Herald-Leader Editorial

Big Tobacco adds insult to injury; Ky. at risk of losing settlement payments

March 11, 2014 

After addicting our children, shortening our lives, making puppets of our politicians and using generations of Kentucky farmers, Big Tobacco has another insult in store for the state that suffers the nation's highest rates of smoking and cancer.

Under terms of the 1998 master settlement agreement the big four tobacco companies (it's down to three now) were freed from endless legal liability, in exchange for paying the states almost $200 billion over 25 years. States that signed on would no longer be able to sue to recover the enormous costs of caring for sick smokers.

Kentucky was due to get $93 million from the settlement this year.

But Philip Morris, Lorillard and R.J. Reynolds, which merged with Brown & Williamson, and 30 smaller companies that joined the settlement later are disputing their obligation.

An arbitration panel sided with the cigarette makers last year, saying that Kentucky and five other states had been "nondiligent" in collecting escrow payments from the "non-participating" cigarette manufacturers. The non-participants are upstart generic cigarette companies that never misled the public about their research findings and whose executives never lied under oath about what they knew to be smoking's devastating harm to human health.

In addition to getting the master liars off the legal hook, the master settlement had terms to help them maintain their market dominance against new competitors. The settlement turned Kentucky and the other states into guardians of a Philip Morris monopoly.

Philip Morris and the others claim Kentucky fell short of enforcing required payments from the non-participants and says this caused the larger companies to lose market share in 2003, which, under the settlement, triggers a reduction in payments.

Just one year is at issue so far, but we can safely assume that, if successful, the manufacturers will challenge Kentucky's compliance in other years and keep trying to reduce their obligation to the state.

Kentucky is not the only state that Big Tobacco tried to stiff. A settlement was reached with 22 states earlier this year, although it's disputed whether the master settlement even allows such settlements, and the arbitration panel that ruled against six states ruled for nine.

Kentucky has used the tobacco settlement money mainly to diversify agriculture but also for early childhood programs; financing public water expansions in rural areas, and on various health programs, though not nearly enough on smoking prevention.

Kentucky is challenging the arbitration ruling in Franklin Circuit Court, where there is a hearing today. The state insists it has been diligent, a term not defined in the master settlement, about collecting the required assessments.

The industry has legions of lawyers and would never have signed anything that did not work to its advantage. But if it wins, no one should mistake that for justice.

For decades, Kentucky and its elected officials were foot soldiers in the battle to protect the interests of cigarette makers, even as their friends and family fell victim to tobacco addiction and disease.

Big Tobacco has always been Kentucky's exploiter, never its friend.

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