Mo. AG says tobacco payment loophole causing big problems

John O'Brien Feb. 2, 2012, 2:51pm


JEFFERSON CITY, Mo. (Legal Newsline) - Missouri Attorney General Chris Koster says the state legislature's inaction on a tobacco payment loophole has placed the state in "terrible and unnecessary peril."

For a third time, Koster is asking the legislature to repeal a flaw in the state's tobacco escrow statute, writing to each member of the Legislature on Jan. 25. Koster says a state law related to the 1998 Tobacco Master Settlement Agreement allows companies that pay concentrate their sales in Missouri to recover almost the entire amount they put into an escrow fund designed to help with medical costs caused by smoking.

The other 45 states that signed the MSA have taken care of this issue, Koster says. Tobacco companies must either sign the MSA or put funds in escrow accounts.

"Missouri stands alone in its coddling of these non-signatory cigarette producers," Koster wrote.

Sen. Kurt Schaefer has introduced a bill that would repeal the Allocable Share Release. Other bills with that intended purpose have failed in the past.

Not approving Schaefer's bill would possibly cost the state millions in MSA payments, Koster said. Tobacco companies that have signed the agreement have alleged that Missouri is not diligently enforcing its escrow statute.

"In no small part, they complain that these non-signatory companies which concentrate their sales in Missouri are still able to recover nearly all of their escrow payments each year," Koster said. "In short, the failure to repeal the Allocable Share Release has allowed signatory companies to contest their previous payments to Missouri in an attempt to claw back millions of dollars from the General Assembly.

The dispute is over 2004 tobacco payments. Should the State lose, more than $100 million from those payments could be lost, as well as payments from the subsequent years. Koster estimated it could cost more than $1 billion.

The case goes to arbitration in April.

The MSA has an estimated worth of $246 billion over its first 25 years to the participating states and territories. Four states reached individual agreements with the tobacco industry.

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