Cigarette maker settles with 5 states
March 15, 1996
Web posted at: 9:45 p.m. EST
WASHINGTON (CNN) -- The nation's fifth-largest cigarette maker broke ranks with the rest of the tobacco industry Friday, agreeing to repay more than $10 million in Medicaid bills for treatment of smoking-related illnesses.
The Liggett Group admits no wrongdoing in the settlement, which could be worth up to $2 billion to five states over the next 25 years. The money would help pay for Medicaid costs for treatment of smokers.
A chief executive of Ligget's parent, The Brooke Group, called the deal a "new economic model" for the tobacco industry.
"This comprehensive settlement is good news for ... shareholders and it is also in the long-term financial interests of the entire tobacco industry."
-- Bennet LeBow, CEO, The Brooke Group
The settlement came just two days after Liggett made history by settling a private lawsuit by smokers. The Castano class-action suit in New Orleans alleged that cigarette makers manipulated nicotine in cigarettes to keep smokers hooked.
Details of Friday's settlement were announced in Washington by the attorneys general of Mississippi, Massachusetts, Florida, Louisiana and West Virginia.
"This is the beginning of what I hope will be the effort that will finally get the tobacco companies in this country to play by the same rules that every other legitimate business has to play by." (332K AIFF sound or 332K WAV sound)
-- Scott Harshbarger, Massachusetts attorney general
Settlement terms
Under the settlement, Liggett will pay 2.5 percent of its annual profits for the next 25 years to the five states that filed the lawsuits. Minnesota has filed a similar suit but opted out of the settlement, calling the terms inadequate.
Liggett has agreed to set aside 5 percent of its income to pay other states that may seek Medicaid reimbursement. The company will contribute 5 percent of its pre-tax profits, not to exceed $50 million a year, to programs that help people stop smoking.
The deal also calls for Liggett to curb advertising and marketing campaigns aimed at teen-agers. The company must stop selling clothing that bears cigarette logos and avoid billboard advertising near schools.
Liggett, maker of Chesterfield and Eve cigarettes, agreed to cooperate in lawsuits continuing against six other tobacco companies by turning over "any material concerning fraudulent or illegal conduct."
The Associated Press contributed to this report.
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