Tobacco company stalls state’s payment

Maine won’t see about $5 million in expected tobacco settlement funds this year because a cigarette manufacturer says its calculations show it owes the state less money.

Brown & Williamson Tobacco Corp., makers of Kool and Pall Mall cigarettes, is withholding the money based on its interpretation of its U.S. market share and other issues, state officials said.

The company, based in Louisville, Ky., controls more than one-tenth of the U.S. tobacco sales market.

Sorting out the issues raised by Brown & Williamson will take more than a year, Maine Treasurer Dale McCormick predicted in a recent memorandum to the state’s revenue forecasting committee.

“For this reason the January 2002 payment should be booked as it was received, without expecting the additional dollars now held in the dispute escrow,” she wrote.

McCormick now expects Maine to receive $50.9 million in 2002 from the tobacco companies that signed onto the agreement.

A spokesman for Brown & Williamson contacted late Friday could not immediately comment on the issues.

Whether or not the additional Brown & Williamson money ever arrives, Maine’s 2002 shortfall will be covered, said Adam Krea, assistant state treasurer. That’s because Maine still expects to have $7.3 million of tobacco settlement money left unspent at the end of the year.

Krea said the treasurer expects to have a better handle on whether the money will be coming in 2003 by late this year.

Paul Stern, deputy attorney general, explained that the issues involved in calculating payments from the tobacco manufacturers under the settlement are complex. How the process will move forward remains unclear, he said.

So far, Brown & Williamson has filed a letter outlining its position. After a comment period, the matter could head toward arbitration or the courts, Stern said.

One of the key issues raised by Brown & Williamson is that some states haven’t done enough to create and enforce protective laws aimed at creating a level playing field with manufacturers that did not sign onto the agreement and don’t pay settlement money, Stern said. Stern said it was surprising the tobacco giant decided to withhold money from all the states instead of withholding just from those it thought tardy, he said.

Stern said Maine has been a leader in adopting a model statute related to companies that didn’t sign onto the settlement and it has been vigorous in enforcing the statute. Last year, Maine enacted first-in-the-nation legislation that put even “bigger teeth” into the law, he said.