Tobacco-firm turmoil as deal founders

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The Independent Online
WHEN the attorneys-general and heads of the five biggest US tobacco companies came forward with their comprehensive settlement 10 months ago, there was reason to be optimistic. Last night, pessimism reigned.

What seemed to be a watertight truce that would have protected the firms from further litigation and offered voluntary curbs against selling cigarettes to teenagers had this vital flaw: for it to be put into practice the necessary laws had to be enacted in Congress.

The Big Three in particular - Philip Morris, RJR Nabisco and Brown & Williamson, which is owned by London-based British American Tobacco (BAT) - knew the settlement was at risk of being picked apart, so they spent millions lobbying to protect the deal on Capitol Hill.

That money - Philip Morris spent $59m (pounds 36m)- was all a waste. Never mind that the industry had agreed to pay $368bn of their profits over 25 years.

Never mind that they had accepted new codes to curb sales to minors. The politics was a one-way street. Bash it, bash it, bash it.

That was the atmosphere that spawned the Bill that surfaced in the US Senate a week ago that took up the settlement and turned into something much harsher: $600bn payments would be extracted for the companies to push up prices by at least $1.10 a pack. And almost no immunity was offered from new lawsuits.

BAT said that, if approved, the Senate version would lead it and all its competitors down the road to bankruptcy. No one in Washington seemed willing to listen, however. Not the Senate, not even the White House.

No wonder Steven Goldstone, the head of RJR Nabisco, was so angry in his speech yesterday. Confirming the obvious - that his company at least could not participate in the process, he accused the Senate of "playing the politics of punishment" and working in a "coercive, Big Brother- type tone".

What now? What indeed? No one in Washington was daring to hope that any negotiated settlement could be salvaged. It follows, therefore, that the tobacco companies, and their stockholders, face fighting every battle in the courts one by one, against individual states and against any civil lawsuits.