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No Solution In Sight As Congress Prepares To Tackle Settlement

By Rebecca Carr, CQ Staff Writer

Even before Congress begins scrutinizing the historic $368.5 billion tobacco agreement, new developments are threatening to undermine the deal and cloud chances for legislation. 

The most significant of these developments came from the Justice Department on Jan. 7, when it filed its first criminal charge in an ongoing investigation of the tobacco industry, alleging that a California biotechnology firm conspired with Brown & Williamson Tobacco Corp. to develop a high-nicotine tobacco plant that would be used to manipulate nicotine levels in cigarettes.

The charge against DNA Plant Technology Corp. of Oakland is a misdemeanor violation of a seed export law which has since been repealed, but its importance rippled throughout Capitol Hill.

It was seen as a sign that there is more to come from the department's three-year probe of the industry. And the criminal charge immediately raised concerns among lawmakers of both parties and others about the prospect of turning the settlement into legislation.

The settlement, reached June 20 between the tobacco companies and 40 state attorneys general, calls for giving the industry limited protection from civil lawsuits in exchange for paying $368.5 billion in compensation to the government, private litigants and education programs over 25 years.

The Immunity Question

In interviews, members and aides expressed concern over the prospect of bargaining away immunity from lawsuits, which the tobacco industry badly wants, at a time when criminal indictments could be pending in another arena.

"This will have a major impact on Congress' effort to pass tobacco legislation this year," said Rep. Martin T. Meehan, D-Mass., co-chairman of the 90-member bipartisan Congressional Task Force on Tobacco and Health.

Members have doubts about granting "sweeping protections to tobacco companies that have either been indicted or have pled guilty to criminal charges," Meehan said.

But the tobacco industry remained hopeful it would prevail with legislation that included protection from civil liability suits.

"It would be a deal-killer without it," said tobacco industry spokesman Scott Williams. "The goal of the industry is to establish a national tobacco policy and to create a predictable environment where companies can conduct their business."

Public health advocates appeared united in their opposition to giving the industry legal immunity and vowed to lobby against it. The powerful American Medical Association, for one, passed a resolution at its December meeting in Dallas that it would not support a national tobacco policy that shielded the tobacco industry from civil lawsuits.

Members of both parties said the deal would not pass as it now stands, but they predicted portions of it, such as curbing teen smoking, would have widespread support.

"Tobacco has replaced the Soviet Union as public enemy No. 1," said one senior Republican Senate leadership aide. "The settlement doesn't matter; Congress matters."

The aide suggested that the GOP did not have any intention of giving the tobacco industry immunity. "I don't see us doing the settlement," he said. "I do see us doing the right thing on the public health question. We are not bound, stapled and duct-taped to the settlement."

The Justice Department charge was only the latest development that has raised questions about the settlement. Others include:

  • Concern over tobacco industry plans to launch a $25 million ad campaign to promote the agreement.
  • Congressional concern about legal fees, as much as $2.8 billion, for private lawyers who worked under contract with the 40 state attorneys general on the deal.
  • The states have been balking at attempts by the federal government to take at least half of any money recovered from lawsuits against tobacco companies to pay health care costs for people with smoking-related illnesses under Medicaid.
  • Pending lawsuits in Minnesota, Tennessee and Texas alleging an array of charges against the tobacco industry, including a charge that the industry intentionally targeted blue-collar workers with special advertising and promotional campaigns.
  • Other industries facing an onslaught of health-related complaints, such as asbestos companies, are looking to Congress for the same type of protection from civil lawsuits.
  • Added to all the concerns is President Clinton's desire to use new revenues from the tobacco settlement to pay for a slew of unspecified domestic projects. The anticipated revenue from the settlement, estimated to be nearly $10 billion in 1999 alone, would pay for such projects as medical research and child care. The White House said it planned to use the anticipated new revenues to pay for one-third of the cost of a $21.7 billion effort over five years to make child care more affordable.

    Aides said Clinton clearly wants to see a tobacco bill in this session.

    When asked at a news conference why there was such optimism for a tobacco bill when no Republican had stepped forward in support of specific legislation, White House spokesman Michael McCurry said, "There hasn't been specific legislation written, but there has been an enormous amount of work done on the issue. . . . And I think our optimism is well-founded."

