CHARLESTON, W. Va. - It wasn't just West Virginia Attorney General Darrell McGraw's idea to spend $10 million from a 2004 settlement the way it was spent, his office recently said.

The controversial amount, which has sparked disputes between McGraw and the state's Legislature, and the State and the federal Medicaid agency, has been dished out by McGraw ever since he and Purdue Pharma reached an agreement to settle the State's OxyContin lawsuit.

State lawmakers say the money should have been placed in the state's general fund, to be appropriated by the Legislature. The feds say they are owed more than $4 million of it because McGraw never went through the proper channel of handing it over to the state's Department of Health and Human Resources.

Now, Chief Deputy Attorney General Fran Hughes says it was Purdue Pharma who demanded the money be used to repair the company's image. Purdue Pharma has also been ordered to pay more than $600 million in fines after pleading guilty in a federal criminal suit against it.

"That was their demand as part of the settlement," Hughes said, according to a report in the Charleston Gazette. "They insisted that the money should go to finance community programs to help drug abusers, law enforcement aimed at reducing substance abuse and medical education to further reduce substance abuse."

Purdue Pharma would not confirm or deny Hughes' claim.

"We have not thus far, and will not at this time, comment on the dispute between the Attorney General's office and the Legislature," said Timothy Bannon, special counsel for the company.

Annual payments of $2.5 million have mostly gone to day report centers, check-in spots for individuals convicted of non-violent crimes. Another $500,000 went for a pharmacy school at the University of Charleston.

The federal Centers for Medicare and Medicaid Services, which supplies about 75 cents of every dollar the State spends on Medicaid, has notified the state's DHHR that it will be withholding $4.1 million in Medicaid funds because it does not believe it was given what it was owed from the settlement. That withhold is being appealed.

Hughes has admitted that not giving the money to the DHHR was an intentional way around keeping the federal government from claiming any of the settlement.

McGraw is seeking election to his fifth term this year. He has recently battled with members of both the House of Delegates and state Senate.

Sen. John Doyle, D-Jefferson, criticized McGraw at a Senate Finance Committee meeting.

"That is constitutionally the job of the Legislature to appropriate money," he said, according to the Charleston Daily Mail. "The minute your office or any office gets money for the State of West Virginia, that money is instantly the property of the taxpayers of West Virginia. Therefore, the Legislature must decide how it is spent."

McGraw says he is simply following a court order and will continue to do so when the final $2.5 million payment is delivered.