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MADISON - A federal court in Virginia has ruled in favor of the State of Wisconsin in a dispute with the federal government over who has the right to certain funds of a defunct tobacco company. Federal Judge James P. Jones ruled that it was improper for the federal government to seize money that CLP, Inc., had placed in a reserve fund as required by Wisconsin statutes. The purpose of the reserve fund is to pay judgments on tobacco-related claims brought by the State of Wisconsin against CLP.
“This is a significant legal win for the citizens of Wisconsin,” said Attorney General J.B. Van Hollen. “While the dollars at dispute in this specific case are not large, it establishes an important legal precedent that no one has a right to such funds except the State of Wisconsin. This ruling will prevent future raids on similar monies held on behalf of the State to help pay health care-related tobacco costs.”
CLP recently went bankrupt owing hundreds of thousands of dollars in unpaid federal taxes. Upon obtaining judgment in the bankruptcy proceeding, the federal government seized various assets of CLP, including the escrow account held on behalf of Wisconsin and numerous similar accounts held for other states. A number of states brought motions in opposition to the federal government's seizure of such funds. All states except Wisconsin and Oregon eventually settled on a division of such funds between such states and the federal government. Wisconsin and Oregon, however, maintained that all such funds should continue to held for the benefit of their respective states, and the federal court agreed.
Under the court's ruling, such funds must be held for the benefit of the state for 25 years, during which time the funds can be used to pay tobacco-related judgments obtained by the state against CLP. If no claims are filed against CLP during that time, only then are such funds subject to seizure by the federal government.
“We could have settled with the federal government, we didn't,” Van Hollen added. “We did what we felt was right under the law and what was in the best long-term interests of the citizens of the State. This position was vindicated and Wisconsin wins.”