From Deseret News archives:
A tobacco-money tussle
Cigarette makers don't hand all funds over to Utah, other states
Payments to the states were due by close of business Monday. By late afternoon, Utah had received partial payments from two of the three tobacco companies and the third had paid in full, assistant attorney general Mark Burns said.
The state was scheduled to receive an estimated $29.5 million as part of its share of the 1998 Master Settlement Agreement. Burns said it would not be clear until later in the week how much Utah ultimately received and what impact, if any, that will have on the programs that rely on the tobacco monies, primarily the Children's Health Insurance Program and the Department of Health's Tobacco Prevention and Control Program.
"As you can imagine, we're working furiously on this issue at the moment," he said.
No. 2 cigarette maker R.J. Reynolds Tobacco Co. paid the states overall about $1.4 billion but withheld $647 million, putting it in a "disputed payments account," Reynolds general counsel Charles Blixt said.
Blixt said the company was playing by the rules of the agreement. "This is the mechanism by which we withhold money," he said.
R.J. Reynolds believes it does not have to pay the extra $647 million because of a provision in the deal that allows the cigarette makers to pay less if they have lost market share to smaller companies that weren't part of the settlement, Blixt said.
An economic consulting firm concluded last month that the agreement, which set marketing limits on the companies and required payments to states, was a "significant factor" contributing to the loss of market share.
The states' attorney generals say the companies would be entitled to a reduction only if states did not adequately enforce laws requiring cigarette makers outside the settlement to put money in escrow for future legal obligations.
"The states all take the position that when the dispute is finally settled we will be entitled to all the moneys placed into the Disputed Payments Account today, with interest, and we will take all necessary steps to ensure that these disputes are resolved as speedily as possible," Connecticut Attorney General Richard Blumenthal said in a written statement.
Blixt said the cigarette makers are working together to try to resolve their disagreement with the states.
No. 3 cigarette maker Lorillard Tobacco Corp. is withholding $108 million and putting that in a disputed escrow account, Blixt said. He said Lorillard was paying the states $558 million.
