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Attorney General's News Release

February 1, 2012

Attorney General Koster calls on legislature to pass bill closing tobacco-settlement loophole

Jefferson City, Mo. – For the third consecutive year, Attorney General Chris Koster is calling on the Missouri General Assembly to pass a law to close a critical loophole in the tobacco master settlement agreement Missouri and 45 other states signed in 1998. Missouri is the only state left that has not closed the loophole – a situation that could potentially cost Missouri past and future settlement funds of more than $1 billion.

According to Koster, a state law related to the settlement agreement requires tobacco companies that did not participate in the settlement to set aside funds in escrow each year that could pay states’ claims against the companies in the future. But a gap in the law’s drafting led to unintended consequences, allowing companies that concentrate their sales in Missouri to recover almost the entire amount of the money they put into escrow at the end of each year. While every other state of the 45 states participating in the settlement has corrected this error, Missouri’s legislature has failed to act year after year, despite being repeatedly asked to do so by former Attorney General Jay Nixon and annually by Koster since taking office. This failure to act places Missouri at a unique disadvantage in national arbitration scheduled for this spring.

“Simply put,” Koster said in a letter he sent to each member of the legislature, “the General Assembly’s inaction over the past decade has placed our state in terrible and unnecessary peril.”

Since 2001, Missouri has received a total of $1.8 billion in tobacco settlement payments. Koster implored the General Assembly to “consider how much more dire our economic challenges would be” without those funds.

Koster said bills to close the loophole in the escrow law have been introduced in prior years, including last year’s proposals by Senator Mike Parson and Representative John Diehl. Senator Kurt Schaefer has filed Senate Bill 629 this session to address the issue.

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