CHARLESTON, W. Va. - The federal government isn't the only one demanding money from West Virginia Attorney General Darrell McGraw's controversial OxyContin settlement.

The West Virginia Business and Industry Council on Tuesday wrote a letter to McGraw, demanding he pay $2.2 million of a 2004 settlement with prescription drug manufacturer Purdue Pharma to reimburse the state's old Workers' Compensation fund.

The fund was one of the plaintiffs in a lawsuit filed by McGraw in 2001. It alleged Purdue Pharma misrepresented the painkiller OxyContin's addiction capabilities, thereby creating addicts that the State had to take care of.

BIC Executive Director Karen Price wrote McGraw's office, according to a report by West Virginia Metro News.

"The money came from employers and we feel should go back to the Workers' Compensation old fund debt reduction," Price said, according to the report.

The federal Centers for Medicaid and Medicare Services, a division of the Department of Health and Human Services, is planning to withhold $4.1 million from its next Medicaid payment to the State because of the manner in which McGraw handled the settlement.

McGraw's office argued in the complaint that addicts put a strain on the state's Medicaid budget. The two sides settled for $10 million, though McGraw structured the settlement in a way that allowed him to keep the settlement funds for the purpose of appropriating them himself.

Chief Deputy Attorney General Fran Hughes admitted that before the state's Legislature when it questioned the settlement.

In February, she promised the Legislature that McGraw's office would stop appropriating settlement funds on its own. She also said the money was not given to the state's Department of Health and Human Resources, another one of the suit's plaintiffs, because the CMS would then be able to claim a share -- "We have arranged a methodology that has prevented the federal government from coming back and seizing money," Hughes said.

The CMS provides roughly 75 cents of every dollar the State spends on Medicaid..

McGraw's office has continued to give the settlement proceeds to various substance abuse programs around the state, as well $500,000 for a pharmacy school at the University of Charleston. Critics, like Attorney General-hopeful Hiram Lewis, claim it is done with the intention of promoting McGraw's re-election campaign.

In a notice of intent to appeal the CMS's decision, the State wrote that McGraw had abandoned the causes of action under which the DHHR was entitled to participate by the time of the settlement. The only remaining causes of action were a violation of the state's Consumer Credit and Protection Act, which can only be filed by a natural person, and a public nuisance claim for damages only for OxyContin users.

The state's Public Employees Insurance Agency was the third plaintiff in the suit.

Hughes told the Charleston Daily Mail that the BIC's motives are political.

"I doubt if we'll even respond to their letter," Hughes said.

The old Workers' Comp fund was severely in debt before the State decided to privatize the insurance. Hughes said the Legislature also took money paid each year by tobacco companies as the result of a 1998 settlement with the attorneys general of 46 states (known as the Tobacco Master Settlement Agreement) to help out with the debt.

"Our office has contributed more to paying down the Workers' Comp debt than just about any other state office or agency," Hughes said, according to the Daily Mail.