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WASHINGTON-Congressional approval of the so-called "global" tobacco settlement between cigarette makers and 40 state attorneys general appears less and less likely to occur before next year, if at all.
Doubt about the settlement was expressed from both sides of the political spectrum last week as the Senate Agriculture, Nutrition and Forestry Committee began its examination of the proposed deal, under which tobacco companies would agree to pay $368.5 billion over 25 years to settle suits brought against them by states seeking to recoup Medicaid funds spent to treat tobacco-related illness in return for an end to class-action suits against the tobacco industry (BI, June 23).
According to proponents of the settlement, the agreement's chief long-term aim is to reduce underage smoking and to subject tobacco companies to fines if specific targets aren't met in reducing the percentage of youths who smoke. The proposal, which also limits tobacco manufacturers' legal liability in other ways, must receive congressional approval because of its impact on the civil justice system, which traditionally has been the realm of the states.
The Agriculture Committee's major interest in the proposal revolves around its impact on tobacco farmers. But last Thursday's hearing-the sixth to be held by a Senate committee since the proposal was announced June 20-dealt with the deal as a whole. Within minutes of the hearing's beginning, it became evident that senators-some of whom are troubled by the proposal's limits on tobacco company liability-are in no hurry to approve the measure.
"I have doubts about the settlement as a whole. It may suffer from an overly regulatory, bureaucratic approach when something simpler would work better. I will ask our witnesses whether a large increase in the federal excise tax on cigarettes-perhaps $2 a pack-might be more effective in deterring young people from smoking," said the committee's chairman, Sen. Richard Lugar, R-Ind.
The panel's ranking Democrat, Sen. Tom Harkin, D-Iowa, was harsher in his criticism.
"A settlement on the right terms could do even more toward preventing underage tobacco use, besides addressing a number of other tobacco-caused problems. I personally would support a good agreement-one that protects public health by reducing smoking, adequately compensates for the harm caused by tobacco and protects the interests of taxpayers. So I have not given up on the idea, but the deal we have before us plainly is not going to fly in its current form. Right now, I would say it is headed for a crash landing."
"I see no reason to rush to judgment," said Sen. Harkin. "If it's a good deal this fall, it'll be a good deal next spring," he said.
But J. Phil Carlton, a former North Carolina Supreme Court associate justice who served as one of the tobacco industry's negotiators in the talks that led to the proposal, warned that the deal would not survive additional changes.
"We urge you-we implore you-to accept the settlement as it is. The companies have determined they are as far as they can go," he said after the senators spoke.
Sen. Max Baucus, D-Mont., however, echoed Sen. Harkin's sentiment.
"I hope that during this next year-because this settlement will not be accepted this year-we'll consider" more how this affects children, he said.
From the other side of the political spectrum, Sen. Jesse Helms, R-N.C., predicted that "if and when codified, it will deeply affect the legal, public health and business communities."
"It's a certainty that a precedent is being set for other industries" that manufacture legal products, said Sen. Helms. He predicted that makers of alcoholic beverages would be the next target.
Sen. Helms also used the proposal to take a swipe at the plaintiffs attorneys who helped hammer out the deal.
"We all ought to be aware of the tremendous amount of money going to the lawyers," he said. He called the public health aspects of the proposal simply a "recycled version of the national health fiasco," as he termed President Clinton's failed health reform plan.
"I cannot and will not support this settlement" or any portion of it that does not adequately protect the interests of tobacco farmers, said Sen. Helms.
Although he did not testify before the committee, Mississippi Attorney General Mike Moore, the principal architect of the proposal, used the opportunity posed by a committee break to hold yet another impromptu news conference to assess the situation.
He noted that the Senate voted 95-to-3 to rescind a $50 billion settlement-related tax credit for tobacco companies last week. The credit would have allowed tobacco companies to reduce their liability under the proposed settlement by having revenues raised from a new tobacco tax "credited against the total payments made by parties pursuant to federal legislation implementing the tobacco settlement agreement of June 20."
Saying he felt "more encouraged" by the tax move than he had before, Mr. Moore said the "tobacco industry better listen to what they've been hearing from Congress." He called upon the tobacco companies to "quit whining" and pay what is required to get a settlement.
He added that he now expects the White House to weigh in on the deal this week . He said the White House has at least two major concerns that must be met before the president will endorse a settlement: more money from the tobacco industry and fuller disclosure of internal tobacco industry documents. A concern over granting the Food and Drug Administration more regulatory power over tobacco already has been met, he said.
Mr. Moore said he remains optimistic the settlement will be approved.
"It's getting a lot of action for a bill that hasn't been introduced yet," he said.
In other tobacco-related developments last week:
U.S. District Court Judge James Trimble Jr. ruled that the Louisiana attorney general's suit against tobacco companies and their insurers will remain in the U.S. District Court for the Western District of Louisiana rather than be moved to state court. The judge based his decision on the absolute right of parties to an international commercial agreement containing an arbitration clause to have their cases heard by federal, rather than state courts."This is an extremely favorable development for the insurance industry," said Mitchell Lathrop, an attorney with the New York office of San Diego-based Luce, Forward, Hamilton & Scripps L.L.P. who represents one of the insurers, Bermuda-based ACE Ltd.
Another federal district judge dismissed a crucial part of the state of Texas' suit against tobacco companies when he ruled the state could not bring antitrust claims against tobacco companies. Judge David Folsom of the U.S. District Court for the Eastern District of Texas also ruled that internal tobacco industry documents used in Florida's suit against tobacco companies were privileged and could not be introduced in the Texas action, which is expected to go to trial later this month.