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S P E C I A L Tobacco Under Attack

Texas, tobacco giants settle lawsuit, avoid trial

Cigarette firms reportedly to pay at least $14 billion

Cigarette
Florida, Mississippi and Texas have settled   
January 16, 1998
Web posted at: 9:15 a.m. EST (1415 GMT)
In this story:

AUSTIN, Texas (CNN) -- Texas has become the third state to settle a lawsuit against the tobacco industry, reportedly accepting at least $14 billion over 25 years to reimburse the state for Medicaid money it spent treating smokers. Details were to be announced Friday, the day the trial was to start.

According to a source, who asked not to be identified, lawyers' fees would be determined by a judge, whose decision would be subject to approval by a national arbitration panel.

Also included in the deal, as of three days ago, the source said, was a multimillion-dollar fund that would be set up by the tobacco industry to pay for advertising to discourage youths from smoking.

The settlement reached Thursday would be about the same as the combined $14.7 billion the tobacco industry negotiated with Florida and Mississippi last year.

Fifteen per cent of the money Texas receives reportedly will go to the five law firms hired by the state.

The state's charge; tobacco's response

Armed with internal documents from the tobacco industry, Texas had sued eight tobacco companies and three trade groups for reimbursement of about $8.6 billion in Medicaid funds spent on smoking-related illnesses dating to 1968.

With damages, the lawsuit grew to $14 billion.

The lawsuit alleged the industry lied to federal officials, committed fraud, illegally marketed its products to children and conspired to deceive the public about the dangers and addictive nature of cigarettes.

Teen smoking
Texas accuses tobacco companies and trade groups of boosting nicotine levels to addict generations of smokers   

"This industry views ... our children ... as nothing more than replacement smokers in order to maximize their profits," said Texas Attorney General Dan Morales.

Dan Webb, an attorney representing the industry, countered that cigarette-makers did nothing wrong by selling a product that not only was legal in Texas, but also provided the state with annual tax revenue of a half-billion dollars. (icon 85K/6 sec. AIFF or WAV sound)

Minnesota next

Another 37 states have lawsuits pending. A trial is to start Tuesday in Minnesota, where the state and Blue Cross Blue Shield of Minnesota are seeking unspecified punitive damages on top of actual damages estimated at $1.75 billion.

Texas should now be guaranteed payment. No such promise existed as the state awaited a $13 billion payout as part of a $368.5 billion national settlement the industry negotiated with a coalition of states in June.

That settlement foundered in Washington last year and is awaiting congressional debate.

The national pact would eliminate most pending class-action lawsuits against the tobacco industry and give it some protection from future lawsuits in exchange for the cash and new restrictions on nicotine and cigarette marketing.

Trial watchers speculated that the tobacco industry would settle in Texas to avoid disclosures from a trial that would have influenced Congress and possibly erode terms of the proposed national settlement.

Defendants in the Texas lawsuit were the American Tobacco Co. Inc.; R.J. Reynolds Tobacco Co.; Brown & Williamson Tobacco Corp.; B.A.T. Industries; Philip Morris Inc.; Liggett Group Inc.; Lorillard Tobacco Co. Inc.; United States Tobacco Co.; Hill & Knowlton Inc.; the Council for Tobacco Research-USA; and the Tobacco Institute Inc.

Correspondent Charles Zewe contributed to this report.
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