Officials urge state to pay Angelos' bill

Schaefer, Dixon want to end suit over fees in tobacco case

At least $500 million asked

Lawyer's 1996 pact with Md. charged 25% of cigarette settlement

January 05, 2000|By Thomas W. Waldron and Scott Shane | Thomas W. Waldron and Scott Shane,SUN STAFF

Stepping into a billion-dollar legal fight, Maryland Comptroller William Donald Schaefer and Treasurer Richard N. Dixon called yesterday for the state to pay lawyer Peter G. Angelos more than $500 million for his work battling the tobacco industry.

In a statement that caught other officials off guard, Dixon and Schaefer said the state should abide by the terms of legislation passed by the General Assembly in 1998, which called for a maximum 12.5 percent fee for Angelos.

"That's the figure the General Assembly passed and what the governor signed," Dixon said last night. "We're losing money while this is pursued."

It is not clear how much influence the two officials will have in the state's lawsuit against Angelos, which seeks to force him to collect his legal fee from the tobacco industry. But their statement might give the Orioles owner some political ammunition as he continues his fight with other state officials.

Dixon and Schaefer constitute a majority of the three-member state Board of Public Works -- with Gov. Parris N. Glendening -- which would have to approve any fee payout to Angelos.

At stake is Angelos' piece of Maryland's estimated $4.7 billion share of the national settlement with cigarette manufacturers.

Under his firm's 1996 contract with the state, Angelos was to receive 25 percent of any money recovered. But in 1998, the General Assembly passed legislation capping the fee at 12.5 percent, which would translate into a payment of well over $500 million for Angelos over 25 years.

Although he has disputed the legal validity of the legislature's action, Angelos privately told state officials last year that he could accept a 12.5 percent fee, according to sources familiar with the discussions.

But Maryland Attorney General J. Joseph Curran Jr., who is handling the state's negotiations, has insisted that Angelos first seek payment from the tobacco industry. When Angelos refused, Curran went to court last month asking a judge to order Angelos to seek his fee from the industry.

Baltimore Circuit Judge Clifton J. Gordy declined to issue such an order last week, saying the whole matter of what fee Angelos gets and who must pay it will be resolved in a trial in September. But Curran immediately appealed the ruling, and the matter is pending before the Maryland Court of Special Appeals.

A spokesman for Schaefer, a longtime associate of Angelos, said the comptroller believes that Angelos' contract with the state -- as modified by the General Assembly -- should be honored.

"Everybody signed off on it, including Governor Glendening when he signed the legislation," said Paul G. Edwards, a Schaefer spokesman. "Governor Schaefer is clearly promoting what he thinks is in the best interest of all the parties, including Peter Angelos."

A spokesman for Glendening declined to comment on the recommendation from Dixon and Schaefer, noting the pending lawsuit.

"The payment is in litigation, with the basic question being what is a reasonable fee," said spokesman Michael Morrill. "There is no agreement right now at any specific figure."

Surprise proposal

Deputy Attorney General Carmen M. Shepard said the proposal from Schaefer and Dixon came as a surprise and had not been discussed with Curran or his assist- ants before it was announced.

"They didn't call," she said. "But I'll take any helpful idea."

She said that the press release from Schaefer and Dixon was mistaken in suggesting that Maryland's tobacco money would sit idle while the state's lawsuit against Angelos is resolved.

In fact, Judge Gordy ruled last week that 75 percent of the first settlement payments could be spent by the state. He directed that the other 25 percent be held in an escrow account jointly controlled by the attorney general and the Angelos firm.

No loss of interest

Shepard said the 25 percent escrow share will be invested under the same guidelines used by Dixon as state treasurer, so there will be no loss of interest.

From a legal point of view, the proposal from Schaefer and Dixon apparently is only a suggestion, one that Curran could accept or reject. Shepard said state law requires the Board of Public Works to approve settlements of state litigation, but not to initiate them. "As I read the law, it requires the attorney general to present a proposed settlement," she said.

Angelos said last night he had not been warned of Schaefer's and Dixon's press release and had not seen it.

"It's the first I heard of it," Angelos said. "It's a surprise. I'll have to take a look at it."

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