Virginia Okay Triggers U.S. Tobacco Payouts
CHARLOTTE, N.C. (Reuters) - The state of Virginia finalized its acceptance of the $206 billion national tobacco settlement on Friday, clearing the way for payments to begin under the pact nationwide, state attorneys general said.
The first payouts under the landmark settlement, negotiated last year to fend off a rash of state lawsuits seeking to recover costs of treating ill smokers, will be made before the end of the year, the attorneys general said.
``We'll get our first payment within the next 10 days to two weeks, second payment in January, then we'll begin the first annual payment that begins in April each year,'' Washington state Attorney General Christine Gregoire said.
The national tobacco settlement announced in November 1998 had required states representing at least 80 percent of the proceeds from the settlement to sign on, and Virginia's inclusion cleared that threshold, the attorneys general said.
``We can only hope that the attorneys general and the public health community will use this money to develop and implement programs to reduce youth smoking,'' R.J. Reynolds Tobacco Co. spokesman Seth Moskowitz said.
Under the settlement, negotiated with more than 40 state attorneys general, the tobacco companies agreed to pay an estimated $206 billion to the states through 2025. The industry earlier had settled suits in Mississippi, Florida, Texas and Minnesota for more than $40 billion.
Among other things, the settlement requires the tobacco industry to underwrite a campaign to cut underage smoking and substance abuse and educate smokers about tobacco-related diseases.
The settlement also restricts industry lobbying, bans the use of cartoon characters and billboard advertising, and dissolves groups like the Tobacco Institute and Council for Tobacco Research, which have been blamed for misleading research on the effects of smoking.
Gregoire said preliminary data indicate that anti-smoking campaigns and the cost of the settlement, which is reflected in higher cigarette prices, have contributed to a 7.5 percent drop in cigarette consumption this year.
``The fact that we have seen that dramatic a change is very good news,'' she said.
The drop in cigarette sales will cut into the payouts to the states. The estimated $206 billion payout assumed constant cigarette demand over the next 25 years, with payments reduced to reflect the drop in sales, and raised at least three percent a year for inflation.
``(The payout amount) is simply going to depend on whether consumption declines are greater than the three percentinflation factor,'' said Phil Carlton, a North Carolina attorney and tobacco industry negotiator. ``If I was a betting man, I would say that your percentage decline is going to be greater than the inflation rate.''
In Virginia, one of the leading tobacco-producing states, the settlement had been challenged by Lynchburg attorney James Feinman, who alleged the state should have sought double the $4 billion it is slated to receive under the settlement.
Feinman's lawsuit, tossed out by a state court in Richmond as frivolous, had argued that Earley and Virginia Gov. James Gilmore, both Republicans, should not have negotiated on behalf of the state after accepting a combined $300,000 in campaign contributions from tobacco companies.
The Virginia Supreme Court on Nov. 5 rejected Feinman's appeal seeking a new hearing in the case.
Feinman was not immediately available for comment.
According to a spokesman with the National Association of Attorneys General, seven states -- Alabama, Arizona, Arkansas, Missouri, New Jersey, Tennessee and Pennsylvania -- have not yet finalized agreements to participate in the settlement.
The settlement has been accepted by the governments of Washington, D.C., and Puerto Rico, the U.S. Virgin Islands, Guam, Northern Mariana Islands, and American Samoa.