TOBACCO FIRMS AIM FOR PACT WITH STATES

Accord Would End All Pending And New Suits

WASHINGTON -- It's Plan B for the tobacco industry -- and this time there's
a chance it may work.

Last week word emerged of secret negotiations between cigarette makers and
state attorneys-general to strike a deal.

They are reportedly after a settlement that could end all present and
future anti-tobacco lawsuits by states in return for payments by the
tobacco industry of between $180 billion and $200 billion in the next 25
years. Already, the industry has settled lawsuits with four states for sums
totaling $36 billion over the next 25 years.

Under the secret talks now under way, cigarette prices -- which now average
$2.05 a pack -- would be forced up by about 35 cents a pack. Though the
tobacco industry would accept certain marketing and advertising
restrictions, they would be much less onerous than the ones the
anti-smoking lobby wants.

Last month, the tobacco industry's first attempt at a settlement collapsed
after Congress eliminated the legal immunities the tobacco industry had
wanted and proposed toughening industry payments to $516 billion over 25
years, with much larger penalties if smoking among young people was not
reduced by targeted amounts and dates.

Plan B, on the other hand, would not require Congress' approval; it would
be a private settlement between the cigarette makers and the states. ``The
beauty of it is that it doesn't require a single vote,'' says Gary Black, a
tobacco analyst.

The new proposal is a slimmed-down version of the settlement first
negotiated between the tobacco industry and the states last year, under
which the tobacco industry would have paid $368.5 billion over 25 years and
accepted tough restrictions on advertising and marketing.

That settlement would have required the industry to meet targeted
reductions in youth smoking, with extra financial penalties if the targets
were missed. And tobacco companies agreed to accept regulation by the Food
and Drug Administration.

Cigarette makers sought the settlement because it would have disposed of
all the lawsuits brought by states seeking compensation for the cost of
treating smoking-related diseases. It also would have settled existing
class-action lawsuits on behalf of whole classes of smokers and given
immunity from future class-action lawsuits.

The new settlement would settle only the state lawsuits, theoretically
leaving cigarette makers exposed to the risk of ruinous class-action
lawsuits.

Those talks may come to nothing: Discussions apparently broke down
Wednesday over money. And it is still possible that Congress, angry at
being bypassed, might attempt to revive plans for federal legislation.