Tobacco Farmers, Co-Op Propose Deal

Source from:  By The Associated Press  09/28/2005

Tobacco growers would share at least $50 million held by a tobacco cooperative formed to run the price-support system, under a proposed settlement to a lawsuit announced yesterday. The lawsuit filed in Wake County Superior Court by tobacco farmers sought class-action status on behalf of all current and former members of the Raleigh-based Flue-Cured Tobacco Cooperative Stabilization Corp. since it was created in 1946. The cooperative bought tobacco from growers of flue-cured tobacco in Virginia, North Carolina, South Carolina, Georgia and Florida who could not sell their crop to major cigarette-makers or leaf dealers. It is trying to reinvent itself as a leaf dealer, marketer and cigarette maker. The plaintiff farmers said that with the end of the federal price- support system, the cooperative wasn't needed and had become a self- perpetuating bureaucracy. They also sought payment of dividends to members from more than $240 million in stockholder equity the cooperative accumulated. They sought either a distribution of the cooperative's assets or its dissolution. The proposed settlement would create a fund of at least $50 million and allow the cooperative to continue, among other elements, according to a statement. The fund would come from selling tobacco ceded to the cooperative by the U.S. Department of Agriculture when the price-support program ended last year. The proposed settlement requires approval from plaintiffs and a judge. If the court grants preliminary approval of the deal, a final hearing would be scheduled about 60 days later. During those 60 days, plaintiffs can opt out of the settlement or object to it. Under the quota system, the cooperative's purchases took billions of pounds of farmers' tobacco off the market when the leaf did not fetch the government-set minimum price at auction. The cooperative later sold the crop to international leaf dealers or cigarette- makers. Enditem