Joel Neaveill, Interim Phase II President
Kara Keeton, Communications Director
Governor’s Office of Agricultural Policy
(502) 564-4627
agpolicy.ky.gov

Three major cigarette manufacturers declined this week to send their scheduled third quarter payments to the National Tobacco Grower Settlement Trust, commonly referred to as the Phase II Trust. The funds provide direct aid to tobacco growers and quota owners in 14 tobacco-growing states. In letters dated September 18, R.J. Reynolds, Lorillard, and Brown & Williamson tobacco companies announced that they would instead put the funds into an escrow account, until it is determined whether the proposed tobacco buyout legislation pending before Congress is adopted.

Philip Morris, the only other participating manufacturer, made their payment to the trust as scheduled.

Withholding of the funds totaled approximately $51.2 million and could result in a reduction of over $15.2 million in payments this year to Kentucky’s growers and quota owners.

Joel Neaveill, interim President of the Kentucky Tobacco Settlement Trust Corporation (KTSTC) said that the KTSTC Board recognizes the importance for the tobacco companies to honor their commitment to the farmers. "Whether you are for the buyout or not, our focus is to ensure that these three companies meet their obligations under the trust agreement," Neaveill said. "Our main concern is the Kentucky tobacco farmers and we want to make sure that tobacco growers and quota owners receive the full benefit of any payments they are due under the terms of the trust."

JP Morgan-Chase, National Trustee for the Phase II program, responded to the three companies, stating that by not making the scheduled payment to the Trust, they are in violation of the trust agreement. That agreement is part of the master settlement reached in 1999 between the major tobacco companies and 46 states. The trustee indicated it hoped that the three companies would reconsider their position and make the scheduled payment directly to the trust as scheduled.

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