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Tobacco foes question deal
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June 23, 1997: 6:05 p.m. ET
Lawmakers, health advocates say the settlement raises many questions
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NEW YORK (CNNfn) - The ink was barely dry on a $368.5 billion tobacco settlement Monday when a string of anti-smoking advocates and lawmakers questioned whether the pact gave away too much.
Among the gravest concerns are that the tobacco industry secured loopholes to escape federal regulation of nicotine and won too many concessions on liability.
The administration asked David Kessler, former chief of the Federal Drug Administration, to head a committee that will review the landmark agreement reached Friday after three months of grueling talks.
The deal between attorneys general and Big Tobacco would require companies to pay out billions over the next 25 years to settle a wave of lawsuits and start tough anti-smoking programs. The companies will admit for the first time that tobacco is addictive and causes cancer.
But critics say the industry will be able to thrive without the ominous threat of lawsuits. Class action suits were also banned, and there is a $5 billion cap per year on new claims.
And in order for the FDA to regulate nicotine, critics say it will have to jump through a series of legal hoops. The agency can't limit nicotine for 12 years and has to first prove it won't create a black market.
Kessler said he doesn't think the deal has enough teeth. He'll work with former Surgeon General C. Everett Koop, another outspoken activist. (89K WAV) or (89K AIFF)
"I have very serious concerns that the settlement as it's written could effectively make it impossible for the FDA to regulate tobacco," Kessler said.
The question of federal oversight apparently caught the eye of President Clinton. He said he wants the administration to study the FDA's authority under the deal and how the companies will actually pay out the money.
"What is the scope of the FDA's jurisdiction?" Clinton questioned. (105K WAV) or (105K AIFF)
Kessler said public health leaders from around the United States will return to Washington this week to review the terms "line by line."
The settlement requires Presidential and Congressional approval. Analysts said the package will face blistering scrutiny on Capitol Hill.
U.S. Rep. Henry Waxman, D-Calif., doubts the settlement has enough teeth and said the companies can still thrive. He is the ranking Democrat on the House subcommittee on health and environment. (216K WAV) or (216K AIFF)
"It looks like this agreement will give (tobacco companies) a whole new lease on life, because they will have certainty for the future," Waxman said. "It's almost like a license to make their product, sell it, export it overseas, and not be liable for it, even though it's a product that constitutes an addictive drug that's lethal to many people."
Another irony is that if the companies do reduce the number of people smoking, as required in the accord, they won't pay the full $368.5 billion, Waxman said.
Analysts predicted Kessler's review would be critical.
"I think it will be months and months before you see this clarified," said Greg Valliere, managing director of Schwab Washington Research Group. Regardless of the outcome, the tobacco companies will likely find it uncomfortable in the spotlight. (122K WAV) or (122K AIFF)
Stock market prices on Monday reacted sharply. Philip Morris (MO), fell 2-5/8 to 42-7/8. RJR Nabisco (RN) dropped 1-1/2 to 33-1/2, while US Tobacco (UST) declined 1 to 28 and Loews (LTR) ended 3-5/8 lower at 99-3/4. Brooke Group (BGL), parent of Liggett Group, lost 1/4 to 4-3/8.
A spokesman for Brooke Group blasted the settlement and said it would put its Liggett unit out of business. Marc Kasowitz, attorney for Brooke, said the deal unfairly burdens Liggett.
"You really have an unfair, ironic and outrageous situation here," Kasowitz said. "The one company that had the courage and took the steps of breaking with the entire industry … is now in a position where it's going to be bankrupt if the settlement is enacted."
In the meantime, the one group that will likely be smiling are the lawyers involved in the case. They stand to make billions.
"That's pretty shocking," Waxman said.
-- Martine Costello
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