Master Settlement Agreement :: 1998
Those who are foolish enough to ride on the back of the tiger soon end up inside.
John F. Kennedy, Inaugural Address, 1961
In November 1998, 46 states agreed to settle
with the tobacco industry. After extensive research,
we find no rational reason (other than short-sighted interest in money) for signing this accord.
The research by TobaccoFreedom.org illustrates that the estimated $206 billion financial package falls significantly short of covering annual public expenditures to support Medicaid. In addition, the deal does not compensate states for the billions of dollars allocated to support past Medicaid costs.
The tobacco industry gained stability and legitimacy through this settlement. States
gave the industry "wide latitude" in advertising and promotional activities.
Most importantly, many states recognize they must use settlement funds to counter the influence of big tobacco. The Centers for Disease Control and Prevention (CDC) recommends
states dedicate about one-third their payments toward tobacco control.
"I'll tell you want I like about the [tobacco] business. First, there are no
surprises. There is nothing more to be said or discovered about the cigarette business
or the industry. And there's no way to write an article that could do us any more harm
than what has already been written. Second, no new company wants to get into the
tobacco business. That's great. Third, we have the best partners in the world: the
governments. In a lot of countries, it's incredibly important to the whole welfare
state that we sell our products to collect taxes.
When you sit with a finance minister
or deputy of any government to discuss taxation, he's much cruder about the financial
analysis of that taxing than we are. He asks, 'how much can I put up the tax, to make
sure that demand is not going to go down so much that my net intake goes down?' Amazing.
So no matter how you look at the cigarette business, it's incredibly predictable, it's
extremely secure as an investment vehicle -- if you can deal with the fact that some people
are not going to like you."
-- David E. R. Dangoor, exective vice president, Philip Morris International
In a CONFIDENTIAL Philip Morris document (May 27, 1987 p.3), industry executives state that
they are not worried about government intervention.
"Cigarettes are not only taxed at the
federal level but at the state and possibly local level. To the extent that government
bodies tend to regard this tax as a 'cash flow' there is a degree of resistance to destroy
the [tobacco] industry."
When the various state's attorneys general challenged the industry, in particular,
through the National Association of Attorneys General (NAAG), an internal Philip Morris document shows the company executives believed they could control NAAG.
"This might explain why Keith Teel and
our industry tort consultants assigned to NAAG might be unaware of these sorts of activities
()... While our allies in NAAG have been strong enough to prevent the organization from being used against us, our mortal adversaries are too strong for us to be able to use it much to our advantage. To be truly effective, I think that whatever we hope to accomplish with individual AGs will have to be done one-on-one utilizing the allies and resources that we have available to us in each state ()."
source: Philip Morris: 2044038528/8529, 1996
The stated purpose of the settlement was to reimburse states for costs to support Medicaid. States must now use part of this money to fight the tobacco industry. Tobacco Freedom.org advocated strongly for states to rescind the Master Settlement Agreement. We now work to ensure states use the money to reduce the negative impact tobacco has on our society. We provide the following analyses and presentations to ensure the world does not forget this mission: