General Tobacco, 6th largest U.S. tobacco company to close..

September 3, 2010 - General Tobacco, maker of low-priced cigarettes such as Bronco, Silver and GT One is planning to shut down after failing to make Master Settlement Agreement payments owed to states, reports the Wall Street Journal.

General Tobacco, of Mayodan, N.C., stopped producing cigarettes and other tobacco products at its North Carolina plant several months ago and is winding down operations, according to J. Ronald Denman, executive vice president and general counsel. He said the closely held company, which is formally called Vibo Corp., recently has been selling off inventory in foreign markets.

The Master Settlement Agreement (MSA) of 1998 was a legal settlement between the Attorneys General of 46 U.S. states and the four largest American tobacco companies to settle lawsuits brought by the states to recover billions of dollars in costs associated with treating smoking-related illnesses. Four states - Florida, Minnesota, Mississippi, and Texas - settled their tobacco cases separately from the MSA states. The MSA requires the tobacco industry to make payments to the states totaling approximately $246 billion through the year 2025.

General Tobacco became a participating manufacturer to the Master Settlement Agreement in 2004, six years after it was signed by major tobacco companies, and agreed to make payments to the states for both ongoing sales and those it recorded prior to joining the agreement.

The company has made about $600 million in payments to states, but early this year, Washington, North Carolina and other states barred the company from selling cigarettes because it had not made certain payments for cigarette sales prior to 2004. The bans didn't affect filtered cigars and roll-your-own tobacco sold by the company. The delisting is part of the pressures that the 46 participating states in the Master Settlement Agreement are putting on General to make good on its back-payment obligations.

Mr. Denman said General Tobacco has informed states that it will not be able to make the so-called back payments. The company did not say how many states have requested the delisting. Noelle Talley, a spokeswoman for the N.C. Attorney General's Office, said that General's cigarette brands were removed from the state's list of approved brands on Jan. 20. Talley said that the state cited "General's failure to comply with the financial obligations under the Master Settlement Agreement and subsequent agreements."

General Tobacco products is on its way to being barred from selling its cigarette products in 18 states over its failure to make payments under the multistate Master Settlement Agreement (MSA), which was created in 1998. (General Tobacco - will remove cigarette brands from certain states..)

In 2008, General Tobacco sued many attorneys general and tobacco companies, alleging that the Master Settlement Agreement violated federal antitrust and constitutional law. The company argued that rivals such as Liggett enjoyed terms under the agreement that gave them unfair competitive advantages. A U.S. judge in Kentucky dismissed the case last year. General Tobacco filed an appeal this year, and continues to pursue it, Mr. Denman said.

Reference: General Tobacco Plans to Shut Down, by DAVID KESMODEL, The Wall Street Journal, 9/3/2010.

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