Tobacco.org

• Court rules against tobacco shop 

Customers are still rolling their own smokes at Tobacco Haven, despite a superior court ruling Monday that says the Brookline shop is a cigarette manufacturer that hasn’t been paying either the mandatory Tobacco Settlement tax, or making escrow payments.

Merrimack County Superior Court Judge Larry Smukler issued a temporary injunction against Tobacco Haven on Monday, ordering the shop on Route 13 to either ensure that its supplier has paid the required tax or escrow payment, pay itself, or stop operating its two high-speed cigarette-rolling machines.

The machines take loose tobacco and roll 200 cigarettes in a matter of minutes. A carton costs $25.99, while cartons of many name brand cigarettes can cost twice as much. Customers have flocked to the store, often lining up to use the machines.

What’s at stake here is a lot more than where people can buy cheap smokes. The state filed suit against the company in August because New Hampshire stood to lose about $50 million in tobacco settlement money.

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• Cancer hits Tennesseans hard  

Tennesseans die of cancer at the fifth-worst rate in the nation.

What kills them most frequently is cigarettes, but a powerful mix of misinformation and denial also drives up the death count.

A Tennessean examination that included dozens of interviews with doctors, cancer experts and patients across the state found health professionals frequently encounter people who have ignored symptoms for months or even years before going to a doctor. A lack of urgency or confusion about routine cancer screenings, coupled with misconceptions about treatment and even a fatalistic acceptance of the disease, leads to cancers being diagnosed too late to be treated successfully.

"There's a personal value system, a thought process that says, 'It can't be me,' and an incredibly complicated health system," said Mary Jane Dewey, director of the state Health Department's sole free cancer screening program. "Even people with insurance can't understand their policies."

Lung, breast, prostate and colorectal cancers are the most commonly diagnosed in the state. In the 2001-05 reporting period, more Tennesseans died from lung cancer — 20,629 victims — than from the other three combined. . . .

But money can be an issue. The Tennessee legislature put $10 million into smoking prevention and cessation programs for the first time for the 2007-08 fiscal year, but then halved that the following year. This year, the state's tobacco control program is running on a $1.5 million budget, all but $300,000 of that from a Centers for Disease Control grant.

The money pays for the state's 1-800-QUIT-NOW line, which matches smokers with counselors to help them quit, and literature.

But anti-smoking advocates look most longingly at the state's $4.8 billion settlement with tobacco companies, which it began receiving in annual payments in 1999. The legislature voted to put the money into the general fund; none into anti-smoking programs. Tennessee has collected $1.9 billion to date.

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• State auditor critical of Golden LEAF Foundation 

A foundation that distributes North Carolina's tobacco settlement money broke the law by approving a $15 million grant behind closed doors, State Auditor Beth Wood said Monday.

In a report, Wood accused the Golden LEAF Foundation of repeatedly restricting and delaying her access to records of the foundation's meetings and investments.

That is worrisome, Wood said.

State lawmakers set up Golden LEAF, which stands for the Long-term Economic Advancement Foundation, in 1999 to manage the proceeds of a historic settlement with cigarette makers.

The Rocky Mount-based foundation has received $706.5 million

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• Texas lost $19.5 million to Madoff 

The Texas treasury lost $19.5 million through an investment in the Ponzi scheme run by convicted financial swindler Bernard Madoff.

The money was part of a $224.5 million investment the Texas Treasury Safekeeping Trust Co. had with a Texas-based hedge fund called Austin Capital Safe Harbor. Austin Capital closed in May due to losses it suffered in one of Madoff's scam investment funds.

Comptroller Susan Combs chairs the Treasury Safekeeping Trust, which manages $50 billion in tobacco lawsuit settlement funds, TexPool investments for 2,000 local governments and Treasury Pool for managing state funds.

Combs spokesman R.J. DeSilva said the $19.5 million was written off last December after Austin Capital notified the state the money had been lost when Madoff's Ponzi scheme collapsed. The treasury had been investing with Austin Capital since 2006.

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• Lawyer denies shop makes cigarettes 

The state says a Brookline business that sells loose tobacco to customers who roll their own cigarettes on machines inside the shop is a cigarette manufacturer and is obligated to pay into a tobacco settlement fund.

