THE SMOKE SETTLES AUGUST 25, 1997 TRANSCRIPT

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Florida has become the second state to win an out-of-court settlement with the tobacco industry. After this Newsmaker interview with Florida Governor Lawton Chiles, two tobacco analysts discuss the agreement.

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A RealAudio version of this NewsHour segment is available. August 25, 1997: Florida Governor Lawton Chiles discusses his state's settlement with the tobacco industry. July 11, 1997: Congressman Henry Waxman and Connecticut Attorney General Richard Blumenthal discuss the agreement reached between tobacco manufacturers and states attorneys general in an Online Forum. June 20, 1997: A panel discussion on tobacco the agreement . May 20, 1997: Research strongly suggests that second-hand smoke is a possible cause of heart disease. April 18, 1997: Experts debate the future of the tobacco industry. April 18, 1997: A background report on the tobacco industry's decision to settle. March 20, 1997: Smoking cigarettes is addictive and can cause cancer, admits the Liggett Group. February 28, 1997: A report about selling cigarettes to teens and new government rules to prevent under-age smoking. February 10, 1997: FDA Commissioner David Kessler discusses his contentious term as commissioner of the Food and Drug Administration. August 23, 1996: Brennan Dawson, of the Tobacco Institute, and FDA Commissioner David Kessler debate new restrictions on tobacco sales. July 5, 1996: Mark Shields and Kate O'Beirne explore Sen. Bob Dole's comments that tobacco may not be addictive. Browse the Online NewsHour's coverage of health issues.

MARGARET WARNER: For more on this deal we turn to Mary Aronson, who heads a Washington research firm that analyzes tobacco policy for institutional investors, and Paul Raeburn, senior editor for BusinessWeek Magazine. Mary Aronson, why did the tobacco companies agree to this deal in Florida?

MARY ARONSON, Tobacco Policy Analyst: Well, I think Florida was a very, very difficult problem for the companies. It was clearly, as the governor just said, the next case to go to trial. It would have been, I think, rather difficult for the industry to, on the one hand, be in a courtroom defending its past behavior, while at the same time, you know, admitting in this new mode of confessing to past bad behavior that, you know, it did, in fact, engage in bad behavior. So getting rid of the Florida case, settling it was a good idea for the industry. The other thing that was peculiar to Florida was that there was a strong piece of legislation that was enacted a few years ago, which gave the state in this particular case all sorts of benefits in bringing the case to trial, things like these statistics, rather than individual proof, and things of that nature. So that's something that was peculiar to Florida. And I think the industry really needed to settle this case.

MARGARET WARNER: And then what about the $11.3 billion they have to pay and the advertising restrictions. How onerous are those stipulations for the companies?

MARY ARONSON: Well, I'm assuming that, given that the industry settle this case for $11.3 billion, they can handle it. I think perhaps every other state that has filed--some 39 states and I believe Puerto Rico thus far filed suit--if they had to dole out that kind of money over the long run, you know, it might become difficult. But I think the most recent figures that I have seen suggest that an increase in the price of the pack of cigarettes of 4 cents brings in about a billion dollars. So I think it's something that can be handled.

MARGARET WARNER: Paul Raeburn, put this settlement in perspective for us. What do you think the impact is in terms of this ongoing battle we have between the industry and government at various levels?

PAUL RAEBURN, Business Week: Well, I'm inclined to believe in the domino theory on this. We now have Mississippi, which settled its case. That was the first state where the suit came to trial in July. Florida is the second. The industry has settled that case. Texas will be the next at the end of September. If these states continue to settle and none of these cases go to trial, I think that increases the likelihood of a national settlement. It seems to me that Congress from its perch in Washington will look around the nation and say this is what people want, the states are doing it, let's go ahead and complete the job.

MARGARET WARNER: And it was apparent from what the company said in their statement today that they, themselves, want this national settlement. Explain that. Why?

