HARSHBARGER PONDERS TOBACCO SETTLEMENT

BOSTON -- While echoing President Clinton and critics' sentiments that the
nationally proposed tobacco settlement is lacking, Attorney General Scott
Harshbarger said he wondered whether the deal, which would bring in more
than $7.5 billion over its first 25 years, is the best the state can do.

"The proposed settlement is not all that I had hoped for when it comes to
protecting our children and improving the public health," Harshbarger said
in a statement. "The decision I must make now is whether this is the best
Massachusetts can do, or whether more can be achieved at trial."

President Clinton said the agreement was a "milestone" in the effort to
protect children, but he urged Congress to pick up where it left off.

"With this very large settlement ... we are moving forward but we have a lot
more to do," the president said at the White House, where he was joined by
some of the eight state attorneys general who spent five months negotiating
the deal.

"It is still up to Congress to act, to rise to its responsibility to pass
national tobacco legislation," Clinton added.

Under the settlement terms, Harshbarger said, the Bay State would stand to
receive an initial payment of $98 million, followed by a $263 million
payment in 2000.

And beginning in 2026, Massachusetts would receive $323 million annually
forever.

Payments could be adjusted up or down, depending on inflation and tobacco
sales.

Twelve states, including the eight negotiators, said they plan to sign it.
They are Arizona, Arkansas, California, Colorado, Iowa, New York, North
Carolina, North Dakota, Oklahoma, Pennsylvania, Utah and Washington.

Harshbarger and the other attorneys general considering the deal must decide
by Friday whether to accept.

The agreement would settle lawsuits by 39 states seeking to recover Medicaid
money spent to treat sick smokers. It also would apply to the seven states
that have yet to sue. But it would not apply to the four states --
Mississippi, Florida, Texas and Minnesota -- that previously settled their
state lawsuits for a total of $40 billion.

If Harshbarger opts not to join the settlement, the state will move ahead
with its lawsuit, set to go to trial Feb. 1.

The four major tobacco companies reaching the agreement -- Philip Morris,
R.J. Reynolds, Brown & Williamson and Lorillard -- said in a statement that
while they remained confident their legal defense would hold up in court,
they accepted the settlement "as a way to end this unique litigation and
join in a common sense approach to addressing important tobacco issues."

By that time, however, the attorney general's office will be led by newly
elected attorney general Thomas Reilly.

The state, under Reilly, could choose to reach an out-of-court settlement at
any time up to, and during, a trial. Reilly had no comment yesterday.

In its suit, Massachusetts is seeking to recover $2 billion worth of
Medicaid claims paid for smoking-related illnesses, but it could be awarded
more in damages.

No state has followed a case through to a verdict. Minnesota, which was
suing the tobacco industry, settled its case for $6.6 billion in May.

The proposal would require the industry to pay a total of $206 billion to
the states through 2025. Individual sums would be calculated using formulas
agreed to by the state attorneys general and payments would begin April 15,
2000.

States would be free to spend the windfall as they like, said Christine
Gregoire, Washington state attorney general.

Harshbarger has been one of the leaders of the fight against the tobacco
industry, filing suit in 1995 when many in the state, including Gov. Paul
Cellucci, thought a legal battle against the powerful tobacco industry was a
lost cause.

The $206 billion settlement does not give the Food and Drug Administration
power to regulate nicotine or penalize tobacco companies that don't reduce
youth smoking rates, but it does ban all outdoor advertising. That includes
billboards, signs and placards in arenas, stadiums, shopping malls and on
public transportation, such as buses and subways.

It also bans the use of cartoon characters in the advertising, promotion,
packaging or labeling of tobacco products. Use of human characters in
advertising, such as the Marlboro Man, however, could continue, and it puts
no restrictions on retail advertisers or print advertising.

The distribution and sale of apparel, such as baseball caps and T-shirts,
emblazoned with cigarette brand names and logos also would be banned.

Other provisions would prohibit tobacco companies from targeting youths; ban
payments to promote tobacco products in movies, TV shows and other
entertainment; prohibit brand-name sponsorship of events with a sizable
youth audience; and require the industry to reimburse states for attorney's
fees.

Within the last month, the Massachusetts Appeals Court sided with the
attorney general's office in rejecting the industry's requests to throw out
the suit or to be able to question thousands of Medicaid recipients.

Harshbarger was also among the attorneys general trying to hammer out a
national settlement. But in late August, he abandoned the talks to focus on
the state suit.

He said at that time that he had doubts about the industry's commitment to
improving public health and curbing underage smoking.

Cellucci said he had not reviewed the documents and would be speaking with
the state's tobacco control director to get his input, but he said it
ultimately will be up to Harshbarger.

Checked-by: Rolf Ernst