State has eyes on tobacco account
SPRINGFIELD -- Key lawmakers Monday called on lawyers to release $60 million in tobacco settlement money they have tied up in court, a concession the legislators say could help the state bridge its budget gap and leverage federal money for the poor.
The lawyers, hired by Illinois Atty. Gen. Jim Ryan to win damages from tobacco firms, contend the state owes them more than $900 million in fees and have filed a lien blocking the $60 million in tobacco money from flowing to state coffers while they battle to get the rest.
But legislators say that money, if freed up, would allow Gov. George Ryan to roll back a big portion of cuts he recently announced in health-care services for low-income residents while also capturing federal matching funds to further alleviate the cash crunch.
"Every available dollar not being spent should be used to acquire federal money for Medicaid," said Rep. Jeffrey Schoenberg (D-Evanston), a House Appropriations Committee chairman.
"It's obscene that this money isn't going to stop hospital closures," said Sen. Kirk Dillard (R-Hinsdale), sponsor of a pending measure that seeks to invalidate the attorneys' claim for more of the tobacco money than they've already been awarded.
Schoenberg has petitioned Atty. Gen. Ryan to formally request that the lawyers agree to temporarily lift the lien on the money as an act of goodwill. A spokesman for the attorney general said Ryan would look into it.
But Bob Clifford, the Chicago attorney representing four law firms hired by Ryan in 1996 for the tobacco litigation, said they would not back down. Ryan agreed back then to pay the firms 10 percent of whatever the state collected from the tobacco industry, and Clifford said the state should be forced to stick by its word.
The lien was filed by the firms of Hagens & Berman of Seattle; Barrett Law Offices of Lexington, Miss.; Lieff, Cabraser, Heimman & Bernstein of San Francisco: and Freeborn & Peters of Chicago, where former U.S. Atty. Fred Foreman is a partner.
Illinois was one of 46 states that reached a $206 billion settlement with tobacco companies in 1998 to help cover costs associated with cigarette-related illnesses. Illinois' share of the settlement was $9.1 billion, to be paid in installments over 25 years.
A national arbitration panel later ruled that details of the settlement allowed it to award legal fees without regard to contracts between attorneys and individual states. It found that the four firms were entitled to $121 million for their work on behalf of Illinois, a fraction of the $910 million they claim under terms of the agreement with Ryan.
The panel also concluded that while Hagens & Berman played an important role in the national settlement, the work it and the other law firms did on behalf of Illinois was minimal. "We are faced with a situation in which a large state hired counsel, both local and national, to prosecute its case against the tobacco industry, but relatively little was done to advance the case to trial in Illinois," the panel wrote.
Despite that conclusion, the firms are fighting in court to get more, and they have forced the state to escrow a portion of the settlement proceeds to help pay them off if they prevail.
That money looks attractive to state officials who are grappling with serious budgetary problems right now. To deal with a major budget shortfall earlier this fiscal year, Gov. Ryan slashed the state's budget, and hospitals that serve the poor took such major hits that some of them are worrying about closing.
In a recent letter to Atty. Gen. Ryan, Schoenberg urged him to push for a temporary relaxation of the lien to "alleviate some of the budgetary pressures."
"We need to ease the pressure of these painful cuts to hospitals and health-care providers," Schoenberg said in an interview. "That means we need to be very aggressive in seeking matching federal Medicaid dollars."
The escrow fund could be emptied to attract the federal money and then replenished when the state's financial picture improves, he said.
Dillard agrees, arguing that the lawyers didn't do $121 million worth of work, let alone $910 million. "The lawyers involved in this greed should be ashamed of themselves," Dillard said. "The lawyers would have a better public relations case if they'd actually had to try the matter or taken hundreds of depositions."
A spokesman for Atty. Gen. Ryan said he would like to see the lawyers drop their lawsuit or their lien, but that "we can't force that upon them."
If it's possible to persuade the lawyers to change their minds, Ryan spokesman Dan Curry said, his office will try to do so. "Whatever we can possibly do, we'll do," he said.
Fiscally, the mechanics of Schoenberg's proposal are probably workable, said Steve Schnorf, the director of Gov. Ryan's Bureau of the Budget.
"Normally, when you have a lawsuit and you're afraid they'll fritter it away, you have the money put in escrow in case you win," Schnorf said. "In the case of the State of Illinois, it's not like we're not going to be there in six months or six years. It's not as if there won't be anyone to collect from."
But Clifford said the litigation could be over in a year or less, and the attorneys ought to be able to collect what is owed to them.
"We are a democracy that follows the rule of law," Clifford said. "That applies in Washington and in Springfield," the state capital.
As for the legislators' talk about goodwill, Clifford said: "If they want to talk about good citizens, why aren't these good citizen legislators telling their attorneys to abide by a contract made at arm's length by good lawyers?"