April 16, 2013
Pennsylvania declines offer from tobacco companies
HARRISBURG- Attorney General Kathleen G. Kane has announced that rather than accept the tobacco industry's settlement offer, Pennsylvania will continue to litigate, along with 30 other states, the Master Settlement Agreement which originated in 1998. Kane said she arrived at this decision because the offer was based on financial estimates - data provided by the tobacco industry - that lacked solid evidence or could not be verified, and could have cost Pennsylvanians hundreds of millions of dollars over the next few years.
"Our job is to diligently protect the citizens of Pennsylvania. I could not agree to a settlement that contained unclear terms and financial projections. After a thorough review of the proposal and after speaking with Attorneys General across the country, I decided that at this time, based upon a lack of concise information, the settlement was not in the best interest of the Commonwealth."
Kane also said that terms proposed by the settlement "called for the imposition of a tax that the Office of Attorney General had no authority to impose, and terms that benefited tobacco manufacturers and not Pennsylvanians."
"On the surface, this deal may appear attractive," said Kane. "Long term, it may have cost Pennsylvanians hundreds of millions of dollars, and if we did not comply with some rather burdensome terms and conditions, those losses would have been increased dramatically."
In 1998, Pennsylvania and 51 other states and territories joined a Master Settlement Agreement to resolve claims that the major tobacco companies had caused serious financial harm to the states through the sale of cigarettes. The settlement payments continue so long as the tobacco companies continue to sell cigarettes. In 1998, the settlement was valued at $206 billion over 25 years. Pennsylvania's share of the settlement was then valued at $11.2 billion over 25 years. Each year, Pennsylvania receives more than $300 million from the Tobacco Settlement. This amount can fluctuate depending on cigarette consumption.
There has been a dispute for many years about whether the tobacco companies are entitled to a reduction in their payments. The dispute concerns whether Pennsylvania and other states were collecting enough payments from the non-participating cigarette manufacturers. Pennsylvania's share of the disputed amount averages about $50 million each year, with a significant variance from year to year.