ADS CLAIM HIGH TAX ON CIGARETTES AIDS CRIME

Spots Contend Smokers Buy From Smugglers When Price Gets Too High

PHILADELPHIA - The Lorillard Tobacco Co. is hoping people are more afraid
of mobsters than they are of lung cancer.

The nation's fourth-largest tobacco company, maker of Newports and Kents,
launched an advertising campaign in three states this week that claims
higher cigarette taxes encourage organized crime.

One ad featured a picture of a scowling, beefy man wearing a pinstriped
suit and a pinky ring, posing next to a black sedan and a suitcase stuffed
with cash.

"The mob, smugglers, and other street criminals are making a fortune
selling illegal cigarettes while legitimate small businesses are forced to
cut jobs," the ad reads.

The newspaper, radio and billboard ads began appearing Wednesday and are
scheduled to run for a month in Pennsylvania, New Jersey and Delaware --
three of at least 29 states where lawmakers have suggested raising
cigarette taxes, including the Carolinas.

The ads specifically take aim at New York City's taxes, saying they created
a market for smugglers who make knockoffs of name brands or buy cartons in
other states and resell them.

William Corr, executive director of the Campaign for Tobacco Free Kids,
called the ads "deceptive and desperate."

"Lorillard is trying to divert attention from what they really want, which
is lower-cost cigarettes," he said.

John Kirkwood, chief executive of the American Lung Association,
acknowledged cigarette smuggling is a problem, but said eliminating tobacco
taxes isn't the way to deal with it.

"Maybe we shouldn't have laws against drug use, either, because people are
going to go out and smuggle drugs?" he said. "The reasoning is fallacious."

Few dispute that cigarette smuggling has been a mainstay of organized crime.

Federal agents in April announced the breakup of smuggling rings that made
$20 million buying cigarettes in states like Virginia, where the state tax
on a pack of cigarettes is 2.5 cents, and shipping them to places like New
York, where state and local taxes are about $3 per pack.

In another bust, authorities charged a group with buying cigarettes in
North Carolina and trucking them to Michigan. Investigators said proceeds
went to finance the militant group Hezbollah in Lebanon.

Anti-smoking organizations claim tobacco companies secretly encourage
smuggling by oversupplying wholesalers in low-tax states, knowing tons of
cigarettes will be bought for sale elsewhere.

In February, Canadian authorities charged tobacco manufacturer
JTI-Macdonald Corp. with smuggling cigarettes to evade $805 million in
duties and taxes. The company denied the charge.

Steve Watson, spokesman for Greensboro-based Lorillard, said higher
cigarette taxes don't alter people's smoking habits. He said merchants and
smokers simply turn to illegal sources when prices get too high.

In January, Delaware's governor proposed doubling the state's cigarette tax
from 24 cents to 50 cents a pack. New Jersey recently raised taxes by 70
cents and has proposed another increase to $1.90 per pack.

Pennsylvania more than tripled the cigarette tax last year, to $1 per pack,
and state officials have discussed raising it again to help doctors defray
insurance costs.