What Deal? We Got Suckered

The tobacco industry “settlement” that was announced Friday is quite simple: The tobacco companies get economic certainty by eliminating the threat that litigation will destroy them. In exchange, they pay out $360 billion over 25 years and $15 billion a year after that.

Fifteen billion a year sounds like a lot of money, but it is not. Smoking costs society $100 billion a year in medical and related costs alone. The industry is getting off for pennies on the dollar. Even more troubling, the tobacco companies will simply pass these costs through to their victims, the smokers, leaving management and investors untouched. The litigation discovery process will stop and we will never know the full extent of the wrongdoing. The likelihood that industry officials and lawyers will face criminal prosecution drops.

One of the key provisions of the agreement, the “look back” provision, fines the tobacco companies if certain goals for reducing teen smoking are not met. Unfortunately, the fines for not meeting these goals are smaller than the value of addicting new smokers. The deal will make the tobacco industry a little less profitable while guaranteeing its continued long-term health.

Finally, free of the huge threat that litigation held, and a stable situation for continuing to do business here in the United States, the tobacco industry will be free to expand its markets in Asia, Eastern Europe and elsewhere. Even if fewer Americans die from tobacco as a result of this deal, it will be at the price of more deaths overseas.

Above all, keep in mind that this “settlement” is not really a settlement at all. A settlement in a legal dispute is an agreement among the parties. What was announced Friday is a back room political deal in which the negotiators freely gave away the rights of the people who were not in the room. (For example, none of the California cities that are suing the industry were allowed to participate.) Since neither the attorneys general nor the private lawyers who negotiated the deal can grant the industry the kind of immunity it is seeking, the deal will have to go to Congress for approval.

The two largest sources of soft money for the Republican Party in the last election were Philip Morris and R.J. Reynolds. It is simply inconceivable that Trent Lott and Newt Gingrich will do anything that seriously burdens the tobacco industry. One can be certain that, as bad as this deal looks today, what emerges from Congress will be worse.

Indeed, the best indicator of the damage to the public health that this deal will do is the stock market. Every time settlement rumors heated up, tobacco stocks went up. The business community clearly thinks that this deal is good for tobacco. And what is good for tobacco is bad for public health.

But important elements of the health community--particularly the American Cancer Society and American Heart Assn.--are now in the position of having to support a deal in Congress that will ensure the survival of the tobacco industry. (The American Lung Assn. staunchly opposes the deal.)

What is the alternative to this deal? Finish the job that the attorneys general started. Finish the discovery so that we know the full extent of wrongdoing. Take a few cases to trial and let the public decide what the real liabilities are. I am confident that, given patience and hard work, the tobacco industry will lose enough of these cases to be brought to its knees.

At that point, the same stock market that has been bidding up tobacco stocks will force R.J. Reynolds, Philip Morris and the others out of the tobacco business. The liability associated with a pack of cigarettes will simply exceed the profits.

We should reconsider a settlement when the stock market is driving tobacco stocks down, which would put the cookie, cheese and beer assets of Philip Morris and the others at risk.

What should we accept in such a settlement? We should take the tobacco business, all of it, including foreign subsidiaries, as part of an agreement to let these companies keep their cookies, cheese, and beer. We should let the government make plain cigarettes available (no fancy brands, no advertising, no nicotine boosting additives, no campaign contributions) for smokers who can’t quit. We should take the money from the sales of these cigarettes and use it to help tobacco workers and farmers retool and to run a big, aggressive anti-smoking campaign (modeled on California’s successful campaign) to reduce smoking as quickly as possible. Since we will own the overseas business, we can simply close it so that America can no longer be accused of exporting death.

A jury has voted the death sentence for Timothy McVeigh because he killed 168 Americans. The tobacco industry has killed 10 million Americans since 1964. No attorney general or politician even considered letting McVeigh cop a plea; the same should be true for the tobacco industry.