But an attorney for North of the Border Tobacco, which operates under the name Tobacco Haven, told a Merrimack County Superior Court judge Tuesday that his client isn't manufacturing cigarettes and should not be obligated to pay.

Judge Larry Smukler heard arguments in the case and will issue a ruling in the next 30 to 60 days. In August, the New Hampshire attorney general's office cited the small business for possible violation of state laws, saying a violation might put the state at risk of losing millions of dollars in tobacco settlement funds.

Assistant Attorney General David Rienzo, who works for the consumer protection and antitrust bureau, said the case was the first in the state and possibly the country.

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• Governor blasted over anti-smoking program cuts 

A leading researcher of secondhand smoke sharply criticized the governor and the Legislature on Wednesday for cutting tobacco-control programs nearly in half, saying the cost to the health-care system will quickly overcome any short-term savings.

"Gov. Gregoire is no longer the anti-tobacco governor," Stanton Glantz, professor of cardiology at the University of California, San Francisco, told a group of public health professionals meeting at the Yakima Convention Center.

"The fact that she let the program be gutted means she's just riding on the old coattails."

Gov. Chris Gregoire made her name as state attorney general in 1998 by leading the states in negotiating a master settlement with tobacco companies that poured billions into state coffers nationwide.

That settlement still brings in about $120 million a year to Washington state, with most going to pay for state-subsidized health care.

But the 2009 Legislature cut 43 percent from the state's $28.5 million-a-year tobacco-control program

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• General Tobacco Appeals California Ruling 

MAYODAN, N.C. – General Tobacco (GT) announced that it has appealed the interpretation of the Master Settlement Agreement (MSA) by the Superior Court of California. The company also answered a claim by Arkansas Attorney General Dustin McDaniel seeking payments from General Tobacco for products it sold before joining the MSA.

The continuing legal issue in both matters involves the fairness of the MSA which dictates that later market entrants, such as GT, have to pay the states substantially more than certain competitors pay.

J. Ronald Denman, GT executive vice president, said none of the largest cigarette companies, which were sued by the states for decades of misleading the public about the harms of tobacco products, paid anything for pre-MSA sales.

“In addition, to induce some of the oldest tobacco companies to join the MSA, the states agreed to yearly sales exemptions giving those companies hundreds of millions of dollars in free sales. GT was offered no such exemption and must pay the MSA for every sale made each year,” he said in a press release.

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• State may stub out anti-smoking funds 

Ohio is poised to reduce its spending on anti-tobacco programs from $40 million a year early this decade to nothing by the beginning of the next decade, anti-tobacco activists said yesterday while calling for cigarette taxes to be applied to other tobacco products.

Last year, state leaders dissolved a $264 million fund stocked with money from a multistate settlement with tobacco companies reached a decade earlier. At the same time, Gov. Ted Strickland's administration set aside a fraction of the money -- $6 million this year -- for the Ohio Department of Health to continue running some of the anti-smoking programs the foundation administered.

The programs include a toll-free quit line, grants to local groups and an annual survey regarding tobacco use.

Most of the foundation's money was redesignated for social services, although a Franklin County judge last month blocked the diversion. The state is appealing the ruling.

A coalition of anti-smoking activists called Investing in Tobacco-Free Youth held a news conference at the Statehouse yesterday to decry the loss of funding.

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• Bar's inflatable Winstons broke tobacco ad limits, health officials say  

The Kanawha-Charleston Health Department has asked the state Attorney General to investigate a Charleston bar owner who flouted the county's expanded smoking ban by setting up a giant inflatable cigarette pack replica outside his bar.

Health officials allege that Blackhawk Saloon owner Kerry "Paco" Ellison violated the 1998 Tobacco Master Settlement Agreement that limits cigarette marketing and advertising. Last month, the 16-by-18-foot inflatable Winston cigarette pack was visible for weeks to motorists on Interstate 64, just east of the state Capitol.

"It was visible to children," said Brenda Isaac, the health board's president. "We thought people should look into whether it's breaking federal law. You can't put up a billboard like this and advertise cigarettes."

Ellison, who has butted heads with the Health Department over the county's expanded smoking ban for more than a year, said he put up the custom inflatable to help advertise a "smoker's night" at his bar on Aug. 19. . . .

