>>> March 21, 2002

Smoke screen

With the 1998 Master Settlement Agreement, it may have looked like the 46 U.S. states involved were sending a hard message to the tobacco industry. The settlement obliged the four leading tobacco giants to pay $206-billion (U.S.) in compensation for expenses incurred from tobacco-related illnesses. However, a study by the Investor Responsibility Research Center has found that 33 of those states have invested their settlement cash back into tobacco industry stocks or the index funds that include them.
With the settlement to be paid out over 25 years, Bob Levy of the Cato Institute says the states are simply ensuring they collect their share. Levy believes the agreement was tantamount to collusion, leaving the companies involved with state protection against outside competition.

“The states get their money only if the tobacco companies are… making lots of money,” Levy says. “As a result of the settlement, they are betting on the success of the tobacco companies.” :

—Scott Saxon