MORALES OBTAINS $15.3 BILLION, MARKETING RESTRICTIONS IN SETTLEMENT WITH TOBACCO INDUSTRY

Deal is Largest in Litigation History

Texas Attorney General Dan Morales on Friday announced a $15.3 billion settlement in the State's lawsuit against the tobacco industry, with the first year's payments dedicated to children's health care. It is the largest settlement in the history of U.S. litigation.

Payments this year will total more than $1.2 billion. At the heart of the package is $428 million for a non-profit foundation that provides grants to organizations that offer a variety of health care services for all Texans. The remainder of the first year's payments are designated for children's health care as well as smoking-cessation, tobacco education and enforcement programs. The deal also includes additional restrictions on the industry's marketing practices, such as the elimination of all billboard advertising in the state.

"Our children are the primary beneficiaries of this agreement," Morales said. "Specifically, more than a million poor children in Texas without health insurance will receive the care they need.

"The taxpayers of Texas are now fully compensated for the cost of providing health care to those afflicted with tobacco-related diseases. The money will be used for prevention and treatment," he added.

Morales sued the tobacco industry on March 28, 1996, alleging violations of federal racketeering, mail fraud and conspiracy laws, as well as state consumer protection and liability laws. The State had sought $8.6 billion in compensatory damages plus punitive damages.

The agreement requires the tobacco defendants to pay $428 million to the Texas Foundation for Children and Public Health, a non-profit foundation. It provides grants to organizations and programs which promote and protect the interest of Texas children and public health.

The endowment will be used for childhood immunization, pre-natal care, health education programs, child nutrition, children's hospice, physical and sexual child abuse prevention or care, adult domestic violence, substance abuse and mental health, physical and mental disabilities, children's health screening and tobacco-related programs.

Other payments to be made to the State this year by the tobacco industry include $151 million to be used for the Children's Health Insurance Program under Title XXI of the Social Security Act. The program provides health care coverage to uninsured children in families with incomes too high for Medicaid, but too low to afford private family coverage (The cutoff is 200 percent of the poverty level). The $151 million will result in approximately $423 million in matching federal funds for the program. It also will expand coverage to make eligible an additional 500,000 children currently without health insurance. Medicaid covers about 560,000 uninsured children in Texas.

The tobacco defendants also will pay $200 million to the University of Texas Health Science Center of San Antonio to be used for establishing, maintaining and operating the Texas Children's Cancer Institute. The University of Texas System's M.D. Anderson Cancer Center in Houston will receive $100 million for an endowment for research and reimbursement of indigent health-care costs. Texas Tech Health Sciences Center in Lubbock and El Paso will receive $50 million for border health initiatives, including the establishment and operation of the Institute of Border Health. The University of Texas Southwestern Medical Center at Dallas will receive $50 million for research, endowments and other programs that benefit the public health.

The industry will pay another $200 million to the general revenue fund of the State to be used for the exclusive purpose of supporting smoking cessation programs, enforcement of juvenile smoking laws, counter-marketing promotional efforts and general anti-tobacco educational programs.

Texas also will receive annual payments from the tobacco industry which will provide the Texas Legislature an extra $1 billion, on average, each session for general revenue appropriations for the next 25 years.

Other provisions of the settlement require the tobacco industry, in less than four months, to remove all billboards in the State, including those in sports stadiums. It also must remove all advertising on private or public vehicles, such as buses and taxis, and at any bus stop, taxi stand, train station, airport or similar transit location.

Morales' agreement requires the industry to support and not challenge laws recently passed by the Texas Legislature which prohibit the sale of cigarettes in vending machines, except in adult-only locations; which strengthen penalties for sale of tobacco products to children under the age of 18; and, which increase penalties for possession of tobacco products by children under the age of 18.

The millions of litigation documents in storage in Texarkana will be delivered to a national document depository if Congress approves a national settlement prior to December 31, 1998. The documents will be retained by the State if there is no settlement by the end of 1998.

The settlement requires the tobacco industry to pay the Office of the Attorney General $5 million for its costs and attorneys' fees. It also states that the costs, expenses and fees for the State's private counsel will be determined by a three-person arbitration panel or the Court. The industry will pay the fees determined by the panel on top of the amounts paid to the State.

The settling defendants are: The American Tobacco Company; R.J. Reynolds Tobacco company; Brown & Williamson Tobacco Corporation; B.A.T. Industries, P.L.C.; Philip Morris, Inc; Lorillard Tobacco Company, Inc; United States Tobacco Company. The Liggett Group, Inc. settled with the State in March, 1997 and agreed to provide documents and testimony in the State's case.

Special Assistant Attorney General Harry Potter directed Morales' trial team and assisted Morales in negotiating the settlement.

CONTACT:

Ron Dusek, Ward Tisdale or Sonya Sanchez @ 512-463-2050 or press@oag.state.tx.us 

NOTE: A copy of the settlement is not yet available on our web site. Please call or email the press office for a faxed copy.