"I'm going to have to get that up again," Ellison said. "I'll have to do that. I call it my inflatable doll." . . .

Ellison said the Winston inflatable was originally displayed at the Charlotte Motor Speedway, which hosts NASCAR races. The product replica was discarded at some point, he said.

"It was in a Dumpster down there, and some guy fished it out," he said. . . .

Ellison said Winston did not pay him to display the air-blown advertisement.

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• Enforcement unit obtains $2.6 million in tobacco judgments  

Two tobacco companies must remove their cigarettes from Kansas distribution for the next two years as part of a $2.6 million judgment against them announced today by the Attorney General’s Office.

As a result of the judgment, Veneto, S.A. and Tapti Tobacco Products, Pvt., Ltd., are barred from selling the Nova or American Hero brand cigarettes within state lines.

The penalties resulted from the companies failing to pay into the state escrow fund created as a result of the Tobacco Master Settlement Agreement reached in 1998 after 46 states, including Kansas, sued major tobacco companies seeking to recoup the costs of treating sick smokers. State Medicaid programs spend millions yearly for treatment of tobacco-related illness.

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• Much at stake in roll-your-own suit 

Customers from near and far line up daily at the Route 13 smoke shop with the roll-your-own cigarette machines that can spit out 200 cigarettes in 10 minutes. They buy by the carton, for less than half the price of many name brands.

But state officials say the machines are making an end run around the landmark 1998 settlement with major tobacco companies, which were required to pay yearly contributions to the states. In a lawsuit filed last week, New Hampshire's attorney general contends Tobacco Haven's cigarette machines violate terms of the agreement and could jeopardize the $50 million in settlement money New Hampshire receives each year.

"At $50 million a year, we have a rather inescapable incentive here,'' said David Rienzo, an assistant attorney general.

Rienzo, along with smoking industry specialists and antismoking groups, say that higher cigarette taxes have spurred a burgeoning roll-your-own market. But until now, it has been largely confined to individuals who buy small, hand-operated rolling machines for personal use. The machines at Tobacco Haven, by contrast, are more akin to high-powered vending machines that spit out cartons of cigarettes in a matter of minutes. Such machines have cropped up across the country, and in New Hampshire prosecutors worried that they could emerge as powerful competitors to commercial cigarettes.

New Hampshire's suit, believed to be the first of its kind, argues that Tobacco Haven is essentially manufacturing cigarettes and therefore should be making contributions to the state. Tobacco Haven counters that they are strictly a retail outfit and that customers are paying to use the machines for personal use.

State officials say that by allowing a shop to make cigarettes without contributing some proceeds, they risk lawsuits from competing manufacturers angry over unequal treatment.

"At face value, this tobacco shop is in the business of making cigarettes,'' Rienzo said. "It's roughly a pack a minute, so it's not an insignificant number of cigarettes, and it really could cause us some heartburn.''

Under state law, Tobacco Haven would have to contribute about 2 cents for each cigarette sold to a set-aside fund, he said.

This week, the state ordered the shop to shut down the machines, but the two machines rolled on as usual on a recent morning, with a lengthy line of smokers from New Hampshire, and Massachusetts. . . .

Sweda had never heard of a similar lawsuit, but Burd said there are plenty of other shops that have machines like Tobacco Haven's.

Doug Kennedy, editor of Roll Your Own Magazine, which caters to custom-made cigarette smokers, said the publication has "aggressively recommended shops to walk away from making cigarettes for their customers.''

"You make a cigarette for someone, then sell it to them, you are a tobacco manufacturer,'' he said.

Kevin O'Flaherty, director of advocacy in the Northeast for the Campaign for Tobacco-Free Kids, said many states are fueling the growth of roll-your-own cigarettes by taxing loose tobacco at a lower rate than store-bought cigarettes.

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• Judge rules Ohio legislators can't use tobacco funds to balance state budget  

A judge ruled Tuesday that state officials had no authority to divert $230 million from an anti-tobacco fund to balance the recently approved state budget.

The decision blows a hole in the $50.5 billion spending plan and means that human services programs that provide health care for the poor and services for abused children and adults could face another round of slashing and burning.

State officials, who said they have every right to the money, immediately appealed.

