Philip Morris Expected To Request Lower Illinois Bond Payment

Philip Morris today is expected to file a court motion seeking to reduce a $12 billion bond that an Illinois state court said the tobacco company must pay to appeal a recent court decision, the New York Times reports (Fuerbringer, New York Times, 4/2). The company must pay the bond to appeal a decision reached last month in a class-action case filed on behalf of about one million Illinois smokers. Illinois Circuit Court Judge Nicholas Byron ruled that Philip Morris misled consumers about the health risks of "light" cigarettes, and he ordered the company to pay $10.1 billion in damages (California Healthline, 3/31). Philip Morris has said that it cannot afford to pay the bond and that the company could face bankruptcy (New York Times, 4/2). The expected court motion follows the company's warning that it might not be able to pay $2.5 billion in settlement money to 46 states by April 15 because of the bond order, the Wall Street Journal reports. Philip Morris is responsible for about 50% of the annual settlement payment to the states that won a $246 billion lawsuit against the tobacco industry in 1998. Washington state Attorney General Christine Gregoire (D), who has said that the large bond "could deal a significant, unnecessary financial blow to the states," is expected to join other state attorneys general in filing a formal motion to urge the Illinois court to lower the bond.

Although the national tobacco lawsuit sought funds for public health costs and smoking prevention programs, many states have used the settlement money to address budget shortfalls, the Journal reports. "These dollars are becoming more and more important," Lee Dixon, who researches health policy for the National Conference of State Legislatures, said (Fairclough/O'Connell, Wall Street Journal, 4/2). MPR's "Marketplace" yesterday included a report on the Philip Morris bond payment. The segment includes comments from Morningstar tobacco analyst David Kaplan and George Washington University Law School professor John Banzhaf (Eaton, "Marketplace," MPR, 4/1). The full newscast is available in RealPlayer online.