CHARLESTON – Virginia's former attorney general has written an opinion piece in a Washington-based legal newspaper that criticizes the way West Virginia AG Darrell McGraw's office appoints outside attorneys as special assistant AGs.
In the July 10 issue of Legal Times, Jerry Kilgore wrote an article titled "Outsourcing the State AG" in which he writes that he worries that "too much authority is being turned over to outside lawyers" by state AGs.
Kilgore says the trend of AGs using private attorneys "increasingly threatens the independence of the attorney general and creates a conflict between public benefit and private profit."
He also says this work "should be done by the attorney general's office."
"I am concerned that these relationships with plaintiffs lawyers may raise serious ethical questions, involve the transfer of huge sums of money, and undermine the integrity and independence the attorney general's office," Kilgore writes. "And I fear that when elected officials take contributions from those who benefit under these litigation arrangements, the public's trust in our system of government is further eroded."
Kilgore, a Republican, was Virginia's AG from 2002 to 2005. He unsuccessfully ran for governor in 2005 as well, losing to Lt. Gov. Tim Kaine.
Kilgore uses McGraw as one of three examples in the article.
"West Virginia's attorney general has appointed local plaintiffs lawyers to the post of 'special assistant attorneys general' to represent the state in litigation," he writes. "These special assistants are often hands-selected by the attorney general without undergoing a competitive bidding process."
Just last month, two drug companies petitioned the state Supreme Court about whether McGraw's office has the authority to hire private lawyers.
And in April, McGraw's office terminated the January appointments of Weirton attorneys M. Eric Frankovitch and Michael Simon as special assistant Attorneys General in a case they already were working as private attorneys. Their terminations came after Cooper Wiring Devices and Leviton Manufacturing both filed complaints in March stating that subpoenas issued by Frankovitch and Simon in February requesting safety testing records regarding an electrical outlet the companies produced were without power.
Cooper and Leviton said McGraw overstepped his constitutional boundaries with the appointment of outside attorneys. Frankovitch and Simon were working on a civil case in Marshall County, and they were appointed by McGraw to act on behalf of the Attorney General's office.
In this year's legislative session, a bill that would have tightened the belt on the state Attorney General office's contracts with outside attorneys died in committee.
Fran Hughes, McGraw's chief deputy attorney general, wasn't happy with Kilgore's comments.
"We're obviously dismayed that a former attorney general who ran for higher office would then proceed to criticize his fellow attorneys general," she said Thursday. "The question of how effective he was was pretty much answered by the voters of Virginia.
"Of course, he's of a different political party. And I personally worked with him on the pharmaceutical task force, and he wouldn't file a lawuist no matter how egregious the conduct."
Hughes also defended the practice of using outside counsel.
"We feel very comfortable with the policy our state has pursued," she said. "We've found a way for Darrell McGraw to fulfill his role as the constitutionally elected chief legal officer of the state. Some of these cases cost $500,000 to millions of dollars to try. The state Legislature isn't going to say, 'Here's 500,000. See what you can do.'"
Hughes said the use of outside counsel has helped McGraw's office balance the state budget.
"What we do (in those cases) doesn't cost the taxpayers one red cent," she said. "And we've paid down the workers' comp debt. We've established the physicians' mutual fund. We've helped balance the state budget. And we're still being criticized.
"Why are the people criticizing us, and who are these people? What's their agenda? It's probably the people we're suing. They know if we don't have money to try lawsuits, that will shut us down.
"We have found a way to fulfill the attorney general's role, and the people have spoken. They elected Darrell McGraw as attorney general. And they've certainly got their money's worth from him."
Hughes also discounted the notion of putting outside legal services up for bid.
"Think about it," she said. "Going in, we don't know how long it's going last, scope of work, the amount of time involved. It just doesn't lend itself to the competitive bidding process. There are no defined terms."
Kilgore also says McGraw's office dips from a small pool of outside attorneys when they seek help.
"Of the more than 4,000 trial lawyers in West Virginia, the attorney general works with fewer than 20 select lawyers," Kilgore wrote in Legal Times. "The settlements obtained in these cases often have been structured to pay the outside attorneys first, before giving any money to the taxpayer-funded state agencies that are the actual plaintiffs."
