PUNITIVE PHASE STARTS IN TOBACCO TRIAL

MIAMI - The industry will try to show that it has reformed and should
not be forced to pay hundreds of billions of dollars.

With protective legislation in hand, the tobacco industry's corporate
leaders will take their case against a possible multibillion-dollar
punitive damage verdict to an unfriendly jury that views smoking as
addictive and deadly. The industry will offer its $250 billion in
settlements with states and its restrictions on youth marketing as
proof that no more punishment is needed in a landmark case brought on
behalf of an estimated 500,000 sick Florida smokers.

Some smokers have an entirely different view. In court for the first
time as a group, they want a day of reckoning for the nation's five
biggest cigarette makers, which have yet to pay a penny to a smoker
who went to trial.

"If an award comes down that's substantial as predicted, this will
send a message to other prospective jurors that the way in which the
tobacco industry has conducted its business and sold its product is no
longer acceptable," said Peter Jacobson, a University of Michigan
associate professor of public health who researches the role of courts
in shaping health policy.

Circuit judge Robert Kaye will be asked Monday to decide on a chunk of
motions that have accumulated since he went on vacation two weeks ago.
If everything can be resolved quickly, opening statements are likely
Tuesday and Wednesday.

The case is important enough for the industry's top executives to plan
to voluntarily testify under oath, even though the jury decided last
July that the five companies conspired to fraudulently produce a
defective, dangerous and addictive product.

"They have a good story to tell. The people running these companies
now are not the ones running the companies in the '50s, when most of
this alleged wrongdoing occurred," said David Adelman, a tobacco
analyst with Morgan Stanley Dean Witter. "They really and truly have
reformed their business practices."

Another set of executives denied in congressional testimony in 1994
that cigarettes are addictive, in spite of internal documents stating
the opposite. Jacobson said he expects the CEOs to project a
conciliatory tone and sympathy for sick smokers, and the jurors to
hold any evasiveness against them.

"Look what happened to Microsoft based on Bill Gates' depositions or
Bill Clinton, where the public visually can see and can read what they
say and how they say it," Jacobson said.

If smokers' attorney Stanley Rosenblatt repeats his strategy when the
jury awarded $12.7 million in compensatory damages last month to three
smokers with cancer, the actual dollar request won't be known until
closing arguments in at least two months.

Economists and actuarial experts will testify about the financial
value of the industry and the size of the class. The industry intends
to call a tobacco farmer and a convenience store owner about the
impact of a big verdict on the companies. It's easy to see why the
numbers make cigarette makers nervous.

Years before the industry agreed to any payouts, Rosenblatt suggested
$200 billion in damages. The compensatory verdict was $500,000 less
than his suggested maximum. He declined comment on the case.

Using a conservative figure of 300,000 for the number of smokers
covered by the class-action lawsuit lead tobacco attorney Dan Webb
noted in court that a punitive award of $500,000 each, low by today's
standards, would produce a $150 billion verdict.

The simple math was one reason for a bill passed by the Legislature
this month. The industry will be allowed to appeal by posting a
maximum $100 million bond, an exception to the standard appeal bond
equal to about 125 percent of the verdict

By Florida law, a verdict can't bankrupt a company, and a judge would
be required to reduce an overwhelming award. Consequently, industry
profits are what's at risk.