Virginia Attorney General Rips IRS ‘Incompetence’ in Asset Forfeiture

Published June 12, 2013

Virginia Attorney General Ken Cuccinelli has called out the Internal Revenue Service for “incompetence” for being past due in returning $115 million to the state.

Hours later, Cuccinelli’s office announced that federal officials pledged to settle up.

Cuccinelli on June 5 said the IRS went beyond “monumental incompetence” in delaying the disbursement of $1.5 billion in asset forfeitures stemming from prosecution of Abbott Laboratories Inc.

Abbott pleaded guilty in May 2012 to criminal and civil liability arising from the company’s unlawful promotion of the prescription drug Depakote for uses not approved as safe and effective by the Food and Drug Administration.

The case – which netted the second largest penalty payment by a pharmaceutical company – included a criminal fine and forfeiture totaling $700 million and civil settlements with the federal government and the states totaling $800 million.

Only $5.5M of $120M

But only $5.5 million of the $120 million owed to Virginia had trickled down from Washington, Cuccinelli said in his announcement.

“There’s a lack of performance, and a refusal to even discuss the matter, much less act on it,” Cuccinelli said of the IRS. He said the ongoing delay smacked of “malevolence” by the agency.

Virginia investigators led the 26-state, multiyear investigation into the Abbott Medicaid case that was officially resolved when the company paid the $1.5 billion penalty last October.

“We were the linchpin of the entire investigation,” said Cuccinelli, who counted 38,500 state agency man hours versus an estimated 1,500 man hours by the IRS.

$500K In Interest

With the IRS delays, the attorney general said interest on the remaining amount owed to Virginia totals roughly $500,000. But Cuccinelli’s office said it was satisfied with the result Wednesday — though no delivery date for the money was announced.

Cuccinelli said the expected reimbursement is earmarked for state and local law-enforcement initiatives, ranging from programs combating elder abuse and domestic violence, to funding for equipment and training.

During his news conference, Cuccinelli displayed a one-page, two-side document that he said the IRS had failed complete to conclude the disbursement process.

The IRS did not respond to requests for comment.

Kenric Ward ([email protected]) reports for, where a version of this article first appeared.