TOBACCO COMPANIES, STATES APPEAR CLOSE TO SETTLEMENT

WASHINGTON - Negotiators for the nation's top cigarette makers and
some of the states suing them appear close to a multibillion-dollar
settlement proposal that would send money to the states for Medicaid
spending and anti-smoking campaigns.

Details still are being worked out, but a deal could be announced by
week's end, said Stanton Glantz, a leading tobacco-control advocate in
San Francisco who has been in close touch with negotiators.

Attorneys general from eight states, including Washington, are leading
a second attempt to reach a national accord with the tobacco industry.
In June 1997, the states and Big Tobacco announced a $368.5 billion
proposed settlement, but that deal failed to get the congressional
approval it needed to take effect.

Current talks are more narrowly focused, and any final deal would not
require an OK from Congress. It would, however, require support from a
majority of states for the industry to be willing to give it final
approval.

Glantz said that he expects the core group of attorneys general to
announce a settlement proposal as early as Friday and that other state
lawyers would have less than a week to sign on to or reject the deal.

However, Steve Duschesne, a spokesman for the four largest cigarette
companies, strongly cautioned last night that a final settlement is
not imminent.

"I can tell you that there is no deal," Duschesne said. "The deal is
not done, and suggestions otherwise are untrue."

Brian Smith, a spokesman for Washington state Attorney General
Christine Gregoire, who has led the latest talks, said it would be
premature to describe the deal as done.

"Nothing's concrete now," Smith said. However, he said that Gregoire
was returning to New York City, where the negotiations were under way.

Gregoire, along with Mississippi Attorney General Mike Moore, was one
of the main negotiators of the failed national deal.

Four states, Mississippi, Minnesota, Texas and Florida, already have
reached independent settlements of their lawsuits against the industry
to recover Medicaid spending on smoking-related illness and to cut the
number of smokers. Those deals were worth a total of $36 billion.

Washington state is now in trial against the major tobacco
companies.

Under the settlement in the works, the tobacco industry would be
required to pay about $200 billion over 25 years. The cigarette makers
also would face certain marketing restrictions, such as limits on
billboards and sponsorship of events.

The settlement would cover the nation's four major cigarette
manufacturers - Philip Morris, R.J. Reynolds Tobacco, Brown &
Williamson Tobacco and Lorillard Tobacco. They are expected to pay for
the settlement through an estimated 35-cents-per-pack price increase.

The deal could apply to the 36 states that have lawsuits pending
against the industry, as well as 10 states - including
tobacco-friendly Kentucky and North Carolina - that have not filed
suit.

The industry would still face dozens of private class-action suits
seeking damages for allegedly addicted smokers, or reimbursement of
smoking-related medical payments by union health-care funds. Although
they also seek enormous damages from cigarette makers, many of these
cases appear to be in jeopardy because of pretrial rulings that have
dismissed or gutted several of the class-action cases.

Public-health groups objected to the first settlement proposal reached
more than a year ago, particularly to a provision that would have
given the industry some broad protections from future lawsuits.

Information from the Los Angeles Times is included in this
report

Checked-by: Patrick Henry