Editorial: Sunshine For Hoods

Wall Street Journal, February 20, 2007

Following the example of Eliot Spitzer, state attorneys general have had a field day using their power to accuse all and sundry of wrong-doing. So it's only fair that a little sun is now beginning to shine on the cozy business relationships between these AGs and their trial lawyer buddies.

The sight won't be pretty, judging from a recent Associated Press report that former California AG Bill Lockyer's office concealed tens of millions of dollars in contracts with lobbyists and legal firms.

California has an open-records law so the public can see how officials spend their money. Yet Mr. Lockyer's office incorrectly labeled dozens of contracts "confidential" and thus kept them out of public sight.

Now state treasurer, Mr. Lockyer says this was just a simple mistake. But the records sure are revealing. The law firm of Cotkin, Collins and Ginsberg received a $2 million contract to work on an insurance case.

That same firm has donated to Mr. Lockyer's political committees. Two other no-bid contracts, worth as much as $489,000, went to the Ferguson Group, a Washington lobbying outfit. Ferguson 's president was the legislative director for former California Congressman Vic Fazio, a Lockyer pal.

Going back to 2003, Mr. Lockyer's office labeled as "confidential" more than 1,700 contracts valued at more than $100 million. The AP asked California 's Department of Justice -- now run by Attorney General Jerry Brown -- to inspect a sample of 131 contracts. That review found that only 12 deserved to be confidential. One test of Mr. Brown's desire for honest government will be whether he now allows a review of all contracts.

This episode also has Californians calling for legislation to require its AG both to publicly disclose contracts and subject them to competitive bidding. A movement -- led by the American Legislative Exchange Council and the Institute for Legal Reform -- is also spreading for model legislation known as the "Private Attorney Retention Sunshine Act." So far, seven states have adopted some variant of legislation, and West Virginia and Mississippi are debating whether to follow suit.

Mississippi is a fitting place for this fight, as it may well be the birthplace of AG-tort bar collusion. In the 1990s, then-Attorney General Mike Moore hired several tort lawyer friends to take the lead in his mammoth tobacco suit. Trial lawyer Dickie Scruggs later acknowledged making hundreds of millions of dollars in contingency fees; not bad for government work.

Current AG Jim Hood struck an equally suspicious deal as part of his $100 million settlement in 2005 with MCI/WorldCom over back taxes. Mr. Hood hired attorney Joey Langston as outside counsel to represent Mississippi in negotiations with MCI. Mr. Langston's firm shared half of $14 million in legal fees as a result of the settlement. You won't be shocked to learn Mr. Langston was Mr. Hood's largest individual campaign contributor.

As a reaction to this mutual back-scratching, the Mississippi senate earlier this month passed a sunshine act to require the AG to solicit proposals from at least three law firms for contracts larger than $1 million; it would also set up a review board to inspect proposals. Mr. Hood went bananas, claiming it was a "politically motivated" bill designed to "prevent the state from catching" corporations that defraud consumers. He's rallying Democrats to oppose the bill. The office of West Virginia AG Darrell McGraw has been similarly dismissive of legislators' desire to spotlight his trial-bar contracts.

You have to smile at their nerve. These are the same AGs who deplore the mere appearance of a "conflict of interest" in business, and who justify their lawsuits as protecting state consumers. Yet they don't seem to think it's a conflict if their offices sign contracts with law firms that return a cut of their profits back to the AGs as campaign contributions.

Even worse, these contracts often include contingency fee deals that guarantee outside lawyers a slice of any settlement. This means the AGs can initiate legal proceedings against an industry with little risk to the state, while the outside attorneys have every incentive to push for the highest dollar settlement. Doing justice takes a backseat to the big-dollar payout. This AG-tort bar alliance confronts companies with a double whammy that makes it far more risky to fight a lawsuit. Even companies that are unfairly sued are inclined to settle, and the AGs can thus impose new rules and regulations via lawsuit rather than having to pass legislation.

State attorney generals have become an unchecked source of government abuse in recent years, combining political ambition with the awesome power to prosecute. They need to be reined in, and a good place to start is by exposing their sweetheart contracts with their trial lawyer friends and campaign contributors.