Who you know: Connected lawyers get fat fees for fighting state’s legal battles

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Critics of the secretive selection process that the South Carolina Attorney General’s Office uses to hire private lawyers for cases that can generate millions in fees have been speaking out against the practice for the last two decades.

But nothing has changed.

The same politically connected lawyers are still securing highly lucrative, no-bid, contingency fee contracts from the state, which has yet to make the process competitive or shed any light on how the work gets doled out.

One of the world’s largest pharmaceutical companies, Cephalon, recently generated new interest in the issue when it challenged the contingency fee arrangements that the attorney general enters into with private lawyers. However, the case settled for $6 million shortly before both sides were slated to argue before the state Supreme Court.

The private lawyers who helped the state go after Cephalon for alleged violations of the Unfair Trade Practices Act are expected to receive more than $1 million in fees from the settlement. Attorney General Alan Wilson is entitled to a percentage of those fees, which in this case amounts to slightly more than $26,000.

Cephalon’s attorneys called the state’s deals with private firms an unconstitutional “litigation lottery system” and also a violation of the separation of powers doctrine. The attorney general deposits his office’s portion of the fees into an account that he controls instead of allowing the state Legislature to manage the money.

At least $36.5 million has gone into the attorney general’s account, which is used to pay salaries and benefits for the office’s employees but also “for a number other unclear purposes,” according to Cephalon’s brief to the Supreme Court.

While digging into the Cephalon case, Lawyers Weekly filed a public records request with Wilson’s office seeking all of the state’s contracts with private attorneys who were hired on a contingency fee basis to sue pharmaceutical companies, as well as the settlements reached in those matters.

The suits often follow successful federal actions and hinge on alleged violations of the state’s Unfair Trade Practices Act for marketing medications for uses that the Food and Drug Administration has not approved, even when the promotional statements are true.

The office responded Oct. 16 with more than 230 pages of documents in eight cases that date back to 2006. The bulk of the cases are tied to ex state Attorney General Henry McMaster, now the state’s lieutenant governor. He tended to hire the same two lawyers to work on Big Pharma cases: John Simmons of Columbia and John White of Spartanburg.

(For those records and responses follow these links: response, FOIA1, FOIA2, FOIA3)

Simmons is a former U.S. Attorney for South Carolina and has served as chief of the state grand jury for the Attorney General’s Office and on the state’s Commission on Ethics Reform. White’s ex law partner is Mark Hayes, a circuit judge in Spartanburg, where many of the Big Pharma cases are tried.

McMaster hired Simmons and White in four of the suits and Wilson retained the pair in a fifth case in 2011 against GlaxoSmithKine over its off-label promotion of the diabetes drug Avandia. The suit settled for $43 million 2013.

Simmons and White split more than $6.9 million in fees from the settlement with three other private lawyers: former state Attorney General Charlie Condon of Charleston, Michael Messina of Albuquerque, New Mexico, and Bill Robins of Santa Fe, New Mexico.

According to contract documents provided to Lawyers Weekly, Wilson initially had Condon, Messina and Robins working on the suit. But three months into the case he hired Simmons and White at the request of Condon and Robins.

In 2013, Wilson retained Condon to sue Amgen on behalf of the state shortly after the biotech company agreed to pay more than $760 million to settle federal off-label marketing violations. Wilson’s office said it did not have settlement documents in the Amgen case.

But under Condon’s contract, which is similar to other contracts that the state has entered into with private attorneys, he is entitled to 21 percent of the first $25 million in proceeds from any judgment or settlement with the state. His fees decrease incrementally as the proceeds increase.

‘The appearance of cronyism’

Condon and Wilson are close. They exchange shout-outs on Twitter, where Wilson has referred to Condon as “my good friend.” Condon also donated $3,500 to Wilson’s campaign in June 2010 – the maximum allowable contribution per election cycle – and he gave Wilson another $3,500 in September of the same year. He also donated $100 to McMaster’s campaign for lieutenant governor in 2014.

During Condon’s time as the Palmetto State’s top prosecutor from 1995 to 2003, he came under fire for hiring White and his law partner Ben Harrison to work for the state in a suit against Big Tobacco. White and Harrison donated the maximum of $3,500 per election cycle to Condon during his reelection campaigns. They also contributed to Condon’s unsuccessful campaign for governor.

Condon referred questions to Mark Powell, a spokesman for the Attorney General’s Office who did not respond to repeated calls and emails seeking comment. But in 2004, Condon told the Spartanburg Herald-Journal that he had hired Harrison and White based on the recommendation of “a very prominent judge.” He did not name the judge.

“Condon replied that he had selected the best lawyers possible with regard to political affiliation,” the article also stated. “He would later announce he was supporting a proposed change in the way the state hires private lawyers, acknowledging that the system he had used earlier ‘leads to the appearance of cronyism.’”

Condon now profits from that same system.

‘A problematic situation’

Another attorney that McMaster hired for several cases against Big Pharma is Ken Bailey, a Houston lawyer who has worked for state attorneys general across the country, earning massive fees along the way – including a $181 million payday for his firm’s work for Arkansas in a suit against Johnson & Johnson involving the antipsychotic drug Risperdal. The fee amounted to about $19,700 per hour for each of the attorneys and paralegals who were assigned to the case.

An editorial in the Wall Street Journal about so-called “pay-to-play” litigation in 2009 had this to say about Bailey’s practice of donating thousands of dollars to the campaigns of state attorneys general (records show that Bailey has not contributed directly to McMaster or Wilson) who awarded contingency contracts to his firm: “It’s some racket.”

“The biggest losers here are the cause of justice and the principle of prosecutorial neutrality,” the WSJ told its readers. “When outside lawyers are hired to do the government’s business, and then given a financial stake in the outcome, it creates irreconcilable conflicts of interest.”

Another lawyer who McMaster hired on a Big Pharma case, William Coates of Roe Cassidy Coates & Price in Greenville, donated $1,000 to McMaster’s campaign in 2008 and gave another $1,000 in 2009. He also contributed $2,000 to Wilson in 2010 and donated $500 to his campaign earlier this year.

Coates referred questions about his contract work to Wilson’s office. The only attorney who would talk about working for the state, Eugene Covington Jr. of Covington, Patrick, Hagins, Stern & Lewis in Greenville, refused to say how he got the contract.

“I was brought in at the very end for a reason I can’t disclose,” he said, referring to his involvement in a suit against the Merck pharmaceutical company that settled in 2012. Fees for the private attorneys involved in the case totaled nearly $500,000, according to records from the Attorney General’s Office.

Covington and several other lawyers who have worked for the state on a contingency basis have not given money to further the political campaigns of McMaster or Wilson. But whenever a state attorney general awards discretionary contracts to outside attorneys, it “raises concerns about pay-to-play, conflicts of interest, the use of a public entity for personal gain and fairness in prosecutions,” Lisa Rickard, president of the U.S. Chamber Institute for Legal Reform, wrote in an email.

She added that the appearance of impropriety has spurred 20 states, including North Carolina, to take “action to limit outside contingency fee counsel arrangements by state attorneys general.”

Marc Rodwin, a professor at Suffolk University Law School in Boston who has written a couple of books dealing with conflicts of interest and the medical industry, suggested that the selection process could be vastly improved simply by having an independent third party select private counsel to work on a contractual basis with the attorney general’s office. And by preventing campaign donors from getting those contracts.

“It’s a problematic situation when someone in political power can bestow favors upon someone for contributing to their campaign,” he said. “Most people who study this area would immediately say this is a conflict of interest.”

Follow Phillip Bantz on Twitter @SCLWBantz