Tobacco Producers Are Willing to Talk With Justice Dept.
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.
"We do not believe this lawsuit has any legitimate basis, and we are continuing to prepare our defense," R. J. Reynolds, the nation's second-biggest cigarette maker, said in a statement. "We have no intention of settling this suit." Still, the company said it would join in the talks and "listen to what the Department of Justice may have to say."
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.
"The industry's in a good position," said John P. Coale, a partner in the law firm of Coale, Cooley, Lietz, McInerny & Broadus, who has tried dozens of class-action cases against tobacco companies and doubts the strength of the Justice Department's case. "The government's claims are tough to prove."
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.