TOBACCO DOLLARS MAKE STRANGE BEDFELLOWS

AUSTIN -- Two factors -- death and money, lots of money -- have
remained constant. But the saga that began when Texas and a handful of
other states sued the tobacco industry a few years ago has taken more
twists and turns than most presidential races.

First, the tobacco challenge was considered impossible. Then, it
became a gold mine. Now, it borders on the absurd.

The latest episode even has some states and their anti-tobacco lawyers
scrambling to keep the cigarette companies from going bankrupt.
Anti-smoking crusaders contend there isn't much danger of that and
suggest the tobacco industry is playing some state officials for
patsies in a not-so-subtle effort to protect themselves from suits
brought by individual smokers.

But state governments and their lawyers, once the sworn enemies of
cigarette makers, have in a practical sense become their business
partners. With lawsuit settlements and legal fees worth billions of
dollars for years to come, they have a vested interest in the
financial health of tobacco companies, even as those companies
continue to manufacture and sell a product that kills people.

Perhaps a handful of insiders contemplated this outcome when Texas'
then-Attorney General Dan Morales filed a federal lawsuit against the
tobacco industry in 1996 over smoking-related health-care costs and
the industry's marketing practices.

Some tort reformers opposed the idea of attacking a legal industry.
But most state officials thought Morales was wasting his time because
he sued the tobacco industry when it had never yet had to pay a court
judgment related to smoking.

Protected by armies of high-priced attorneys and seemingly endless
resources, the industry was viewed as an impregnable fortress. But
incriminating industry documents started becoming public, and rather
than test their defenses before juries, tobacco companies chose to
negotiate settlements with the states.

Texas was rewarded in 1998 with a settlement worth an estimated $17.3
billion over the next 25 years. And a team of high-powered trial
lawyers hired by Morales was rewarded with $3.3 billion in legal fees,
also payable by cigarette makers, but over an undetermined number of
years.

Tobacco companies negotiated similar settlements with Mississippi,
Florida and Minnesota, which also had sued the industry, and then
reached a separate, blanket agreement with the remaining 46 states. In
all, cigarette makers agreed to pay state governments more than $240
billion over the next quarter century. And they are paying $500
million a year to the lawyers hired to represent the states.

But piles of money, alas, can bring out the worst in people. Even
though the lawyers aren't being paid with taxpayer dollars, the size
of their fees sparked a fight in Texas. There was even a dispute over
how to spend the state's share of the settlement.

Although the Legislature last year budgeted Texas' first $1.8 billion
in tobacco payments for health-related programs, some anti-smoking
groups were dismayed that relatively little of the money will actually
be spent to discourage people from smoking.

The states, ironically, now stand to see their tobacco payments
reduced this year because of a settlement provision that lowers
payments when smoking declines nationwide. Although most people would
consider that good news, you can bet some state officials, somewhere,
will grumble.

But alarm bells really started going off after a jury in Florida a few
weeks ago awarded $12.7 million in compensatory damages from cigarette
companies to two smokers and the family of a third, deceased smoker.
With the same jury set to consider punitive damages against the
tobacco industry on behalf of all Florida smokers, the bankruptcy
issue -- either real or contrived -- popped up because punitive
damages could be in the tens of billions of dollars.

Florida officials, eager to protect their own settlement dollars,
began scrambling to pass laws to protect the industry. And four other
states with significant tobacco interests -- Kentucky, North Carolina,
Virginia and Georgia -- recently enacted laws limiting bonds that
corporate defendants, such as cigarette companies, would have to post
to appeal verdicts in damage suits.

Cigarette makers were way ahead of the game in Texas. In 1993, three
years before Morales sued the industry, tobacco companies got a
provision put into a products liability law to offer them special
protections from suits brought by smokers.