ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Saturday, March 16, 1996 TAG: 9603180106
SECTION: NATIONAL/INTERNATIONAL PAGE: A4 EDITION: METRO
DATELINE: WASHINGTON
SOURCE: LOS ANGELES TIMES
In a second precedent-setting settlement of tobacco litigation, the Liggett Group agreed Friday to pay a huge sum to resolve a lawsuit involving tobacco- related illnesses among residents of five states.
Under the terms, Liggett agrees to pay potentially as much as $2 billion over the next 25 years and pledges to make cigarette advertising reforms that include abandoning the use of cartoon characters that appeal to teen-agers. The settlement was announced by the attorneys general of Mississippi, Florida, Massachusetts, West Virginia and Louisiana.
Those states had filed lawsuits seeking compensation from the tobacco industry for costs incurred by taxpayers in treating smoking-related diseases contracted by indigent citizens. These Medicaid-related costs have ranged from $60 million a year in West Virginia to $400 million in Florida.
Liggett's settlement with the states follows by two days its agreement to resolve a large class-action lawsuit in New Orleans that alleged cigarette makers manipulate nicotine levels to keep smokers addicted. In both cases, there was no admission of guilt or liability by Liggett, a unit of Brooke Group Ltd. and the nation's fifth-largest cigarette maker.
Each case involves a commitment by Liggett to begin complying with certain proposed Food and Drug Administration regulations governing smoking by teen-agers. The company will abandon the use of cartoon characters similar to RJR Nabisco Holdings Corp.'s popular ``Joe Camel'' in tobacco advertising. It also will limit the use of promotional materials and the distribution of free samples where minors are present.
Mississippi Attorney General Mike Moore, who led months-long negotiations that resulted in the settlement, said the most important goal was ``protection of the public health of this country, primarily the children.''
While Liggett's break puts pressure on the other defendants to settle, Moore said officials will continue to pursue legal action against RJR, Philip Morris Cos., Loews Corp. and B.A.T. Industries.
He invited other states to join in the pending lawsuit and receive compensation payments from Liggett. Legal sources said Maryland and Texas are expected to do so shortly, but California cannot because a recent state law gives the tobacco industry special protection from certain forms of liability.
Under the settlement, Liggett will pay $135 million into a fund to compensate the five states for past and current medical costs of persons suffering from smoking-related illnesses such as heart disease.
The company will cover future tobacco-related costs of the states by paying $30 million annually over the next 25 years or 2.5 percent of the company's pre-tax profits, whichever is greater. It will establish another fund for additional states filing lawsuits that will amount to at least $50 million a year.
The agreement also provides for larger payments if Liggett affiliates with RJR or another tobacco company within three years, as is being sought by Bennett LeBow, chief executive officer of Liggett's parent, Brooke Group.
LeBow said an ``escape clause'' permits Liggett to terminate the deal if any of the remaining defendants in the lawsuit win their cases.
Minnesota, while joining with the other five states in the lawsuit, thought the awards were too small and did not agree to the settlement.
``Anything less than requiring the tobacco industry to pay a fair share of the $470 million in annual costs Minnesotans spend on smoking-related disease cover-up committed by the tobacco industry is unacceptable,'' said Hubert Humphrey III, the state attorney general.
Some lawyers said Liggett would not have entered into the historic settlement unless it recognized the solid factual basis on which claims against the industry are grounded. In addition, the company has agreed to furnish any information it has on ``fraudulent or illegal conduct'' on the part of other defendants, officials said.
LENGTH: Medium: 75 linesby CNB