Landmark tobacco lawsuit settled 25 years ago — what happened to money?

by Bobby Harrison, Mississippi Today
June 26, 2022

If Mississippi's political leaders had stuck to their plan, the state would now have a trust fund of more than $4 billion earning about $320 million annually to spend on health care, based on projections made in 1999.

But, as often is pointed out, “the best laid plans of mice and men often go awry.” Such is the case with the health care trust fund that was created in 1999 with the money from the state's settlement with the tobacco companies of a landmark lawsuit to collect government funds spent treating smoking-related illnesses.

The settlement funds have been delivered to Mississippi as promised, but the promise of a trust fund was broken long ago.

The lawsuit, which originated in Mississippi, turned into a $365 billion national settlement that was announced by then-Mississippi Attorney General Mike Moore and others on June 20, 1997 – 25 years ago.

The lawsuit guaranteed Mississippi $4 billion over 25-years with annual payments of $100 million or more, based on a formula, continuing forever.

“The money is good, but the most important thing is when you look at kids smoking, it was 27% then and it is now less than 4%. We have done a lot of wonderful things in the last 25 years,” said Moore who resides in Madison County near Jackson and remains active in groups combatting cigarette use. “Adult smoking was around 30% and it is now 12%.”

He said lung disease has been cut in half and the prevalence of other diseases associated with smoking also is down. The lawsuit placed restrictions on the cigarette-makers advertising to young people and played a key role in campaigns that have led to significant reductions in tobacco use.

Moore concedes that he is disappointed that the trust fund was fleeting.

“It breaks my heart,” Moore said recently.

Slowly at first, state leaders began removing funds from the trust fund to fill budget holes. In 2005, legislation was passed to take $240 million from the trust fund to plug a Medicaid deficit. At first the Democratic-led House rejected the proposal, touting instead an increase in the cigarette tax – at 18 cents a pack one of the nation's lowest – to plug the hole. But Republican Gov. Haley Barbour resisted the tax proposal.

In the end, the House agreed to the raid as long as there was a commitment to replenish the trust fund. Each year legislators and Barbour balked at making the repayments to the trust fund while at the same time removing more money to fill other holes.

When Barbour took office in 2004 there was more than $630 million in the fund. When he left office, the fund contained $50 million.

Eventually, the Legislature repealed the trust fund.

The erosion and eventual elimination of the trust fund was bipartisan. It began to a limited degree under Democratic Gov. Ronnie Musgrove and accelerated under Barbour. Both Republican and Democrats in the Legislature at the very least acquiesced in the trust fund withdrawals.

Still, it could be argued that the funds were used for important purposes – primarily to evade Medicaid cuts. But it is at least worth pointing out that many of the same political leaders who participated in the trust fund raids have passed tax cuts in recent years that will total more than $1 billion annually when fully enacted. Could some of those funds have gone to restoring the trust fund?

The lawsuit was concocted by Clarksdale attorney Mike Lewis upon visiting a friend – a chronic smoker suffering from cancer. He took the idea of suing the cigarette companies to recoup public funds spent treating smoking-related illnesses to Moore. The AG brought into the discussions Richard Scruggs, a nationally recognized attorney from Pascagoula, Moore's hometown.

The lawsuit advanced the template of the state contracting with private attorneys. If the state prevailed, the private attorneys won big. If they did not, they received nothing. And the caveat was that the private attorneys had to use their own money. Legislative leaders made it clear Moore should not expend any state funds on the tobacco lawsuit that they viewed as a pipe dream.

“Scruggs spent every penny he had,” Moore said. “If it had not worked out, he would have had nothing left. It turned out the other way. But that is not what people were predicting.”

Of course, years later Scruggs was convicted in federal court in a judicial bribery scheme involving a lawsuit where some of the attorneys involved in the case were bickering about their share of funds from the settlement.

Some have argued that the judicial bribery tainted the lawsuit.

Moore conceded Scruggs made a mistake, but the lawsuit has been good for the state and nation – even though it did not result in a health care trust fund for Mississippi.

This article first appeared on Mississippi Today and is republished here under a Creative Commons license.