Miss. A.G. Withheld State Farm Settlement Money Pledged to Charities

The Mississippi attorney general’s office says it plans to pay $1 million in settlement money that was pledged to charities nearly a year ago after a deal was struck with State Farm Fire and Casualty Cos.

Boys and Girls Club programs in Mississippi thought they would have had the money long ago and are “in a very, very critical situation” and in danger of scaling back operations, said Morgan Shands, director of the Mississippi Alliance of the Boys and Girls Club.

Attorney General Jim Hood told The Associated Press on Friday he would make the payment next month.

Hood worked out an agreement with State Farm in January 2007 after he sued the company and initiated a criminal investigation over the insurer’s handling of Hurricane Katrina claims.

As part of the agreement, State Farm paid Hood’s office $5 million to cover the cost of his investigation. The attorney general later pledged $800,000 to the Boys and Girls Club and $200,000 to the Cal Ripken Foundation, Shands said.

“The Boys and Girls Club understood last March or April that this was a done deal,” Shands said. “And through no fault of their own, some clubs have had to take out credit and I’ve got clubs that are talking about closing down programs and even closing down units.”

Hood said in a statement the money had not been paid earlier because State Farm sued the attorney general’s office. He said the money has been held in an interest-bearing account and will be paid in March.

“The Legislature gave us the authority and said the attorney general may give up to $1 million to the Boys & Girls Clubs and the Cal Ripken Foundation,” Hood’s statement said. “When State Farm filed suit against us, we had to hold the money in trust. We cannot do anything with the money until their time to appeal the case is up, which will be in mid-March.”

State Farm spokesman Jonathan Freed said Friday: “At no time have we put any barriers in the way of Jim Hood living up to his promises to these charities.”

The Associated Press obtained a letter from a State Farm vice president to the Boys and Girls Club that says State Farm never asked for any of the money back from the initial agreement. The letter was apparently also sent to Patricia Marshall in Hood’s office.

The letter, dated Dec. 11, 2007, is from Webb Howell, vice president of State Farm in Mississippi, to Billy Redd, president of the Boys and Girls Club of Central Mississippi.

Webb wrote that while State Farm was not aware that some of the money had been promised to charities by Hood’s office, it was “troubled” that the failure to deliver was being blamed on State Farm’s lawsuit.

“State Farm has not received any communication from the attorney general’s office on this issue, and we have not taken any actions to prevent the Attorney General from making good on the commitments,” the letter said.

When asked why the money was not paid between April, when the money was pledged, and September, when State Farm filed its federal lawsuit against Hood, the attorney general’s office said it was because State Farm “breached the state court order” June 11, 2007.

That was the day Hood filed a complaint after the terms of the settlement – to reopen and possibly pay thousands of more claims – were not approved by a federal judge. State Farm later reached a similar agreement with George Dale, who was Mississippi’s insurance commissioner at the time.

State Farm sued Hood in September 2007 after receiving a grand jury subpoena. The company claimed Hood violated the terms of the January 2007 agreement by resuming his criminal investigation. A federal judge ordered Hood to stop the investigation while the matter was considered in court.

On Feb. 7, State Farm settled its lawsuit against Hood a day after the attorney general was called to testify in federal court in Natchez. Hood claims victory in the lawsuit. However, he has not provided details of the settlement he reached with the company, including whether he was forced to abandon his criminal investigation.

The attorney general has said the information is not public because it is sealed by the agreement.

A State Farm spokesman has also said the company was pleased with the outcome, saying a judge found that the agreement is “valid, unambiguous and enforceable.”