TOBACCO LAWYERS ... AND THE HONEY POT

I mentioned last week I would discuss a $400 million honey pot that no one is discussing. I will briefly.

But the BIGGER issue in Missouri government (which by a Missouri Supreme Court ruling must be acted on this year) is state Sen. PETER KINDER'S bill capping the JAY NIXON-appointed lawyer fees.

Kinder's bill puts the estimated $250 million fee arrangement into a trust, which will then pay $500 an hour plus expenses instead of the percentage of settlement fee arrangement put together by Nixon.

If the 49 involved lawyers each work 1,000 hours (25 weeks full-time), the 49,000 hours would generate compensation of $24,500,000 to which generous expenses of $500,000 would total $25 million.

Nixon says the lawyers have incurred costs to date of $10 million. Who wants to support the current arrangement that gives 49 lawyers over $225 million additional money that could be better spent on:

1. Transportation.

2. Education.

3. Health.

4. State employee salaries.

5. New construction.

I would hope Gov. BOB HOLDEN, Civic Progress, St. Louis Mayor FRANCIS G. SLAY, the Missouri Chamber of Commerce, the Missouri Farm Bureau, the news media and fellow legislators would join in with Kinder in exploring the legal ramification of the possibilities and benefit of his bill.

Lawyers in many other states have received different and, in most instances, lower percentages than Missouri is estimating. For example, Illinois' projected settlement is $9.3 billion with lawyer fees of $121 million, which is 1.3 percent.

At a time when Holden is announcing cutbacks of $50 million to $70 million because of projected revenue shortfalls ... why the reluctance to check out this $225 million source of revenue?

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The honey pot I mentioned last week is a $400 million-plus fund -- Missouri Foundation for Health -- that has been created by the state but which the state has no input on concerning its expenditures.

The fund consists of $13 million in cash and 15 million shares of RIGHT CHOICE Managed Care (the successor to Blue Cross and Blue Shield of Missouri) which are currently valued at $471 million.

The independent foundation has currently applied to the Securities and Exchange Commission to sell about 20 percent of its stock (2.75 million shares at a closing price of $34.27 two weeks ago) for $94.2 million.

The Missouri Foundation for Health is the state's newest and largest health-care philanthropy and owns 80 percent of Right Choice stock. The foundation was created last year in a legal settlement in an action brought by Attorney General Jay Nixon. The foundation benefited from a conversion by Blue Cross from a not-for-profit to a for-profit corporation. This corporate change was legally reviewed and recommended by one of the largest law firms in St. Louis and was pre-approved by the head of the Missouri Insurance Division. Later, Nixon intervened and successfully pushed for the creation of Missouri Foundation for Health to continue the original Blue Cross mission of providing health care for all.

The 15-member board (all appointed by Nixon with nine living in the greater St. Louis area) has its own bylaws with no government oversight on how the board spends the income from investments.

Nixon projects the fund could grow to $1 billion, and he projects the income will grow from $30 million annually to a much larger number. The money is to be spent for health-related causes.

More in-depth coverage will be reported in the future.

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I was in Memphis from late Friday to Saturday afternoon. What a change is going on downtown, which was dying worse than St. Louis just 10 years ago.

A new $72 million baseball facility opened in April 2000 (a 13,000-seat mini-version of the $370 million, 49,000-seat proposed Cardinal stadium in St. Louis). This home of the Class AAA Memphis Redbirds has an attractive brick exterior. Additional area offices, retail, entertainment and parking expansions might even cost more than the $370 million additional similar expansion planned for St. Louis.

To be decided in the next two weeks is whether Memphis will get a new NBA basketball franchise and whether it will build a new facility in this explosive five-block area which would enhance Memphis as a place to visit.

The Pink Palace museum, new nature center, Imax theater, Elvis's Graceland and the four-runway international airport (permitting two active runways at the same time -- something St. Louis needs -- makes one wonder where Memphis is getting the money and leadership.

Gary Rust is chairman of Rust Communications.