Scoppe: The scandalette that wasn't supposed to happen

IT'S MORE than a bit ironic that the first little ethics explosion of the 2010 gubernatorial campaign should be over campaign donations that Attorney General Henry McMaster accepted from lawyers he approved to file a multimillion-dollar lawsuit on behalf of the state.

Mr. McMaster, who watched both of his predecessors get into hot water for accepting donations from lawyers they picked to represent the state, had gone to great lengths to try to insulate himself from such problems.

Shortly after taking office in 2003, he started getting calls from attorneys who wanted to chat about bringing what are essentially class-action lawsuits on behalf of the state. This type of arrangement is not uncommon, because both sides stand to benefit if the suit is successful:

Some suits can only be brought in the name of the state, and even when there is no such restriction, suing on behalf of the state rather than trying as an individual attorney to hold together a class-action suit can streamline and speed up the process, and add an unquantifiable heft to the case.

For their part, attorneys general usually don't have the staff or expertise to bring complex civil suits themselves, much less front the expenses that can mount up for years before a settlement or verdict, and so approving "outside counsel" can serve the public interest - as when the state is able to recover millions of dollars that drug companies overcharged Medicaid. (The practice also can lead to attorneys general turning themselves into super-legislatures, using the courts to try to change policy in a way that the people elected to do that sort of thing won't.)

Mr. McMaster put off the attorneys while he examined how other states handled these arrangements, paying particular attention to the pitfalls encountered by Charlie Condon. Mr. McMaster's immediate predecessor had allowed a handful of his political supporters to bring suit against the tobacco companies but set no limits on their potential compensation (they ended up with $82.5 million), even though the heavy lifting on the case already had been done by lawyers who brought successful suits in other states. It took Mr. McMaster 20 months to come up with the first draft of what he calls a model agreement, which severely limits the potential reward for the outside attorneys and puts the attorney general clearly in charge.

The model agreement replaces the industry-standard 25 percent (minimum) contingency fee for winning attorneys with a scale that maxes out at 23 percent and slides down to less than 4 percent on the largest settlements; spells out precisely what expenses attorneys can claim out of any award (for example, airfare is reimbursed based on coach, meals are not reimbursable, and attorneys can't get repaid for overnighting packages without "a justifiable basis"); and requires the attorneys to pay 10 percent of any fee they receive to cover the attorney general's cost for overseeing the case. If the lawyers are fired for cause, they don't even get reimbursed for out-of-pocket expenses.

It was another 22 months before Mr. McMaster signed the first agreement letting loose the lawyers. It authorized a half-dozen attorneys to bring suit against five drug companies for defrauding taxpayers of more than $40 million in prescription drug overcharges though Medicaid and the State Health Plan. Shortly afterwards, he authorized suits against other pharmaceutical companies, including the Eli Lilly case that created the first firestorm of the gubernatorial campaign. (A side note: It was not another campaign that dug up the "controversy," but rather the Lilly attorneys, who cited it in what clearly was a desperate attempt to set back the state's case.)

At the time he signed that first agreement, Mr. McMaster told me he had tried to be careful to anticipate any possible objections, because "the fuel this office runs on is public confidence."

And there's your irony: It took Mr. McMaster more than a week after questions were first raised in the political arena before he stopped focusing on the legality of the donations and realized how politically damaging they could become. I suspect all the work he did trying to avoid this sort of thing contributed to his tin ear.

Finally, the attorney general relented to pressure and gave back not just the donations cited in the lawsuit but a total of more than $32,000 he received (mostly before he even made the appointments) from five attorneys he had authorized to work on this and other cases for the state. He explained - correctly - that he had to be concerned not only with legalities but also with the appearance of impropriety. It was an overdue gesture, but one that others might take note of, particularly those who almost certainly did violate the ethics law.