Tobacco Co-Op Offers Settlement to 200,000 Farmers

Source from:  By David Rice JOURNAL RALEIGH BUREAU 09/26/2005

Growers could get a payout of at least $50 million, or more should co-op dissolve More than 200,000 tobacco farmers in six states would get a payout of at least $50 million - and potentially as much as $288 million - in a proposed settlement of a lawsuit against the Flue-Cured Tobacco Cooperative Stabilization Corp. that attorneys in the case announced yesterday. The flue-cured growers' cooperative was created in 1946 to administer the federal tobacco program, and over the years it has accumulated substantial cash reserves. Farmers from southeastern North Carolina sued the cooperative in January, saying that with a buyout of tobacco quotas and the end of the federal tobacco program, it had outlived its purpose and should be dissolved so that members could claim their assets. The growers' co-op angered some farmers when it bought its own cigarette plant near Roxboro last year, effectively going into competition with members who grow leaf for other cigarette-makers. It angered still more by telling them in December that they are entitled only to the $5 shares they originally invested to become members. The settlement announced yesterday must still be approved by a Wake County judge. But its main elements are: • At least $50 million - but possibly more - would be paid over three years to growers who sold flue-cured tobacco between 1985 and 2005 from the sale of surplus leaf that was left to the Stabilization co-op with the end of the federal tobacco program. • At least $26 million in "certificates of interest" that were issued to farmers in connection with the sale of leaf from 1967 to 1973 will be paid to growers or their heirs who apply to have them redeemed. • The cooperative will allocate $110 million of paid-in capital on its books for members who paid "no net cost" assessment fees for the 1982-84 crop years. Those funds would be allocated only if Stabilization dissolves or decides to retire those obligations, officials said. • Similarly, Stabilization would make a book allocation of $102 million in retained earnings for farmers who sold flue-cured tobacco between 1985 and 2005, based on the pounds sold by each member. "This preserves the money for a designated group of individuals," said Marks Arnold, an attorney for the cooperative. Dennis Worley, an attorney for the growers in Tabor City, said that the settlement would not require farmers to remain members of the cooperative to claim their benefits. The settlement should protect most farmers who contract directly with cigarette-makers or leaf dealers, but also those who still want Stabilization to offer marketing alternatives, he said. "We believe the settlement fairly addresses and protects the interests of all farmers," Worley said. Donald Tucker Jr., an attorney for Stabilization, said that the co-op has protected farmers' interests for almost 60 years. "This settlement, if approved, will ensure that Stabilization can continue to serve its historical role of providing marketing opportunities for its members and also allow it to focus on new initiatives for the benefit of flue-cured-tobacco growers," Tucker said. Arnold Hamm, the assistant general manager of the cooperative, said that the settlement should allow the co-op to remain an outlet for farmers who don't or can't sell their leaf to major tobacco companies. "It's not Stabilization (that benefits) as much as it is the farmers who still depend on Stabilization and the farmers who may have to depend on Stabilization in the future," Hamm said. "It keeps the alternative." Under the settlement, the cooperative would be able to continue running its cigarette plant in Timberlake in Person County, which Hamm said is producing Traffic, Passport and Kick brand cigarettes as a contract manufacturer. As for the potential that farmers could eventually get $288 million if the co-op dissolves, "There are no plans to dissolve," Hamm said. "As we move forward in this new environment without a tobacco program, many of us understand that this transition is not an instant transition," he said. "This thing is going to continue to evolve, and we're confident we can find a niche within that." Most farmers will not have to do anything to get their share of the settlement if it is approved in court, the attorneys said. Most can be identified through Stabilization's records and will receive checks without filing a claim. But if the settlement is approved, members or their heirs who own a certificate of interest will need to fill out a simple form and submit it to Stabilization to have it redeemed. A separate class-action lawsuit filed against Stabilization by another group of farmers from North Carolina and South Carolina continues. But Hamm said that Stabilization officials hope that farmers in that lawsuit would be able to join this settlement. Enditem