Misspending, Abuses Marks Tobacco Settlement Anniversary

Christine Hall, 202.331.2258

Washington, D.C., November 28, 2005—Seven years ago this month, the states signed the biggest settlement deal in history with major tobacco companies. Back then, states claimed they had been forced to pay large health care costs to treat smokers over the years and blamed tobacco companies. Since then, states have become business partners with Big Tobacco, enacting laws to protect settlement revenue by penalizing small competitors.

MISSPENDING

• States have received over $45 billion from Big Tobacco and smokers, but little of the money has been spent on treating sick smokers or on tobacco control programs. In fact, states have spent an average of two-to-six percent of the money on tobacco control, while as much as 44 percent of the money has gone towards budget shortfalls.
• Some of the programs funded by the tobacco settlement include:
  • $100,000 on motor sports research in North Carolina
  • $271,750 for improving Kentucky’s prawn industry
  • $33.8 million on the creation of life sciences jobs and businesses in Southeastern Pennsylvania
• An estimated $13 billion was awarded to trial lawyers. Cato Institute scholar Robert Levy calculated that some lawyers were awarded $7,716 per hour (assuming they worked 24 hours per day, seven days per week, for 42 months on the tobacco lawsuits and settlement).

CORRUPTION & MISDEEDS

• JAIL TIME – Former Texas Attorney General Dan Morales was sent to prison in 2003 after being charged with scheming to funnel millions of dollars from the state’s tobacco settlement to a trial lawyer friend.
• PLAYING MONOPOLY – Vermont Attorney General William Sorrell in 2003 urged fellow state attorneys general to take steps to reduce sales by small companies that compete with Big Tobacco. Why? A drop in market share for major tobacco companies reduces settlement payments to the states.
• CONFLICT OF INTEREST? – A Kentucky legislator introduced a bill requiring tobacco companies outside the settlement agreement to make bigger payments to the states. The lawmaker, Rep. Rob Wilkey, is also general counsel for a competing tobacco company–Commonwealth Brands–that’s part of the settlement agreement. The bill narrowly passed in 2004, forcing competitors to raise cigarette prices by $4 per carton.

In August 2005, CEI filed a lawsuit challenging the constitutionality of the tobacco settlement. For more information about the tobacco settlement or the CEI lawsuit, please visit www.ControlAbuseofPower.org.