Tobacco Company 'Turns State's Evidence'

WASHINGTON -- The smallest of the nation's major tobacco companies settled 22 state lawsuits Thursday by admitting that smoking causes cancer and other diseases, that nicotine is addictive and that the industry targets underage smokers -- concessions that could have repercussions for the entire industry.

Liggett Group Inc. also agreed to release thousands of pages of internal documents that could provide damaging evidence in lawsuits still pending against other cigarette makers and to provide Liggett employees to testify as witnesses in those cases.

Minnesota Attorney General Hubert H. Humphrey III compared the Liggett action to "turning state's evidence," and explained, "This is a little like busting a street drug dealer to get at the Colombian drug cartel."

"I believe this is the beginning of the end of this conspiracy of lies and deception," said Arizona Attorney General Grant Woods at a news conference where the agreement was announced. "Someone is finally telling the truth."

Breaking for the second time with the tobacco industry's decades-long united front, Liggett also agreed to beef up the warning labels on its products and pay 25 percent of pretax profits to the states for the next 25 years. The money would be used to help pay for the costs of treating smokers' health problems and for anti-smoking programs, which is what the original lawsuits had sought.

Before the deal was even signed, the other major tobacco companies denounced the agreement and raced to court in Winston-Salem, North Carolina, where they won a court order temporarily blocking Liggett from releasing documents covered by other companies' attorney-client privilege.

Liggett immediately released a handful of documents that it determined were not covered by attorney-client privilege to the attorneys general, and sent the thousands of pages of protected documents to courts around the country hearing the state suits. If a judge determines the documents show that the papers show crimes or fraud had occurred, the legal protections for those papers could be broken.

Attorney General Mike Moore of Mississippi was confident that the North Carolina injunction would not prevent the release of documents to courts in other states. The first state trial begins June 2 in Mississippi.

Moore, who brought the first state suit against the industry in 1994, said the new cache "will be the most incriminating documents in the entire history of tobacco litigation."

The documents also could be used in some 200 other lawsuits filed against cigarette makers by smokers, ex-smokers and people who say they are victims of secondhand smoke.

In addition, federal prosecutors investigating the tobacco industry said they would be taking a close look at the documents as possible evidence of fraud and false statements to Congress and government agencies.

The admission that companies target children could also help the Clinton administration's initiative giving the Food and Drug Administration power to limit youth access to tobacco products, which is currently being challenged in federal court in North Carolina.

Although publicly they have denied any negotiations are under way, Thursday's announcement might increase pressure for a broader settlement that would end all lawsuits against all tobacco companies in exchange for money and agreement to abide by underage smoking regulations.

The other major tobacco companies were quick to denounce the agreement, saying it was part of an ongoing effort by Liggett Chairman Bennett LeBow in his bid to sell Liggett to R.J. Reynolds. "We suspect he is simply brokering this deal in a desperate attempt to force one of the other cigarette manufacturers to take over his financially troubled and failing tobacco interests," Philip Morris, R.J. Reynolds, Brown & Williamson and Lorillard said in a statement.

While Brooke Group Ltd., parent of Liggett, gained 11 percent Thursday, tobacco stocks fell on news of the agreement. Philip Morris was down 5 percent to $115.87 1/2, and RJR Nabisco Holdings lost 2 percent, closing at $31.50.

Tobacco industry analysts, however, said they were unimpressed with the news. "I don't think this settlement is anything earthshaking," said Diana Temple of Salomon Brothers.