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Tobacco a done deal
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November 20, 1998: 6:38 p.m. ET
Forty six states and five territories sign on to $206B tobacco settlement
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NEW YORK (CNNfn) - A group of 46 states reached an agreement Friday with leading tobacco companies that calls for cigarette makers to pay the states $206 billion and submit to sweeping advertising and marketing restrictions.
The agreement, the largest civil settlement in history, is expected to be formally signed on Monday.
"It's a great day for the attorneys general," said Washington State Attorney General Christine Gregoire in a conference call with reporters. "Joe Camel and his ilk are now in intensive care and will be gone by April. Billboards will be coming down, and the real truth about tobacco will be available to every American."
Gregoire said the deal could lead companies to increase the cost of cigarettes by 35 to 40 cents over the next five years, but they could also choose to absorb the costs.
Deal resolves 37 state lawsuits
The deal resolves 37 state suits filed against the tobacco industry to recoup Medicaid costs of sick smokers. Four states -- Florida, Minnesota, Mississippi and Texas -- had previously negotiated separate settlements with the tobacco companies.
Jeff Modisett, Indiana Attorney General, called the deal an important step in reducing youth smoking. (143K WAV or 143K AIFF)
The cigarette makers, Philip Morris Cos., the world's largest, RJR Nabisco Holdings Corp., Brown and Williamson Tobacco Corp. and Lorillard Inc., as well as smokeless tobacco maker UST Corp., will participate in the deal.
Gregoire also said the deal includes Bennett LeBow's Brooke Group, owner of the Liggett cigarette company, which broke from the rest of the industry and became the first tobacco company to settle with the states in 1996 and 1997.
"We're...pleased to be joining the agreement with the attorney generals and the rest of the tobacco industry," Bennett S. LeBow, Brooke Group's chairman and chief executive, said. "Going forward, we hope that this agreement leads to a meaningful reduction in underage smoking."
Under a March 1997 accord, LeBow turned over damaging internal documents against other companies and has repeatedly testified against them. Just last week, he appeared before a Florida jury in a smokers' class-action trial in which he testified that smoking causes lung cancer and heart disease.
Separately, Brooke announced plans Friday to sell three cigarette brands to Philip Morris for $300 million in cash.
Companies will reveal secret documents
Under the agreement, the companies will fund a $1.5 billion anti-smoking campaign and open previously secret industry documents.
In addition, the companies will shoulder increased restrictions on tobacco advertising, ending cigarette ads on billboards and public transportation, as well as on promotional items such as hats and T-shirts. The deal bans the use of cartoon characters, such as the once-popular Joe Camel, in any tobacco advertising, though it will permit sports promotions of brand labels in retail stores.
Finally, cigarette makers agreed to establish a $250 million foundation dedicated to reducing teen smoking.
However, the deal excludes any provision for Food and Drug Administration regulation over cigarettes because such a condition would require congressional approval.
Martin Feldman, tobacco analyst at Salomon Smith Barney, said the agreement removes the threat of endless litigation for the tobacco industry, something investors have worried about for years. (165K WAV or 165K AIFF)
"I think we'll see a major change in the amount of money being used on anti-tobacco measures," said Seattle attorney Steve Berman, who negotiated the 1997 settlement between Liggett and 22 states. "They lied about everything. At key points in time, when the U.S. government or states tried to legislate them, the tobacco companies used their lies to stall regulation, to stall warnings."
Berman also said the success of this case shows that prosecutors can come together and take on the larger issues.
The deal does not resolve a battle in Massachusetts, where tobacco companies want to overturn a 1997 state law that requires them to disclose the ingredients of each cigarette brand and smokeless tobacco product to the state health agency.
An earlier $368 billion national settlement proposal would have granted that power to the FDA, but that agreement fell apart in Congress last summer, when politicians added restrictions and tried to get tobacco companies to pay as much as $516 billion.
Tobacco companies will offer farmers about $5 billion to compensate for lower leaf demand resulting from the settlement.
"The war against tobacco won't be won in one engagement," Gregoire said, adding, "This is but one battle. This is a realistic solution to our lawsuits. We couldn't overreach for unachievable goals. The status quo can't be allowed to persist."
--staff and wire reports
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