PAUL RAEBURN: It's clear that they do. And we can't know all the reasons why they do, but the tobacco industry officials very early on after the settlement was announced reviewed it and gave their consent to their negotiators to continue and press very hard for it. There are respects in which the money, $368 billion, sounds like a huge sum. And if you look at precedents of other cases, it is a huge sum. But we're talking about an extremely large industry. So in some respects it's not a large amount of money for the industry to pay. It amounts to 10 to 15 billion dollars a year to get rid of a lot of potential liability. Now, no one knows whether those cases would be won against the industry or not if they're settled and the settlement is accepted, but it's a huge potential risk.

MARGARET WARNER: And Mary Aronson, do you agree with Paul Raeburn that this deal today will actually generate more momentum for the national settlement?

MARY ARONSON: Well, It enables the parties involved in Florida, both the people in the AG's office to the extent that they want to come to Washington and lobby for the national settlement, as well as the industry, to refocus attention on the national settlement. But beyond that, I'm not too sure. I disagree with one thing Paul said a little earlier. I don't--if I'm understanding him correctly--I don't see this as being the beginning of every other state that's out there and that has filed suit coming forward and putting out their hands and asking the industry for settlement. I think the first three or four cases were rather unique--as I said, Florida, because of the statute, Mississippi because of some procedural issues, as well as the fact that the attorney general there has made the settlement a big cause for himself and--

MARGARET WARNER: Mike Moore.

MARY ARONSON: Mike Moore. You know, one of the upcoming cases that has been scheduled has a very strong attorney, a plaintiff's attorney, dealing with the case. So I think there are peculiarities. I have also heard that the other cases are not nearly as strong and that the other cases aren't even getting ready for trial as much. So I don't think that this is necessarily going to mean that all of the other cases are going to--or all of the other states are going to settle. The government is going to look at this and say, hey, this is what the American public wants, and, therefore, let's give it to them.

MARGARET WARNER: Paul Raeburn, you want to respond on that point?

PAUL RAEBURN: Yes. I'll hedge a little bit. I talked to John Cole this afternoon, who's one of the private attorneys who's been involved in the national settlement, and in another case involving a class action based--representing about 10 million smokers based on the addictive properties of cigarettes and the fact that that was concealed from smokers. He told me this afternoon that he had visited with the tobacco industry recently in New York. And, as they made it very clear to him, that they were going to look very carefully at these cases, settle some, but by no means settle all; however, I do think that Florida, being a very big and very important state, does increase the momentum for a national settlement.

MARGARET WARNER: And, briefly, bring us up to date on where the review and both the White House and Congress stands right now--

PAUL RAEBURN: The latest--I'm sorry--

MARGARET WARNER: Of this national deal.

PAUL RAEBURN: Yes. The White House issued a statement today from Martha's Vineyard, where the President is vacationing, saying that they did not think this would affect the national deal, it wouldn't affect their review. I think the President has probably been wise politically to wait for a bit on his decision on this. Sometime early in September I suspect that he will announce support for the settlement. That seems to be the direction things are going. But he has some very strong reservations. I think they're looking for freedom from any restriction on the FDA. They're looking for tougher penalties on the industry if teen smoking is not reduced in the coming years. And they have a few other reservations. But I expect that they will sign on.

MARGARET WARNER: And, Mary Aronson, where would you put the prospects for the national settlement coming to some conclusion?

MARY ARONSON: Well, perhaps I've been in Washington too long. I have a hard time believing that if the amount of diligent review necessary for something as complicated as this tobacco deal is, indeed, given by the White House and by Congress, that it's going to be a long time before we see anything happen, if at all. There are a lot of people who should have been at the table, I believe, a lot of interests who should have been at the negotiating table, who weren't there, and who are affected by this settlement. And I think it's the duty of the White House and certainly the duty of the Congress to look very carefully at the rights of others who were not present, to let that, for example, what about money for Medicare and veterans and other federal programs, as well as private insurers, and their ability to bring class litigation later on, I think those activities will be limited as a result of this settlement.

MARGARET WARNER: All right. Well, thank you, Mary Aronson. Paul Raeburn, thanks very much for being with us.

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