LITTLE ROCK — Criticism of how he spends lawsuit settlement funds should end since the Legislature chose during this year’s legislative session not to change who decides where the money goes, Attorney General Dustin McDaniel said.
Money to fund a new cyber-crime lab in the attorney general’s office came without prior legislative oversight, a move the office said is legal, but at least one lawmaker has objected to spending settlement money without legislative authorization.
Computers and other equipment were purchased for the lab with funds from a February 2010 settlement of a lawsuit against drug manufacturer Eli Lilly, McDaniel spokesman Aaron Sadler said.The $18.5 million settlement was over the manufacturer’s marketing of the anti-psychotic drug Zyprexa for uses not approved by the U.S. Food and Drug Administration.
Sadler said $500,000 of it was used for the lab equipment. Other costs were covered by the office’s existing budget. The settlement included $15 million for the state Medicaid Trust Fund.
McDaniel has used money from other settlements to contribute to the Arkansas Fallen Firefighters Memorial fund, programs to help children, and for causes that earlier attorneys general started. Those attorneys general also did it without legislative authorization.
In April he gave $141,666 each to the Arkansas Foodbank, Arkansas Rice Depot and Arkansas Hunger Relief Alliance after receiving a roughly $425,000 settlement from The Dannon Co. Inc., maker of Activia and DanActive yogurts, in a lawsuit.
Article 5, Section 29 of the Arkansas Constitution provides that funds in the Arkansas treasury may only be withdrawn in accordance with an appropriation by the Legislature. Sadler has cited a 1949 state Supreme Court case, Gipson v. Ingram, as why the attorney general has the authority to disburse the money without legislative oversight.
In the case, the court held that “cash funds” not deposited into the treasury, such as money from a lawsuit settlement, may be spent even when there is no appropriation by the Legislature to authorize the expenditure.
“Cash funds” consist of money that various parts of government generate out of their own activities, such as, in McDaniel’s case, a court settlement, rather than from taxes.
In the 1949 decision, the court held that because the money never makes it to the treasury, the provisions that restrict taking money from the treasury without an appropriation don’t apply.
Lt. Gov. Mark Darr recently questioned the ethics of not running the money through the treasury.
“If I were to do that it would look like I was trying to buy some votes,” he said about McDaniel’s donation to the food bank in April.
A bill filed by Rep. Jane English, R-North Little Rock, would have required that any money received by a constitutional office be subject to appropriation by the Legislature. She withdrew House Bill 1046 and lawmakers have plans to study the topic this summer.
“I’m not finished. I just think it’s not good government. It’s like we’ve set up a separate government in the attorney general’s office. There is no other state agency that has that sort of power,” English said. “In my mind, if you are going to use state resources to enter into these suits, the money ought to go back to the people.”
English, a Republican, said McDaniel, a Democrat, has chosen worthwhile causes to support, but she said her concern is whether it is an appropriate way to decide how to use state money.
“It’s almost like, whose money is this?” English said.
McDaniel said the Legislature “considered changing the practice this session and decided not to. I was elected to bring litigation, exercise my best judgment, follow court orders, and try to be a good steward of the people’s money, and I think that is exactly what we’ve done.
“We’ve run an extraordinarily ethical shop. We have handled our business very appropriately, and, frankly, have heard no criticisms at all until recently and, frankly, I haven’t found those to be very wellfounded.”
Lawyer Dan Greenberg of Little Rock, president of the Advance Arkansas Institute, wrote on his website Friday that McDaniel illegally used public funds to “benefit private interest” and assumed “extra-constitutional spending powers his office does not have” by spending the cashfund.
Greenberg is a former House member.
Greenberg wrote that Mc-Daniel cited a legal doctrine known as “cy pres,” which holds that settlement money should go toward resolving failings uncovered in the lawsuit if it cannot go directly to people who were harmed.
Greenberg said the money should have gone to a group similar to the plaintiffs or to a charity that would benefit them.
“The whole theory of the class action was that people with mental illness were harmed,” he wrote. “But taking a chunk of that money to build a new ‘cybercrimes’ law enforcement division ... betrays the principles of both the law and good government.”
McDaniel’s office did not comment on what Greenberg wrote, but referred the Arkansas Democrat-Gazetteto a deputy attorney general's testimony to a legislative committee in March.
McDaniel has said Eli Lilly promoted the use of the “potent and powerful drug” for children, and that is why the cash funds should go to a cyber-crime lab to protect children.
According to the written testimony provided by the office spokesman, Deputy Attorney General Brad Phelps called English’s bill “an improper intrusion into the judicial branch” that would “legislatively alter agreements that have been approved by courts.”
Front Section, Pages 11 on 06/12/2011