FEINSTEIN FEARS TOBACCO BLACK MARKET

Senate: She considers joining effort to weaken pending bill. Democrat says
big cigarette tax would foster smuggling in border states, especially
California.

WASHINGTON--Despite representing one of the most anti-smoking states in the
country, California Democratic Sen. Dianne Feinstein is considering joining
Utah Republican Sen. Orrin G. Hatch in trying to weaken tough tobacco
legislation being debated on the Senate floor. The reason: She worries that
a big tax on tobacco will create a black market for cigarettes that could
add to law enforcement's woes.

Feinstein's name appears with Hatch's on a yet-to-be introduced substitute
bill that is similar to the widely criticized proposal to end tobacco
litigation announced last June by industry negotiators and state attorneys
general.

The bill, which would could be introduced later this week, would take the
place of legislation sponsored by Sen. John McCain (R-Ariz.). The McCain
bill goes far beyond the proposed settlement in hiking cigarette prices
and raising money for anti-smoking programs, while eliminating most of the
liability protections sought by the cigarette makers.

Hatch, traditionally a staunch tobacco foe, fears the McCain bill goes too
far and that the industry might successfully challenge some of its
requirements on constitutional grounds. Hatch would raise cigarette prices
by close to 80 cents a pack compared to the $1.10 hike contained in the
McCain bill.

Feinstein said she is unhappy with the McCain bill because she thinks
raising the price of cigarettes by that much would increase cigarette
smuggling, particularly in border states such as California.

"I've got some concerns," she said. One "is the likelihood of a major
black market. . . . This is a big bill, we have to understand how the
pricing works."

In an interview, Feinstein did not say if she would join with Hatch in
offering the bill. But lobbyists deeply involved in the fight said she was
working with the Utah senator on a more modest package, and The Times
obtained a copy of a summary of the bill, prepared by Senate staff, which
called the measure the "Hatch-Feinstein Tobacco Substitute."

The black market warning has become a principal theme of tobacco industry
attacks on the McCain bill. Supporters argue, however, that even with the
$1.10 per pack price increase, cigarette prices in the U.S. will remain at
or below those in most industrialized countries, where cigarette taxes are
even higher.

By imposing higher cigarette prices on consumers, the McCain bill would
bring in an estimated $516 billion over the next 25 years, compared to a
projected $430 billion with Hatch-Feinstein. On the question of legal
liability, the Hatch-Feinstein approach would grant the tobacco industry
protection from the most damaging types of lawsuits, including private
class actions and lawsuits by states. By contrast, the biggest benefit for
the industry in the McCain bill is a cap of $8 billion on judgments and
settlements, compared to $5.5 billion in the Hatch-Feinstein approach.

Feinstein is already taking hits from some home-state anti-smoking
activists for her position. "It's absolutely appalling," said Stanton
Glantz, a UC San Francisco medical professor and a leading foe of
cigarette manufacturers. "She's giving the industry the farm. . . . I
mean, she's totally out of step with the people of California."

Feinstein's support for a more tobacco-friendly bill is but the latest
sign that in the smoking wars, the traditional world of Washington power
politics has been turned upside down. McCain and other
Republicans--ostensibly the champions of smaller government and lower
taxes--are leading the charge on a measure that would bring unprecedented
regulation to a single industry, dramatically raise cigarette taxes and
fund the kind of public health crusade that is usually backed by liberal
Democrats. Ironies abound.

"The politics of the entire package are fairly phenomenal," marveled a
tobacco industry lobbyist, noting that the unusual pairings go beyond
Feinstein with Hatch, and Republican McCain's alliance with the Clinton
White House in pushing the sweeping legislation. Sen. Alfonse M. D'Amato
(R-N.Y.) is voting for a huge tax increase in an election year. Sen.
Ernest F. Hollings from the tobacco-growing state of South Carolina is
siding with McCain. And perhaps most paradoxical, anti-tobacco lawyers and
the industry they forced to the bargaining table through massive lawsuits
are both taking potshots at the McCain bill.

Without a bill that is more to the industry's liking, the lawyers fear the
companies will balk at paying hefty attorneys' fees on top of the cigarette
price hike of at least $1.10 proposed by McCain. If the industry likes the
legislation, they reason, it will not resist the added burden of paying
legal fees.

John Coale, one of the anti-tobacco lawyers, argues: Whatever legislation
emerges this week could blow "this industry apart, so I've done my job,
and, hopefully, I'll get paid."

Copyright Los Angeles Times

Checked-by: jwjohnson@netmagic.net (Joel W. Johnson)