State Sen. Gerald Malloy formally answered a Chesterfield County family's claim that he cheated them out of a nearly $15,000 insurance settlement.

In an answer and counterclaim filed Monday in Darlington County, Malloy states the accusations he stole the check are false. He said he has turned all of the funds in question over to the family's new attorney, George Gregory of Cheraw, along with notices of all applicable liens.

Malloy said the reason he did not turn over the money to the family initially was because of medical liens that prevent him from doing so.

Gregory said Tuesday he received the check valued at $14,868.97, and he is checking with lien holders to see what he should do next.

Gregory said the $500,000 lawsuit against Malloy would continue to move forward, because the family deserves to receive some punitive damages since Malloy held out on the check for more than two years.

"As an attorney (Malloy) should have known he couldn't co-mingle funds," Gregory said. "If for some reason he couldn't disperse the check, he should have put it in a separate fund. Whatever (Malloy) did, he shouldn't have kept it in his pocket and collected all the interest on it."

In response to the $500,000 lawsuit, Malloy has filed two counterclaims. The first states Malloy was never given an opportunity to explain why he kept the check, and the second states that he believes the action being taken against him is to embarrass or humiliate him during a political campaign.

Malloy is asking that if proven not guilty, he be awarded attorney fees and all costs associated with his defense.

According to court reports filed in the case, the situation started when Malloy was hired to represent Jerry Bittle, who became mentally incompetent after suffering brain damage in a motor vehicle accident May 24, 1999.

According to the complaint, filed Aug. 4 by Bittle's mom, Annie B. Melton, Malloy had Bittle endorse the insurance check in 2001, promising to send Bittle his share of the money in a few days.

The complaint states Bittle's family waited more than two years for their portion of the check, eventually contacting Cheraw attorney George Gregory Jr. when the money never came.

In Malloy's answer to the complaint, he admits representing Bittle in the case and having him endorse the insurance check. He later states that common law, statutory and contractual liens existed far in excess of the funds recovered by Bittle and that Malloy is obligated to hold the funds until the lien issues are resolved.

Gregory said he is working to resolve those issues.