ROANOKE TIMES
Copyright (c) 1997, Roanoke Times
DATE: Thursday, April 17, 1997 TAG: 9704170041
SECTION: NATIONAL/INTERNATIONAL PAGE: A-1 EDITION: METRO
SOURCE: ASSOCIATED PRESS
Analysts have said tobacco companies could finance a big settlement simply by raising cigarette prices.
Abandoning their all-out defense of cigarettes, the nation's two biggest tobacco companies now seem willing to cut their legal losses at up to $300 billion and retire Joe Camel and the Marlboro Man if the government backs off its threat to regulate nicotine.
RJR Nabisco and Philip Morris are in early talks with the attorneys general of eight states in hopes of winning blanket protection from lawsuits over smoking-related health problems, it was disclosed Wednesday.
In return, the cigarette companies would pay hundreds of billions of dollars and agree to cut back on ads, especially ones like Joe Camel that appeal to children and those that depict people, such as the Marlboro Man.
The cigarette companies' willingness to even consider such concessions marks a startling turnaround. For decades, the tobacco industry has fought a no-retreat battle on all fronts.
In the past few years, however, the industry has been barraged with lawsuits filed by 22 states and countless individuals, and the litigation is hurting stock prices and taking management attention away from the business of selling cigarettes.
``I think the tobacco industry is in big trouble and they know it, so they are finally beginning to come to the table,'' Minnesota Attorney General Hubert Humphrey III said. ``I think their proposals still fall short of what we'd be interested in.''
A sticking point is whether the Food and Drug Administration would get the right to regulate the nicotine levels in cigarettes to make them less addictive.
The tobacco companies adamantly oppose such regulation for fear that once the FDA gets the power to regulate tobacco, it will try to ban it.
News of the talks, first reported Wednesday by The Wall Street Journal, sent cigarette company stocks up 10 percent, reflecting investor hopes that an industrywide settlement of tobacco lawsuits would lift a cloud hanging over companies.
Industry analysts have said that tobacco companies, which had revenue of about $45 billion last year, could finance a big settlement simply by raising cigarette prices.
``A resolution of this issue is important to our shareholders, our customers and our country,'' RJR Nabisco Chairman Steven Goldstone told a stockholder meeting Wednesday in Winston-Salem, N.C. ``But it has to be fair and it has to be reasonable.''
The amount of a settlement is also among the sticking points.
``The industry is in the low 2's and the plaintiffs are in the upper 3's. There is no consensus on the money,'' said a source close to the negotiations, who spoke on condition of anonymity.
Also under discussion is the establishment of a fund from which smokers could seek payments. They would be banned from suing the cigarette companies.
Protection from lawsuits would require an act of Congress, and that's another one of the unresolved issues that could still sink the talks.
Democratic Sen. Dick Durbin of Illinois, a longtime tobacco opponent, said he is skeptical of the industry's proposals and will review them carefully if they land on Capitol Hill.
``The great wall of tobacco is coming down,'' Durbin said. ``Tobacco companies are in a hurry to get out of court, off the front pages of newspapers and back to the business of making billions of dollars in profit.''
The companies and attorneys general from Minnesota, Florida, Connecticut, Mississippi, Washington, Massachusetts, Wisconsin and Arizona have been meeting at undisclosed locations during the last two or three weeks.
``The companies have vowed never to come to the table, let alone settle any lawsuit. The mere fact that they are talking is historic and unprecedented,'' said Connecticut Attorney General Richard Blumenthal.
The negotiations include representatives of two other major tobacco companies, Lorillard and Brown & Williamson. Deputy White House Counsel Bruce Lindsey is also monitoring the talks.
The talks come as legal pressure on tobacco companies intensifies. Liggett Group, the maker of L&Ms and Chesterfields, reached a settlement recently with 22 states in which it turned over thousands of internal documents that could show the industry sought to conceal the dangers of smoking for decades.
LENGTH: Medium: 83 linesby CNB