State sues to regain tobacco cash
Attorney General Mike Cox sued 23 tobacco companies Tuesday for withholding part of their annual payments to the state under a 1998 court settlement that has brought nearly $300 million a year to Michigan.
Cox joined attorneys general in 16 other states who have sued the tobacco companies over the disputed payments.
Two of the largest companies, R.J. Reynolds Tobacco Co. and Lorillard Tobacco, cited falling cigarette sales as reasons to withhold $30 million to the state. In all, tobacco companies stand to keep $1.2 billion that 46 states say are owed to them.
In Michigan, money from the tobacco settlement pays for three state programs -- the Merit Award Scholarships, Medicaid and a new $1-billion fund to lure high-tech companies and entrepreneurs.
It's unlikely the dispute will affect the state budget, said Greg Bird, spokesman for the state budget office. He said if Cox wins the lawsuit, the state would receive the tobacco money plus interest.
Bird said at worst the withheld $30 million would come out of an expected $80-million surplus at the end of the fiscal year Sept. 30.
The tobacco companies say the 1998 settlement allows them to reduce payments if they lose market share to smaller cigarette companies.
Cox, in a lawsuit filed in Ingham County Circuit Court, said the companies have no legal grounds to reduce payments. He said the companies can withhold payments only if other cigarette manufacturers don't pay into escrow accounts that cover costs of the 1998 settlement.
Those escrow account payments are meant to prevent the smaller companies that were not part of the settlement from having an unfair pricing advantage, Cox spokesman Rusty Hills said.
Hills said the state has successfully sued small tobacco companies to enforce the escrow requirement.
"Our fight is not whether market share was lost or not," Hills said. "We have aggressively upheld terms of this agreement, including going after companies that weren't paying their fair share."
