CHARLESTON - A truancy task force is the target of state Attorney General Darrell McGraw's latest appropriation of funds from his controversial 2004 settlement with prescription drug manufacturer Purdue Pharma.

Friday, McGraw gave the Mountaineer Boys N' Girls Cub $10,000 to be used by the Monongalia County Truancy Task Force, a partnership between several organizations -- including the Department of Health and Human Resources.

It is the DHHR -- and West Virginians who need Medicaid services -- who may suffer as a result of the $10 million settlement. The federal Centers for Medicare and Medicaid Services says it is owed a share of the settlement because it supplies 73 cents of every dollar spent on Medicaid and West Virginia.

In representing the DHHR, McGraw argued Purdue Pharma's drug OxyContin had an addiction factor that put a strain on the state's Medicaid budget because addicts needed treatment -- similar to the argument made against tobacco companies that led to 1998's Tobacco Master Settlement Agreement.

But when Purdue Pharma settled, McGraw did not turn the money over to the DHHR, preventing the CMS from claiming its share. Chief Deputy Attorney General Fran Hughes said the settlement is structured to keep the feds from getting a piece of it.

The money for the truancy task force is from the third installment of four from the settlement.

"Programs like the Monongalia County Truancy Task Force provide our children with a second chance and give them an opportunity to get on the right path," McGraw said. "Truancy has been referred to as the 'first step in a lifetime of problems.'

"This center helps students see the downside of skipping school and shields them from things such as substance abuse and crime."

Controversy started when he gave $500,000 for a pharmacy school at the University of Charleston.

In February, Chief Deputy Attorney General Fran Hughes promised the Legislature that McGraw's office would stop appropriating the settlement funds on its own. She also said the money was not given to the DHHR because then the CMS could claim its share -- "We have arranged a methodology that has prevented the federal government from coming back and seizing money," Hughes said.

Hughes previously served as general counsel for Human Services Management, a national consulting firm specializing in Medicaid financing

After the promise, though, McGraw continued to hand out money. More than $1 million went mostly to day report centers that are checkpoints for non-violent convicts.

In a May 15 letter to the DHHR (a copy can be found here), the CMS took issue with Hughes admitting the settlement was structured to prevent it from earning its share. In the DHHR's response (a copy can be found here), it sided with McGraw.

"We will continue to pursue, or to rather maintain and standby our position that the state's actions don't have any bearing on its obligation to pay back Medicaid," CMS spokesperson Mary Kahn said.

Kahn added that it is still unclear when a withhold might happen. In a report by the Charleston Daily Mail, Hughes said she will fight any such maneuver in court.

"The State is free to take whatever action it needs to take, and we will respond," Kahn said.

State watchdog group Citizens Against Lawsuit Abuse has been verbal on the matter as well. President Steve Cohen says the DHHR's response that supports McGraw doesn't add up, mostly because the DHHR is now claiming it did not pay for OxyContin prescriptions that were not medically necessary.

DHHR's lawsuit read, "as a result of the excessive and unnecessary prescriptions of OxyContin, Medicaid recipients in the State of West Virginia have been inappropriately and unnecessarily prescribed OxyContin, and the State and the (DHHR) have incurred excessive and unnecessary expenses as a result thereof."

The CALA also claims the Public Employees Insurance Agency expected money from the settlement, and Greg Burton, who was heading the Workers' Compensation system at the time, expected money and was never even told the case was settled.

In addition to that, Cohen argued that McGraw's office recently stated there was less than $2 million remaining in the settlement account, even though court records show his office will receive another $2.5 million payment this year.

"McGraw's pocketing these public dollars for his own pet projects has created an inconvenient truth, may jeopardize health care for West Virginian's neediest citizens and has brought out conflicting statements about what's going on here," Cohen said.