Gov. Paul LePage moved Thursday to block Attorney General Janet Mills from tapping into nearly $11 million in legal settlement funds, adding a new chapter to an ongoing dispute between the two offices.

LePage directed the state controller to transfer more than $10.9 million from an account controlled by Mills’ office into an account that would require the Legislature’s approval for expenditures. In a letter to legislative leaders notifying them of the transfer, LePage, a vocal critic of Mills, said her ability to tap into the funds without legislative or executive oversight was “repugnant to the constitution and the laws of the state of Maine.”

“By way of my executive action, I am making no comment on whether the purposes for which the attorney general wants to spend the money are appropriate,” LePage wrote. “I maintain that the decision belongs to the Legislature and not the attorney general.”

But Mills fired back Thursday, accusing LePage of “misappropriating” the funds and, in the process, violating state law.

“The governor has transferred funds out of the Consumer Protection Trust Fund without consultation and without legal authority, including funds already appropriated by the Legislature for the biennial budget,” Mills said in a written statement. “He and the controller have now overdrawn this account in violation of law, in violation of court order and in violation of the constitution, unlawfully taking funds from an account established by the Legislature nearly three decades ago, misappropriating funds intended for restitution, expert witnesses, expenses of litigation and other legitimate uses in accordance with court order and statute.”

The money represented part of Maine’s share of multistate settlements with Volkswagen over diesel emissions, and with Moody’s Corp. over mortgage-backed securities involved in the last decade’s financial crisis.

The Maine Department of Transportation plans to spend $21 million of the Volkswagen settlement on several projects to improve air quality in the state. Mills’ office received a separate portion of the Volkswagen settlement that also must be earmarked for clean-air and clean-energy projects, but a Mills spokesman said no decisions have been made about precisely how and where the money will be allocated.

Maine Controller Douglas Cotnoir said he transferred $10.9 million from the AG’s “fiduciary fund” – $7.2 million received from the Moody’s settlement in February and $3.6 million from the Volkswagen settlement last December. Cotnoir also disputed Mills’ statement that the fund is now overdrawn.

“The fiduciary fund continues to maintain a balance, so the fund has not been overdrawn,” Cotnoir said in a written response. “These funds were not appropriated by the Legislature for the biennial budget.”

Cotnoir said “the settlement funds that the governor instructed the controller to transfer were not specifically authorized for restitution, expert witnesses or expenses of litigation by the Legislature or court order.”

This is at least the second time that LePage has transferred settlement money out of a fund that was largely controlled by Mills, a Democrat who has clashed repeatedly with Maine’s Republican governor. Mills is currently seeking the Democratic nomination to succeed LePage as governor when his term ends in January 2019.

States’ handling of legal funds varies dramatically and often depends on language included in the settlement. Some states give attorneys general broad discretion to use the money, while others funnel much of it into the “general fund” that pays for state government and services.

In Maine, settlements typically flow into the Consumer Protection Trust Fund. It was unclear Thursday whether the Volkswagen and Moody’s settlements required Maine to devote a portion of the money to specific purposes. However, LePage pointed to language saying expenditures from the fund were at Mills’ “sole discretion.”

In her statement, Mills said LePage was trying “to misappropriate funds that the Attorney General’s Office is using instead to fight the opiate epidemic, to litigate against corporate wrongdoers and to win restitution for the state and its people.”

In February 2015, LePage introduced legislation that sought to take that discretion away from the attorney general and, instead, allow the Legislature to decide how to spend settlement money. But lawmakers rejected LePage’s bill, prompting him to order the comptroller to transfer $21.5 million from a settlement with Standard and Poor’s rating agency out of an account controlled by Mills into one requiring legislative oversight.

On Thursday, LePage repeated his argument.

“Members of the Legislature, the question for you is this: Did the Legislature intend to grant the attorney general the unrestricted and unchecked authority to spend over $10 million in public dollars in any way she sees fit?” LePage wrote in his letter. “If so, you need to make that intention clear and public because, at this point in time, I do not believe the relevant laws or the Maine Constitution gives her such broad and unrestricted discretion.”

LePage and Mills have had a tense and, at times, combative relationship for years as they have clashed on issues ranging from Medicaid to immigration policy. She has declined to represent LePage’s office in federal lawsuits that she says do not represent the state’s interests.

After the 2015 transfer, Mills worked with the Legislature to allocate the $21.5 million from the Standard and Poor’s settlement.

Mills spokesman Andrew Roth-Wells said the Attorney General’s Office was reviewing its options for responding to the most recent transfer.

Kevin Miller can be contacted at 791-6312 or at:

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