Naked City

Kicking the Habit

The fight over the fees for the lawyers who won the state's multibillion-dollar settlement with the nation's tobacco companies appears to be over. And while that's good news for state lawmakers who had worried about the lawyers' attempt to get a bigger share of the settlement, declining cigarette sales will likely mean less revenue for the state.

On Nov. 19, the five lawyers who represented the state in its lawsuit against the cigarette makers agreed to accept a $3.3 billion award set by a national arbitration panel. In doing so, the Big Five -- Walter Umphrey, Wayne Reaud, John O'Quinn, John Eddie Williams, Jr., and Harold Nix -- waived their rights to collect their 15% share of the state's $17.3 billion settlement. (U.S. District Judge David Folsom, who is overseeing the tobacco case in Texarkana, must agree to vacate their claim on the fee.) Although the $3.3 billion award is more money, it will be paid out over more than two decades, making the award worth less in today's dollars than the 15% contingency fee. The Big Five had quarreled for months with Attorney General John Cornyn over the legality of the contingency fee contract they signed with former AG Dan Morales.

Among Cornyn's allegations was a charge that Morales had demanded a $ 1million payment from each of the five before the contract was awarded. That allegation was raised again last week when Williams' ex-wife, Dawn Nelson, testified that Williams told her he had indeed paid Morales $1 million to get the case. Nelson, who divorced Williams in March 1997, is suing her former husband in an effort to get part of his share of the tobacco settlement. In the addition to one of her depositions, Nelson also claimed that Williams told her that he paid people "all the time" to get lucrative contingency contracts. But Nelson's charges didn't get very far. The judge overseeing her lawsuit refused her request to force Williams to turn over documents relating to his negotiation of the fee contract. The move also prevents Cornyn's office from seeing any of the documents.

The court machinations are overshadowing last week's announcement that declining cigarette sales will mean tens of millions of dollars less for the state. The projected decline in consumption could mean Texas will lose up to $200 million in tobacco tax money -- already allocated by state lawmakers -- over the next two years. If the projected shortfall occurs, it will likely require a meeting of the Legislative Budget Board, which will have to decide how to make up the shortfall.

While legislators deal with the decline in smoking-related revenues, a few items in the tobacco fee fight still have to be resolved. At the state level, Cornyn has to decide if he is going to pursue his investigation of the Big Five in state court. Given his repeated efforts to pillory the five attorneys, it appears unlikely that Cornyn will quit his attack any time soon. Calls made to Ted Delisi, Cornyn's press aide, were not returned.

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