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Liggett Group and Vector Tobacco to Sue Attorneys General

MIAMI -- The Liggett Group and Vector Tobacco, subsidiaries of Vector Group Ltd., have notified the attorneys general of 46 states that they intend to initiate proceedings against them for violating the terms of the Master Settlement Agreement (MSA) entered into between those 46 states and tobacco manufacturers in 1998. The subsidiaries allege that the attorneys general extended unauthorized favorable financial terms to Miami-based General Tobacco when, on Aug. 19, they entered into agreements with the company allowing them to become a subsequent participating manufacturer under the MSA.

General Tobacco imports discount cigarettes manufactured in Colombia, South America.

In the notice sent to the attorneys general, the Vector Group Subsidiaries indicated that they will seek to enforce the terms of the MSA, void the General Tobacco agreements and enjoin the settling states and National Association of Attorneys General from listing General Tobacco as a participating manufacturer on their Web sites.

"While we welcome and encourage non-participating manufacturers, including General Tobacco, to join the MSA, they should join under the agreed-upon terms of the MSA," said Ronald J. Bernstein, president and CEO of Liggett Group. "We are disappointed that the attorneys general are violating the clear provisions of the MSA in order to provide concessions and benefits to General Tobacco -- a tobacco company that has grown from selling 60 million cigarettes in the United States in 2000 to 7.6 billion cigarettes in 2003 by, among other things, as alleged by the attorneys general, failing to make timely or adequate deposits under state escrow statutes."

Bernstein added that by granting General Tobacco special treatment, the attorneys general are depriving their states of funds properly due to them and are providing General Tobacco with an unwarranted and improper benefit.

The Vector Group Subsidiaries claim that the General Tobacco agreements violate their rights and the MSA by:

* Exempting General Tobacco from annual payment due on April 15, 2005.

* Failing to require that General Tobacco make back payments within a reasonable period of time.

* Allowing interest to accrue on payments owed by General Tobacco at a rate lower than provided for in the MSA.

* Affording credits to General Tobacco for payments made to non-settling states.
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