Cuomo Announces $767 Million Tobacco Settlement Payment For 2007

NEW YORK, NY (April 18, 2007) - Attorney General Andrew Cuomo today announced that a total of $767 million was paid to New York State, New York City, and individual counties this week under the tobacco Master Settlement Agreement (MSA). Several tobacco companies, however, withheld approximately 25% of their payments due, most notably R.J. Reynolds and Lorillard. Many of these same companies similarly withheld money from their 2006 payment to New York, prompting court action last year by the Attorney General to recover the amounts withheld.

"The good news is that New York State and its counties will be getting millions of dollars to make sure that all New Yorkers, especially kids, know that smoking kills. Since the MSA was executed in 1998, cigarette sales in the United States have fallen by more than 21% and by 2005 smoking by youth had declined by 36%," Cuomo said. "However, the failure of two of the big three tobacco manufacturers - R.J. Reynolds and Lorillard - to pay the full amount owed to the States violates both the letter and the spirit of the tobacco Master Settlement Agreement. Whenever the tobacco companies withhold funds that they are required to pay under the agreement, I am going to use all possible legal avenues to get those funds back for the taxpayers."

The MSA, which requires tobacco companies to make significant payments to the signatory States to offset the hundreds of millions of dollars spent to treat tobacco related illnesses, is primarily a public health agreement. The MSA is a court-ordered contract between the parties, in which the tobacco companies agreed to make annual payments to the States, and also to stop certain marketing practices, such as advertising aimed at young people and advertising that misleads the public about the dangers of cigarette smoking.

This year, the tobacco companies were supposed to pay the States approximately $6.753 billion, of which New York was to receive about $820 million. However, the companies only paid $6.009 billion (89%), which reduced New York's payment to approximately $767 million. The basis for withholding these funds is an alleged entitlement to a downward adjustment to the payments for cigarette sales lost to tobacco companies that have declined to sign the MSA ("Non-Participating Manufacturers" or "NPMs"). More than a dozen tobacco companies made their full payment - including Philip Morris, which paid the full $3.5 billion that it owed to the States. Numerous other companies did not pay, however - including R.J. Reynolds and Lorillard Tobacco, which withheld $561 million and $110 million, respectively. Approximately $756 million is still owed to the States nationwide for this year and $814 million is still owed for last year's annual payment, totaling nearly $1.6 billion outstanding.

The litigation is being handled by Assistant Attorneys General Louis Willenken and Kesha Tanabe, under the supervision of Dana Biberman, Chief of the Tobacco Compliance Unit.

Attached are two charts. The first chart shows the MSA payments made to New York in each year since 1999. The second chart shows the allocation of the latest $767 million payment among New York State, New York City, and the 57 individual counties.

TOTAL MSA TOBACCO SETTLEMENT PAYMENTS TO NEW YORK STATE

2007 MSA TOBACCO SETTLEMENT PAYMENTS TO NEW YORK STATE AND COUNTIES