Debate and Issues Archive

draft settlement

Tobacco Companies Create Trust Fund For Farmers
A state court in Wake County, North Carolina approved the establishment of a trust for tobacco farmers to be funded by tobacco companies.

The National Tobacco Grower Settlement Trust could receive up to $5.15 billion over 12 years from Philip Morris, R.J. Reynolds, Brown & Williamson and Lorillard. The purpose of the trust is to provide financial support to farmers and quota holders - farmers who have been granted tobacco-growing rights by the federal government.

Tobacco analysts speculated that the creation of the trust was politically motivated. "The Trust will keep tobacco state lawmakers allied with the interests of tobacco industry," said David Adelman, analyst at Morgan Stanley Dean Witter. Adelman went on to say, "It's one thing if five farmers dominated tobacco farming, but there are tens of thousands of tobacco farmers and quota holders and that is where the votes are.

The tobacco industry had to try to appease that constituency and align their interests with tobacco companies - this agreement achieves that goal." The trust is separate from and will not affect the national tobacco settlement.

Reuters, (8/19/99) "Tobacco Grower Settlement approval seen as political", Edward Tobin
[Full Text: http://biz.]
WALL STREET JOURNAL, (8/20/99) "Trust To Be Funded By Tobacco Companies For Growers Is Cleared", p. B7

Commentary: provided by Advocacy Institute, distributed by Smokescreen
Friday, August 20, 1999

BIG TOBACCO BUILDS FARMERS' TRUST WITH TRUST FUND -- Once again, Big Tobacco has used its huge financial resources to buy political power. A North Carolina judge yesterday approved the National Tobacco Grower Settlement Trust, a $5.15 billion dollar payoff from the four largest U.S. cigarette companies to tobacco states and tobacco farmers to make up for a decline in sales caused by the Master Settlement Agreement.

This voluntary payoff will help reduce tension and reseal the bond between Big Tobacco and tobacco state lawmakers in Congress and state legislatures, who were displeased with farmers' omission from the Master Settlement Agreement. Big Tobacco hopes that these policymakers will once again do the industry's bidding as it seeks to neutralize tobacco use prevention activities in Congress and state legislatures.

Activists can use this time to remind farm groups that cigarette excise tax increases can also be used for economic development in farming communities and would generate more farm money than Big Tobacco is providing. Considering that a large state or federal excise tax could raise billions each year for crop conversion, tobacco state lawmakers may be selling their allegiance for a pittance.