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Tobacco deal dead, but public roused

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Having helped to extinguish a tobacco pact in Congress, cigarette-makers may have more incentive than ever to end the cloud of doubt over tobacco's future.

Even if they dodged $561 billion in payments over the next 25 years, public opinion and the courts have turned against tobacco manufacturers. With that background, stocks of the cigarette companies rose only modestly after the Senate this week killed legislation the industry claimed would lead to bankruptcies."It doesn't mean the industry's out of the woods, but it faced two major threats: litigation and regulation," said David Adelman, a tobacco industry analyst at Morgan Stanley in New York. "Now the regulatory threat is significantly decreased."

The tobacco industry will now have to contend with an increasingly critical American public. Two out of three Americans back the government in its efforts to rein in the industry, according to a poll released Monday by the Pew Research Center for the People & the Press.

The Clinton administration and Democrats are expected to keep tobacco in the public eye by making the deal's failure an issue in the 1998 congressional elections.

"Everything we dreamed of one year ago today has been shelved for the sake of dishonest politics," Utah Attorney General Jan Graham said in a statement Thursday. "Congress just blew it."

The tobacco companies unleashed a $40 million media blitz, and the bill died at the hands of a Republican-led filibuster.

"They have had every opportunity to make history for American children but abandoned the fight by giving in to the massive advertising assault by big tobacco," Graham said.

Courtrooms, in which tobacco companies have for years gone undefeated, have also grown more hostile to tobacco-makers.

Last week, a Florida jury ordered Brown & Williamson Tobacco to pay nearly $1 million to the family of a man who died after smoking Lucky Strikes for almost 50 years. The verdict marked the first time a tobacco company was ordered to pay punitive damages because cigarettes are inherently dangerous.

A trial date for a Utah case is expected to be set early next year. Written and oral arguments have already been made before U.S. District Judge Dee Benson.

Hope for a resurrected deal on Capitol Hill remains, but the immediate prospects appear dim, tobacco industry spokesman Scott Williams said.

"We have always felt that a comprehensive resolution is the way to go. You can't do it any other way," he said. "However, it's clear that the atmosphere in Washington hasn't changed."

Nevertheless, the tobacco industry is willing to barter, he said. So are plaintiffs' lawyers, who need a settlement - in Congress or in court - in order to get paid.

The lawyers have spent more than $25 million in unreimbursed research and expenses suing tobacco companies, said Cleveland lawyer John R. Climaco, who has been suing the companies since 1994 and helped negotiate the pact.

The trial lawyers could still try their chances in increasingly sympathetic courtrooms, but that could take years. "If nothing happens, we've spent a lot of money and we go home," Climaco said.

When the bill failed, tobacco- makers eluded a deal that could have proved financially crippling, Wall Street analysts say.

The bill would likely have bankrupted debt-laden RJR Nabisco, and a mandatory price increase that would have made a $1.95 pack cost $4.50 at the checkout stand would have reduced the number of cigarettes sold by a whopping 57 percent, Adelman said.

"This was not a settlement. This was a giant excise tax," said Gary Black, a tobacco analyst with Sanford C. Bernstein in New York. "There was nothing in it for the tobacco industry."

Sen. Don Nickles, R-Okla., said he believes that Congress will pass a tobacco bill before the session ends but that the legislation will work within the budget. The Republican whip said there is support among his party's members for a measure that would curb both tobacco and drug use among teenagers.

Tobacco companies want three things, all of them vigorously contested, to protect future income. The industry wants to hold any price increase to no more than $1.10 a pack, an unlimited cap on liability in civil suits and protection for the assets of the parent companies of tobacco-makers in case tobacco divisions go bankrupt.

"If you get those three things," Black said, "tobacco companies will come back to the table."


Additional Information

States with trial dates for lawsuits against the tobacco industry:

Arizona, March 4, 1999

Hawaii, Sept. 7, 1999

Maryland, April 5, 1999

Massachusetts, Feb. 1, 1999

Missouri, Jan. 24, 2000

New Jersey, May 1999

New York, May 17, 1999

Ohio, May 4, 2000

Oklahoma, Jan. 25, 1999

Oregon, April 5, 1999

Vermont, Nov. 13, 1999

Washington, Sept. 14, 1998

Wisconsin, Sept. 13, 1999

Lawsuits in California, Iowa, Michigan and Utah are expected to come up for trial sometime next year, but no dates have been set.

The tobacco industry reached settlements with Minnesota, Texas, Florida and Mississippi for a total of $36.5 billion.