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V ‘W.Mggy’M:z’ AM q =11115Ews w a t me n gsga g a , e tax any potential A John Cornyn gently, the five outside >trial. lawyers have broken their agreement to decide between the $3.3 billion from the tobacco companies and the $2.3 billion from taxpayers. It seems like an obvious choice to most Texans, but these lawyers admit to holding the taxpayer hostage for “leverage.” That is wrong. These five trial lawyers should honor their December 1998 agreement with Governor Bush to let the taxpayers off the hook. In addition, these lawyers continue to refuse to cooperate with our investigation. They throw up roadblocks at every turn. I do not think it is proper to submit an investigation by the Attorney General’s Office to be supervised of a federal court. [sic] Time and again these trial lawyers claim that they acted ethically. Now they have the chance to show the world that they did so. I call on them to help bring this issue to closure and honor their agreements to let taxpayers off the hook. I ask them to honorably comply and fully cooperate with our investigation and produce the documents which rightly belong to Texas. If they choose not to cooperate and keep taxpayers on the hook, I will use every available legal means to protect the State of Texas. a*, allowed the state to subpoena all the top tobacco executives. By the end of 1997, faced with putting their chief executives on the stand in a protracted trial they were likely to lose, the tobacco companies came to the bargaining table. THE SETTLEMENT On January 16, 1998, Dan Morales was on top of the world. He announced that the tobacco companies had agreed to pay the state between $14.5 billion and $15 billion. The value of the settlement has since been revised upward, to $17.3 billion. And that’s not all. Depending on who’s doing the math, the final value of the deal could be as much as $105 billion, because the payments continue for as long as the tobacco companies sell cigarettes. There’s even a costof-living adjustment in each annual payment, and the state will likely have lower health care costs because it will have fewer smokers to care for. When Morales announced the deal, however, he was immediately confronted with questions about the fees for the Big Five. “I think any discussion or speculation of fees in the multibillion-dollar amount range is laughable,” Morales told reporters. “I think the court isgoing to do something appropriate, something responsible.” Trial lawyer Walter Umphrey saw things differently; he said he intended to ask Judge Folsom to “honor our contract.” Asked if that meant getting the full 15 percent, Umphrey assured everyone that was exactly what he meant. Six days later, Folsom signed an order obligating Texas to pay $2.3 billion of its recovery to the Big Five. Responding to the announcement of the settlement, Bush first congratulated Morales, then began complaining that the fees due the Big Five were “too big, way too big. A substantial part of that money ought to be going to the taxpayers.” A group of legislators headed by Republican Senator Troy Fraser \(who has led the tort recourt to intervene in the case to block payment of the fees to the lawyers. Cornyn joined them, saying that as A.G. he would not give any cases to lawyers whose “idea of public service is a fee that would make Midas blush.” Throughout 1998, the two sides skirmished over the fees, and after months of wrangling, the Big Five agreed to submit their claims to a national arbitration panel. On December 11, the panel decided how much the lawyers from Florida, Mississippi, and Texas would get. The Big Five got $3.3 billion all to be paid by the tobacco companies. Not a penny would come from the state. But there was a catch. The tobacco companies agreed to pay no more than $500 million per year nationwide to all of the lawyers who worked on the tobacco lawsuits. The $500 million per year will not be adjusted for inflation, and it must be shared with scores of lawyers from other states. So the Big Five will get their $3.3 billion, but the payments may be spread out over a period of ten to twenty-five years, making the award much less valuable than an immediate cash payment. NEW A.G. ON THE BLOCK Once he was sworn in this year as Attorney General, John Cornyn officially joined the fight. On January 12, representatives from his office and those of the Big Five met to talk about the fee dispute, and how to facilitate whatever investigation into their actions Cornyn wanted to conduct. The meeting was scheduled to start at 3:30 p.m. but actually didn’t get underway until about 4 p.m. The time is important, because while the meeting was still in progress, Cornyn’s office distributed a press release claiming the Big Five “are not satisfied with their $3.3 billion attorneys’ fee award. They want a release from me, on behalf of the state, for any illegal or unethical conduct that they may have engaged in while representing the state.” The fax machine time stamp on the press release is 4:21 p.m. The trial lawyers were livid. Charles Silver, a U.T. law professor meeting. After reading the press release, Silver wrote an op-ed piece that appeared in Texas Lawyer, blasting Cornyn. “An ethics investigation should not begin with a lie,” wrote Silver, “but here in Texas one just did.” Yet facing a protracted investigation of their work, the Big Five still tried to strike a deal. They would relinquish their claim to the $2.3 billion award granted to them by Folsom if Cornyn agreed to conduct his investigation under the direction of the federal judge rather than the Texas Supreme Court. In return, the Big Five would NOVEMBER 26, 1999 THE TEXAS OBSERVER 11