ELIZABETH FARNSWORTH: For more perspective on today's developments we're joined by Paul Raeburn, who's covered the tobacco industry as a senior editor for Business Week Magazine. Paul, why do you think--what's your personal theory about why Liggett agreed to this settlement?
PAUL RAEBURN, Business Week: It's very difficult to say. He hasn't said anything today about it. Last year he was involved--you remember, it was almost a year ago to the day last year that he--
ELIZABETH FARNSWORTH: You're talking about "he," the head of Liggett.
PAUL RAEBURN: I'm sorry. Bennett LeBow, the head of Liggett, who initiated the first proposed settlement with the attorneys general, at that time only five or six, now the twenty-two that we have now. And in that period he was involved in a very nasty fight with R. J. Reynolds in which he was trying some complicated maneuvers to try to ultimately take over the company, have R. J. Reynolds acquire Liggett, some stock swaps, and somehow arrange to be in charge of the resulting consolidation. That didn't work.
The plan there was to offer R. J. Reynolds stockholders a legal out from the lawsuits by making the settlement. What happened, in fact, was tobacco shares, with the exception of Liggett's, were battered. Stockholders were very angry and decided not to deal with LeBow. Why he's continuing and why this latest settlement? It may be that as the very smallest tobacco company he feels he has the least to lose and may somehow profit through the visibility and the initiative that he's taking. It's not clear. We can only speculate.
ELIZABETH FARNSWORTH: The documents seem to be one of the most important elements of all this. Give us some--put this in perspective. What documents are we talking about? Where do they come from? Why are they so important?
PAUL RAEBURN: There's a large series of documents that are--will reveal many of the industry's practices over the past few decades. These can be important not only in the state attorneys general suits but in various individual liability suits, product liability suits, that is, suits where people are suing for recovery of damages after they have personally developed a smoking-related disease. But the key documents are something called committee of council documents, very interesting group that's been operated by the tobacco industry for sometime, this committee of council, which is a group in which lawyers from all of the tobacco companies met regularly to plan a joint litigation strategy.
The idea was that they would move absolutely in lockstep. And this has in general been a very effective strategy. It has kept a stone wall in front of them and really prevented any significant legal victories on the other side. However, now what's happened with LeBow's break from that fortress, is that these documents have been requested by the attorneys General. And it may be that they'll--that they will be turned over. That's what the lawsuit, or the temporary restraining order in North Carolina is all about to prevent the release of those documents.
ELIZABETH FARNSWORTH: But won't they have a pretty compelling argument? I know that Attorney General Gregoire said that the Liggett documents that have been turned over are really revealing, but the documents that involved the other four companies, won't they have a pretty compelling argument saying that they are; they should be protected because they were attorney client--these are attorneys that we're meeting, after all.
PAUL RAEBURN: That's right. The argument on one side is that this is a legal confidentiality and that's generally held quite sacred by the courts. As Attorney General Gregoire pointed out, the argument on the other side is that there may have been a fraud and committees committed. And if these documents are judged to be evidence of fraud crimes then a judge can decide to violate the normal rules of confidentiality and make those things public.
ELIZABETH FARNSWORTH: Paul, Liggett's admitting that tobacco is addictive and that it can cause cancer. How significant is this, given the fact that there's already a little statement on every cigarette box saying smoking causes lung cancer, heart disease, emphysema, and may complicate pregnancy. That's the warning from the surgeon general.
PAUL RAEBURN: Surgeon general, right. There are a couple of points to make here, I think. No. 1, the main effect of the warnings that are now on the packages has been to give the tobacco companies some insulation against product liability suits. They were intended initially to try to persuade smokers to quit. Studies have shown, however, that they just cannot compete with the images and the glowing full color advertisements that tobacco companies produce, so the warnings have been judged to be not very effective at alerting smokers to the dangers.
Now, to add warnings that say cigarettes are addictive is certainly a victory for the industry's opponents. It's not likely to have a major effect on whether people decide to smoke. The admission that tobacco is--that nicotine is addictive is particularly significant in light of what Attorney General Gregoire mentioned that dramatic moment a couple of years ago when the tobacco CEO's swore that they believed it was not. So that is a more interesting admission of the two. The admission that cigarettes cause cancer is certainly an important symbolic step, but there has been no scientific debate on that question for several decades. So it's symbolic. It's not substantive.
ELIZABETH FARNSWORTH: And what is the current evidence showing, all of this publicity about cigarettes, is it cutting down on smoking in this country, or not?
PAUL RAEBURN: Smoking in this country has been slightly on the decline. The most effective means of encouraging the decline of smoking was a program that has been operated off and on for some years in California which involved very, very sharp television ads and also involved in a very extensive monitoring and survey program that judged the effectiveness of those ads. And for a period when those ads were running at full steam the rate of smoking in California was declining at twice the rate of decline in the rest of the country.
Now, that program in California has taken some political shots, and it's not quite as effective now as it was. But it seems that directed messages to young people in particular do seem to cut the rate of smoking. Publicity about trials, warnings on cigarette packages, there the evidence that they do anything to cut smoking is unclear.
ELIZABETH FARNSWORTH: Well, Paul Raeburn, thanks for being with us.
PAUL RAEBURN: Thank you.