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   |  | Published Thursday, June 18, 1998 |
What's wrong with paying $550 million to the Robins Kaplan law firm for its work on the tobacco settlement? First, there is the question of whether the fee contract is legal. Second, the amount, an astounding $550 million! Third, the timing of the payments: Lawyers get paid up front, while the state of Minnesota gets its money over 25 years.
A lawsuit will be filed on behalf of Minnesota taxpayers questioning the legality of the contract Hubert Humphrey III signed permitting this huge fee. The obvious question is can one person in government contract to pay this outrageous amount without any oversight from the Legislature or the governor?
The answer appears to be no. Our Legislature, in its wisdom, passed legislation in 1905 that requires the attorney general to get the written OK from the governor and the chief justice of the Supreme Court. While I'm sure the lawyers will find all kinds of reasons why this does not apply, it is pretty clear that this is what was intended. Judge for yourself. Minnesota Statute 8.06 reads:
"Whenever the Attorney General, the Governor, and the Chief Justice of the Supreme Court shall certify in writing, filed in the Office of the Secretary of State, that it is necessary, in the proper conduct of the legal business of the state, either civil or criminal, that the State employ additional counsel, the Attorney General shall thereupon be authorized to employ such counsel and, with the Governor and the Chief Justice, fix the additional counsel's compensation. Except as herein stated, no additional counsel shall be employed and the legal business of the State shall be performed exclusively by the Attorney General and the Attorney General's assistants."
The courts will decide this issue, but I think it is pretty clear what was intended. The attorney general never received the necessary signatures of Gov. Arne Carlson or the chief justice to engage the Robins Kaplan firm. Also, contrary to statements made by the attorney general's office, Judge Kenneth Fitzpatrick did not rule on this issue.
As for the amount of the payment, you don't have to be a CPA to know that $550 million is outrageous. That amount exceeds the net worth of the vast majority of publicly traded companies in the entire United States. It is over $125 for every person in Minnesota. You could run the entire school system in the city of Minneapolis for a year on $550 million. It amounts to tens of thousand of dollars per hour worked for these lawyers. Some partners in the Robins Kaplan firm will collect tens of millions of dollars. With over 200 lawyers in the attorney general's office, why is it is necessary to pay outside lawyers $550 million?
Attorney General Humphrey crows that the attorneys' fees are only some 7 percent of the settlement. This is clearly not true. The tobacco settlement will be paid to the state over 25 years, but the legal fees will be paid upfront. Using a real risk-adjusted discount rate, the $550 million lawyers' fees comes closer to 20 percent. This fee arrangement is highly unusual in legal settlements. In most settlements, the lawyers would be paid over the same time period as the plaintiffs. Why was it structured this way?
Furthermore, any reasonable person has to question whether the state will collect its money for the full 25 years. The tobacco industry is under assault in Congress and in all 50 states. Does anyone truly believe that the tobacco industry, as we know it, will be around for 25 years? The prospect for bankruptcy of a large tobacco company is very possible, if not likely. As a spoiled child anticipates an inheritance, the state of Minnesota will likely spend its windfall many times over on a wide range of programs before it sees a dime. In a very real sense, the settlement makes the state partners with the tobacco industry. Fact is, the only way the state can collect this money over 25 years is if these "merchants of death" survive and prosper.
This $550 million payment to trial lawyers is truly outrageous. This contract between the attorney general's office and trial lawyers represents the ultimate partnership between big government and trial lawyers. Where will it end?
-- Bill Cooper, TCF Financial Corp. chairman and CEO, is chair of the Minnesota Republican Party.