The ruling by Franklin County Common Pleas Judge David Fais said the state cannot spend the funds, which were frozen after anti-smoking advocates filed a suit seeking to protect the money. . . .

Wurst said the decision was disappointing but not unexpected given that Fais had granted a preliminary order against the state last year.

"We're confident that the state has ability to appropriate state funds and that the governor and the legislature were under their full rights under the law," she said.

House Speaker Armond Budish, a Beachwood Democrat, agreed, saying in an interview with Plain Dealer editors Tuesday that the judge's decision was "not a strong legal ruling." He predicted it would be overturned.

"From what I understand, the law supports our position," he said, noting that lawmakers have repeatedly tapped tobacco funds for the budget in the past.

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• State barred from raiding anti-smoking fund 

A judge today permanently barred the state from taking more than $250 million in funds designated for anti-smoking programs and using it for Medicaid services and other state functions.

Judge David W. Fais of Franklin County Common Pleas Court dealt a blow to efforts by Gov. Ted Strickland and legislative leaders to balance the state's budget by draining most of the remaining funds from the Ohio Tobacco Prevention Foundation.

Fais wrote that the state doesn't need the money and could issue bonds instead.

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• Court reverses decision on tobacco settlement  

The Montana Supreme Court is overturning a lower court decision that would have forced the state into arbitration over the multimillion dollar tobacco settlement. . . .

The tobacco companies have argued the states are not diligently enforcing parts of the settlement that deal with non-conforming companies. They want national arbitration on the issue, and a lower state court agreed that was appropriate.

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• STATE OF MONTANA v. PHILIP MORRIS, INC., et al.,  

 “participating manufacturers” (PMs), while the tobacco companies that are not signatories to the MSA are known as “non-participating manufacturers” (NPMs).

¶3 In exchange for the Settling States’ release of all claims, the PMs agreed to certain marketing restrictions and to make annual payments to the Settling States “for the advancement of public health” and “the implementation of important tobacco-related public health measures.” The PMs do not make payments directly to individual Settling States; rather, each PM is required to make a single, nationwide payment into an escrow account, and the amounts are then allocated among the Settling States. Each PM’s individual contribution to the account is based on its market share. Likewise, each Settling State receives an “allocable share” of the sum of all payments made by the PMs in the year in question. Montana’s allocable share is 0.4247591%. The State received $24.8 million in MSA funds in 2006; $25.8 million in 2007; and $34.6 million in 2008.

¶4 The MSA assigns several responsibilities to an “Independent Auditor,” which is defined as “a major, nationally recognized, certified public accounting firm.”3 Specifically, the Independent Auditor

shall calculate and determine the amount of all payments owed pursuant to [the MSA], the adjustments, reductions and offsets thereto (and all resulting carry-forwards, if any), the allocation of such payments, adjustments, reductions, offsets and carry-forwards among the Participating Manufacturers and among the Settling States, and shall perform all other calculations in connection with the foregoing . . . .

In calculating the PMs’ annual payments, the Independent Auditor takes the base amount owed by the PMs for the calendar year and then applies a series of adjustments, , , ,

¶6 The present litigation concerns the PMs’ annual payments for 2006. The PMs had lost the requisite percentage of market share in 2003, and an economic consulting firm

5

had determined that the disadvantages imposed by the MSA were a “significant factor” contributing to that loss. Thus, the PMs asked the Independent Auditor to offset their 2006 payments by the amount of the 2003 NPM Adjustment. In response, the Settling States contended that they each had enacted Qualifying Statutes which were in full force and effect in 2003 and that the Independent Auditor should presume, in the absence of substantial evidence to the contrary, that state officials had “diligently enforced” those statutes. The PMs, however, argued that the Independent Auditor must “presume just the opposite,” i.e., that the statutes had not been diligently enforced.

¶7 The Independent Auditor declined to apply the NPM Adjustment to the PMs’ 2006 payments. . . .

the dispute in the present case, as framed in the State’s motion, is whether Montana diligently enforced a Qualifying Statute. We reject the PMs’ attempts to repackage the dispute in this case as something it clearly is not. . . .

¶28 The District Court erred in granting the PMs’ motion to compel arbitration. We accordingly reverse the District Court’s order and remand this case for further proceedings consistent with this Opinion.

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