Texas Wants Court to Make Tobacco Companies Repay $125 Million in Missed Payments

Tobacco companies owe Texas more than $125 million as compensation for smoking-related health care costs, and the state is demanding they pay up.Attorney General Ken Paxton on Tuesday asked a U.S. District Court to enforce the terms of a 1998 settlement that mandated annual payments in perpetuity from five major cigarette companies. The lapse in payment took place after two companies from the original settlement sold cigarette brands to a separate company in 2015, and none of the entities made the necessary payments in the following years, according to court filings.“Taxpayers of Texas are owed over $100 million in back payments from the tobacco settlement,” Paxton said in a written statement. “And my office is going to make sure that the tobacco companies live up to the terms of the comprehensive settlement agreement with our state now and in the future.”In 2015, R.J. Reynolds Tobacco Company and Lorillard Tobacco Company sold four brands of cigarettes to ITG Brands LLC: Winston, Kool, Maverick and Salem. ITG paid $7.1 billion for the brands, which Reynolds and Lorillard sold after merging. The companies did not make the state aware of the sales, which they were obligated to do. Now, the state says either Reynolds or ITG is liable for the missed payments and must pay the state with interest. The 1998 Texas Settlement Agreement was the largest settlement against the tobacco industry to date. The funds would go to repay the state for smoking-related Medicaid claims and could be used for anti-smoking programs and other efforts. The Houston Chronicle reported that 2 percent, or $10.2 million, of Texas' settlement money was allocated to efforts to reduce smoking in 2016. About 10 times that went to an endowment for children's health care and cancer research.Texas’ victory in federal court helped clear the way for a 46-state Master Settlement Agreement in 1998 that allows states excluding Texas, Florida, Minnesota and Mississippi to collect annual payments from the tobacco industry.The four excluded states had already reached wn separate settlements in cases against the industry by then, a development that pressured tobacco companies into entering the master settlement to avoid further litigation.  Continue reading...