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ABSOLUTELY NOT," TOBACCO-industry attorney Keith Teel told The Tampa Tribune a few days before the news leaked. His clients weren't talking settlement. No money was on the table. It was the same refrain tobacco had sounded for years. But "never" has arrived. The discussion began in whispers more than a year ago. Last week lawyers for Philip Morris, RJR Nabisco and their opponents were face to face in a northern Virginia hotel, talking turkey: a $300 billion fund for claimants; no more billboards; goodbye, Joe Camel. By the weekend the ground had already shifted, with talk of a historic deal yielding to shouts of sellout. More talks were scheduled for this week, but the wheeling and dealing has just begun--and could end as quickly. A split has already emerged among the state officials negotiating the deal. With tobacco at the table, something has changed forever. But there are still many questions.
The industry's awesome track record in court began to falter early in the '90s. But in the last year, Big Tobacco has taken body blows. Just since February, the Supreme Court rejected industry pleas to stop states from suing to recoup medical costs and Liggett Group broke ranks with the industry, signing its own settlement deal and admitting that cigarettes cause cancer, are addictive and have been marketed directly to children. On Friday a Florida judge ordered new, sensitive documents released, declaring for the first time that the tobacco companies had voided their attorney-client privilege because they had used their lawyers to mislead and defraud the public. Talks of settlement, he added, won't keep Florida's case against the industry from going forward.
Tobacco is talking, says Bill Brown, of Mezzina/Brown, the New York ad agency that markets Camel, because it's been "litigated into submission." And because the industry's decades-old culture of all-out resistance is crumbling. It's no coincidence that RJR chairman Steven Goldstone, a major force behind the talks, is a lawyer who didn't grow up in the industry.
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Beyond acknowledging the talks, which were first disclosed in The Wall Street Journal, company officials wouldn't comment. But the industry clearly hasn't lost its smarts, timing or grip on Washington overnight. Count on a conservative Congress to support a deal hammered out by the industry and the state attorneys general. As a bonus, settlement talks will probably stall any new congressional initiatives, such as the Kennedy-Hatch proposal to raise cigarette sales taxes to fund children's health care. And the industry knows it will soon lose one advantage: the empty chair at the Food and Drug Administration. NEWSWEEK learned last week that the White House now has a "long short-list" of hard-line candidates to succeed former FDA chief David Kessler. It's a good bet that industry lobbyists already know who's on that list.
In a word: immunity. No deal can shield companies or executives from criminal fraud charges now under consideration by grand juries. And Bruce Lindsey, the White House point man in the negotiations, told NEWSWEEK that the administration is "troubled by the idea of blanket immunity" against civil liability. One insider says the administration would support only a conditional immunity. In such a deal, a certain number of years' protection from lawsuits would be contingent on achieving certain results. If teenage smoking failed to decline by, say, 50 percent over seven years, the immunity would be rescinded.
But the industry will push for as much protection as possible from litigation, current or contemplated.
Not really. Spread out over 25 years, as proposed, that comes to $12 billion a year (not even counting inflation). Minnesota alone estimates its annual tobacco-related costs at more than $1 billion. And a jury could mete out billions more in damages.
Technically. But companies would pass the costs on to smokers by raising prices. The run-up in tobacco stocks on the news was proof that investors want a settlement. Settling would save at least a billion a year in legal costs, and could pave the way for lucrative spinoffs of Philip Morris's and RJR's tobacco businesses.
As in any settlement, it would mean guaranteed money upfront. Without it, states, smokers and others could wait many years more for compensation. And if advertising were sharply curtailed and industry money became available for a public-education campaign, says Bill Novelli of the Campaign for Tobacco-Free Kids, it could be "a huge step forward." But hard-line foes are furious. "It's a catastrophe," says health-policy researcher Stanton Glantz. Adds Minnesota AG Hubert Humphrey III: "We've had 40 years of illegal activity, and all of a sudden the industry says it's a new day." Some attorneys general and activists accuse officials such as Mississippi Attorney General Michael Moore of pushing prematurely for a settlement to further their political careers. Moore's office didn't return NEWSWEEK's phone calls.
Yes, literally. Billboard ads, which could be eliminated, have been a tobacco mainstay since broadcast ads were banned in the 1960s. But tobacco has always found new ways to send its message.
The industry isn't likely to cut back on the estimated $5 billion a year it now spends on marketing. (It spends about $315 million a year in consumer magazines like NEWSWEEK.) Adman Bill Brown, who's now testing ads for Eclipse, RJR's smokeless cigarette, says he's not worried about his business. But if the tobacco companies are forced to yield on their right to free speech, he warns, a Frito-Lay will soon have to fight for its right to advertise to kids, and the auto industry for its right to sell cars that can exceed the speed limit.
Actually, a settlement could free opponents to fight on new fronts. "We would turn attention to secondhand smoke," says Novelli, and to carrying the battle overseas. Tobacco foes are now planning for an international conference scheduled for August in Beijing; he thinks a settlement could spur efforts to regulate tobacco abroad. But any U.S. settlement could be trumped by then. Britain's Labour candidate Tony Blair has said he'll ban all tobacco ads if he's elected on May 1.
THE SMOKE FINALLY CLEARS Nobody knows what will emerge from tobacco talks. But here's what's under discussion:
Cigarette makers would spend as much as $300 billion over the next 25 years on compensation to individuals and states. About $500 million would go toward anti-smoking education projects.
Smokers would be barred from suing in most cases and could be forced to seek payments from a single industry fund. States could no longer sue to recover Medicaid costs.
The industry may give up billboards, sporting-events sponsorships and people in its ads. Chemical additives would be disclosed.
Now in court fighting government rules, cigarette makers could agree to even stiffer restrictions. But they hope to keep control over levels of nicotine.
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