Florida wins billions in deal with tobacco firms

Florida yesterday became the second state to reach a settlement with the United States' big tobacco companies over liability for smoking-related illnesses, winning a total payment of $11.3bn (pounds 7.1bn). Florida had sued the tobacco companies for $12.3bn to defray the costs of treating state- assisted patients for lung cancer and respiratory diseases associated with smoking. The money will be payable over 25 years.

The settlement, which was announced as jury selection was already underway in the case, was several times larger than the $3.4bn agreement reached between the companies and the state of Mississippi last month. Florida's governor, Lawton Chiles, hailed it as a triumph, saying that it entailed "the largest monetary concessions the industry has ever paid and the toughest prohibitions ever imposed on advertising and marketing to children".

Florida and Mississippi will now be excluded from the so-called "tobacco pact", an overall national settlement reached in June between the same group of tobacco companies and the attorneys-general of 22 states. Their separate arrangement means that the two states will start receiving payments earlier, will know exactly how much they are getting and will not have to compete with the others for a slice of the overall settlement.

The out-of-court agreement in Florida disappointed some because it meant the issue would not be fought out in court. However, it became almost inevitable after Geoffrey Bible, the chief executive officer of Philip Morris, the biggest US tobacco company, accepted during pre-trial questioning last week that tobacco could cause fatal illness. Asked if he accepted that 100,000 people might have died as a result of smoking, he said, "maybe", and added that if it were proved cigarettes caused cancer, he would suspend the company's cigarette production.

Mr Bible's testimony, and the Florida settlement, suggest that the tobacco companies still have their backs against the wall, despite June's tobacco pact between 22 states and the companies, which include Philip Morros, RJR Nabisco and US Tobacco. Under that agreement, the companies agreed to a total payment of $368.5bn to be distributed among the states over 25 years, a new, stronger warning on cigarette packets and stricter regulation of tobacco advertising. In return, the companies received immunity from future class-action lawsuits.

That settlement, however, is not final. In particular, it has yet to receive the approval of the White House and Bill Clinton, a crusading anti-smoker, has indicated that he believes the financial settlement ought to be higher. The President was particularly displeased to find that a new tax on cigarettes contained in the just-passed Budget bill and designed to fund health coverage for millions of uninsured children, could be set against the agreed compensation payments. This would considerably reduce the cost of the settlement to the companies.

Until this year, the tobacco companies had resisted accepting liability for smoking-related illnesses. In March, however, their united front was shattered when the Liggett Group, one of the smaller US producers, conceded that smoking was addictive and could cause cancer and agreed to settle. While continuing to insist that they were not liable, the other companies soon followed suit.

While what is often termed "big tobacco" in the US is fighting unprecedented social and political opprobrium, the political background is complicated by the fact that the US is a major tobacco producer as well as consumer. Several states, especially in the south, depend on the tobacco industry for jobs and revenue, and the companies have been impressive contributors to political campaigns of both major parties.

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