On Jan. 6, as the state's lead-paint trial entered its third month, lawyers for some of the nation's biggest paint companies gathered in the conference room of a Providence law firm to depose their nemesis, Attorney General Patrick C. Lynch.

For nearly 4 1/2 hours, the lawyers grilled Lynch about his decision to drop DuPont from the case, in return for DuPont's promise to donate $12.5 million to address childhood lead poisoning in Rhode Island.

The paint companies were challenging the agreement, announced in June 2005, because if they were found liable in the ongoing trial, they faced the possibility of having to pay more to clean up the damage with DuPont out of the case.

Tensions ran high, reflecting the high stakes and historic nature of a seven-year legal struggle that has captured national attention.

Lynch had publicly denounced the paint companies and their lawyers, calling their tactics "despicable" and describing them as "those who would spin and twist the facts." Although the public and the jury were not aware at the time, the judge had secretly fined Lynch $5,000 for some of his remarks.

During the January deposition, Lynch fenced with the paint company's lawyers over the terms of the unorthodox DuPont deal, which wasn't even written down.

The lawyers challenged his decision to let the bulk of the money go through a Washington, D.C., nonprofit agency funded by DuPont, and questioned whether he had directed another $2.5 million to a Boston hospital to offset charitable pledges made by the state's private law firm in the lead-paint case.

The deposition grew particularly combative over the "s" word -- settlement.

The lawyers pressed Lynch to acknowledge that the DuPont agreement was, in fact, a legal settlement, meaning that it could be counted toward determining how much the other companies might have to pay if a jury found them responsible for creating a public nuisance.

Lynch countered that it wasn't a settlement -- the money wasn't being paid to the state, and DuPont was not paying any legal fees. DuPont had insisted that the deal be done that way, Lynch explained, because the paint industry had never paid out any money as a result of a lead-paint lawsuit and didn't want to set a costly precedent.

DuPont's early overtures to the state, Lynch testified, had been no different from overtures by the other defendants. Early in his tenure, the attorney general noted, he had even met over lunch in the back room of Capriccio restaurant with Christopher Connor, the CEO of Sherwin Williams, the nation's largest paint company.

"He flew in to talk to me about settlement," Lynch testified. "You guys have all come to talk about settlement."

The Sherwin Williams lawyer objected to Lynch's characterization, and demanded that the transcript of the deposition be sealed.

Lynch's at-times heated deposition illustrates the delicacy of the DuPont negotiations against the backdrop of a continuing legal battle. In February, a Rhode Island jury, in a historic verdict, found that three other companies created a public nuisance by making lead paint two generations ago that has poisoned thousands of children.

The case is being appealed, even as a judge weighs how much the companies will have to pay to clean up Rhode Island houses with lead paint -- a price tag that could run into the billions.

The verdict, the first of its kind in the nation, also reverberated on Wall Street. On the day it was announced, the losing companies' stock took a billion-dollar-plus hit. The case has also fueled a national debate about the practice of states hiring private law firms, as Rhode Island did, to sue corporations, with the promise of hefty contingency fees. In the nationwide tobacco litigation, fees paid to private lawyers ran into the hundreds of millions of dollars.

On Wednesday, The Wall Street Journal's lead editorial criticized Lynch and the DuPont deal, saying that the attorney general "has some explaining to do."

The DuPont deal has also become an issue in Lynch's campaign for reelection this November. His challenger, Republican J. William Harsch, criticizes him for accepting $2,500 in campaign contributions from DuPont's chief negotiator and his wife.

Harsch says that Lynch "got rolled for $12.5 million" in a case potentially worth billions. Harsch calls the DuPont deal "one of the most egregious examples of scandalous Rhode Island insider, powerbroker politics that this state has ever seen."

Lynch dismisses the criticisms as attacks from a political foe and powerful corporate interests seeking to discredit and punish him for taking them on.

"This is part of a monstrous battle to do right," said Lynch. "And when you do, you get hit from every side."

In his January deposition, Lynch defended the agreement.

"I got the best deal that was available," he said.

LYNCH SAYS he began hearing from lawyers for the paint companies even before he was sworn in as Rhode Island attorney general in January 2003,.

