Md., Angelos may be near agreement on tobacco fees

Hundreds of millions at stake in dispute

January 10, 2002|By Michael Dresser and Scott Shane | Michael Dresser and Scott Shane,SUN STAFF

Gov. Parris N. Glendening said yesterday that he and lawyer Peter G. Angelos could be close to breaking an impasse over hundreds of millions of dollars in fees for Angelos' handling of Maryland's tobacco lawsuit.

Angelos may be motivated to reach agreement with the state over his fees because a national arbitration board is prepared to award him $132 million instead of the more than $1 billion he says he is owed under his contract, according to sources familiar with the negotiations.

Praising the "great cooperation we have received from Mr. Angelos," Glendening said he was optimistic the dispute could be resolved in the next few months.

While the governor described the negotiations between the two men in conciliatory terms, the Orioles owner signaled apparent displeasure with the pace of talks by disclosing the terms of his most recent offer to General Assembly leaders.

Angelos offered to settle his fee dispute with the state for $250 million in six annual installments beginning next year, according to the sources. His original contract called for him to receive 25 percent of any settlement with the tobacco industry, an amount the Assembly cut to 12.5 percent after it became apparent the payout to the state could exceed $4 billion.

Former state Sen. John A. Pica Jr., Angelos' lobbyist in Annapolis, said he had briefed House and Senate leaders about the negotiations but would not give details. Angelos could not be reached for comment.

Sources said the Angelos representative told lawmakers the $250 million offer, which the administration has not accepted, would amount to about 5 percent of a tobacco settlement that the firm estimated at $4.7 billion.

Like much else about the tobacco fee fight, dollar figures are interpreted very differently by the two sides. State officials do not accept the Angelos firm's contention that $250 million paid out over six years is a 5 percent fee, or one-fifth of the 25 percent called for by Angelos' 1996 contract.

Maryland is scheduled to receive approximately $4 billion, adjusted for inflation, over 25 years. So, 5 percent of that would be about $200 million over 25 years - far less in current value than $250 million over six years.

Nevertheless, some lawmakers seemed encouraged that there had been movement in the talks.

"I would say that 5 percent is a world away from the contractual obligation that the state of Maryland entered into in the beginning," said House Speaker Casper R. Taylor Jr.

Angelos' readiness to negotiate follows the arbitration panel's recent decision, which is expected to be announced in March. The panel awards the lawyers' fees, which are paid by the tobacco industry.

The three-member panel met in New York City in June to hear a presentation by Attorney General J. Joseph Curran Jr. and others about the work the Angelos firm performed on the case. Angelos, though he had originally stated that he would seek his fee from the panel in order to leave the state's settlement intact, declined to participate.

Though $132 million is far less than Angelos has insisted the state owes him, it would still be the largest legal fee in Maryland history and amount to roughly $3,800 per hour of legal time the Angelos firm invested in the case.

The negotiations with Glendening would determine how much money, if any, the state would add to the $132 million paid to Angelos by the tobacco industry.

While Angelos is being pushed toward compromise by the arbitration award, the state is under pressure to come up with money as quickly as possible because of a serious revenue shortfall.

Resolving the Angelos award could let the state gain access to money held in escrow because of the fee dispute, an amount expected to reach $120 million by April. The money represents 25 percent of the amount the state has collected so far from the tobacco companies.

The escrow order has forced the state to cut back or find other money to fund anti-cancer and anti-smoking programs the state launched with money from the tobacco settlement. Glendening said he expects most of any money recovered from escrow to go for those purposes.

The governor said Angelos shares his desire to restore the money to those programs. "He is committed to the fight against Big Tobacco and the fight against cancer," Glendening said.

One Republican lawmaker expressed concern yesterday that Glendening is negotiating with Angelos at a time when the state's negotiating power has been weakened by budget constraints.

"The governor is painting himself into a corner where we are desperate to do a deal," said Del. Robert L. Flanagan of Howard County. "He is not in a position to play hardball with Peter Angelos."

The state, however, is aware that if the dispute ever reaches court adjudication, it could well be decided in Angelos' favor, according to experts on contract law. That would mean that the state would end up paying far more than the $250 million.

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