Settlement reached with cigarette maker

Attorney General Mark R. Herring has secured nearly $40 million for the Virginia Health Care Fund from a settlement reached with S&M Brands, a “Non-Participating Manufacturer” (NPM) or a cigarette manufacturer that did not sign the 1998 Tobacco Master Settlement Agreement (MSA). Under the terms of the settlement, S&M Brands paid the Commonwealth $39,388,787.20, that has been transferred to the Virginia Health Care Fund.

“With this settlement, almost $40 million has been transferred into the Virginia Health Care Fund where it will be used to help the people of the Commonwealth who truly need it,” said Herring. “I want to thank my team for all of the hard work that they put into reaching this substantial settlement with S&M Brands.”

In 1998, the Commonwealth, forty-five other states, the District of Columbia, Puerto Rico and four United States territories entered into the Tobacco Master Settlement Agreement with the four largest U.S. tobacco product manufacturers. Following settlement with these manufacturers, various other tobacco product manufacturers also voluntarily joined the MSA. Under the MSA these tobacco product manufacturers agreed to adhere to various marketing, advertising and promotional restrictions, especially pertaining to youth smoking. 

In addition to the MSA, Virginia enacted “NPM Statutes” that require Tobacco Product Manufacturers who have not entered into the MSA to establish Qualified Escrow Fund accounts, controlled by the Commonwealth. All NPMs, including S&M Brands, are required to make regular deposits (calculated based on state sales) into these escrow accounts. After 25 years, such deposits are returned to the NPM (minus any funds used to satisfy judgments following suits against the manufacturer). However, under Virginia Code, NPMs may assign rights to their escrow funds to the Commonwealth before the 25-year period expires. This settlement comes as a result of S&M Brands’ agreement to assign the rights to certain funds in its escrow account over to Virginia in return for the right to retain a portion of those funds. In addition to the settlement resulting in the payment of nearly $40 million into the Virginia Health Care Fund, it will also prevent the possibility of any potential future litigation that might have been brought over the return of those escrow funds.

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