$6 billion bond set for Philip Morris

EDWARDSVILLE, Ill., April 14 (UPI) -- A judge Monday reduced by half a $12 billion bond for tobacco giant Philip Morris USA to appeal a $10.1 billion verdict against the company in Illinois.

Madison County Judge Nicholas Byron ruled on March 21 that the nation's largest tobacco company had committed consumer fraud by claiming its "light" cigarettes were safer than regular smokes.

Byron ordered Philip Morris to post $12 billion to appeal a $10.1 billion class-action award -- $7.1 in compensatory damages and $3 billion in punitive damages -- but Philip Morris said it might file for bankruptcy unless the appeal bond was lowered.

At a hearing Monday, the judge approved a request to lower the bond, cut it in half and ordered the company to deposit a $6 billion term note in escrow.

The lower appeal bond apparently will allow Philip Morris to make $2.5 billion in payments to 46 states due under the 1998 national tobacco settlement.

Indiana Attorney General Steve Carter had threatened to go to court if Philip Morris missed a $52 million payment to the state by midnight Tuesday.

Philip Morris USA had said it could not meet a $52 million payment to Indiana because of the $12 billion bond to appeal the Illinois case. Carter warned if the company defaulted on the scheduled tobacco settlement payment, he would sue after 30 days.

"If the company does not make the payment, the state of Indiana will immediately issue them a default notice, which under terms of the master settlement agreement gives them 30 days to cure their default," Carter said. If Philip Morris misses the payment, Carter said the state would "seek every legal and every collection option we have."

Indiana has collected nearly $444 million from the nation's top four tobacco companies since 1998, but did not join attorneys general of 36 other states in asking the Illinois judge to reduce the appeal bond.

"I didn't think it was appropriate for us to become partners with a tobacco company in litigation," Carter told a news conference. "To sign off on that, you also have to buy into Philip Morris's argument that they can't support their legal and financial obligations."

Indiana is supposed to collect $151 million in tobacco settlement payments this year. The state spends 60 percent of the money on health-related programs, including a prescription drug subsidy for low-income seniors.

Shares in Altria Group Inc., Philip Morris's parent, closed up 81 cents to $31.40 in trading on the New York Stock Exchange.