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Tobacco Companies Will Not Contest Vermont's Diligent Enforcement

CONTACT: William H. Sorrell, Attorney General, (802) 828-3173

November 4, 2011

Attorney General William H. Sorrell reports that the major tobacco companies have dropped their charge that Vermont failed to meet its obligations in regulating the smaller tobacco companies that are not a part of the 1998 tobacco Master Settlement Agreement (MSA). Had the industry prevailed against Vermont, the State would have lost from $4.7 million to $25 million dollars of the MSA payment owed to the State based on the major companies’ 2003 cigarette sales.

“This is a very sweet victory for us,” said Attorney General Sorrell. “Vermont held up its end of the bargain and did all the enforcement work required of our State under the MSA.”

The 1998 MSA requires the major tobacco companies to make annual payments to the Settling States of billions of dollars, in perpetuity. The MSA also provides for a reduction in the companies’ required payments to any State that failed to diligently enforce certain laws regulating the smaller companies during a given year. Each State, in order to avoid that reduction, must demonstrate that it diligently enforced the applicable laws during each year in dispute. These determinations will be made separately for each State and each year in dispute by an arbitration panel of three retired federal judges. The first year being litigated challenges enforcement efforts during 2003.

Since July 2010, Vermont, with the other Settling States, and the major tobacco companies have been arbitrating the diligent enforcement disputes regarding the States’ enforcement in 2003. The arbitration panel set November 3, 2011 as the deadline for the companies to identify the States whose diligence they do not contest.

“Although it could be some time before Vermont receives the disputed funds held in escrow accounts, when we do receive our money, it will be 100 cents on the dollar plus interest. And these funds will be able to be used for public health purposes, rather than going back to tobacco industry profits,” added the Attorney General.

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