TRIAL MAY SHED LIGHT ON DEMISE OF 'SAFER' CIGARETTE

Courts: Ex-industry lawyer is expected to testify about 'XA' project.
Liggett Group once saw product as savior.

Of all the accusations being hurled at tobacco companies,
none is more damning than the charge that they colluded to squelch
development of "safer" cigarettes, fixating on avoiding legal
liability rather than customers' welfare.

Cigarette makers have hotly denied the claim. But the line of attack could
get a significant boost
from new evidence on the demise of a supposedly safer smoke that
struggling Liggett Group Inc. once viewed as a breakthrough against
lung cancer and the salvation of its dying business. In the first case
of an industry lawyer cooperating with antitobacco plaintiffs,
Lawrence G. Meyer, former outside counsel to Liggett, has agreed to
testify for the state of Washington at its trial, scheduled to start
Sept. 14. His testimony is sure to rekindle a 20-year-old mystery
concerning the death of the "XA" project, which involved the blending
of a catalyst with tobacco to neutralize cancer-causing compounds in
the smoke. Meyer, a 57-year-old Washington, D.C., attorney, also is
expected to be debriefed by lawyers for the three dozen other states
with pending antitobacco suits, and by Justice Department
investigators involved in a criminal probe of Big Tobacco. Nor is
Meyer the only knowledgeable insider who has not been heard from yet.
Another who has not been contacted by the states is J. Bowen Ross Jr.,
a former Liggett patent lawyer who recently gave The Times copies of
his notes from more than 100 meetings on the XA project between 1976
and 1983. Ross, 60, who said he has had three relatives die of lung
cancer from smoking, believes Liggett blew a big opportunity--and not
just because it "would have made a lot of money . . . I thought if you
came out with something that's beneficial, you have an obligation" to
bring it to market.

Mild Sensation Soon Fizzles The XA affair created a mild sensation in
1988 when it was first revealed in a New Jersey tobacco case. Amid
charges and denials, the story soon faded into the mists. But now
Washington and other states--whose lawsuits, among other things,
charge cigarette makers with conspiring to not compete on product
safety--are beginning to dig deeper. Meyer was a partner in the law
firm of Patton, Boggs & Blow, and an outside lawyer for Liggett from
1974-86. He advised the firm in its dealings with federal agencies,
and at times represented Liggett on the Committee of Counsel, where
top industry lawyers plotted legal and regulatory strategy. Meyer also
attended some of Liggett's meetings on the XA project. At one such
meeting, Ross said, Meyer made this statement that appears in Ross'
notes: "Other tobacco companies will look upon this [the XA] as a
catastrophic event." Lawyers for Washington first contacted Meyer in
May. His cooperation would have been impossible but for the landmark
out-of-court settlement Liggett reached last year with Washington and
other states. In return for dismissal from their lawsuits, the
financially wobbly firm agreed to help them gather evidence against
its larger rivals. Under the agreement, Liggett had to waive
attorney-client privilege to allow Meyer to testify. Other tobacco
companies are seeking to limit the scope of Meyer's testimony.
However, his recollections are outlined in a document filed by his
lawyer, Dwight P. Bostwick, this month in state court in Seattle. The
10-page proffer alludes to the pivotal role of Joseph Greer--former
general counsel of Liggett's tobacco division--in scrubbing the XA.

Greer, a smoker who died of lung cancer in 1985 and was a close friend
of Meyer's, was under pressure from Liggett defense lawyers, who
thought the XA would undermine their defense of smoking and health
cases, the proffer states. It says Greer also was leaned on "by other
tobacco companies," which feared that "Liggett's marketing and sale of
a safe cigarette could result in infinite liability in civil
litigation as it would constitute a direct or implied admission that
all other cigarettes were unsafe." A tobacco industry lawyer said he
could not comment until Meyer testifies. But cigarette makers have
always rejected claims that they ignored health concerns, arguing that
they have gradually lowered tar and nicotine yields and invested
millions trying to come up with novel new brands. "Is there a silver
bullet for cigarette design?" industry lawyer David Bernick asked
jurors earlier this year at the state of Minnesota's big tobacco
trial. "Nobody's told us about it. We've spent a hell of a lot of
money trying to find it. We can't."

Costly Failure of Effort Cited The costly failure of R.J. Reynolds'
Premier brand in the late 1980s is an oft-cited example of the
industry's efforts. Premier heated, rather than burned, tobacco and
appeared to lower risks from smoking and from secondhand smoke. After
bombing in test markets it was canceled.

But there also is evidence the industry took a dim view of such
efforts and the potential legal fallout. In 1987, for example, a
lawyer for Shook, Hardy & Bacon, Big Tobacco's leading courtroom
defenders, noted with alarm that Premier could prove injurious to "the
tobacco industry's joint defense efforts." "The industry position has
always been that there is no alternative design for a cigarette as we
know them," wrote the lawyer, William S. Ohlemeyer. "Unfortunately,
the Reynolds announcement . . . seriously undercuts this component of
industry's defense." Liggett, smallest and weakest of the companies,
was tormented by such fears as it planned the launch of its new
product, documents and interviews show.

