The Way To A Chicago Alderman

images-39A recently unsealed indictment in Chicago shows just how far money from 1998′s  $200 billion master tobacco settlement with the states spread. Federal authorities have charged former Chicago alderman Edward “Fast Eddie” Vdolyak with trying to help another lawyer evade taxes on potentially $65 million in fees the pair were promised despite having done no legal work on the deal.

The indictment against Vdolyak was unveiled last week as an addition to the pending criminal case against Daniel P. Soso, a former policeman and lawyer the feds charged with tax evasion last year. The government accuses Vdolyak of using relatives and other intermediaries to hide his payments to Soso under a fee-splitting agreement with an unnamed Seattle attorney who was identified in earlier court proceedings as class-action lawyer Steven Berman.

Vdolyak’s lawyer Michael Monico with Monico & Spevack said his client would plead not guilty at his arraignment tomorrow. The government failed to send notice to the proper entity for the back taxes, Monico said, although Vdolyak nevertheless placed $300,000 in escrow against the IRS claim.

Regardless of how Vdolyak fares in court, the indictment further taints a massive multistate agreement that rewarded the political friends of the attorneys general who helped negotiate it. Former Texas Attorney General Dan Morales went to jail in 2003 for trying to steer some $400 million in fees to one of his friends, and state AGs elsewhere hired private law firms, many of them with strong ties to the Democratic Party, to pursue the cases seeking repayment of Medicare and Medicaid expenses for smoking-related diseases.

The resulting settlement was a financial win for Philip Morris, which got a price-sustaining cartel out of the deal under state agreements to restrict new entrants from the cigarette industry.

It was also a bonanza for the private lawyers, who reaped more than $1 billion in fees paid out over the next 25 years. Recipients included Berman’s firm Hagens Berman, Motley Rice, Milberg Weiss (one of whose name partners later went to jail on unrelated securities charges), and Baltimore Orioles owner Peter Angelos. Here in my home state of Connecticut, then-AG, now-Sen. Richard Blumenthal authorized lucrative fee contracts with his former law firm Silver, Golub & Teitel as well as another firm with ties to then-Gov. (and since jailed) John Rowland.