PASCAGOULA, Miss. (AP) -- A Mississippi judge will determine if R.J. Reynolds shortchanged the state of Mississippi when it failed to report profits from the sale of 7.8 billion cigarettes made for Star Tobacco.
The state argued Monday before Jackson County Chancery Judge Jaye Bradley that R.J. Reynolds failed to fulfill its obligations to Mississippi as provided in the landmark 1997 master tobacco settlement.
The North Carolina-based company, whose products include six of the 10 best-selling U.S. cigarette and moist snuff brands, is the second-largest tobacco company in the United States.
The state argued that from 2000 to 2005 R.J Reynolds excluded 7.8 billion cigarettes from the 1997 settlement that were made by its subsidiary Brown and Williamson for an independent tobacco company.
"Those cigarettes were not included in the production numbers to come up with the tobacco settlement," Gary Wilson, an attorney representing the state.
Wilson said the cigarettes were fabricated for Star Tobacco, which then packaged and sold them.
"The original settlement included all cigarettes sold and that means to other manufactures as well," Wilson said.
Mississippi's share of the 25-year, $206 billion settlement is expected to be about $3.6 billion, depending on the amount of cigarettes the companies sell in the state each year. Mississippi generally receives $90 million to $100 million each year from the settlement, attorneys said.
Mississippi and 45 other states had argued the cigarettes produced by the tobacco industry contributed to health problems among the population, which in turn resulted in significant costs to the states' public health systems.
Elli Leibenstein, an attorney for R.J. Reynolds, said Brown and Williamson made cigarettes for the independent tobacco manufacturer that then packaged and sold the cigarettes in Mississippi. He argued those sales were not directed at customers' whose health could be affected and should be exempted.
Attorney General Jim Hood filed suit in 2010 alleging that the miscalculations "resulted in artificially low payments in Mississippi for 2001 and for every year thereafter in which Mississippi was entitled to a net operating profits adjustment."
Star sold the cigarettes using such brand names as Gunsmoke and Vegas, research showed, between 1999 and 2002.
Bradley took the arguments under advisement and did not indicate when she might rule.
