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Tobacco Companies Talking Settlement Rjr Nabisco, Philip Morris Would Pay Off Smokers, States In Exchange For Protection Against Lawsuits

Thu., April 17, 1997

After decades of fighting any attempt to hold them liable for the health effects of smoking, the nation’s major tobacco companies are negotiating a possible settlement that would compensate smokers and taxpayers in exchange for protection against lawsuits.

With active encouragement from the White House, RJR Nabisco Holdings Corp. and Philip Morris Inc., the two largest tobacco companies, have been negotiating a proposal that calls for companies to pay hundreds of billions of dollars to create a fund to cover settlements with states, private individuals and others suing cigarette companies. The industry also would accept unprecedented restrictions on advertising and marketing.

In exchange, the industry would be protected from nearly all current and future lawsuits by setting a limit on the industry’s legal liability once and for all, an amount that could be $300 billion or more. Part of that payout would go to smokers claiming damages from the industry, and part would go to reimburse 22 states suing the industry to recover tobacco-related health care expenses.

The agreement as being discussed also would hold the companies to the spirit of U.S. Food and Drug Administration regulations to curb underage smoking, while limiting the ability of the agency to widen its regulatory program.

“This is the first time they have, literally, sat across the table,” said Hubert H. Humphrey III, Minnesota’s attorney general and a participant in the discussions.

While the negotiations, which began April 3, are unprecedented, their outcome is far from certain. Any deal resulting from the negotiations, first reported Wednesday in the Wall Street Journal, would require the consent of Congress by passage of a federal law. And the plan faces opposition from some state attorneys general and others.

Senate Majority Leader Trent Lott, R-Miss., said Wednesday that he has been briefed on the negotiations, adding, “I know the parameters of what they’ve been talking about. I don’t know the status over the last couple of weeks,” however. Lott has said he would work with a proposal were one brought to him.

Although none of the tobacco companies would acknowledge Wednesday that talks were under way, the news sent tobacco stocks upward.

According to sources familiar with the negotiations, the industry representatives have been willing to accept restrictions on advertising that even go beyond those called for by the FDA. The agency would ban tobacco billboards within 1,000 feet of schools or playgrounds; the industry has said it would drop billboard advertising as well as ad campaigns like the Marlboro Man and Joe Camel.

In return, the companies are asking that the FDA’s jurisdiction over tobacco products as “drug delivery devices” be nullified. Industry officials have long contended that FDA jurisdiction is the beginning of backdoor prohibition that could lead to further restrictions on tobacco products, including a gradual ratchetingdown of nicotine levels to render the products non-addictive. The FDA has consistently denied that prohibition is its goal, but did reserve the right to pursue more stringent measures if its goals for reducing underage smoking are not met.

Thus one proposal being floated in the talks would rename the agency the “Food, Drug and Tobacco Administration” to make clear that its authority over tobacco does not equate to that over drugs and to remove the threat that it may one day try to outlaw cigarettes entirely.

Said Senator Edward M. Kennedy, an outspoken opponent of the industry: “Anything acceptable to the industry at this point is highly unlikely to be acceptable to the Congress.”

The sense of Kennedy, and others like them could become crucial, because negotiators already have conceded that the wholesale action under discussion would involve an act of Congress and approval of President Clinton. Still, the Republican majority has historically been more sympathetic to tobacco interests than Democrats, and the tobacco lobby as spent more than $22 million in congressional races in the last decade.

“We’re fully aware … that they have a home-field advantage in Congress,” Massachusetts Attorney General Scott Harshbarger said Wednesday.

The negotiations come as the industry faces a number of legal challenges.

The lawsuits by 22 states, including Washington, are all heading toward courtrooms around the country, as are a number of suits by individuals and classes of smokers claiming tobacco-related injury.

In addition, the Liggett Group, the smallest major tobacco company, recently announced its own settlement. The company admitted that the industry targets young people and that its products are both addictive and cause fatal illnesses. Liggett also made internal documents available that the company says proves those contentions for the entire industry.


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