MIAMI, June 12 (Reuters) - The head of America's biggest cigarette maker testified on Monday in a landmark sick-smokers lawsuit that the tobacco industry was cleaning itself up and need not be stung with billions of dollars in court penalties.

In a much-anticipated appearance in the high-stakes Engle class-action case, CEO Michael Szymanczyk of Philip Morris USA, said his unit, the domestic tobacco arm of the global packaged goods giant Philip Morris Cos. Inc.,had been reforming its sales methods, attacked for targeting teenagers, since 1997. ``It was pretty clear what Philip Morris was doing was out of alignment with society's expectations of it,'' Szymanczyk told the six jurors weighing punitive damages for an estimated 500,000 or more sick smokers in Florida. The jury has already declared Philip Morris, R.J.Reynolds Tobacco (NYSE:RJR - news), maker of Camels, British American Tobacco Plc (quote from Yahoo! UK & Ireland: BATS.L) unit Brown & Williamson and others committed fraud, conspiracy and had sold defective products. The jury is now considering punitive damages, which could total hundreds of billions of dollars, by some forecasts. Defence lawyers have said they hope to convince the jurors that the maligned tobacco industry has mended its ways. The six jurors have heard testimony since 1998 in the pioneering case named after an ailing Miami Beach pediatrician and have also ordered the tobacco companies to pay $12.7 million to three sick smokers for actual damages. Szymanczyk said Philip Morris, the maker of Marlboro, the world's best-selling cigarette, and other tobacco groups were besieged in the mid-1990s by state government lawsuits, calls for get-tough laws in Congress, and scores of suits by sick smokers and nonsmokers claiming injury from secondhand smoke. With Philip Morris responsible for at least half the payments, the tobacco companies struck deals with all the state governments calling for $254 billion in payments over 25 years, he testified. The agreements also called for sharp restrictions on cigarette advertising and marketing, spurred a 50 percent per-pack price increase to $3 and have so far cut volume sales of cigarettes in the United States by 13 percent, Szymanczyk said. Philip Morris, he said, no longer sponsors sports events such as the Virginia Slims tennis matches or uses billboards, arena signs, and give-away caps and jackets to promote Basic, Parliament and its other brands. In fact, many of the same billboards once carrying Marlboro ads of robust cowboys on horseback now had anti-smoking banners and posters, he said. Dan Webb, an attorney for Philip Morris questioning the executive, presented slides of some of the substituted anti-smoking advertisements. One portrayed two cowboys chatting in the great American West, parodied the distinctive styling of a Marlboro ad, and bore the caption, ``Bob, I have emphysema.'' Szymanczyk, in an apparent bid to temper punitive damages, testified Philip Morris USA was already committed to pay out roughly $93 billion under the 1997 state-government pacts through 2021, or more than twice its profits between 1971 and 1996. The executive did not testify on the profits of parent Philip Morris Cos. Inc., whose businesses include Kraft Foods and Miller Brewing and whose net profits totalled $7.67 billion in 1999. Asked by Webb if Philip Morris USA could have paid its half share of the state governments' pact in one lump sum, the form punitive damages usually require, Szymanczyk said, ``No.'' Florida legislators in April took away much of the immediate financial threat to the tobacco companies by passing a law limiting to $100 million the bond a losing defendant must post while appealing a verdict. Without that bill, a security bond of 120 percent of awards might have bankrupt the industry.

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