The XA evolved from bombshell research that triggered the country's
first big cancer scare. In 1953, researchers announced they had
produced cancerous tumors on the backs of mice by daubing their skin
with liquid condensate, or 'tar,' from cigarette smoke.

The industry generally sought to belittle the study, arguing tests on
mice had no relevance to human lungs. But Liggett, something of a
maverick even then, secretly decided to replicate the work.

The company hired scientists from the consulting firm of Arthur D.

Little who validated the findings through their own skin painting
tests. But that was just the beginning. The idea was "to do something
about changing cigarettes if it were true that [cigarettes] do cause
cancer," according to a 1954 memo.

Over the years, Liggett spent more than $15 million and tested more
than 200 additives in search of one that might blunt the carcinogenic
effects of smoke. Eventually, researchers found that trace amounts of
palladium--a metal used in automobile catalytic converters--and
magnesium nitrate blended with tobacco would destroy a group of
compounds known as polycyclic aromatic hydrocarbons. The result was
that in skin painting tests, cancerous tumors were reduced by up to
100%.

When Liggett obtained the first of several patents in 1977, the timing
seemed perfect. Liggett's sales were sinking fast, and it was
desperate for a way to right the ship. Once an industry giant with
more than 20% of the market, Liggett was stuck with tired brands and a
market share under 3%. Ross' meeting notes show the company thought
the XA could quickly grab a 2% market share, or about 12 billion cigarettes.

Preparations were so serious that Liggett purchased huge inventories
of palladium. Once, when a truckload arrived at Liggett's Durham,
N.C., plant during a strike by Liggett workers, the 55-gallon drums
were trucked late at night to Ross' home and rolled into his basement.

Obstacles to Marketing Brand But there were obstacles. In the
marketing arena, the challenge was in touting a safer cigarette
without making health claims that would draw the ire of the Federal
Trade Commission.

Indeed, the XA did nothing to counter heart disease or
emphysema.

And while mouse skin painting had become standard, the XA's favorable
data was not solid proof of benefit to smokers' lungs.

This gave XA foes great ammunition: Why take the legal risks, they
asked, if the XA could not be properly promoted? But documents and
testimony suggest this was less a reason than an excuse.

"Whenever any problem came up . . . the legal department would pounce
upon that in an attempt to kill the project," said former Liggett
scientist James D. Mold, whose deposition in 1988 first brought the
episode to light.

In a 1977 memo in which Greer voiced his staunch opposition to the XA,
he noted that Liggett in defending itself in court had always debunked
the mouse skin tests. To launch a brand whose superiority was based on
those very tests could be disastrous, Greer argued.

The company would be "taking enormous risks in the defense of
governmental actions and civil litigation with its attending
subjection to vast amounts of monetary liability," Greer wrote.

Greer earlier had taken the precaution of ordering that a lawyer
(often Ross) be present for all XA meetings, with all notes to be
collected by the law department so the firm could assert
attorney-client privilege and refuse to produce them in court.

Ross recalled being on an out-of-town trip when Greer ordered company
officials to ignore an impending deadline for paying the negligible
fee for issuance of an XA patent.

"I went ballistic," Ross recalled--adding that he got Greer to relent
by raising the specter of stockholders suing over the wasting of
corporate assets.

Greer also interfered with a strategy Liggett officials had devised to
cope with the marketing problem, documents and testimony show.

In October 1978, Mold and Charles Kensler of Arthur D. Little flew to
Buenos Aires for the 12th International Cancer Congress, hoping to
drum up publicity for the XA. They believed the scientific press would
seize on the news, and the popular press would pick it up from there.

As they prepared to stage a press conference, Mold recalled getting "a
frantic call from Mr. Greer" with orders to not distribute "the press
release and not hold a press conference, that they had changed their
mind." According to the Meyer proffer, Greer feared that if "Mold went
forward with his comments at the Buenos Aires conference, the world
press would report on the attendant scientific advances . .

. and, thereafter, Liggett would not have the option of abandoning the
project," the document states.

Liggett's peril, according to Ross' rough notes, was thus
twofold.

The XA could increase "potential [liability] for existing products."
But "if withheld, conspiracy," and "nonuse of valuable asset to public
good," his notes said.

Retribution Claim Is Denied Mold said Liggett President K.V. Dey Jr.
told him in 1981 that a Philip Morris executive had vowed unspecified
retribution if the XA were launched. "They would not sit back and
allow us to market this without creating problems," Mold said. Dey
denied there were such threats.

Nonetheless, Liggett decided to avoid the U.S. and seek licensing
deals with foreign manufacturers. If the XA succeeded overseas, they
might then bring it home.

Mold, Ross and another Liggett executive pitched cigarette makers in
France, Austria, Germany and Russia--but found no takers. Mold, who
left Liggett in 1984, said the effort was doomed from the start.

In essence, Liggett told the Europeans, "This is a great product but
we're not going to produce it," Mold recently told The Times.

The obvious question, he said, was, "If it's that great, why aren't
you going to produce it?"

Copyright 1998 Los Angeles Times. All Rights Reserved

Checked-by: Rich O'Grady