Turning A New Leaf

WHEN ONE GUY IN A CASE FINALLY squeals, it's champagne time in the prosecutor's camp and ulcer time for the defense. Sure enough, tobacco opponents broke out in cheers and press briefings last week, when Liggett Group became the first of the major cigarette makers to say the magic words: cigarettes cause cancer, nicotine is addictive and we market directly to your kids.

The statements are part of a settlement between Liggett, the smallest of the top tobacco companies, and 22 state attorneys general who are suing the tobacco industry for recovery of health-care costs. The deal gives the AGs a new weapon against their biggest adversaries, and could shift the odds in a slew of lawsuits due in court this spring and summer. It also promises the release of damaging documents and frees any Liggett employee to testify--in court, in Congress or on TV. That's ""the kind [of evidence] every prosecutor dreams of in these ... conspiracy cases,'' says Massachusetts AG Scott Harshbarger.

No question, this means new pain for the industry. In its usual stoic style, Big Tobacco released a joint statement dismissing the ""so-called settlement'' and its importance. But the companies have a point. The deal has holes that could limit its impact or cause parts of it to be overturned. It could be many years and billions of dollars before tobacco's opponents can really dance in the streets.

Liggett didn't settle out of altruism. The company is in severe financial straits. Last year Bennett LeBow, head of the Brooke Group, which owns Liggett, failed in an attempt to take over RJR Nabisco. By dealing with the AGs, LeBow hopes to find a buyer for Liggett--and stave off bankruptcy. The settlement may make Liggett more appealing to buyers because it includes a cap on liability: any company that merged with or acquired Liggett would gain protection for its nontobacco assets and for lucrative overseas tobacco business.

But this cap might not hold up in court--and there are other uncertainties. Liggett claims that, except for suits brought by other states' AGs, it has obtained immunity to virtually any other litigation, present or future. Many lawyers view this as unconstitutional. Even more important are questions about whether Liggett can act on a promise to turn over masses of documents potentially devastating to the entire industry. The other companies got a court order preventing, for now, the release of most of the documents, claiming that they are protected by attorney-client privilege. Win or lose, such arguments gain the industry valuable time to woo new smokers and push opponents into a favorable settlement.

Despite the evident hurdles, the industry's enemies took heart from last week's news. Liggett has promised to pay a percentage of its earnings over the next 25 years--but it probably won't amount to much, given its current financial condition. Some see LeBow's admissions of tobacco's effects as dynamite, given the decades of denial on the part of every tobacco executive. One negotiator in the settlement was Woody Wilner, a Florida attorney who last year won the only damages yet paid by a tobacco company. For companies outside the settlement, he says, hearing LeBow's words is ""like you're sitting in the po- lice cruiser and you see the guy you did the robbery with having dinner with the cops.''

Liggett's admissions could also boost federal restrictions on tobacco. Federal prosecutors in several grand-jury probes of possible perjury or conspiracy by the industry could use the Liggett statements as evidence. Rep. Martin Meehan, cochair of the House tobacco task force, speculates that prosecutors could bypass court battles by subpoenaing Liggett for the hot documents. And, he says, Congress may now show more support for regulation of tobacco advertising aimed at children.

But opponents will have to be careful. In 1964, after the surgeon general's first report, they let the industry off with a few restrictions on advertising and the famous warning labels that later proved a strategic advantage to the cigarette companies. If prosecutors ""stay the course, [this could] transform the tobacco epidemic,'' says University of California professor Stanton Glantz. ""But if they settle for too little, we could look back in 30 years and see this as a time of lost opportunity.''

Within a month, a judge's ruling is expected on the FDA's right to regulate tobacco marketing to minors. Other hot cases to watch:

Key: A DATE B COURT CASE C PLACE D COMMENTS A April 7 B Raulerson C Fla. D Wrongful-death suit; 'Woody' Wilner tries for win No. 2 A June 2 B Broin et al. C Fla. D First national class-action suit; job injuries from secondhand smoke A June 2 B Moore et al. C Miss. D First state Medicaid suit; no punitive damages; decision by judge A Aug. 4 B Florida et al. C Fla. D Medicaid suit as well as racketeering charges, punitive damages A Sept. 8 B Engle et al. C Fla. D First class-action suit for smokers; similar cases in more than 12 states A Sept. 29 B Texas et al. C Texas D Medicaid suit seeks more than $16 billion in damages