SETTLEMENT ON TOBACCO 'A DONE DEAL'

Texas may get $15 billion

AUSTIN -- Texas Attorney General Dan Morales has nailed down a
multibillion-dollar settlement of the state's anti-tobacco lawsuit, sources
said Thursday.

Morales scheduled a news conference for noon today in Austin to discuss the
details, despite a last-minute challenge from two prominent state
lawmakers, who want a voice in how settlement proceeds should be spent.

The agreement, which would pay the state about $15 billion over the next 25
years, is virtually "a done deal," according to one source familiar with
the private negotiations.

Tobacco lawyers reportedly were taking final copies of the settlement
documents to their clients late Thursday. U.S. District Judge David Folsom
of Texarkana, who presides over the case, also was to review the final
documents before Morales' public announcement.

State Sen. Bill Ratliff, chairman of the Senate Finance Committee, and
state Rep. Rob Junell, chairman of the House Appropriations Committee, had
asked Folsom late Thursday to let them belatedly intervene in the lawsuit,
which Morales filed two years ago to recover damages for public health care
costs associated with smoking.

Morales also accused tobacco companies of conspiring to defraud the public
by concealing the health risks posed by tobacco.

Ratliff, R-Mount Pleasant, and Junell, D-San Angelo, said they were
concerned about reports that Morales planned to commit as much as $1
billion in settlement proceeds to smoking prevention and other health care
programs.

They said such commitments would exceed the attorney general's authority
because state spending decisions must be made by the Legislature.

It was unknown what effect, if any, their motion would have on the pending
settlement.

Gov. George W. Bush and Lt. Gov. Bob Bullock said they shared the two
lawmakers' concerns, but they didn't join in the intervention motion, which
was filed by a private attorney.

The attorney general's office has refused to discuss any details of the
agreement. But various sources have said that the settlement will earmark
money to several health-related programs, including health insurance and
anti-cancer programs for children and an anti-smoking media campaign
conducted by the Texas Department of Health.

Anti-tobacco activists have urged that settlement money be spent for health
care needs.

There also was an unconfirmed report that $500 million would be set aside
to create a private foundation specializing in health- related issues.

Ratliff and Junell said they had tried to communicate their concerns about
spending decisions to Morales, but did not receive a response.

"Even today we are being kept totally in the dark about the terms of the
proposed settlement," they said in a joint statement. "It became apparent
that the only recourse left to us ... was to join the other parties at the
courthouse."

Ratliff added in an interview that he "might not even disagree" with the
spending priorities that the settlement may outline.

"But that's not his (Morales') authority," he said.

Morales spokesman Ron Dusek said the legislators' concerns were premature.
"Once the terms of the settlement are made known, we don't expect there
will be any controversy. Their concerns will not be an issue," Dusek said.

Bush and Bullock, in separate meetings with reporters on Thursday morning,
acknowledged Morales' authority to negotiate a settlement of the
anti-tobacco lawsuit, which the attorney general filed on his own
initiative. But they also indicated their disappointment at not being kept
informed on settlement negotiations.

"We have not been kept abreast of the details of the settlement. And so,
like many members of the Legislature, I have really no idea what the
details will be," Bush said.

"I do feel a sense of frustration."

The governor said he recently had sent word to the attorney general's
office, through Secretary of State Al Gonzales, that "we had hoped to be
brought up to date."

"We also sent the signal that we had hoped that there would be as few
strings attached as possible to the money that could be coming to the state
so that the appropriate people would be spending the money, and that's the
legislative branch," Bush added.

The Legislature won't convene in regular session again until next January,
and Bush said that would be soon enough to address concerns about spending
the settlement proceeds. He said he doesn't intend to call a special
session before then.

Despite his misgivings, Bush commended Morales on the reported size of the
pending agreement.

"It's hard to second-guess success. It sounds like he achieved a big
settlement. For that, I think that the state of Texas ought to congratulate
the attorney general," Bush said.

"I'm pleased, and I hope other members are pleased, that he has been
successful at achieving a settlement. The question is the details, how the
money is spent, how much money ends up in lawyers' pockets."

There has been speculation that several private trial lawyers Morales hired
to try the lawsuit will share as much as $2 billion in legal fees under the
settlement.

Bullock said he believes legislative approval for spending settlement money
may be necessary even if the agreement is approved by the federal judge.

Bullock also warned that it may be premature to plan on spending any of the
money until after the state learns whether the federal government will
demand part of the settlement funds.

Any federal share, which is being debated in Washington as part of a
proposed national tobacco settlement, would represent a refund of federal
Medicaid dollars spent on smoking-related illnesses. The federal government
provides more than 60 percent of Texas' Medicaid funds, which Morales sued
the tobacco industry to recover.

"I think before we count our chickens, we better make sure that they're
hatched," Bullock said.

Texas would become the third state to settle a lawsuit against tobacco
companies since a proposed $368 billion national settlement of 40 state
lawsuits got hung up in Congress last year.

Mississippi settled with cigarette makers for $3.6 billion last July, and
Florida settled for $11 billion in August.

Copyright 1998 Houston Chronicle Austin Bureau