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Cough up $17M more, state says

By SCOTT BARANCIK
Published May 18, 2006

How does a tobacco manufacturer lose track of 7-billion cigarettes?

Deliberately, say Florida officials.

Documents filed Wednesday in Palm Beach Circuit Court accuse former tobacco manufacturer Brown & Williamson of cheating Florida taxpayers out of $17-million by hiding cigarettes it made for another company.

Brown and several competitors agreed in 1997 to pay Florida $11.3-billion over 25 years to settle claims that they sold a defective product and deceived the public about its dangers, costing the state billions of dollars in Medicaid costs. Annual payments were to be based in part on cigarette sales figures.

But Florida officials claim Brown excluded from its calculations billions of "Gunsmoke," "Vegas" and other cigarettes it made for Star Tobacco and Pharmaceuticals from 1999 to 2002, and then lied about it.

The state wants Brown, which was acquired by R. J. Reynolds in 2004 to form the country's second-biggest tobacco company, to pay $17-million it allegedly owes Florida taxpayers, plus damages.

Wednesday's filing also asked the court to hold Brown in contempt, which could mean additional cash for Florida.

R. J. Reynolds spokesman David Howard said Brown excluded Star's cigarettes from its annual payment calculations because Star was not part of the 1997 settlement agreement and because the cigarettes "were not sold, distributed or marketed by Brown & Williamson."

Howard added that the state of Texas recently lost a similar lawsuit over Star cigarettes, though that decision is under appeal. He said he was unaware that Brown settled a Star-related complaint in 2003 with 46 other states and the District of Columbia for $160-million.

JoAnn Carrin, a spokeswoman for Florida Attorney General Charlie Crist, said the state discovered Brown's alleged undercount in 2002 but wasn't able to verify it under the terms of the settlement agreement until now.

Scott Barancik can be reached at barancik@sptimes.com or 727 893-8751.

[Last modified May 18, 2006, 07:59:50]