Cigarette makers, states fight over money owed under settlement

Tobacco companies are withholding more than $700 million (Ђ579 million) that the states contend is owed to them this year under a landmark legal settlement.

Photo: Cigarette makers, states fight over money owed under settlement

Cigarette makers, states fight over money owed under settlement

No. 2 cigarette maker R.J. Reynolds Tobacco Co. paid the states about $1.4 billion (Ђ1.2 billion) but withheld $647 million (Ђ535 million), putting that in a "disputed payments account," Reynolds general counsel Charles Blixt said Monday.

He said the company was playing by the rules of the agreement. "This is the mechanism by which we withhold money," he said.

Blixt said his company believes it does not have to pay the extra $647 million (Ђ535 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.

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' attorneys 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.

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 (Ђ89.3 million), and putting that in a disputed, escrow account, Blixt said. He said Lorillard was paying the states $558 million (Ђ461.4 million). The payments were due Monday.

Industry leader Philip Morris USA said earlier this month it had made all of its $3.4 billion (Ђ2.81 billion) payment, but that it too believes the sum eventually should be reduced.

Philip Morris spokesman Michael Neese said the company hoped it could negotiate an agreement with the states. "We're going to continue to strive for that resolution," Neese said, reports AP.

O.Ch.