The previous November, just a week before Lynch's election, the state's first lead-paint trial had ended in a hung jury. The initial lawsuit had been brought in 1999 by Lynch's predecessor, Sheldon Whitehouse -- now a candidate for U.S. Senate -- but it would be up to the new attorney general to decide whether to retry the case.

"I got approached everywhere I went, even before I raised my right hand to take the oath of office," said Lynch in an interview.

One of the people he heard from was Bernard Nash, a Washington lawyer who has cultivated relationships with attorneys general around the country.

As the head of the State Government and Litigation practice at Dickstein Shapiro, Nash is skilled in finding "creative non-litigation solutions" for corporate clients facing scrutiny from the nation's attorneys general, according to his law firm's Web site. Dickstein Shapiro's lawyers boast "remarkable success" in helping corporate clients "avoid or minimize the impact of investigations and litigation."

In 2004, DuPont hailed Nash's firm as "an integral part" of the Fortune 100 company's "government affairs and litigation strategy" in defending against lead-paint lawsuits around the country.

Lynch testified in January that he may have first met Nash at a Florida conference of newly elected attorneys general, followed by phone conversations early in 2003.

At first, Lynch said in his deposition, "there was nothing substantive, but more of an introduction . . . and obviously, you know, do I have any inclination or desire to sit down and talk about, you know, any understandings that could be reached, short of having to go back to a second trial."

Nash's pitch on behalf of DuPont, recalled Lynch, was, "We're not as bad as the other guys."

Later in 2003, Lynch asked his chief of staff, Leonard L. Lopes, to serve as a witness to the DuPont negotiations. On Nov. 15, Nash called Lopes.

According to Lopes, Nash asked, "What is it going to take to get out of this?"

About a week later, Nash faxed a column to Lopes that had appeared in that day's St. Louis Post-Dispatch. Written by Dr. Benjamin Hooks, former chief executive of the NAACP and founder and cochairman of the Children's Health Forum, the column described the CHF's efforts to assist programs combating childhood lead poisoning in St. Louis.

Hooks wrote that "not all of our civil-rights battles would be fought in the courthouse" and called prevention "the only cure" for lead exposure. (In another op-ed piece, for The Baltimore Sun the previous year, Hooks called lawsuits against paint companies, like the one in Rhode Island, "misguided.")

The Children's Health Forum, a Washington nonprofit that Hooks cochaired with former HUD secretary Jack Kemp, was "pleased" to have worked with Congress to "create and fund" a national program providing $50 million in federal grants for "lead-hazard reduction," wrote Hooks in his Post-Dispatch column.

The op-ed piece did not mention that DuPont had financed the Children's Health Forum, or that Hooks and other board members were paid consultants for DuPont, or that the City of St. Louis had sued DuPont and other companies over lead paint.

Nash, in his talks with the Rhode Island attorney general's office, touted the good work that DuPont had done in St. Louis -- "how they established some sort of program through CHF," said Lopes.

"My understanding was that Bernie Nash had a relationship with CHF," said Lopes.

According to Lopes, Nash also asked, "Hey, you know, what can we do to make things better in the state of Rhode Island?"

A few months later, on March 8, 2004, Lopes wrote Lynch with the details of DuPont's first proposal. The company would donate $3 million over three years to the Children's Health Forum, money that would be spent on education, enforcement and abatement of 100 houses.

DuPont also offered to pay for a grant writer to help Rhode Island obtain federal money for lead programs.

On June 30, 2004, Nash donated $500 to Lynch's political campaign. The following year, six months after the DuPont deal was finalized and the state had dismissed DuPont from the case, Nash donated another $1,000, in December 2005. Nash's wife, Phyllis, also donated $1,000, the maximum allowed, on the same date.

Nash, who would not talk to the Journal, defended the contributions to the Associated Press earlier this summer, after Lynch's opponent, Harsch, filed a complaint with the Rhode Island Ethics Commission.

Calling the complaint "rubbish," Nash said: "It defies logic. Would I put my career on the line at any price? This is not big bucks."

"Patrick Lynch is a friend of mine," said Nash, who called the contributions personal and said that he has given to other attorneys general, in Rhode Island and around the country. "I support him, and I support maybe 30 other AGs."

