Top offical for Gov. Blunt says Nixon broke law by mishandling settlement money

Wednesday, June 25, 2008 | 11:24 p.m. CDT; updated 3:31 a.m. CDT, Tuesday, July 22, 2008

JEFFERSON CITY — A top official for Gov. Matt Blunt on Wednesday accused Attorney General Jay Nixon of breaking the law by mishandling settlement money from a prescription drug company.

Administration Commissioner Larry Schepker said Nixon’s office illegally deposited a $630,000 settlement check from Caremark into an office trust fund. Schepker said Nixon’s office then illegally set up a grant program to distribute that money.

“The state’s top legal officer has violated state law in the operation of his office,” Schepker said while releasing a report on his investigation into how the settlement money was handled.

Nixon spokesman Scott Holste denied Schepker’s assertions, insisting the money was received and distributed “in a manner that was completely consistent with a court order and with state statutes and procedure.”

The dispute is just the latest of many between the administration of the Republican governor and the Democratic attorney general, who for a while were expected to face each other in the 2008 elections. Nixon is running for governor, but Blunt has decided not to seek re-election.

Missouri was one of 28 states and the District of Columbia to settle claims that Caremark deceptively encouraged patients to switch prescription drugs under the guise of saving money. Instead, the attorney general claimed, Caremark kept rebates and discounts that it should have passed on to patients and employers.

Caremark has denied any deceptive or unfair merchandising practices.

The settlement required a portion of the money to be used to benefit low-income, disabled and elderly prescription drug users, to promote lower drug costs or to educate consumers about cost differences among medications.

About $488,000 of the money Missouri received already has been awarded by Nixon’s office to nonprofit groups for the purchase of computers or other equipment that can help consumers get free or cheaper prescription drugs.

Schepker placed a hold on any additional grants from the fund last month by requiring Nixon’s office to get approval from the Office of Administration for fund expenditures.

Schepker recommended Wednesday that Blunt continue to withhold spending authority from the trust fund during the budget year that begins July 1, until lawmakers can appropriate the remaining $142,000 from the settlement to existing state programs.

Schepker said he wasn’t questioning the merits of settlement expenditures, simply the means. But Nixon’s spokesman said that is a distinction without a substantive difference.

“This is an effort to prevent Missouri seniors, disabled and low-income citizens from getting free or low-cost drugs by Governor Blunt — it’s as simple as that,” Holste said.

The attorney general’s office directed Caremark to make its Missouri check payable to the Merchandising Practices Revolving Fund. But after that initial instruction, the attorney general’s office said its fiscal officers determined it made more sense for the money to go to the Attorney General Trust Fund, which typically is used as a pass-through account for legal restitution payments.

Instead of giving new directions to Caremark, the attorney general’s office deposited the check made out to the merchandising fund into the trust fund. Schepker contends that was illegal. Nixon’s staff contends state agencies frequently takes checks made payable to a particular program or to the state in general and then deposit them into the appropriate account.

Schepker further asserts that Nixon’s office directed the money to the trust fund because it has more flexible budgetary uses, allowing the attorney general to set up a grant program that otherwise would not have been allowed under the merchandizing fund. Nixon’s office counters that it could have legally distributed the money through either fund.

Schepker claims that Nixon’s office had no legal authority to set up the grant program, which his report described as “a wholesale giveaway of state money with no oversight or accountability for how the money was spent.”

Nixon’s office responded that the grants are merely a means of providing the court-ordered restitution, which it is legally authorized to carry out.

Schepker began his investigation in May at the request of House Budget Committee Chairman Allen Icet, R-Wildwood. But Nixon’s office questioned that timeline. The attorney general’s office said it had previously provided documents to Blunt’s office about the Caremark settlement in response Sunshine Law request made in March.

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