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Virginia Sues for Tobacco Funds

Posted on: Thursday, 27 April 2006, 18:00 CDT

By John Reid Blackwell, Richmond Times-Dispatch, Va.

Apr. 27--Virginia has joined at least 15 other states in suing some cigarette companies to obtain millions of dollars in disputed tobacco settlement payments.

Attorney General Bob McDonnell said he filed a motion in Richmond Circuit Court late Tuesday seeking to force the companies to pay Virginia $16 million that was due April 17.

The disputed payment is this year's part of a 1998 legal settlement in which major cigarette companies agreed to pay 46 states $206 billion over 25 years to cover smoking-related health costs. Virginia's share is about 2 percent of the overall settlement.

Cigarette companies have paid more than $40 billion so far and were expected to pay $6.5 billion to the states this month. Instead, the states got about $5.7 billion after R.J. Reynolds Tobacco Co. and Lorillard Tobacco Co. withheld a portion of their payments, putting it into an escrow account.

Reynolds, Lorillard and several other, smaller companies withheld money because of a dispute over whether their payments to the states should be reduced.

Henrico County-based Philip Morris USA, the nation's top cigarette maker, made all of its $3.4 billion payment to the states this month, but the company has said it believes the amount should be reduced.

A provision in the settlement allows the companies to cut their payments if they lose market share to competitors that did not sign the accord. A consulting firm decided in March that restrictions imposed by the settlement have been a "significant factor" in eroding the companies' market share, but the states and the companies disagree over what, if any, payment reductions should be made and the process to determine that.

Virginia should have received more than $134 million but got about $118 million, McDonnell said in a statement.

Two groups in Virginia could lose money because of the withheld payments.

The Virginia Tobacco Settlement Foundation, which uses settlement money to pay for youth smoking-prevention programs, would lose about $1.6 million from its $13.4 million budget.

The Virginia Tobacco Indemnification and Community Revitalization Commission would lose about $8 million. That group receives half of the state's settlement money to pay for economic development projects in tobacco-growing communities.

The state general fund would get about $6.4 million less than expected for transportation, health care and education, McDonnell said.

A spokesman for R.J. Reynolds said the company wants a three-judge arbitration panel to settle the dispute.

"We are disappointed that Virginia has decided to seek legal action, when it is clearly spelled out in the [settlement] that disputes over payments should be resolved through binding arbitration," said David Howard, a spokesman for the Winston-Salem, N.C.-based company.

The Virginia attorney general's office "disagrees strongly" with that interpretation and believes the appropriate forum is Richmond Circuit Court, said Deputy Attorney General Frank Ferguson.

The attorney general also believes Virginia should be exempt from any reductions in settlement payments because the state has diligently enforced statutes placing limits on companies that did not sign the accord.

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Copyright (c) 2006, Richmond Times-Dispatch, Va.

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RAI, BTI, BATS, CG, MO,

Source: Richmond Times-Dispatch

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