Will the tobacco trade go up in smoke?

Cancer victim's pounds 500,000 rocks market but manufacturer says its appeal will succeed
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The Independent Online
Billions of pounds were wiped off tobacco shares yesterday after the first successful lawsuit by a former smoker.

On Friday a Florida jury decided in favour of a retired air-traffic controller, Grady Carter, and his wife, Millie, and against Brown & Williamson, a US offshoot of the BAT tobacco multinational.

The jury awarded the couple pounds 500,000 after Mr Carter, 66, who got lung cancer after smoking for 44 years, claimed that the cigarette maker had been negligent in not warning him about the danger to his health.

Yesterday at least pounds 1.4 bn was wiped off the value of BAT Industries shares as the stock market absorbed the impact of the ruling against the tobacco and insurance conglomerate. By the close of business yesterday, its shares had plunged 9 per cent to 464p.

In the United States, shares in other tobacco manufacturers, such as Philip Morris, fell steeply on Wall Street as dealers responded to the decision.

While BAT and some analysts expected the decision to be overturned, others said shares might fall further as the market assessed the prospect of a torrent of litigation.

"Nobody knows whether the floodgates might open," said Simon Willis, an analyst at the stockbrokers Charterhouse Tilney.

There are about 200 similar cases pending against tobacco companies and it is possible that the Carter ruling will encourage other smokers to file suits. The verdict compounds a period of increasingly bad PR for the industry. In the US, nine states are suing tobacco companies, seeking reimbursement of costs to cover smokers' illnesses. There are predictions that up to 11 more states will have filed by the end of summer. A lawsuit from Texas says the defendants are among "the worst of civilisation's evil empires", and are engaged in criminal violations of federal racketeering, conspiracy, mail and wire fraud laws.

In Hong Kong, BAT is involved in a case involving the illegal export of $HK8.5m (pounds 708,000) in cigarettes to China over an eight-year period and the attempted bribery of former BAT officials.

To BAT's dismay, the case gained widespread publicity when a 38-year- old man due to take the stand as a prosecution witness was murdered in Singapore in April.

ASH, the tobacco control pressure group, is among those who believe that the latest verdict could be a watershed and set a precedent for those in Britain.

"We're delighted with the decision. The argument that was used is quite similar to what lawyers in Britain were hoping to use. It shows the tobacco industry does have a case to answer," said Monisha Bhaumik, a spokeswoman.

But she admitted that unless the tobacco industry was crippled by multi- party actions, it would simply refocus its energies, concentrating on the emerging markets and upping the emphasis on its "acceptable face", with sponsorship and advertising.

In Britain, for example, BAT "sponsors" two schools, providing teachers, a technician and five assistants at Archbishop Ramsey school in Southwark, and more than pounds 2m in six years of sponsorship for the Macmillan City Technology College in Cleveland.

Last month Cambridge University agreed to allow the company to sponsor a pounds 1.5m chair. "It buys them credibility if they can get Cambridge University to lend its good name," said Ms Bhaumik. "And it undermines all the work that parents and teachers do to encourage the children not to smoke, if schools are being financed by the tobacco industries."

According to Judith Mackay, of the Asian Consultancy on Tobacco Control in Hong Kong, tobacco companies "could not be doing any more" in terms of penetrating new markets.

"The citadel is crumbling a bit ... but they are saying very strongly that the latest case has nothing to do with Asia. They have identified a developing market in Asia and are predicting a 33-per-cent increase there."

In China there are 300 million smokers, with a predicted rise to 500 million by 2000. "The reason they're so interested is because we're on an economic roll ... as opposed to places like India and Africa."

Dr Mackay said that there was less risk of litigation for the industry in Asia, because it not only provided employment but many governments were involved in the state manufacture of cigarettes.

"The biggest tobacco company in the world is actually the Chinese government - the foreign companies have less than 10 per cent of the business," she said.

And before campaigners begin breaking open the champagne, it would be wise to look at the past history of similar cases. Cigarette makers boast that the industry has never paid a penny in damages in similar cases dating back 40 years.

It has lost only once, in 1988. That jury decision, in which $400,000 was awarded to the family of Rose Cipollone of New Jersey, was overturned on appeal.

In Britain last month the Legal Aid Board withdrew support for a multi- party action on behalf of 300 smokers.

ASH has launched an appeal and lawyers are considering taking the cases on a conditional fee basis.

BAT plans to appeal against the Florida judgement and expects to win. Philip Morris issued a bullish statement describing the verdict as "an aberration", while City analysts agree that the decision is unlikely to stand.

"I think the judge probably allowed evidence he shouldn't have," said Nyren Scott-Malden of the stockbrokers BZW.

"In the last 40 years juries have taken the view that the hazards of smoking are so well known that smokers do so at their own risk."

BAT said that if the appeal court's verdict were to prove unfavourable, the tobacco industry would take the case to the Supreme Court.

"The more we look at it, the more we that believe there are good grounds for success at the appeal stage, based on the way the judge handled the trial in his use of inadmissible, speculative evidence." said a BAT spokesman. "It's a rogue judgement."

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