Philip Morris Must Pay or Face Lawsuits

Philip Morris USA can expect to be sued by 46 states if it misses a $2.6-billion payment to the states due April 15 under a tobacco settlement, Oklahoma Atty. Gen. Drew Edmondson said Wednesday.

“I’m confident that if they don’t make the payment, 46 states will sue under the master settlement agreement, probably the next day,” said Edmondson, who is president of the National Assn. of Attorneys General.

He said the lawsuits would be separate actions filed in state courts in each state. The courts would be asked to find that the cigarette company breached the 1998 agreement with the states and to order it to make the payment, he said.

Illinois Atty. Gen. Lisa Madigan sent Philip Morris a letter Tuesday saying she would take such action if the payment were missed.

Philip Morris, a unit of Altria Group Inc., told state attorneys general last week that it was uncertain whether it could make its next scheduled payment to the states after a $10.1-billion verdict March 21 in an Illinois class-action lawsuit.

The company is required to post a $12-billion bond to appeal that verdict.

The states, which already have had to deal with a collective $27-billion deficit in fiscal 2003, were counting on getting the tobacco payment to fund services in their current and upcoming budgets.

Officials in California, a state under the tobacco deal, will soon decide whether to postpone the scheduled sale of $2.3 billion in tobacco bonds to help plug the state’s budget gap, a spokesman for state Treasurer Phil Angelides said.

A Philip Morris spokesman said the firm was committed to meeting all its payment obligations under the agreement with the states.

“But we’ve also indicated that the present amount of the bond requirement in the Illinois case makes our ability to make that payment uncertain,” the spokesman said.