he's truly representing his constituents, I think the people of his district should be questioning why he's making this an issue."

McKenzie said he thinks it will end up in the chambers of the state Supreme Court because the issue simply won't go away.

"As long as the Attorney General continues to act in the way he has, he's going to continue to feed the fire," McKenzie said. "If it's not me, someone will challenge it in court."

If it does go to court, Hughes said the AG's office feels as if it's on solid footing.

"We hope that people who really analyze the situation will see this money doesn't meet the definition of what state revenue is," Hughes said.

A national expert on public policy said the state Legislature needs to take action.

"The Legislature needs to step in and say this money belongs to the state," said Ted Frank, resident fellow at the American Enterprise Institute for Public Policy. "The attorney general doesn't get to use it as his own personal sludge fund. This kind of power shouldn't be invested in one individual. That's why we have checks and balances.

"There's a certain unethicalness about this if he's handing out money that could go into the state treasury."

Steve Roberts, president of the West Virginia Chamber of Commerce, says McGraw could have structured the Oxycontin settlement to go to state health care programs, such as Medicaid.

Robert says the state agencies McGraw represented in the suit could use the settlement money, among other uses, to be appropriated over the next several years to obtain an additional $30 million in federal Medicaid funds.

"Attorney General Darrell McGraw's arbitrary decision not to structure these settlement dollars to go to these state agencies is unfathomable," he said. "The lawsuit was filed on behalf of these agencies, but it appears that none of the settlement dollars is going back to them. Since they were the clients, how come they are not having a say in how these settlement funds are used?

"The crying shame in all of this is that these dollars should have been returned to the state's General Fund for lawful appropriation such as to obtain, on a 3-for-1 match, much badly needed federal Medical dollars. That would create nearly $40 million more to cover growing pharmaceutical and other costs in our state's health care system.

"The settlement dollars should have been structured so that they go toward securing federal Medicaid dollars and helping more uninsured and disadvantaged West Virginians with their medical and prescription needs."

Roberts notes that lawmakers last year had to trim the state's Medicaid program by millions of dollars because of federal Medicaid funding allocation changes.

"The demands on West Virginia's health care system are near a breaking point," Roberts said. "And these added funds could make a tremendous difference in the lives of thousands of West Virginians, and help to curb the cost-shift situation."

Recently, Mountain State Blue Cross Blue Shield said that if the present situation in the state does not change soon, more private-sector health care plans will become unaffordable in the coming years.

"As Governor Manchin, lawmakers, business leaders, labor leaders and local government officials struggle to get a handle on the issue of health care in West Virginia, I cannot understand why Attorney General Darrell McGraw is ignoring the neediest West Virginians and is missing an opportunity to help with their health care needs," Roberts said.

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