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Excerpts from: Tobacco Producers Are Willing to Talk With Justice Dept.

By GREG WINTER    New York Times  [06/22/01]

    Some of the nation's big tobacco companies said yesterday that they were willing to sit down with
the Justice Department to discuss the possibility of ending the government's multibillion-dollar lawsuit against them.

Responding to overtures made by the Bush administration earlier this week, cigarette makers like Philip
Morris, the largest tobacco company, said that they would consider the Justice Department's
conditions for dropping the suit, but gave few indications that they would agree to any significant
concessions.

Not all the tobacco producers are so hostile to the notion of settling. But for an industry that has been
rife with conflict of late, particularly over the question of federal regulation of cigarettes, the companies'
responses were unusually similar, demonstrating a belief that they could prevail in court without
compromising.

In September 1999, with President Bill Clinton's urging, the Justice Department brought suit against
tobacco companies, accusing the industry of conspiring for nearly half a century to defraud the public
about the risks of smoking. The Justice Department sought to recover more than $20 billion of
"ill-gotten gains" to repay the government for treating Medicare patients, military veterans and federal
employees who had become ill from smoking.

But a year later, Judge Gladys Kessler of United States District Court in Washington dismissed two of
the government's main legal challenges, stripping it of the tools to recover the money it spent on health
care for ailing smokers. The judge left two other counts that accused the companies of operating a
"racketeering enterprise" and relied on laws intended to crack down on organized crime.

Though she limited the government's arguments, Judge Kessler said she had left the Justice Department
with a case that could run into "the billions of dollars."

Still, proving that cigarette companies essentially engaged in criminal activity, which is what the law
requires, is a daunting task, one that rarely succeeds in tobacco cases, some legal scholars say, even
with the truckloads of documents that became public from earlier tobacco lawsuits brought by state
attorneys general.

Add to that President Bush's stated dislike of litigation and Attorney General John Ashcroft's opposition
to the lawsuit while a senator from Missouri and, critics say, there is little interest in the administration in
pursuing a case brought by its Democratic predecessors. Mr. Ashcroft was heavily criticized in April
when he allocated $1.8 million to keep the lawsuit going, instead of the $57 million the department's
lawyers said they would need to mount a vigorous case.

But what has most annoyed critics about the decision to pursue a settlement is what they characterized
as a subtle acknowledgment by the administration that the lawsuit would fizzle in court. That
undermined the government's negotiating strength, antismoking advocates say, paving the way for a
potentially weak settlement.

"It's clear that they want to give in to the tobacco companies," said Representative Henry A. Waxman,
Democrat of California, who has introduced legislation to penalize cigarette makers if rates of youth
smoking do not go down. "Any settlement they reach will be a sweetheart deal for tobacco and not in
the public interest."

Despite its call for a settlement, the Justice Department has not disclosed what terms, if any, it will seek
from the industry. One topic likely to be discussed is the federal regulation of tobacco, a matter that
Philip Morris has been trying to persuade Congress to write into law for several years because it would
allow the company to sell so-called safer cigarettes with the approval of the Food and Drug
Administration.

It is still unclear how the settlement discussions could forward that goal. Empowering the F.D.A. to
regulate cigarettes would require legislation, and Congress has remained deeply divided over the issue
since 1998, the last time such legislation came to a vote. That effort failed and Congress has since been
reluctant to take up the matter.

Other cigarette companies are staunchly opposed to legislation, as Philip Morris, the maker of
Marlboros, conceives it. Lorillard, for example, has accused Philip Morris of trying to limit cigarette
marketing because its brands are now so dominant that it is unlikely to be affected by an absence of
advertising.

Lorillard officials, who call the Philip Morris attempt at legislation the Marlboro Monopoly Act, say
they will take part in the negotiations with the Justice Department but intend to keep a tight focus.

"As far as we know, we're sitting down to discuss the lawsuit," a Lorillard spokesman, Steven C.
Watson, said.

The defendants in the suit, besides Philip Morris and R. J. Reynolds, are Brown & Williamson, a
division of British American Tobacco P.L.C.; Lorillard, a division of the Loews Corporation; and the
Liggett Group, a division of the Brooke Group. Brown & Williamson said it had not yet determined
whether it would join the talks. Representatives of Liggett could not be reached for comment.

After expecting the Bush administration to abandon the suit against the tobacco
companies, investors responded favorably to the decision to seek a settlement.
Since Wednesday, when the announcement was made, shares of Philip Morris have risen 7
percent, to $47.66, while shares of R. J. Reynolds have also climbed 7 percent, to $55.94.