‘Pay to play” deals where public officials hand out big money state contracts to their friends or campaign donors have a troubling history in South Carolina. In particular, plaintiffs’ lawyers donating to statewide politicians and then receiving excessive contingency fees — or slices of any settlement — in lawsuits on behalf of the state has embedded itself within the state’s culture.
Fortunately, there is a solution that would protect taxpayers’ pocketbooks and help stop real and perceived corruption.
Lately, State Treasurer Curtis Loftis has been under fire for a deal that will result in a multi-million dollar payout for his longtime friend and fraternity brother, attorney Mike Montgomery. Montgomery will reportedly receive a $2 million award as part of a settlement agreement which Loftis reportedly “pounded the table” to maximize, in a lawsuit involving pension fund losses. Though none of what Montgomery will receive will detract from what the pension fund will receive from the settlement, his lottery-sized pay day stemming from his coziness with Loftis has certainly raised eyebrows.
But this problem runs deeper than any particular deal, individual, or even specific office.
For example, in one of the largest related payouts dating back to the tobacco litigation of the 1990s, former Attorney General Charles Condon hired seven firms to pursue related lawsuits. Six of these firms had donated to his campaign, but only one had previous experience with tobacco litigation. Condon hired these firms with no formal process, and in 2000 they received an $82.5 million fee, an amount that a former federal judge and arbiter said was “grossly excessive.”
More recently, former Attorney General Henry McMaster, in a suit on behalf of the state, hired private attorneys who had given over $60,000 in contributions to his campaign. One of the attorneys, John Simmons, had already been the subject of a controversial case in 2000 in which he and another attorney, representing the state on a contingent basis, sought a $2.14 million fee, one third of the state’s settlement, in a case that was never tried.
Attorneys general and others represent the public, and they are required to pursue justice. In some cases, the interests of justice may call for dropping a case, pursuing a non-financial settlement, or taking another course other than all-out pursuit of the maximum possible financial recovery.
But private attorneys working on a contingent fee earn a percentage of the money they recover, and therefore have an incentive to pursue whatever course will maximize their own personal enrichment — regardless of what is in the interest of justice and the taxpayers.
Arrangements like these can undermine the public trust and deserve the highest level of scrutiny. Recognizing this concern, numerous other states have passed outside counsel sunshine laws to establish reasonable restrictions of the practice.
So far, Alabama, Arizona, Florida, Indiana, Iowa, Mississippi, and West Virginia have passed laws or adopted policies modeled after the Transparency in Private Attorney Contracting Act that open the relationships between state officials and private lawyers hired to work with them to public scrutiny.
And just this month, Wisconsin passed the nation’s strongest outside counsel sunshine law yet.
Typically, these laws ban state entities from hiring outside lawyers on a contingency fee basis absent a finding that the contract is both cost effective and in the public interest. They also usually require a competitive bidding process, the state to retain supervisory authority over the lawsuit, and the public posting of and a cap on the total payments that outside lawyers can collect.
A bill introduced in the South Carolina legislature, the Transparency in Private Attorney Contracts Act (S-773), would impose these common sense safeguards around the public contracting process in the state.
Lawmakers should immediately pass this outside counsel sunshine bill into law to prevent further conflicts of interest and favoritism.
The only ones with anything to lose are the state officials who dole out big money contracts to their friends and campaign donors, and the plaintiffs’ lawyers lining their pockets by cashing in on their connections.
Lisa A. Rickard is president of the U.S. Chamber of Commerce’s Institute for Legal Reform.