Bluefield Daily Telegraph, Bluefield, WV

June 5, 2013

Va. attorney general says IRS blocking $125M check

Associated Press

RICHMOND, Va. — Attorney General Kenneth Cuccinelli said Wednesday that the Internal Revenue Service is blocking the release of $125 million owed to Virginia from a Medicaid fraud settlement.

The state is entitled to the money because it led an investigation that resulted in Abbott Laboratories paying $1.5 billion to settle allegations that it promoted an anti-seizure drug for uses that were not approved by the Food and Drug Administration, Cuccinelli said at a news conference. A federal judge in Abingdon, Va., approved the settlement in October.

Cuccinelli said his office earmarked most of its $125 million share of the asset forfeiture portion of the settlement for local police and sheriffs’ departments to buy bulletproof vests, vehicles and other equipment. He said nobody the federal government has disputed that Virginia is entitled to the money, but the IRS has refused to complete a simple two-page form that would allow the Treasury Department to cut a check.

“For months we thought this was just incompetence by the IRS, but with its refusal to properly fill out fairly simple paperwork for an entire year, we are left to wonder if this involves more deliberate motives,” Cuccinelli said.

An IRS spokesman in Washington did not immediately respond to telephone and email requests for comment.

The Republican candidate for governor has had other high-profile clashes with the federal government, including an unsuccessful lawsuit challenging the Obama administration’s health care reform law. The IRS has been under fire recently for targeting conservative political groups for additional scrutiny.

Cuccinelli said he could not explain why the IRS is blocking the money. His office has not communicated directly with the agency, Cuccinelli said, but has had some members of Virginia’s congressional delegations relay the concerns.

“We thought that would be a more effective way of communicating,” he said.

Cuccinelli said his office has been dealing with the Treasury Department’s asset forfeiture office, which is getting no answers from the IRS.

According to Cuccinelli, the Abbott Laboratories case marked the largest Medicaid fraud recovery in U.S. history resulting from a state-led investigation. It included a criminal fine and forfeiture of $700 million and civil settlements with the federal government and states totaling $800 million.

He said the U.S. attorney’s office told him last August that Virginia would receive $95 million of the asset forfeiture, but his office reviewed Treasury Department guidelines and determined that the more than 38,000 man hours his Medicaid Fraud Control Unit spent on the case indicated the state should get $30 million more. He said the federal government already has its $575 million share of the fine and asset forfeiture.

The money Virginia is now trying to collect is separate from the pot that was set aside for states’ Medicaid programs. Cuccinelli said states have received those payments. Virginia’s share was about $4 million.