Critics Denounce Empty Promises of Tobacco Deal
By John Schwartz and Saundra Torry Washington Post Service

WASHINGTONHaving had a look at the fine print of the
68page settlement proposal between tobacco companies and state
attorneys general, the critics are lining up to take their shots.
"Overall, this is a document filled with empty promises and
unfilled commitments," said David Vladeck, a regulatory law expert
and head of the Public Citizen Litigation Group, expressing the view of
consumer groups that the agreement was too favorable to the tobacco
industry.
David Kessler, the former Food and Drug Administration
commissioner who is now consulting with the federal government on
tobacco regulation, said there were some "wonderful" provisions in the
plan, including the part that provided for antitobacco education
campaigns. But he also said he had "very serious concerns" about the
parts of the deal he has seen so farthose regarding the food and drug
agency's jurisdiction over tobacco and other components of cigarettes.
"We will ask the public health groups to come back this week
and review the details of the settlement linebyline," Mr. Kessler said.
Mr. Vladeck said the document "reflects the technical
sophistication of the tobacco industry lawyers" compared with the
"neophyte" status of the other side on regulatory issues. "I am not
saying the attorneys general deliberately took a fall, but they came in
second and not even a close second. "
He was particularly critical of provisions in the settlement that
say the food and drug agency would have to prove that attempts to
limit nicotine or other substances in tobacco products would neither be
detrimental to public health nor create a black market. The attorney
general of Mississippi, Michael Moore and his colleagues said the
provisions simply reflected con
cerns expressed by health officials that they did not yet have scientific
evidence to justify taking such moves against tobacco products.
Mr. Vladeck said that rule set the bar almost impossibly high.
Other phrases and concepts scattered throughout the
document, Mr. Vladeck said, turn seeming public health advances into
regulatory traps that weigh heavily in the industry's favor. For instance,
any attempt by the government to limit nicotine would require a
"formal rulemaking" procedure, as opposed to the easier procedure
the food and drug agency uses for most regulations, including its 1996
tobacco rule.
In addition, Michael McGinnis, a former official of the
Department of Health and Human Services, said the $1 billion annual
fund for smoking cessation programs could well be too small to meet
the needs of the nation's 45 million smokers.
Other critics of the planwhich must gain the approval of
Congress and President Bill Clintonsay the proposed fines against the
companies if they miss targets for reducing youth smoking are too Iow.
"Look at all those smokers they can get just by paying that money,"
said Richard Kluger, author of "Ashes to Ashes," a PulitzerPrize
winning study of the cigarette industry.
More fierce criticism came from Bennett LeBow head of the
cigarette maker, Liggett Group Inc. Earlier this year, Mr. LeBow signed
a separate settlement with 22 attorneys general. Mr. LeBow said that
he saw a lot of good news in the public health portion of the larger
proposal, but that the industry got off easy, especially when it comes to
the kinds of internal papers it will have to make public.
The companies involved in the negotiations agreed to turn over
scientific documents, but not the highly sensitive documents Mr.
LeBow agreed to provide. "They are giving up zero" he said.
The other companies are fighting release of Mr. LeBow's
documents, which could shed light on the entire industry. Noting that
the tobacco giants began negotiations with attorneys general just weeks
after the announcement of his deal, Mr. LeBow said it was easy to
figure out "why they're trying to rush to a deal quick. "
While the tobacco companies received some protection from
the federal regulation in the deal, in its pact the weaker Liggett agreed
to be governed by the full food and drug agency rule. Recalling the
remark by the attorneys general that they had held up the deal to
protect a whistleblower; Jeffrey Wigand, because they did not want to
"leave anybody on the beach," Mr. LeBow said: "They left us on the
beach. We are the ultimate whistleblowers."

'Bitter Pill' for the Industry
Barnaby J. Feder of The New York Times reported:
In reaching an agreement that would cost them billions of
dollars a year and poses the potential to chase away customers,
cigarette companies calculated that they still would be left with
sufficiently lucrative business and would not continue to be haunted by
lawsuits that have depressed their stock prices, consumed ever more of
their resources and given their industry an image as America's
corporate rogue.
The tobacco settlement would cost the highly profitable
industry an average of $14.7 billion a year over the next 25 years,
more than twice its profits from domestic cigarette sales in 1996. The
industry called that and other terms of the deal a "bitter pill."
But the companies' stock prices have risen in the two months
since negotiations on a settlement began, a sign of investor recognition
that the companies have much to gain from an agreement even as they
pay what looks like a steep price.
Although the combative tobacco industry has had great success
in the courts at defeating lawsuits brought by sick smokers, it came
under enough pressure in the last several years to force it to the
bargaining table for the first time in four decades of nasty battles over
the health effects of tobacco.
Central elements of that pressure were the lawsuits brought by
more than three dozen states in an effort to recover Medicaid costs of
smokingrelated illnesses.
At the same time, the industry was confronted with the very
real prospect of vastly expanded federal regulation, which is not the
case under the agreement.
Wall Street has no doubt that the manufacturers, whose
cigarette sales in the United States amount to $45 billion a year, would
be able to survive the costs of the agreement by raising prices, though
just how prosperous they would be under the restrictions in the
settlement is still very much in doubt.
In the end, Wall Street is betting there will still be tens of
millions of American smokers, and the industry leadersthe Philip
Morris Companies, RJR Nabisco Holdings Corp. and BAT Industries
PLC, the British parent of Brown & Williamson Tobacco Corp. will
continue to enjoy domestic profits that many other industries dream of
emulating.
Investors are further betting that whatever those cigarette
makers lose in the United States they will make up for overseas, where
they are already enjoying strong growth.
Emanuel Goldman, who follows the industry for Paine Webber,
said if Congress enacts the deal, "the companies' stock prices could go
up another 20 percent" over the next 12 months.
Although Philip Morris, for example, has nearly half the
domestic cigarette market, and so would have the biggest liabilities
from the settlement, its tobacco business derives just 30 percent of its
earnings from the United States, compared with 50 percent for
Reynolds and even higher percentages for other rivals.