FRANKFORT, KY (April 20, 2005) - As required under the 1998 Master Settlement Agreement (MSA) with the major tobacco manufacturers, Kentucky has received an annual payment of $111,013,201.94 in tobacco settlement money, Attorney General Greg Stumbo announced today.

“My office continues to work diligently to ensure that the Commonwealth’s share of the tobacco settlement is secure,” Stumbo said. “We will not sit back and allow the tobacco companies to shortchange Kentucky and its citizens.”

In November, 1998, Kentucky filed suit against tobacco companies Phillip Morris, RJ Reynolds Tobacco, Brown and Williamson and Lorillard. In December, 1998, Kentucky settled all of its litigation against the tobacco manufacturers pursuant to the Master Settlement Agreement (MSA). The claims of over 40 other states and governmental entities that were pursuing a variety of causes of action against tobacco manufacturers were also settled under the agreement.

In the MSA, the tobacco companies agreed to make annual payments in perpetuity to the Settling States, to fund a national foundation dedicated to significantly reducing the use of tobacco products by youth and to abide by certain restrictions on promotional and lobbying activity. Kentucky’s share of the settlement is approximately $3.45 billion over the first twenty five years. Payments are determined according to a formula that is calculated, in part, by the number of cigarettes sold by companies that have agreed to join the settlement.

The total received since the initial MSA payment in 1999 is more than $733 million for Phase I. An additional $600 million has been received under Phase II Trust Agreement which was initiated from the MSA provision to address affected tobacco growing communities in 14 states.

Attorney General Stumbo is currently pursuing an appeal in North Carolina Supreme Court for the 2004 Phase II payments owed to Kentucky tobacco growers. That case will be heard May 16, 2005. The amount at stake is approximately $424 million total, with $123 million as Kentucky’s share.

In January, the Office of the Attorney General filed a petition in the Supreme Court of North Carolina asking for an expedited review of Judge Ben Tennille’s December 23, 2004 ruling (North Carolina Business Court) that the federal tobacco quota buyout entitles the tobacco companies to an offset against their 2004 payments under the National Tobacco Grower Settlement Trust Agreement. Although an appeal had already been filed in the North Carolina Court of Appeals regarding this decision, the document filed asked the Supreme Court for immediate review of the decision due to the fact that delaying the final decision of this case would cause significant harm to thousands of people. The Attorney General filed the petition on behalf of the Kentucky Settlement Trust Corporation, the Phase II certification Board, along with the Boards of six other states and the Phase II Trustee (JPMorgan Chase Bank).

Ultimately, this appeal will decide whether the approximately $424 million will go to hundreds of thousands of tobacco farmers or whether the money will go back to tobacco companies. If upheld, the judge’s ruling will refund payments made by tobacco companies under the Trust Agreement for 2004 (also referred to as Phase II payments) and will leave tobacco farmers without the payment they have been expecting to receive in late 2004 or early 2005. The last payment made to tobacco farmers under the Trust Agreement was December 30, 2003.

In the petition, the Attorney General argued that the elimination of this payment is causing a severe hardship for farmers and their communities because of the unexpected gap in payments. Although the Trust Agreement specifies that the amount each tobacco company must contribute in a given year can be reduced in response to certain governmental obligations, such as the new buyout law, the petition argued that since no payments had actually been made by the tobacco companies during 2004 toward any governmental obligation, then no refund of Trust payments is due for 2004.