BAT close to settling lawsuits

BAT and fellow cigarette companies in the US last night looked close to reaching a landmark settlement to resolve hundreds of lawsuits, which together could be worth $300bn, filed by smokers and state governments seeking to recoup healthcare costs. According to reports in the Washington Post, sources close to the talks have revealed that most of the major issues have been resolved and an agreement could be announced this week. Christine Gregoire, Washington's attorney general said yesterday: "This comprehensive plan is coming together. I remain cautiously optimistic that we'll get it done." Henry Waxman, a US Republican opposed to the tobacco industry and in contact with White House chiefs, said yesterday that a breakthrough in the talks looked imminent. Reports say that in preparation for the announcement, negotiators have launched a campaign to woo public health groups, lawyers, the White House and the news media.

A BAT spokesman in London said he was not aware of any development in settlement talks while a representative of BAT's US tobacco arm Brown & Williamson refused to comment on the negotiations. Roy Burry of US broker Oppenheimer said that any agreement would touch on virtually every aspect of the industry from how cigarettes are advertised and marketed to the level of nicotine used and the price of each pack. Wayne Gerry, tobacco analyst at Kleinwort Benson said that the timing of settlement was uncertain: "We are all sitting here waiting. When it is announced the full ramifications will take most people a week or so to digest. Hell, just look at the logistics".

Though there are many issues still unresolved, those close to the talks say that several matters have already been settled. Cigarette makers could be asked to pay $10bn in cash upfront, with around 70 per cent going to individual states to pay for medical costs to treat sick smokers. The cigarette companies are then expected to make payments of $10bn-$15bn a year in perpetuity. On top the US tobacco industry might have to pay $1.5bn for a campaign aimed at dissuading smoking. In addition, individual lawsuits are expected to be permitted with the total awards to successful plaintiffs capped at perhaps $4bn a year. Analysts point out that in 40 years of lawsuits, the industry has not paid a cent for a health-related claims.

Other issues which may have been settled include an agreement to ban smoking in public buildings except for bars, restaurants, casinos and prisons and there would be bans on tobacco advertising on billboards and on sponsorship of sporting events and a ban on cartoon characters such as Joe Camel.