Lynch said that Nash's political support did not color his judgment. Asked why he would put himself in a position creating at least the appearance of a conflict by accepting the donations, Lynch called Nash a "reputable lawyer" who donates to many candidates.

IN THE SPRING of 2004, Lynch rejected DuPont's $3 million proposal.

DuPont increased its offer to $14.1 million over three years, according to a summary produced by Lopes. But this would include $7.5 million in federal government grants to the Children's Health Forum -- part of the federal lead-mitigation grants that the CHF had lobbied Congress to enact.

The so-called Mikulski grants are named for Maryland Sen. Barbara Mikulski, the leading sponsor of the legislation.

The Mikulski grant, Lopes testified, "was something mentioned by Bernie Nash, that he would use every effort to see if he can secure this type of grant."

"Did Mr. Nash ever tell you why he thought DuPont might have the ability to secure a Mikulski grant for the state?" a lawyer asked Lopes.

"He never shared that with me, no."

Lynch, in his deposition, said that he never placed any value on the Mikulski grants, calling them "a separate category of potential monies that DuPont agreed to assist the state in trying to get."

Still, when the final agreement was struck last summer, it included $12.5 million in Mikulski grants -- though that was not publicly announced as part of the deal.

During the negotiations, Lynch testified, he told the company, "You know, you get credit for [the Mikulski grants] for a good faith effort, but the value of it is limited. Because you're only one part of efforts that everybody has to make. And we might never get it."

But DuPont wanted a more concrete kind of credit, according to Lopes. His handwritten notes summarizing a conversation with Nash refer to the Mikulski grants and say, "DuPont giving itself a 20% credit." On another sheet, Lopes wrote, "DuPont offers 20% credit for the obtaining of grant."

Lopes testified in his deposition that Nash "mentioned that DuPont wanted a credit of 20 percent if they were able to secure a Mikulski grant."

Talk of a credit didn't come up again, said Lopes, and was not part of the final deal.

Nash declined to be interviewed for this story. DuPont, in a statement, denied that the company had used federal grants as a bargaining chip.

"To assist the various Rhode Island towns in applying for these grants, Mr. Nash offered the grant-writing expertise of the Children's Health Foundation -- and nothing further," said DuPont spokesman Anthony R. Farina.

THE NEGOTIATIONS progressed fitfully over the next several months, stretching from 2004 into 2005.

Lynch and DuPont went back and forth on the numbers, how much money to devote to education, enforcement and abatement, how many houses DuPont would clean up, and over how many years.

Finally, DuPont agreed to donate about $10 million over five years. The company would give $1.5 million for education and training, $1 million for community outreach and $1.75 million for enforcement. In addition, DuPont was willing to clean up 600 homes over three years, at an average cost of $10,000 per house, or a total of $6 million.

Lynch insisted that the money "in whole, or in part, must flow through a R.I.-based nonprofit organization."

But DuPont insisted that the money go through the Children's Health Forum. While the CHF put out paint-company "propaganda," Lynch said, he still viewed it as a reputable organization that has supported legitimate programs.

If the money is ultimately going to address the problem in Rhode Island, Lynch argued, "what does it matter?"

Lynch also noted what had happened to Rhode Island's share of the tobacco money, which had been paid directly to the state. The General Assembly has used several hundred million dollars of that money to help balance the budget.

"With no disrespect to the State House, look what happened to the tobacco money," said Lynch, in an interview. "I wanted to show that this record-breaking, historic amount of money would go directly to the problem, and not be lost."

Lynch said that he had no problem cutting a deal with DuPont. While he considered the company culpable, it bore less responsibility than other defendants, having manufactured lead paint for a shorter period of time.

Additionally, the first lead-paint trial had ended in a mistrial, with the jury deadlocked 4-2 in favor of the paint companies. The paint companies had never lost, and there was no guarantee of victory the second time around. Despite DuPont's sensitivity to calling it a "settlement," Lynch said that the deal would still be historic -- the first time that a paint company had ever directed money to the problem in response to a lawsuit. The deal represents "a chink in the industry's armor," said Lynch.

"I wanted a sum of monies that we could apply over a long period of time, assuming your loss, then appeals," Lynch testified. "Then, wherever [the bigger case against the other companies] goes, to make a continued effort during that time, at least to show the community somebody stepped up to the plate while others had failed."

