CHARLESTON, W.Va. (Legal Newsline) - A West Virginia legal reform group, pointing to recent actions by Mississippi's auditor, says state lawmakers need to put a stop to Attorney General Darrell McGraw's "questionable" lawsuit settlement practices.

Last week, the Mississippi Auditor's Office asked the state Supreme Court to declare funds that Attorney General Jim Hood collects from lawsuits to be public money.

Auditor Stacey Pickering wants all funds collected from lawsuits to be turned over to the state Legislature, including what outside, private firms collect for their work.

At issue is the legal fees those private firms collect, not their hiring. Pickering's office told the Court that the money should go to the state.

The Auditor's Office is challenging a decision last year upholding $10 million in fees paid to private attorneys hired by Hood to represent the state in a lawsuit against computer software giant Microsoft.

The Mississippi settlement gave consumers $12 vouchers, while the state received $40 million from Microsoft. It also provided $60 million in vouchers to consumers, businesses, governments and public schools for use in buying Microsoft products.

West Virginia Citizens Against Lawsuit Abuse, a self-described non-profit citizen watchdog group, says that the Mississippi legal dispute draws comparisons to McGraw's own "antics."

According to the group, the West Virginia Legislative Auditor's Office issued a special report in 2002, which similarly recommended that state lawmakers take appropriate steps to recoup lawsuit settlement funds from the Attorney General's Office.

"It's been nearly a decade since our state legislative auditor first urged lawmakers to put reasonable limits on the attorney general's lawsuit settlements practices, and yet they've done nothing to rein in McGraw," WV CALA Executive Director Richie Heath said in a statement Wednesday.

"The Legislature's failure to act on the recommended reforms has effectively allowed McGraw to jeopardize more than $3 million in Medicaid funding for our state's most vulnerable citizens," he said.

The group points to a recent decision by a three-judge panel of the Fourth Circuit Court of Appeals, which ruled unanimously that the state, through the actions of McGraw, misdirected federal Medicaid funds obtained in a recent lawsuit settlement involving Dey Pharmaceuticals.

The Fourth Circuit's ruling allows the federal government to withhold additional Medicaid funding related to McGraw's 2004 lawsuit settlement with Purdue Pharma.

WV CALA says McGraw's office, at the time of the lawsuit settlements in question, withheld payment to several of the plaintiff state agencies as part of "an apparent ploy" to prevent the federal government from receiving proper reimbursement under Medicaid.

Heath said lawmakers were warned to take additional steps to require McGraw to deposit lawsuit settlement funds into the state's General Revenue Fund, otherwise future lawsuit settlements could "subvert the West Virginia Constitution's requirement that the Legislature is the governmental branch responsible for appropriating state funds."

"That's exactly what has happened with these lawsuit settlements," Heath said.

The group says it is urging Acting Gov. Earl Ray Tomblin and other state lawmakers to put a stop to McGraw's questionable conduct by enacting the legislative auditor's recommended reforms, and "holding the Attorney General's Office accountable for the Medicaid funding it has cost the state."

Chief Deputy Attorney General Fran Hughes was not immediately available for comment.

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.