Bloomberg News

Cigarette Makers Agree With 17 States on Cash Release Terms

December 18, 2012

Philip Morris USA said it and other cigarette makers will release to 17 states, the District of Columbia and Puerto Rico their portions of more than $4 billion in payments held back from a 1998 settlement agreement.

That 14-year-old, 46-state accord required the tobacco companies to pay $206 billion to resolve their liability in health-care cost litigation. A dispute later arose over more than $7 billion due under the deal for the years 2003 to 2012, stemming from claims that market-share erosion reduced the amount of the companies’ obligation.

In exchange for the release of funds, Philip Morris, Lorillard Inc. (LO:US) and Reynolds American Inc. (RAI:US) said today they would receive credit against future payments.

“This agreement resolves disputes with a large group of states on financial terms that are fair to the parties and in a way that we believe will lead to a better method for resolving these issues in the future,” Denise Keane, general counsel to Altria Group Inc. (MO:US), the parent of Philip Morris, said today in a statement.

Philip Morris’ credit against future payments is worth an estimated $450 million, according to its press statement. Greensboro, North Carolina-based Lorillard said its credit is worth about $198 million over the next five years.

$1 Billion

Reynolds American said its five year credit could be worth more than $1 billion.

Lynda Gledhill, a spokeswoman for California Attorney General Kamala Harris, confirmed that state’s participation in the accord in a phone interview today.

Amy Rezzonico, a spokeswoman for Arizona Attorney General Tom Horne, didn’t immediately respond to a phone message seeking confirmation of the agreement and comment on it.

Wyoming Attorney General Gregory Phillips also didn’t immediately return a phone message seeking comment.

Other states joining in the agreement include Alabama, Arkansas, Georgia, Kansas, Louisiana, Michigan, Nebraska, Nevada, New Hampshire, New Jersey, North Carolina, Tennessee, Virginia and West Virginia.

States participating in the 1998 accord have already received more than $85 billion, according to the statement issued by Richmond, Virginia-based Altria.

To contact the reporter on this story: Andrew Harris in Chicago at aharris16@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net


Race, Class, and the Future of Ferguson
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

Companies Mentioned

  • LO
    (Lorillard Inc)
    • $60.43 USD
    • -0.14
    • -0.23%
  • RAI
    (Reynolds American Inc)
    • $58.22 USD
    • 0.29
    • 0.5%
Market data is delayed at least 15 minutes.
 
blog comments powered by Disqus