IN THE SPRING of 2005, Lynch and DuPont were close to an agreement.

But there was one final obstacle -- the question of legal fees.

Since DuPont didn't want to enter into a legal settlement, the company was adamant that it would not pay any legal fees to Motley Rice, the private law firm that the state had hired to sue the paint companies.

DuPont and the other defendants had challenged the attorney general's right to hire Motley Rice, a private firm, and promise it a contingency fee -- in this case, 16 2/3 percent of the value of any settlement or judgment. (The issue has yet to be resolved.)

Nash refused to even negotiate with John "Jack" McConnell, a Providence lawyer who would try the case the second time. McConnell, a prominent Democrat and supporter of Lynch and Providence Mayor David Cicilline, among others, had helped negotiate the national $246-billion settlement with the tobacco companies.

DuPont didn't want any of the money from its deal with Rhode Island going to help Motley Rice pursue the company in other lawsuits around the country. According to McConnell, Motley Rice is a plaintiff's lawyer in about three dozen pending lead-paint lawsuits across the country in which DuPont is a defendant, including cases on behalf of several municipalities in New Jersey and the cities of New York and San Francisco.

According to Lopes's notes, Nash wanted a "gag on Jack going to other AGs" -- a condition that did not become part of the final agreement.

"Bernie didn't want to pay any legal costs because he doesn't want Jack running around the country suing him," said Lynch.

Lynch thought that Nash's demand would be a "deal breaker." But Motley Rice, recognizing the long-range value of the deal, agreed to waive its legal fees, according to Lynch and McConnell.

Still, Lynch says, he wasn't satisfied.

"Why should that money stay in DuPont's pocket?" he said.

A written summary of the state's demands says that "DuPont must bear the cost of potential fees and a share of costs." Lynch estimated that the legal fees would have been about $3 million, plus costs of about $1 million.

The attorney general was "willing to be creative on how this happens."

According to Lynch, Nash suggested donations to Harvard University. Lynch rejected that, and suggested a donation to Roger Williams University's law school, perhaps to finance a chair on legal issues involving lead paint. DuPont rejected that.

The two sides finally agreed that DuPont would donate $1 million to the medical school at Brown University, Lynch's alma mater.

Lynch says he also suggested that DuPont donate money to Rhode Island Hospital and/or Hasbro Children's Hospital, but Nash balked. DuPont disputes this, saying that it suggested a donation to a Rhode Island hospital.

Finally, Lynch said, he asked McConnell if he had a favorite charity. McConnell suggested the International Mesothelioma Program at Brigham and Women's Hospital in Boston, which treats a deadly cancer of the tissue surrounding the lungs that is caused by exposure to asbestos.

Motley Rice had been involved in hundreds of asbestos lawsuits and had recently joined the board of the center at Brigham and Women's, agreeing to donate $3 million.

At Lynch's request, DuPont agreed to donate $2.5 million to Brigham and Women's. DuPont now says that it was unaware of Motley Rice's pledge, and has notified the hospital that it does not want its donation to count toward the pledge.

Leonard DeCof, a Providence lawyer who had also worked on the lead-paint case for the state, before withdrawing last year, has since filed a claim for legal fees, arguing that Motley Rice received a "de facto" legal fee by having the money applied toward its charitable pledge.

Lynch said that he was aware that Motley Rice had a "commitment" to Brigham and Women's, but defended the $2.5-million payment as being directed there only after DuPont refused to donate the money elsewhere or apply any more to addressing lead paint.

"Does it trouble you at all," a paint-company lawyer asked Lynch at his January deposition, "that a significant amount of money is going from DuPont to these entities that may have nothing to do with childhood lead poisoning?"

"Well, do I wish more money? . . . I wish all other parties were more genuine in their efforts," Lynch answered. "But in the scope of things, this was the best, absolutely the best application and best amount of funds that we could acquire for a community through an entity to go to the problem of protecting this state."

The lawyer pressed Lynch on whether he had made a conscious decision to "not have that money [going to Brigham and Women's] go to Rhode Island."

"That's not fair to say," answered Lynch. "I insisted on $30 million, you know, to come to this state. I insisted on a lot of things. I got the best deal that was available."

With staff reports from Peter B. Lord.

mstanton@projo.com/401-277-7724