For more than 25 years, the award-winning weekly Legal Times has written about Washington's law and lobbying firms, interest groups, courthouses, and federal government.
Kilgore says the practice of AGs using outside counsel isn't a new phenomenon. But he says a new trend emerged in the mid-1990s when more than 40 states – including West Virginia – "signed up a handful of personal injury firms to contingent fee contracts to pursue litigation against the tobacco industry.
Those settlements, of course, resulted in hundreds of millions in fees for the private lawyers involved.
"It also pioneered a new model for state-sponsored litigation that combines the prosecutorial power of the government with private lawyers aggressively pursuing litigation that has the potential to generate hundreds of millions – or billions – of dollars in contingent fees," Kilgore says.
Kilgore cites a 1935 U.S. Supreme Court decision (Berger v. United States) that says an attorney representing the state "is the representative not of an ordinary party to a controversy, but of a sovereign whose obligation to govern impartially is as compelling as its obligation to govern at all."
He says the use of outside counsel introduces a "powerful private-profit motive into state-sponsored litigation."
"With few standards in place to regulate these contingent fee arrangements, it's a real question whether public justice or private profit is the principal interest of outside counsel who are encouraging the attorneys general to bring this litigation," Kilgore writes.
Kilgore also blasts supporters of this practice who argue that it is risk-free to the states. In other words, if the case isn't won, the AG owes the private lawyers nothing. And if the case is won, the lawyers' fees come from the recovery at no cost to the state.
"This justification is flawed," Kilgore says. "Generally, civil litigation initiated by the state is designed to recover funds to which taxpayer-funded agencies and programs are legally entitled. A fee arrangement that diverts up one-third of any settlement or recovery to pay private counsel may not be the most efficient for the government agencies and programs that serve a state's citizens."
Kilgore also writes that such counsel typically do not maintain records of time spent on the state's matter, so the state has little way of knowing the market value of services or f an hourly arrangement could have returned money more to the state.
He also writes that there are few standards to govern how these contingent fee contracts are awarded.
"Unlike state contracts to build a road or bridge, which are typically awarded to qualified firms through an open and competitive bidding process, contingent fee contracts with potential values in excess of $100 million have been awarded without competitive bidding and in secret."
Kilgore, who know is a partner in the Richmond office of Williams Mullen, writes that a number of states have reformed laws.
"These reforms do not ban the practice of outside counsel on a contingent fee basis," he writes. "Instead, they bring greater transparency, accountability and standards to the practice of retaining plaintiffs lawyers with no-bid, contingent fee contracts."
Kilgore says such changes were made law in Virginia at his request when he was AG, and similar laws have been enacted in Texas, Kansas, Colorado and North Dakota.
"Establishing clear firewalls in every state between the public duties of the attorney general's office and the for-profit agenda of private plaintiffs attorneys would go far in maintaining the independence and dignity of the office," Kilgore writes. "It would help prevent even the appearance of impropriety.
"The office of attorney general should epitomize the highest standards in legal conduct. The office and the citizens it represents deserve nothing less."
A statewide watchdog group praised Kilgore's op-ed piece.
"Many West Virginians have known for some time that something didn't smell quite right in the attorney general's office," said Steve Cohen, executive director of West Virginia Citizens Against Lawsuit Abuse. "Now, others are taking notice.
"WV CALA echoes Kilgore's call for reforms to our attorney general's office by urging the state Legislature to pass a sunshine law to bring more transparency, greater accountability and higher standards to the use of outside counsel who represents the state. We hope the state Legislature will act to reign in the attorney general's office and help restore ethics and fairness to one of the state's highest offices."
Cohen also mentioned the Purdue Pharma settlement of a lawsuit over alleged misrepresentation in marketing OxyContin pills.
When Purdue Pharma settled McGraw's suit for $10 million in 2004, the outside attorneys -- Charleston attorneys David Brumfield and William Druckman, Charleston law firm DiTrapano, Barrett & DiPiero and Washington-based firm Taxpayers Cohen Milstein Hausfeld and Toll -- received a third of the settlement $3,333,333.33.
"Everything that didn't go to McGraw's personal injury lawyer pals has essentially been converted to a political slush fund for the attorney general," Cohen said.