Administration wants to settle tobacco case, sources say |

Administration wants to settle tobacco case, sources say

WASHINGTON (AP) – The Justice Department wants to settle its drawn-out civil lawsuit seeking damages from tobacco companies, government officials said Tuesday, in a move that appeared to take the industry by surprise.

Two Bush administration sources said there has been concern about the government’s case. These officials, discussing the matter only on grounds of anonymity, said the department would prefer to go for a settlement now rather than risk losing.

The department suffered a major setback last year when the judge hearing the case – U.S. District Judge Gladys Kessler – dismissed two counts which would have allowed the government to recover some expenses related to sick smokers.

The suit was filed in September 1999. Under the leadership of then-Attorney General Janet Reno, the Justice Department said at the time that federal health care plans spend more than $20 billion a year treating smoking-related illnesses. It said those costs should be recovered.

President Clinton applauded the suit, saying Americans deserved a day in court.

Officials said Attorney General John Ashcroft has assembled a team of three lawyers, all career attorneys in the department’s civil division, to work on the settlement. The lawyers met Tuesday for the first time with the department’s tobacco litigation team to begin talking about a potential settlement, sources said.

These officials stressed that the department was not giving up the suit, saying instead that it would continue the litigation even as it seeks a settlement.

The recommendation was made to Ashcroft by Stuart Schiffer, head of the department’s Civil Division.

As a senator, Ashcroft opposed the suit.

Philip Morris Inc., based in New York, issued a statement saying: ”Philip Morris has not been approached about settlement of the Department of Justice lawsuit, nor have we approached anyone else about settlement of this lawsuit. We are not aware of any settlement discussions. We continue to believe the case is without merit.”

Steve Watson, vice president for external affairs with Lorillard, Tobacco Co., based in Greensboro, N.C., said, ”We have not had any settlement discussions with other companies within the industry or with the government regarding the case.”

Tobacco analyst Martin Feldman of Salomon Smith Barney said that while individual smokers have successfully sued tobacco companies for large damage awards, the government’s racketeering suit against the industry appeared to be on shaky ground.

”The tobacco industry always had a very good chance of winning this case,” said Feldman.

Philip Morris’ stock fell 20 cents to close at $44.60 on the New York Stock Exchange. RJ Reynolds Tobacco Holdings (RJR) fell 42 cents to close at $52.53. Loews Corp., which owns Lorillard, lost 45 cents and closed at $65.75. British American Tobacco, which owns Brown & Williamson, rose 4 cents a share to close at $15.10.

Anti-tobacco advocates contended the government’s case is strong and expressed concerns that a settlement could be a sweetheart deal for tobacco companies.

”This is clearly a political decision, not a legal judgment,” said Matthew Myers, president of Campaign for Tobacco-Free Kids, adding that tobacco companies contributed $8.3 million to campaigns last year, 83 percent of it going to Republicans.

The Justice Department sued the tobacco industry to recover billions of dollars taxpayers have spent on smoking-related health care, accusing cigarette-makers of a ”coordinated campaign of fraud and deceit.”

The government alleged that the cigarette companies conspired since the 1950s to defraud and mislead the American public and to conceal information about the effects of smoking and the addictiveness of nicotine.

The lawsuit was filed against Philip Morris, R.J. Reynolds Tobacco Co., American Tobacco Co., Brown & Williamson Tobacco Corp., Lorillard, British American Tobacco Ltd., Liggett and Myers Inc., the Council for Tobacco Research-USA and the Tobacco Institute.

Democrats accused the Bush administration of trying to kill the lawsuit by not requesting more money to pay for litigation. The administration earlier this year asked for $1.8 million to pay Civil Division salaries and staff costs for the tobacco litigation team. That was the same level of funding as had been requested by the Clinton administration, which brought the suit.

However, the Clinton White House had sought help from other agencies to cover the legal costs.

Associated Press writer Nancy Zuckerbrod contributed to this report.

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