Tobacco Settlement: It Is Not What
the Tobacco Industry Says It Is (continued page 6)
States' Inability to Default:
There are essentially no provisions for States to default on this settlement
once signed, even within several days of signing the document. Most states
under their consumer protection laws allow consumers to default on say,
buying a car within a certain number of days. This lengthy, complicated,
and far-reaching settlement with enormous long-term public impact was given
only 3 business days for discernment, and no room for default. (XII (b),
page 51)
C. SOME MONETARY ISSUES:
This settlement's monetary provisions create a conflict of interest partnership
between the States' Attorneys General and the Tobacco Industry:
First, the National Association of Attorneys General (NAAG) is to paid
$50 million (Section VIII (c), page 24-25). This money is to be put into
a fund called "The States' Antitrust/Consumer Protection Tobacco Enforcement
Fund". Exhibit J (pages 103-107) details how this fund is to be used.
This NAAG Fund (pages 103-107) is to have oversight by 3 members of NAAG:
the Attorney General of the State of Washington, the Chair of NAAG's antitrust
committee, and the Chair of NAAG's consumer protection committee. The purpose
of NAAG's Fund is to give out grants to States' Attorneys General (for up
to $500,000 per grant) to help them to:
1. Enforce the Settlement;
2. Enforce state and/or federal antitrust or consumer protection laws
with respect to tobacco product manufacturing, marketing, and sales; and
3. Enforce the Qualifying Statute or Qualifying Actions. The Qualifying
Statute is the Model Statute in Exhibit T (pages 137-141) which ensures
an equal playing field for participating tobacco companies compared with
non-participating tobacco companies.
So, the Attorneys General will be receiving money from the Settling Tobacco
Companies-funded NAAG Fund in order to ensure that the Tobacco Companies
entering into the Settlement maintain their market share and are on an equal
playing field in the marketplace compared with non-participating Tobacco
Companies.
NAAG receives $100,000 per year from the settling Tobacco Companies for
"its administrative costs in performing its duties" under the
settlement. This provision also gives NAAG the authority to adjust the amount
of this fee. (Exhibit J, Section E, Section 1, page 107)
NAAG receives $150,000 per year from the settling Tobacco Companies to
carry out some activities as outlined in Section VIII(a) page 24, which
include convening the meetings which determine the success of the Settlement
in reducing youth smoking. (Section VIII(b), page 24).
The Allocation Committee (Exhibit U, pages 141-142), overseen by NAAG,
is given up to $100,000 from the settling Tobacco Companies to carry out
its function of determining each settling state's allocation from the Strategic
Contribution Fund", in section IX(c)(2), page 26.
Attorneys General Offices of settling states are reimbursed by the settling
Tobacco Companies for expenses incurred by this settlement and activities
leading up to this settlement at the hourly rate equal to the market rate
in each settling state for private attorneys. (Section XVII(b), page55)
States' Outside Counsel, who have been hired by the States' Attorneys
General to work on the tobacco lawsuits, are paid by a separate fund, as
designated by Exhibit O (pages 113-129). They are able to apply for a Liquidated
Fee, whose national total cannot be more than $1.25 billion (Exhibit O,
Section7(b), page 118). The amounts of money available to be paid to Outside
Counsel appear to not only be paid in a short time frame but also be very
generous, by some reports from Attorneys General up to $50 million, even
if their work has been quite limited.
In many states, these Outside Counsel were consulted for their opinion
on whether a State should settle or not. How could their opinion be unbiased
when they are eligible for a much larger amount of money than if the State
had pursued trial?