Canadian tobacco company to pay $30M civil penalty

By Bryan Cohen | May 16, 2014

LITTLE ROCK, Ark. (Legal Newsline) - Arkansas Attorney General Dustin McDaniel announced an order on Wednesday against a Canadian tobacco company to resolve allegations it failed to put money in escrow in lieu of participation in the Master Settlement Agreement.

Grand River Enterprises allegedly violated the law by failing to deposit money in escrow for its sales of Seneca cigarettes in 2005 and 2006. Pulaski County Circuit Court Judge Wendell Griffen granted McDaniel's motion for summary judgment against the company.

Griffen ordered Grand River Enterprises to pay a $29,489,259.51 civil penalty, which represents 300 percent of the amount the company was supposed to deposit into escrow. Grand River Enterprises must also place $9,829,753.17 in escrow.

"We are all aware of the health risks associated with tobacco use, and tobacco companies who do business in Arkansas have a responsibility to set aside money in the event the companies are required to pay for the health consequences caused by the products they sell," McDaniel said. "I am grateful to the court for making sure that this company understands the importance of complying with Arkansas law."

Grand River Enterprises was not a party to the 1998 Master Settlement Agreement, which directs tens of millions of dollars annually to fund Arkansas public health initiatives. The Arkansas share of the Master Settlement Agreement proceeds in 2014 was $49.96 million. Since Grand River Enterprises did not participate in the settlement, the company is required to deposit a portion of its Arkansas sales proceeds in escrow.

The funds remain in escrow for 25 years and become available to the state if it obtains a judgment against the company for health-related claims associated with the smoking of the company's cigarettes. Otherwise, the funds in escrow revert to the company after 25 years.

McDaniel's office originally filed suit against Grand River Enterprises in 2006.

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