By James Nash The Columbus Dispatch (KRT)

Two tobacco companies shortchanged Ohio by $38 million under a watershed 1998 settlement between cigarette manufacturers and 46 states and territories, Attorney General Jim Petro alleges in a new lawsuit.

Ohio was the fifth state to sue R.J. Reynolds Tobacco Co. and Lorillard Tobacco Co. for withholding part of the $1.2 billion the tobacco companies agreed to pay to settle claims that their products were driving up health-care costs.

Much of Ohio’s $312 million share of the settlement was used for programs to discourage youth from smoking and to help longtime smokers quit. Some of the money also was used to balance the state budget and to build or renovate schools.

In a written statement, Petro said he sued the two tobacco companies late Tuesday to force them to live up to their obligations under the 1998 agreement between the companies and states.

“We will fight to see that full payments are made,” he said.

The tobacco companies say the settlement included a provision allowing them to reduce their payments if the settlement caused them to lose market share to rivals that were not part of the agreement.

In studying the 2003 payments, the companies found that they had overpaid based on that formula, said David P. Howard, a spokesman for R.J. Reynolds.