Tobacco company ordered to pay Arkansas nearly $30 million

LITTLE ROCK, Ark. (KTHV) – Attorney General Dustin McDaniel announced on Wednesday that a Canadian tobacco company has been ordered to pay nearly $30 million to the State for failing to set money aside in escrow in lieu of its participation in the tobacco Master Settlement Agreement.

The Attorney General's Office accused Grand River Enterprises of violating the law by not depositing money in escrow for its sales of Seneca cigarettes in 2005 and 2006. At a hearing in Pulaski County Circuit Court today, Judge Wendell Griffen granted McDaniel's motion for summary judgment against the company.

Griffen said he will order Grand River Enterprises to pay a civil penalty of $29,489,259.51, which represents 300 percent of the amount that the company did not deposit into escrow. The company must also place in escrow $9,829,753.17.

"We are all aware of the health risks associated with tobacco use, and tobacco companies who do business in Arkansas have a responsibility to set aside money in the event the companies are required to pay for the health consequences caused by the products they sell," McDaniel said. "I am grateful to the Court for making sure that this company understands the importance of complying with Arkansas law."

Grand River Enterprises was not a party to the 1998 Master Settlement Agreement with big tobacco companies, which directs tens of millions of dollars annually to fund public health initiatives in Arkansas. Because Grand River Enterprises did not participate in the settlement agreement, the company is required by state law to deposit into escrow a portion of the proceeds from its sales in Arkansas.

The funds remain in escrow for 25 years. The state would receive the escrow money if it were to obtain a judgment against the company for health-related claims associated with the smoking of the company's cigarettes. Otherwise, after 25 years, the funds in escrow revert to the company.

The Attorney General's Office initially filed suit against Grand River Enterprises in 2006.

Griffen ruled from the bench and said he would order the company to make all payments and deposits into escrow within 30 days or, otherwise, post a bond. He also said pre-judgment interest on the payments would be assessed.

McDaniel has made enforcement of the MSA and Arkansas tobacco laws one of his top priorities during his tenure as Attorney General.

As co-chairman of the National Association of Attorneys General Tobacco Committee from 2010-12, McDaniel successfully negotiated a settlement with the companies who were parties to the MSA, thus restoring certainty to annual payments and ending a long-running dispute with the companies. Nineteen states joined McDaniel in the landmark agreement made last year.

Arkansas's share of MSA proceeds in 2014 was $49.96 million.

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