Pubdate: Thu, 09 Apr 1998 Source: Standard-Times (MA) Contact: http://www.s-t.com/ Author: Laura Meckler, Associated Press writer TOBACCO COMPANIES SAY DEAL IS UP IN SMOKE WASHINGTON -- The nation's major cigarette makers sounded a death knell yesterday for last summer's historic tobacco settlement, saying Congress has twisted their offer to help cut teen smoking into a harsh attack on their industry and sharp tax increases for American smokers. Led by Steven Goldstone, head of No. 2 tobacco maker RJR Nabisco, the companies vowed to fight efforts by President Clinton and Congress to increase prices and fashion tougher restrictions on advertising. "Those price increases will destroy the domestic tobacco business, and I don't just mean my company," Goldstone told the National Press Club. But Clinton and congressional leaders insisted they will press forward with efforts to pass a comprehensive law meant to curb teen smoking and compensate states for treating sick smokers -- with or without the industry's cooperation. "They can be part of it or they can fight it," an angry Clinton said on his return from a trip to Chicago. "I think they ought to rethink their position because we're going to get this done one way or the other." The companies had warned for weeks they would walk away. But yesterday, Goldstone said the process was "broken beyond repair." "We have failed in our effort to achieve a comprehensive resolution of the contentious issues surrounding tobacco in our country," he told the National Press Club. The leading proposals in Congress would raise cigarette prices too much, he said, without regard for adult smokers and businesses that depend on tobacco sales. "Washington has rushed to collect more tobacco revenues while playing the politics of punishment," said Goldstone, whose company, R.J. Reynolds Tobacco Co., makes Winston and Camel brands. White House spokesman Mike McCurry said Goldstone's remarks show how worried the tobacco industry is that Congress will pass tough legislation. "It's a mark of how serious the effort is in Congress," he said. The leading Senate bill, sponsored by Sen. John McCain, R-Ariz., would cost the industry $506 billion and force tobacco companies to curb advertising that critics say helps lure teens to smoke. It overwhelmingly passed a Senate committee last week. It is tougher than the settlement tobacco companies negotiated with states and public health advocates last June. That deal -- had Congress approved it -- would have given the industry significantly more legal protection from product liability suits and would have cost companies $368 billion. McCain agreed with Clinton that the effort will continue with or without industry support. "In the most charitable terms that I can describe it, the tobacco companies do have an enormous credibility problem." "Tobacco companies are not in a position to dictate to Congress," said Rep. Henry Waxman, D-Calif., a longtime tobacco foe. "We don't need their permission." But Congress might need the industry's cooperation to ensure that advertising restrictions are implemented. Tobacco companies have fought these restrictions in court before, saying the Constitution protects their right to free speech. Goldstone said his comments yesterday were not coordinated with other tobacco companies, but other companies immediately endorsed them. "It would be irresponsible -- to our customers and our company -- to agree to the kind of proposals now before Congress," said Lorillard Tobacco Co. Philip Morris, maker of No. 1-selling Marlboro cigarettes, said a solution is "no longer possible" and promised to fight McCain's bill. "We regret that a historic opportunity to resolve decades-old controversies surrounding tobacco has been lost," the company said in a statement. The industry continues to face a host of lawsuits from states looking to recover the costs of treating smoking-related illnesses. Legislation would have settled those suits, but state attorneys general said that if no national deal is reached, they will move forward in the courts. A handful of states have already settled individually with the companies, collecting money but failing to impose the broad national restrictions possible under a congressional deal. Goldstone said he hasn't decided whether to try to settle those cases out of court but said his instinct is to continue fighting. Tobacco stocks, which had fallen about 15 percent in recent weeks as tough legislation gathered support in Congress, were up for the day. RJR Nabisco held on to a $1.06 increase, and Philip Morris was up $2.25 a share. Goldstone accused the administration, Congress and public health advocates of undercutting the deal by demanding more than the industry agreed to in June. "The administration, while publicly praising the concept, privately dismantled it piece by piece," he said. "This resolution cried out for strong, bold political leadership. Precious little was forthcoming." But he said the industry also shouldered some of the blame for misunderstanding public anger about past industry practices such as targeting young people. "(We) did not fully appreciate the depth of the mistrust and anger that existed," he said. "We did underestimate ... how angry people have been over this issue." Associated Press writer SOME QUESTIONS AND ANSWERS ABOUT THE TOBACCO DEAL AND TOBACCO LEGISLATION: Q: What was last summer's historic tobacco agreement? A: To settle lawsuits brought by 40 states, the tobacco companies signed a deal in June with state attorneys general, offering to pay $368 billion over 25 years, most of it for anti-smoking campaigns, and to repay state Medicaid money spent treating sick smokers. In exchange, the tobacco companies would get sharp reductions in their future legal liability, and thus a measure of financial certainty. Q: Why wasn't that agreement implemented? A: Congress had to approve it first. But lawmakers instead decided to write their own agreement -- one that was tougher on the industry. The leading bill, approved by a key Senate committee last week, would require the industry to pay $506 billion over 25 years and curb advertising. It also calls for fining companies billions of dollars if teen smoking rates do not drop significantly. And to the companies' anger, it would not provide the protections from smokers' lawsuits that they had gotten in last June's agreement with the states. Q: What did the cigarette makers say yesterday? A: Led by RJR Nabisco, corporate parent of R.J. Reynolds Tobacco, the cigarette manufacturers said they would stand behind last summer's deal, but would fight congressional efforts to enact legislation that would be more costly and restrictive to the companies. They said they believe last summer's deal, because it lacks support in Congress, is now dead. Q: Why should Congress care if the tobacco companies cooperate and back the tobacco bill? A: Many lawmakers and President Clinton say they don't care if the tobacco companies are on board. However, the tobacco companies have threatened to sue if the resulting bill overly restricted their advertising, saying that would violate their First Amendment right of free speech. Many analysts believe that could tie the issue up in courts for years. Q: How does yesterday's announcement by the tobacco companies affect the agreement negotiated last summer by the state attorneys general? A: Those state lawsuits are still pending, and many states will press forward with them while the debate in Congress continues. Mississippi, Texas and Florida have already signed individual deals with the tobacco companies, collecting millions of dollars in compensation for sick smokers, and the tobacco companies' new position will not affect those.