WASHINGTON -- A tort reform group says, in a new report, that some plaintiffs attorneys have used their relationships with state attorneys general as "a litigious cash cow."
The American Tort Reform Association study -- titled "Beyond Reproach? Fostering Integrity and Public Trust in the Offices of State Attorneys General" -- says it is no coincidence that some of the biggest contributors to attorney general campaigns end up being awarded state contracts.
The report focuses on six states -- Alabama, Louisiana, Mississippi, New Mexico, New York and West Virginia.
"In certain states, attorneys general relationships with private attorneys appear to be highly questionable or unethical, but may be nearly impossible to trace due to state campaign finance laws," ATRA president Sherman Joyce said.
"In other states, the record of past attorney general practices contrasts with recent promises of ethics reform by state leaders - creating a cautionary tale of 'practice versus promise' that voters and good-government advocates should closely watch."
ATRA researched contributions made by specific attorneys, their spouses and political action committees associated with their law firms since 2005. Current New York Attorney General Andrew Cuomo, who was elected governor earlier this month, drew the most from plaintiffs firm.
The report starts in Alabama, where Attorney General Troy King hired plaintiffs attorney Jere Beasley, a former lieutenant governor who filled in as governor when George Wallace was shot in 1972, to sue more than 70 pharmaceutical companies.
There have been multiple settlements, leading to millions of dollars in fees for the firms Beasley Allen and Hand Arendall.
The report says Beasley Allen gave $765,900 to a group of political action committees. Those same PACs gave $240,000 to King's campaign.
"Without a doubt, other funds found their way to King through other PACs," the report says. "As noted above, PAC-to-PAC and candidate-to-candidate transfers create a tangled web of money transfers that are virtually untraceable."
An August report by three groups, including the National Institute on Money in State Politics, chronicled Beasley Allen's spending in a state supreme court race.
Last year, the state Supreme Court overturned $274 million in verdicts against three companies sued by King and Beasley. King lost his re-election bid, faltering in the Republican primary, and is in his last weeks on the job.
The report next probes Louisiana, where the attorney general is not allowed to hire private attorneys on a contingency fee. Legislation that would have allowed it died earlier this year.
Attorney General Buddy Caldwell hired six firms to handle state claims involving the BP oil spill in the spring. The report says those firms have given Caldwell more than $145,000 in campaign contributions since 2006.
"Presumably, these lawyers are 'waiting in the wings' to reap windfall profits if the Louisiana legislature reverses course by changing the law," the report says. "Either way, it is likely that they will be paid millions as a result of being hired by Caldwell.
"The state of Alaska, which did not use contingency fee lawyer agreements, paid approximately $63 million (inflation-adjusted) for Exxon Valdez legal actions."
Law firms representing Louisiana in an action against Eli Lilly & Co. also earned $4 million in a $24 million April settlement with the company.
The lawyers hired by former Attorney General Charles Foti to pursue the suit were: Morrow, Morrow, Ryan & Bassett of Opelousas, La., which donated $7,500 to Foti from 2003-07, when he lost his bid for re-election, then donated $5,000 to Caldwell; Kenneth DeJean of Lafayette, La., who donated $5,500 to Foti before giving $1,000 to Caldwell; and Robert Salim of Natchitoches, La., who donated $1,000 to Caldwell.
Mississippi Attorney General Jim Hood has seen several of his largest contributors run afoul of the law. Dickie Scruggs and Joey Langston are both in jail for judicial bribery schemes.
In the five years following Hood's election in 2003, he hired at least 27 law firms to file at least 20 lawsuits, the report says. Those firms and their attorneys gave Hood $543,000 for his campaigns.
One of those firms is Bernstein Litowitz Berger & Grossman, which was selected to represent a state retirement fund in a lawsuit against Delphi Corp. that resulted in a $333 million settlement and $40 million in attorneys fees.
The firm has given $149,056 to Hood since 2005. Hood also received $75,000 from Houston-based Bailey Perrin Bailey, which he chose to represent the State against Eli Lilly.
New Mexico Attorney General Gary King also received contributions from the attorneys chosen to handle his state's Lilly case, which was originally filed by his predecessor.
More than $5 million went to attorneys in the settlement. One of the firms was Heard Robins Cloud Black & Lubel, which, along with its attorneys, has given King $55,000.
"As The Wall Street Journal observed, New Mexico's culture of cozy relationships between public officials and campaign contributors who stand to profit millions from state contracts could use quite a bit of 'sunshine disinfectant,'" the report says.
The report goes back 13 years when discussing New York. That's when then-Attorney General Dennis Vacco filed a lawsuit against the tobacco industry, hiring three private firms that "had no prior experience with tobacco litigation," the report says.
Those firms received more than $80 million in fees, and gave $250,000 to state politicians before the settlement and another $200,000 after.
New York attorney generals have the power of the Martin Act, which allows them to subpoena any document from anyone doing business in the state, keep an investigation secret or make it public and to file either civil or criminal charges at any time, the report says.
It adds that former Attorney General Eliot Spitzer used that power to lead a crusade against Wall Street investment firms.
"While Spitzer refused to accept campaign contributions from organizations with matters that were pending before the attorney general's office, his former campaign manager once stated that the prohibition did not apply to plaintiff lawyer contributions because 'every law firm does work with the attorney general's office,'" the report says.
Lastly, the report tackles West Virginia, where longtime Attorney General Darrell McGraw has been a constant target of ATRA.
"West Virginia has long been known as fertile ground for the plaintiffs' bar, in part because of Attorney General Darrell McGraw," the report says.
"McGraw's campaign contributors – and at least one relative – have been rewarded with work filing lawsuits against the state. Moreover, McGraw's record over the years and some of his actions as a public official and as an attorney might best be described as 'ethically challenged.'"
McGraw hired Cook Hall & Lampros, which had given him $20,000, for a bid-rigging lawsuit against Bank of America and 24 co-defendants. The managing partner of the firm is Edward Shuff Cook, the nephew by marriage of McGraw's brother Warren. Warren is a former state supreme court justice.
McGraw has also frequently used the firm DiTrapano, Barrett & DiPiero for state work. That firm and its employees and their relatives gave $37,800 to McGraw between 2004-2008.
The DiTrapano firm was part of McGraw's most controversial case. He has been frequently criticized for how his office handled a $10 million settlement with Purdue Pharma, maker of OxyContin, in 2004.
Rather than giving the settlement funds to the state agencies named as plaintiffs, the settlement allowed McGraw to disperse the funds as he saw fit. He gave much of the settlement to day report centers and gave the University of Charleston $500,000 for a pharmacy school.
In retaliation, the federal government is withholding nearly $3 million from its Medicaid appropriation to the state because that's what it feels it was owed in the settlement.
The lawsuit alleged harm to the state's Medicaid program, which is largely federally funded. Private attorneys made more than $3 million in the settlement.
"West Virginia is a state in need of better public and legislative oversight of lawsuits by the attorney general and private counsel," the report says.
"The law firms selected by Attorney General McGraw to file state suits have often been generous campaign contributors, suggesting a 'pay-to-play' process; his actions as an attorney call into question his adherence to the Rules of Professional Conduct; settlement funds are withheld from the attorney general's plaintiffs and used as an apparent 'slush fund' where his own office determines who receives the grants from the settlement, and the state's Medicaid funding is reduced as a result of his actions."
ATRA has championed its own proposed code of conduct for state attorneys general that involves disclosing the methods used in choosing who receives state contracts.
More about the code can be found at the end of the report, which is located online here.
From Legal Newsline: Reach John O'Brien by e-mail at email@example.com.