Big Tobacco Takes Another Big Hit
Industry cuts its losses in a deal with Florida that could change global settlement talks.
The $11.3-billion settlement Monday between the major cigarette manufacturers and the state of Florida is further proof that the tobacco industry realizes it cannot win a protracted legal war in the face of growing public disapproval of smoking.
Instead, industry executives are seeking to limit their losses by attempting to negotiate their way out of a crush of legal challenges.
The threats aren't only financial. The Florida case would have included the first public release of confidential internal industry documents that suggest executives engaged in a decades-long coverup to continue selling a product when they had evidence it would cause illness and death.
Some tobacco critics say the Florida settlement is proof that the proposed $368 billion global settlement of tobacco cases with 40 states - including Florida - is a windfall for the industry. They say the states could get far more money, and more advertising concessions, if they each went to trial on their own. The Florida deal follows an earlier settlement between the industry and the state of Mississippi.
"What this shows is that the industry is on the run and states can win, and it's time to seriously rethink whether we should go ahead with this global settlement or let the states move ahead on their own," says Paul Billings, a lobbyist at the American Lung Association.
A trial, he says, would be a public-relations nightmare for the industry. "They are so afraid of actually going to trial - for the public to learn the extent of the conspiracy, fraud, misrepresentation, and suppression of evidence - that they are willing to settle," Mr. Billings says.
Industry executives late last week signaled their recognition that the public is growing increasingly skeptical of their motives. Several made conciliatory comments under questioning by Florida lawyers, which came in preparation for Florida's multibillion-dollar Medicaid suit that was set to go to trial next week.
Steven Goldstein, chairman of RJR Nabisco Holding Corp., told the lawyers on Friday that he "always believed that smoking plays a part in causing lung cancer."
A day earlier, Geoffrey Bible, chairman of the Philip Morris Cos., said that as many as 100,000 smokers "might have" died as a result of smoking-related illnesses.
Analysts say the comments represent a shift from the industry's long-held position that there is no proof that smoking causes disease.
"I'd say this sends a message that the industry is in full retreat," says Sen. Kent Conrad (D) of North Dakota, who heads the Democratic Senate task force that is examining the global tobacco agreement. "This is another step along the way to the industry taking full responsibility for its actions of the past."
Florida's deal may strengthen the hand of those in Washington who want to get more out of the industry in a proposed $368 billion global settlement. Congress and the White House are now studying the proposal. If the global settlement is approved, both the Florida and Mississippi deals would be largely superceded, industry analysts say.
Tobacco officials declined to comment on the Florida settlement. But in a joint statement, the cigarette makers said the agreement was "another step in a process to end the climate of confrontation and litigation that has marked the national debate on tobacco-related issues."
They said the agreement was a concrete demonstration that the industry is prepared "to emphasize that it does not want kids to smoke."
"While this case dealt with specific concerns of the state of Florida, the comprehensive settlement represents the best opportunity to achieve immediate and meaningful resolution of outstanding issues regarding tobacco," the statement says.
Two issues identified by the industry were reduction of tobacco use by minors and "preservation of adults' rights to use tobacco."
Kathleen Scheg of the anti-tobacco group Action on Smoking and Health in Washington says the industry's agreement to limit advertising marks a major concession not obtained by negotiators in the global settlement.
"It should be a big red light to Congress saying, don't rush to [approve the global] settlement," Ms. Scheg says. "The states can do quite well by themselves."
Ed Sweda, a senior attorney with the Tobacco Products Liability Project at Northeastern University in Boston, agrees. "This will have an effect on opponents of tobacco in Congress," he says. "I think they'll call for a reexamination of the proposed national settlement in light of what the tobacco industry has done. In July they settled the Mississippi case and now in August they settled the Florida lawsuit."
Mr. Sweda says the next state trial is set in Texas in late September. He says negotiators there will likely up the ante when seeking their own settlement.
* Staff writers Robert Marquand and Lawrence Goodrich contributed to this report.
FLORIDA TOBACCO DEAL
What Florida sought:
* $12.3 billion: $1.3 billion for tax money spent treating ill smokers without insurance plus $11 billion to punish the industry for promoting a product it allegedly knew to be dangerous.
What Florida got:
* $11.3 billion to be paid out over 25 years.
* A ban on billboard, bus, and stadium advertising.
* A $200 million pilot education project to reduce the use of tobacco by kids.
* The release of about 400 confidential industry documents.