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Attorney General Bill Lockyer Announces California Will Receive Previously Withheld Tobacco Payment

States Prevail in Dispute with Brown & Williamson Over $200 Million
Friday, April 5, 2002
Contact: (415) 703-5837

(SACRAMENTO) – Attorney General Bill Lockyer and the National Association of Attorneys General (NAAG) today announced Brown & Williamson Tobacco Corp. has agreed to pay about $204 million that it withheld from payments due in January to 46 states and six U.S. territories under the Master Settlement Agreement.

"Brown & Williamson has wisely agreed to honor the global tobacco settlement that holds the tobacco industry accountable for the damage caused by its products," Lockyer said. "The country's state attorneys general will continue to ensure that tobacco companies abide by all terms of the agreement, including strict public health provisions, advertising and marketing restrictions and making timely, full monetary payments to the states."

Brown & Williamson, the nation's third-largest cigarette manufacturer, withheld an estimated $204 million in a dispute about the validity of the industrywide figures used in calculating the amount owed each state under the Master Settlement Agreement (MSA). Following negotiations with the NAAG Tobacco Committee, the company agreed to release the funds when it makes its next payments on April 15. The NAAG Tobacco Committee, responsible for coordinating the enforcement of the MSA, comprises attorneys general from 15 states, including California, and the attorneys general for the U.S. Virgin Islands and the District of Columbia.

In January, the state received a payment of $248 million. Of the $204 million Brown & Williamson has agreed to pay, the state expects to receive more than $30 million, which will be added to the amount it is scheduled to receive in April. Half of all payments California receives are distributed to the state's 58 counties and the cities of Los Angeles, San Diego, San Francisco and San Jose.

Signed in 1998, the MSA is the result of an agreement with all of the major tobacco companies to settle lawsuits the states brought against them to recoup costs associated with smoking.

Reached with the U.S. territories and all states except Florida, Minnesota, Mississippi and Texas, which entered into separate settlements, the MSA requires the tobacco manufacturers to make annual payments to the states in perpetuity. The amount during the next 25 years is expected to total $206 billion, but exact figures are based on a complex formula that changes, in part, based on the number of cigarettes sold. As tobacco product consumption declines, for example, the amount of payments is expected to drop. California is expected to receive more than $20 billion through 2025.

The global settlement agreement also bans tobacco manufacturers from targeting youth in advertising, promotions and marketing; prohibits outdoor advertising of tobacco products on billboards and buses; and restricts the size of signs in retail stores that sell tobacco products. It also prohibits tobacco companies from paying to promote tobacco in the media and sponsoring events that attract a large number of youth.

In 1999, Lockyer established a full-time Tobacco Litigation and Enforcement Section to enforce state laws regarding the sale and marketing of tobacco products and the national MSA. The unit has successfully sued two tobacco companies: R.J. Reynolds Tobacco Company for posting outdoor advertising at sporting events and mailing free cigarettes to consumers without determining if they were over the age of 18, and Swedish Match for violating prohibitions against handing out free tobacco samples. It also has spearheaded a multi-state effort to convince Philip Morris and other companies to cease advertising in magazines that have youth audiences of more than 15 percent of their readership. A lawsuit brought by California against R.J. Reynolds for targeting children through print advertisements is scheduled for trial April 19.

Californians who suspect violations of tobacco laws or the MSA may file complaints by calling (916) 565-6486 at anytime, or by writing to the Tobacco Litigation and Enforcement Section at P.O. Box 944255, Sacramento, CA 94244-2550. Additional information is available on the Attorney General's website at http://www.ag.ca.gov/tobacco/

In addition to Lockyer, the members of the NAAG Tobacco Committee include the attorneys general of Arizona, Illinois, Iowa, Kentucky, Michigan, Mississippi, New York, Ohio, Oklahoma, Pennsylvania, Tennessee, Texas, Vermont, Washington and the District of Columbia and the U.S. Virgin Islands.

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