    But the president's view that the money should come from the settlement appeared to be at odds with the view of members of his own party on Capitol Hill, where support for turning the settlement into law as it stands is lackluster. The main stumbling block is the immunity question.

    "If I were a member of the industry, I would say, 'Listen they have us cornered,'" said Frank R. Lautenberg, D-N.J. "It's time to give in, instead of their constant effort to conceal things and hide things."

    When told that the tobacco industry said there would be no deal without immunity from civil lawsuits, Lautenberg echoed others by saying, "Tobacco says everything is a deal breaker, but believe me, they can't wait to talk."

    To Tax or Not to Tax?

    The White House remained convinced that the money for new domestic programs would come from the settlement, not new taxes. "The revenues are not tax increases; they come from revenue generated by comprehensive tobacco legislation," said Bruce R. Lindsey, White House deputy counsel and assistant to the president.

    But the tobacco companies are clear that they will not support the deal without immunity. And without the tobacco companies at the table, the new revenues would inevitably have to come from additional taxes or fees.

    Lindsey would not say how Clinton's programs would be paid for if a comprehensive tobacco bill failed to pass in Congress, or if the tobacco companies then withdrew from their commitment to pay $368.5 billion over 25 years.

    Academics suggested that the money could come from a mixture of cigarette taxes and user fees. Several tobacco bills pending before Congress call for raising cigarette taxes by at least $1.50 per pack.

    But the tobacco industry has opposed such an increase, warning that raising prices too quickly could create a "Canadian problem." When Canada raised its cigarette prices to $7 a pack ($5.26 in U.S. dollars), it created a black market for cigarettes.

    As these issues are ironed out, the White House intends to work closely with congressional committees to draft legislation.

    Perhaps learning from its lost battle over creating a national health care plan in 1994, the White House does not intend to dictate to Congress what it wants in the tobacco bill.

    "We have no plans to introduce our own tobacco legislation," Lindsey said. "The president's budget will include both new programs and an expansion of programs using tobacco-related revenues, but Congress will be in charge of legislating the settlement. We, of course, will work with them to make sure the president's priorities and concerns are addressed."

    Tobacco Road

    The tobacco industry sees the president's move as evidence of a definite will to pass legislation this year. The industry is betting on legislators eager to pass a national tobacco policy before they go home to campaign for re-election in the fall.

    "The president's continued endorsement of a national tobacco policy is important toward moving this forward," said Williams, the tobacco spokesperson. "The more he can highlight the plan, the more support there will be for legislation."

    The lobbying effort is expected to be fierce as the industry pushes to end its liability problem.

    "I don't believe that you can both exact vengeance on this industry and produce a good public policy tobacco-control law at the same time," said J. Phil Carlton, a tobacco lobbyist, before an editorial board in October.

    Is the Deal Off?

    But academics and anti-tobacco activists remained skeptical about passing legislation that granted immunity to tobacco.

    Former Surgeon General C. Everett Koop said the settlement is no longer viable. "There is no settlement," he said. "Now it is in the hands of Congress." The focus of any future legislation should be on smoking education programs and on raising the price of cigarettes by $2 a pack to discourage smoking amoung youth, Koop said.

    Legal experts see trouble on the horizon for legislation, too.

    As more players enter the fray, the chance for legislation lessens, said John F. Banzhaf III, a law professor at George Washington University.

    In Minnesota, where one of those lawsuits is pending, the criminal case against DNA Plant Technology Corp., the California company, was seen as vindication for holding out against signing the deal with the other attorneys general.

    "This is just the first of a series of federal charges," said Thomas Pursell, senior counsel to Minnesota Attorney General Hubert Humphrey III. "We are just seeing the tip of the iceberg in terms of what Justice will be coming out with."

    Pursell said it has become clear that Congress does not "know all that it needs to know before it passes a law granting immunity or regulating tobacco."

    But Mississippi Attorney General Michael Moore, who led the negotiations between the attorneys general and the industry, stood behind the settlement.

    "The proposed agreement is a compromise," Moore said. "We got what we wanted, and they got a very few items."

    © 1998 Congressional Quarterly Inc. All rights reserved.

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