ATTORNEYS GENERAL OF 14 STATES DEMAND
PAYMENT BY BIG TOBACCO TO FARMERS

Attorney General J. Joseph Curran, Jr., announced today that he and 13 fellow attorneys general asked cigarette makers that failed to pay into a fund for tobacco growers and quote holders to make the scheduled payments immediately.

Attorneys General from Alabama, Florida, Georgia, Indiana, Kentucky, Maryland, Missouri, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Virginia, and West Virginia today wrote to three companies that missed payments due September 30 to the National Tobacco Grower Settlement Trust, also known as the Phase II Trust.

In a letter to executives of Brown & Williamson Tobacco of Louisville, KY, Lorillard Tobacco Company of Greensboro, NC, and RJ Reynolds Tobacco Company of Winston-Salem, NC, the attorneys general asked that the companies "honor the Trust terms by making the September 30, 2003 payment with interest immediately and by continuing to make payments in accordance with the terms of the Trust Agreement."

In a separate letter also dated today, the attorneys general asked the Trustee "to take any and all appropriate actions to ensure that these payments with interest as well as all future payments area made in accordance with the Trust terms." The Trustee has the power to take legal action to enforce the Trust Agreement.

The three companies that withheld payment have indicated that they are holding their quarterly payments to the Trust in escrow because of tobacco buyout bills pending in Congress. Under the proposed legislation, buyout payments to tobacco growers and quota holders may be funded by additional costs borne by cigarette manufacturers.

In writing to the companies, the attorneys general pointed out that, "there have been numerous proposed tobacco buyout bills for several years and you have never before used speculation over whether these bills would become law as a reason to withhold your Phase II Trust payments."

The Phase II Trust Fund was established as part of an agreement between tobacco growing states and the four major cigarette manufacturers to compensate quota owners and growers. According to the Trust Agreement, cigarette makers must pay 25 percent of each annual payment on or before September 30 of each payment year.

Under the Trust Agreement, manufacturers may offset payments only if changes in laws or regulations lead to a new or increased cigarette tax designed to provide direct payments to growers or quota owners. There is no provision in the Trust Agreement for placing the required payments in escrow.

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