CHARLESTON, W. Va. - West Virginia Attorney General Darrell McGraw is giving $30,000 of his controversial $10 million settlement with Purdue Pharma to a Braxton County transitional home for recovering alcoholics and substance abusers.

McGraw, who has been appropriating the money himself after reaching a settlement with the company in 2005 on behalf of the state's Department of Health and Human Resources, said the funds are part of the third installment of Purdue Pharma's four-step payment.

"The Braxton County Fellowship Home is an excellent transitional tool for alcoholics and substance abusers that possess a desire to become citizens for the sake of society, their families, and themselves. This program allows substance abusers to overcome the addiction that has crippled their lives," McGraw said.

The home was founded in 1985 by a group of recovering alcoholics. McGraw has said that the Purdue Pharma money will go to fighting substance abuse in the state.

Usually the DHHR makes those kinds of decisions, but the agency was left out of the settlement despite being one of the state agencies McGraw claimed was harmed.

Also, 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.

Controversy started when McGraw 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 has said.

Kahn has 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.