Published: August 02, 2008 12:39 am      

Group questions legal arrangements following Visa/MasterCard settlement

FAIRMONT — Attorney General Darrell McGraw recently settled a lawsuit with Visa and MasterCard, but a nonprofit citizen group claims there are some problems with the legal arrangements.

The West Virginia Office of the Attorney General filed a case in 2003 against MasterCard International Inc. and Visa U.S.A. Inc. under West Virginia’s antitrust and consumer protection laws. Approximately $11.6 million in settlement money from the lawsuit is funding the upcoming sales tax holiday — from Sept. 1 to 7 — for West Virginians.

McGraw’s office wanted Visa and MasterCard, which deny the allegations, to provide some sort of relief to consumers for their conduct. Although the office advocated for broad-based tax relief on all products, the West Virginia Legislature passed a bill that restricted the tax holiday to Energy Star items.

West Virginia Citizens Against Lawsuit Abuse (WV CALA) was founded about 12 years ago and has about 33,000 grassroots members across the state. There are 1,200 members in Marion County alone.

“The mission of CALA is to let our leaders know that unless we change the legal climate in the state we will not attract jobs,” Steve Cohen, executive director of the group, said. “What employer would want to create jobs in a state where the attorney general appears to be acting outside the law?”

According to Cohen, the two West Virginia firms that McGraw named as deputies in filing the lawsuit happen to be campaign contributors, which has been a pattern for the attorney general’s appointments. The law firms selected were Bucci Bailey & Javins in Charleston and Wexler Toriseva Wallace LLP in Wheeling.

Cohen said the lawyers contributed to McGraw’s re-election campaign and will reap the benefits in terms of legal fees.

“It gives the appearance of a pay-to-play arrangement in the attorney general’s office,” he said. “It just has the appearance of questionable ethics.”

Chief Deputy Attorney General Frances Hughes said the two particular law firms were chosen because of their connection with a national team that handled a merchant case. In this lawsuit, major retailers sued MasterCard and Visa, which resulted in a huge settlement of billions of dollars.

“They had access to information and understand the theory of the case,” Hughes said.

She said the attorney general’s office has certain requirements for appointing lawyers, such as consumer protection or antitrust experience. In the past, firms have been appointed that were not campaign contributors, “so obviously it has not been a criteria,” Hughes said.

“The attorney general’s race has traditionally not been an expensive race,” she said. “You’re going to have lawyers donating, but you look (at) how much the attorney’s race (has) been in the last 16 years, then you will see the fallacy of that argument. It’s just not an expensive race.”

WV CALA feels that these lawyers didn’t need to be hired in the first place, because taxpayers already give McGraw a legal staff big enough to file a lawsuit, Cohen said.

Hughes said the attorney general has 70 lawyers, and most of them are assigned to state agencies. The office receives over 10,000 consumer protection complaints a year and has a very small staff dedicated specifically to this work. It doesn’t have the luxury to devote half of its staff to one case, she said.

Cohen pointed out that other public offices have to follow a competitive bidding process to determine what vendors are best qualified to provide professional services to the state. This makes it so there’s some accountability, he said.

“The fact that (McGraw) does appoint outside counsel or so-called deputy attorneys general, he does this without any competitive bidding,” Cohen said.

Hughes said state purchasing regulations do not require competitive bidding for legal services, and most state agencies do not bid legal services.

For several years, members of WV CALA have been calling on the Legislature to pass a sunshine law that would explain why these legal appointments are made, Cohen said.

“Right now, it just looks like cronyism,” he said.

“They’re asking for transparency when we’re a public agency,” Hughes said. “There’s not anything that we do that’s not open to the public looking at it.”

Under the settlement, McGraw’s attorneys will share about $3.9 million in legal fees, and a court judge will decide how to distribute the money among them.

“We have found a way to enforce consumer laws that does not cost taxpayers a penny,” Hughes said. “The attorneys’ fees aren’t paid with taxpayers’ money. They’re actually paid by the companies that violate the law. We don’t determine the amount of the fee — the court does.”

“This is public money,” Cohen said. “It could go for restitution of state agencies that were allegedly harmed in the lawsuit. A third of the money of these lawsuits is going into the pockets of McGraw’s friends. It should go to the citizens of West Virginia that have allegedly been harmed.”

E-mail Jessica Legge at jlegge@timeswv.com.