MD atty. general to Philip Morris: Pay on time, or we'll sue

Maryland Attorney General J. Joseph Curran Jr. and his counterparts throughout the country are preparing to deliver notice to cigarette manufacturer Philip Morris USA: Pay on time, or suffer the consequences.

The attorneys general are threatening the company with further litigation if Philip Morris fails to make its scheduled tobacco settlement payment on April 15, as it has warned might happen.

"It's the attorney general's obligation to make sure Philip Morris lives up to its obligations [under the 1998 tobacco settlement agreement] and he's going to fulfill that obligation," said Assistant Attorney General Maureen M. Dove, chief of the department's civil litigation unit.

Attorneys general throughout the states were circulating a letter to Philip Morris that they expect to send today, according to Dove. The letter is intended to put Philip Morris on notice that, if the company fails to pay the states on the 15th, it could expect to be in court on the 16th.

The letter will also advise Philip Morris that, because of the public health issues concerned, the attorneys general will seek to waive the 30-day waiting period required in some states before they could file a lawsuit.

Maryland is scheduled to receive $116.5 million from tobacco companies on April 15 as its portion of a multistate legal settlement with the major tobacco companies over the costs of smoking-related illnesses paid by the states. In Maryland, the money pays for educational programs, cancer and heart disease screenings, substance abuse treatment and some Medicaid bills, according to the attorney general's office.

Philip Morris, the nation's largest tobacco company, contributes about 52 percent of that payment, which under the agreement, is scheduled for perpetuity.

Philip Morris will owe the states a total of about $2.5 billion on April 15.

But, in a letter to Washington's attorney general on March 27, Philip Morris USA's Senior Vice President and General Counsel Denise F. Keane expressed doubts about whether the company could pay.

The tobacco company cited a $12 billion appeal bond requirement set by a Madison County, Ill., court following a $10.1 billion verdict against the company.

The judgment, which was stayed for 30 days, stemmed from deceptive advertising claiming "light" cigarettes were less harmful to smokers.

"Because of the extraordinary amount of the bond presently required by the Madison County trial judge, it is presently uncertain whether Philip Morris USA will be able to make the ... payment on April 15," wrote Keane, who did not return a telephone call seeking comment yesterday.

The company noted the bond in its annual report filed with the Securities and Exchange Commission on March 27.

"PM USA believes that requiring a bond in such an amount, in order to stay execution pending appeal, would be unconstitutional and would also violate Illinois law," the company said in its annual report. "It is not possible for PM USA to post such a bond, and, absent judicial or legislative relief, PM USA would not be able to stay enforcement of the judgment in Illinois. PM USA will take all appropriate steps to seek to prevent this from occurring."

In addition to Curran, attorneys general throughout the country are threatening legal action if Philip Morris fails to pay.

"We would hope parties in Madison County can work this out," Washington Attorney General Christine Gregoire said in a prepared statement. "But if not, we plan to be ready to go to court."

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