LeBow in danger of drowning

FROM his lair on the exclusive Fisher Island in the waters of Miami, Bennett LeBow did what he likes doing best when he announced ten days ago that his Liggett Group had settled with two groups pursuing lawsuits against the tobacco industry: he made big waves. Trouble is, he may be the one who gets drowned.

The maneouvre, which smashed four decades of unity in the industry in fighting liability lawsuits, transformed Mr LeBow, 58, into the nemesis of the rest of the cigarette industry and the hero of America's growing anti-smoking community. Behind it, however, was one clear aim: to clinch his campaign to take control of the giant RJR Nabisco and force it to spin off its cracker-and-cookie food division from its cigarette-making interests.

With the former TWA chief executive, Carl Icahn, at his side, Mr LeBow began his assault on RJR last autumn. With 5.8 per cent of the company's stock in his pocket, he recently won - though only just - a non-binding vote of shareholders in favour of an immediate Nabisco spin-off. Victory will be his if, at the annual general meeting of RJR on 17 April, he can force through his own alternative set of directors to implement the break- up.

While certainly audacious, such machinations are not out of character for the financier, who has long enjoyed a reputation for breaking the corporate china for his own gain. His taste for buying and selling assets, mostly when in wobbly shape, came to the fore in the 1980s, when his acquisitions included that of Liggett itself from Britain's Grand Met as well as the US division of the British precious metals concern, Johnson Matthey.

As a director of the Brooke Group since 1986 (and its president since 1990), Mr LeBow has faced accusations from fellow shareholders of plundering its coffers to finance various indulgances which have included a $21m (pounds 14m) yacht, a jet and lavish parties for friends. Of the public companies within Brooke two - MAI Systems and New Valley Corporation - were driven into bankruptcy. New Valley survived only after Mr LeBow was forced to sell off its most famous asset, the Western Union money-transfer business.

At first sight, his Liggett bombshell seemed as inspired as it was unexpected. He announced settlements in both a high-profile class-action suit being brought against the entire tobacco industry by a coalition of 60 law firms on behalf of a friend of someone who died from the effects of smoking, and with five US states that are suing for compensation for the public health costs incurred in the treatment of people with smoking-related diseases.

The smallest of the US tobacco concerns, Liggett stands to suffer only minimal financial pain from the agreement. It is likely to pay out only about $2 million a year over the next 25 years to gain immunity from the lawsuits. Mr LeBow's real trick was this, however: under the settlement, the plaintiffs will also offer the same terms to RJR if Mr LeBow succeeds in his quest to have it separated from Nabisco. It is only because of the looming spectre of these court battles that the current management of RJR Nabisco has been holding out against any immediate spin-off.

But it is the view of most analysts on Wall Street that the strategy has backfired on Mr LeBow in disastrous fashion. "He obviously thought it was a brilliant ploy, but it has turned out to be a flop," Allan Kaplan, a tobacco watcher at Merrill Lynch, contended last week. Mr Kaplan is confident that RJR will prevail at the AGM.

Mr LeBow has been blown off course by the extraordinary bruising inflicted over the past two weeks on tobacco stocks. In five trading days to last Wednesday, RJR Nabisco saw its share price slide by 15 per cent while Philip Morris fell 16 per cent.

Much else, of course, has happened in recent days to contribute to the rout. Last week, the Food and Drug Administration revealed it had garnered statements from three former Philip Morris scientists disputing the company's assertions that it has never played around with nicotine levels in its products. Philip Morris was forced to run full-page newspaper advertisements refuting the implication that it had "manipulated" nicotine levels, which implies seeking to turn smokers into addicts.

Also coming to light is a broadening effort by the US government to investigate cases where it suspects that the tobacco companies have consistently and deliberately misled the authorities and consumers about how much it understood about the addictive qualities of nicotine.

But it was Mr LeBow's action that started the share-price slide. Noting that many RJR Nabisco shareholders also have stock in Philip Morris, Roy Burry, of Oppenheimer and Co, remarked: "Has he made shareholders mad at him? Certainly, he has not made many new friends anywhere and that is a problem for him." Of the annual meeting, he adds: "He will lose."

And Mr LeBow may find he has opened the gates to a flood of new and hitherto undeclared public lawsuits. On one thing everyone seems agreed. If Mr LeBow is defeated on 17 April, he can forget his RJR dreaming. "That will be it for him. He will be out of there," says Mr Burry.

