Office of the Attorney General
Attorney General Stumbo Announces State Receives $833,000 in Supplemental Tobacco Payments

Press Release Date:  Monday, June 04, 2007  
Contact Information:  Vicki Glass, 502-696-5643 Office  

Attorney General Greg Stumbo announced that Kentucky today received a supplemental payment of $833,000 under the 1998 tobacco Master Settlement Agreement (MSA). This payment is the state’s share of the $47.3 million in distributions made now, following the distributions of the annual payment of $6.02 billion that was made in April to the 52 states and territories that are part of the MSA.

The bulk of today’s distribution came from R.J. Reynolds Tobacco Company and Lorillard Tobacco Company. These companies have placed funds into a disputed payments account because of a dispute over the application of the “Non-Participating Manufacturer Adjustment” to the annual payments based on sales years 2003 and 2004. The companies released the funds because PricewaterhouseCoopers, the independent auditor to the MSA, has reduced the maximum potential amounts of these “Non-Participating Manufacturer Adjustments.” There was no similar release of funds from Philip Morris because, unlike R.J. Reynolds and Lorillard, it has not placed funds into the disputed payments account.

“It’s important that Kentuckians due money from the MSA receive all they are entitled,” said Attorney General Stumbo. “The MSA is primarily a public health agreement. As advocates for the public interest, we believe it is important to enforce all provisions and ensure that every dollar of the state’s share is received.”

Today’s distribution also includes late payments, primarily from the General Tobacco Company of Miami, and a smaller amount from the estate of a tobacco company that is being liquidated after filing for bankruptcy.

The MSA requires all the tobacco companies that are signatories to the agreement to make annual payments to the states in perpetuity. The payments are based on each company’s market share and were valued at $206 billion over the first 25 years of the agreement. In addition, the companies that participate in the agreement have agreed to abide by an extensive set of restrictions on their advertising, marketing and promotion of cigarettes, especially to youth. Thus far, the states have received more than $53.7 billion in payments under the settlement. The Kentucky Office of the Attorney General has been directly involved in the litigation and negotiations resulting in these and other MSA payments.