Tobacco Growers To Receive Final 2004 Settlement Payment

Source from:  By Florence Gilkeson: Senior Writer 10/24/2005

North Carolina tobacco growers will receive their final 2004 Phase II settlement payments after all. Judge Ben Tennille, presiding in North Carolina Business Court, ruled Wednesday that tobacco companies must ante up the $106 million in payments and interest due for the fourth quarter of 2004. Exact figures for the fourth quarter payment are not available for Moore County, but the Phase II Web site established by the Womble Carlyle law firm shows that $1.15 million in payments were due to 425 individuals in Moore County for the fourth payment under the original settlement. Tennille ordered the companies to make the full payment and to add a pre-judgment interest payment at the 8 percent rate from December through date of payment. Taylor Williams, an Extension agent with the Moore County Cooperative Extension Service, said this will be the final payment to farmers under the settlement agreement reached between major tobacco companies and attorneys general in almost all of the 50 states in 1999. Under that agreement, the companies were to make payments to the states as compensation for losses attributed to tobacco usage and sales. In that settlement, the states agreed not to file suit against the companies for compensation for the medical costs resulting from the use of tobacco products. Among those companies are Reynolds Tobacco Co. of Winston-Salem and Philip Morris USA Inc. of Richmond, Va. But the companies balked at making the final payment in 2004 because Congress had passed a law providing for a 100 percent buyout of all tobacco quotas, beginning in 2005. The companies argued that the final payment of 2004 was not necessary because it was not payable until 2005. The issue went as far as the North Carolina Supreme Court. The judge's action Wednesday denied the companies' request for additional hearings and for legal costs. "Defendants' reliance on certain words or phrases in the opinion is misplaced considering the opinion as a whole," said Tennille in his ruling. "The court finds the defendants' position that they do not owe the fourth quarter 2004 payment to be inconsistent with and contrary to the express language of the Supreme Court." The Web site reported that 425 individuals in Moore County qualified for payments exceeding $1.15 million for the fourth year of Phase II. In the first four years of the settlement program about $147 million was paid to 9,242 tobacco growers and 65,131 quota holders in North Carolina. The Web site also said that almost 90 percent of the payments had been made. The North Carolina settlement was administered by the Womble Carlyle law firm of Winston-Salem. The settlement in North Carolina was divided into key provisions, one of which was set aside for payments to help communities overcome losses from the tobacco-based economy. Payments to individual growers and quota holders represent one part of the program. Another aspect led to establishment of the Golden LEAF Foundation, which sets aside a share of the money for distribution to communities and community groups to encourage economic development to take the place of tobacco income losses. Critics of the North Carolina program said that the state did not set aside enough money to cover the cost of health care needed for people who suffered serious illness or death because of tobacco product usage. These critics wanted more of the money used to campaign against the use of tobacco, to provide treatment for tobacco-caused illnesses, and to ease the Medicaid cost burden. The quota buyout program is in its initial phase this year. Growers and quota holders were entitled to receive their first payment this year. Payments will be due each year for the next nine years. The first payment was received here in the summer with more than $3.5 million paid out to almost 1,000 growers and quota owners. Farmers can continue to raise tobacco, but under the buyout, the U.S. Department of Agriculture no longer establishes quotas or allotments and farmers may grow as much or as little as they wish. However, they no longer have the protection of price supports that were established and controlled by USDA. As health concerns have grown in intensity, interest in tobacco has fallen dramatically in recent years. In addition to reduced retail sales, quotas have dropped dramatically as companies have turned more and more to overseas markets for less costly tobacco. Southeastern states are responsible for production of most tobacco raised in the United States. North Carolina leaf in particular was popular with companies because of its quality, bulk, color and flavor. Tar Heel tobacco was used extensively to create quality tobacco blends for cigarette manufacturing. Enditem