Kansas - cigarette makers fined, failed to pay into escrow accounts..

September 8, 2009 - TOPEKA — 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.

“It is the Attorney General’s responsibility to enforce the Tobacco Master Settlement Agreement and the subsequent statutes governing tobacco sales in Kansas,” Attorney General Steve Six said in a prepared statement. “My office will ensure that non-participating manufactures live up to the requirements of Kansas law and the Agreement.”

Under Kansas law, manufacturers not part of the 1998 master settlement are still required to pay into escrow accounts held for the benefit of the state. The escrow money may be used to satisfy future judgments against tobacco firms that weren’t part of the original agreement.

Kansas sued and obtained default judgments against Veneto and Tapti Tobacco after they failed to make required escrow payments for sales in 2007 and 2008.

Tapti and its “Nova” brand, and Veneto and its “American Hero” brand were removed from the Kansas Directory of Compliant Non-Participating Manufacturers earlier this spring. Barring certain exceptions, it is illegal to possess cigarettes or roll-your-own tobacco not listed in the directory.

Unlike the Participating Manufacturers to the Master Settlement Agreement, Non-Participating Manufacturers (NPMs) like Tapti and Veneto, have not been released from State claims. The master agreement allows states - including Kansas - to enact statutes forcing such non-participating manufacturers to place money into escrow each year to settle future judgments based on the number of cigarettes sold in that state.

Reference: Enforcement unit obtains $2.6 million in tobacco judgments, Kansas Health Institute News Release, 8/31/2009.

Related news brief: Arkansas - escrow accounts Master Settlement Agreement, non-participating manufacturers..