Start your day with The Independent, sign up for daily news emails
News
The guide, since withdrawn, used illustrations and text to help people understand the court process (Getty)
newsMinistry of Justice gets law 'terribly wrong' in its guide to courts
News
Bobbi Kristina Brown with her mother Whitney Houston in 2011
people
News
Starting the day with a three-egg omelette could make people more charitable, according to new research
scienceFeed someone a big omelette, and they may give twice as much, thanks to a compound in the eggs
News
Top Gun actor Val Kilmer lost his small claims court battle in Van Nuys with the landlord of his Malibu mansion to get back his deposit after wallpapering over the kitchen cabinets
people
PROMOTED VIDEO
News
The actress Geraldine McEwan was perhaps best known for playing Agatha Christie's detective, Miss Marple (Rex)
peopleShe won a Bafta in 1991 for her role in Oranges Are Not The Only Fruit
News
newsPatrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad
News
Robert Fraser, aka Groovy Bob
peopleA new show honours Robert Fraser, one of the era's forgotten players
Life and Style
Torsten Sherwood's Noook is a simple construction toy for creating mini-architecture
tech
Sport
David Silva celebrates with Sergio Aguero after equalising against Chelsea
footballChelsea 1 Manchester City 1
News
i100
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Software Development Manager

£40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...

Ashdown Group: Product Manager - (Product Marketing, Financial Services)

£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Recruitment Genius: Compliance Assistant

£13000 per annum: Recruitment Genius: This Pension Specialist was established ...

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Day In a Page

As in 1942, Germany must show restraint over Greece

As in 1942, Germany must show restraint over Greece

Mussolini tried to warn his ally of the danger of bringing the country to its knees. So should we, says Patrick Cockburn
Britain's widening poverty gap should be causing outrage at the start of the election campaign

The short stroll that should be our walk of shame

Courting the global elite has failed to benefit Britain, as the vast disparity in wealth on display in the capital shows
Homeless Veterans appeal: The rise of the working poor: when having a job cannot prevent poverty

Homeless Veterans appeal

The rise of the working poor: when having a job cannot prevent poverty
Prince Charles the saviour of the nation? A new book highlights concerns about how political he will be when he eventually becomes king

Prince Charles the saviour of the nation?

A new book highlights concerns about how political he will be when he eventually becomes king
How books can defeat Isis: Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad

How books can defeat Isis

Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad
Judith Hackitt: The myths of elf 'n' safety

Judith Hackitt: The myths of elf 'n' safety

She may be in charge of minimising our risks of injury, but the chair of the Health and Safety Executive still wants children to be able to hurt themselves
The open loathing between Barack Obama and Benjamin Netanyahu just got worse

The open loathing between Obama and Netanyahu just got worse

The Israeli PM's relationship with the Obama has always been chilly, but going over the President's head on Iran will do him no favours, says Rupert Cornwell
French chefs get 'le huff' as nation slips down global cuisine rankings

French chefs get 'le huff' as nation slips down global cuisine rankings

Fury at British best restaurants survey sees French magazine produce a rival list
Star choreographer Matthew Bourne gives young carers a chance to perform at Sadler's Wells

Young carers to make dance debut

What happened when superstar choreographer Matthew Bourne encouraged 27 teenage carers to think about themselves for once?
Design Council's 70th anniversary: Four of the most intriguing prototypes from Ones to Watch

Design Council's 70th anniversary

Four of the most intriguing prototypes from Ones to Watch
Dame Harriet Walter: The actress on learning what it is to age, plastic surgery, and her unease at being honoured by the establishment

Dame Harriet Walter interview

The actress on learning what it is to age, plastic surgery, and her unease at being honoured by the establishment
Art should not be a slave to the ideas driving it

Art should not be a slave to the ideas driving it

Critics of Tom Stoppard's new play seem to agree that cerebral can never trump character, says DJ Taylor
Bill Granger recipes: Our chef's winter salads will make you feel energised through February

Bill Granger's winter salads

Salads aren't just a bit on the side, says our chef - their crunch, colour and natural goodness are perfect for a midwinter pick-me-up
England vs Wales: Cool head George Ford ready to put out dragon fire

George Ford: Cool head ready to put out dragon fire

No 10’s calmness under pressure will be key for England in Cardiff
Michael Calvin: Time for Old Firm to put aside bigotry and forge new links

Michael Calvin's Last Word

Time for Old Firm to put aside bigotry and forge new links