U.S. GOVERNMENT BRINGS FIRST TOBACCO CRIMINAL CASE

WASHINGTON (Reuters) - The U.S. government Wednesday brought the first
criminal charges in its tobacco industry investigation, alleging a
California biotechnology firm conspired with a cigarette maker to secretly
develop a high-nicotine tobacco plant.

Justice Department officials said DNA Plant Technology Corp., which
develops new plant varieties, has agreed to plead guilty to one count of
conspiring to violate the tobacco seed export law and to cooperate in the
3-year-old probe.

The officials said Brown & Williamson Tobacco Corp., the nation's third
largest cigarette maker and a unit of B.A.T Industries Plc of Britain, was
an unindicted co-conspirator in the alleged scheme to develop a genetically
altered tobacco plant with a higher nicotine content.

According to court papers, DNA Plant Technology conspired with Brown &
Williamson and its Brazilian affiliate to violate a law that bars tobacco
seed exports from the United States without a permit. The alleged
violations took place between 1984 and 1991, when the law was repealed.

The department charged that one of Brown & Williamson's goals was to
develop a reliable source of high-nicotine tobacco it could use to control
nicotine levels in its cigarettes. It said one variety, code named Y-1,
had a nicotine level of 6 percent, about twice that of normal flue-cured
tobacco.

It said Brown & Williamson gave the variety to the Oakland-based company,
which specializes in developing new plant varieties through genetic
engineering and advanced breeding techniques.

The department said Y-1 was allegedly grown in Brazil and other countries
to help conceal its development. Federal regulations barred the commercial
growth of such high-nicotine tobacco in the United States.

It charged that the two companies also illegally exported seeds to other
nations, including Nicaragua, Honduras, Chile, Nigeria, Costa Rica,
Argentina, Zimbabwe and Canada to explore whether they were good locations
to grow Y-1 tobacco.

The department said the two companies used code words in internal documents
to conceal the tobacco seed exports. The plantings in Brazil were called
``winter trials'' while the seeds were ``special material.''

The Department also said DNA Plant Technology deliberately concealed from
the Food and Drug Administration (FDA) information about its contract with
Brown and Williamson to develop the tobacco.

The department charged that employees of the biotech firm and Brown &
Williamson illegally shipped seeds by air express or courier and smuggled
them when they traveled to Brazil.

The maximum penalty that DNA Plant faces is a $200,000 fine or twice the
gain it received under the contract. The charges were filed in federal
court in Washington, D.C.

The charges were brought as Congress prepares in the next few months to
take up a proposed national settlement under which the tobacco companies
would pay $368.5 billion in a deal negotiated last June with state
officials.

Congressional sources said the case would not likely have a direct impact
on congressional action, but could strengthen tobacco foes fighting an
industry whose public image has grown ever more tarnished.

Congressman Marty Meehan, a Massachusetts Democrat who sought the tobacco
investigation, applauded the bringing of the first case. ``I anticipate
that this is just the tip of the iceberg,'' he said.

A plea agreement is expected to be filed soon, department officials said,
adding that DNA Plant has agreed to tell what it knows about Brown &
Williamson's activities.

DNA Plant said it has agreed to cooperate in the probe and added that its
research agreement with the cigarette maker involving the Y-1 variety ended
in 1994. It said the Justice Department asked it not to comment further
because of the ongoing investigation.

Sources close to the probe said the department has been negotiating with
the biotech company in recent weeks about the terms of the plea deal.

In 1994, FDA Commissioner David Kessler testified before Congress that
Brown and Williamson had shipped Y-1 tobacco to the United States from
Brazil for use in five cigarette brands -- two varieties of Viceroy, two
varieties of Richland and Raleigh Lights King Size.
^REUTERS@