ADMINISTRATION wants to settle tobacco case, sources say

Tuesday, June 19th 2001, 12:00 am

By: News On 6

WASHINGTON (AP) _ The Bush administration is seeking to settle a protracted civil suit demanding billions of dollars in damages from the tobacco industry, government officials said Tuesday.

Concerned about the strength of the government's case, the administration wants to forge a settlement now rather than risk losing later, said sources who discussed the case only on grounds of anonymity.

The decision was based at least in part on a decision last year by the federal judge handling the case. U.S. District Judge Gladys Kessler threw out two counts which would have allowed the government to recover some expenses related to sick smokers.

In filing the suit in September 1999, the Justice Department, then under the leadership of Attorney General Janet Reno, said federal health care plans spend more than $20 billion a year treating smoking-related illnesses.

Officials said Attorney General John Ashcroft has assembled a team of three lawyers, all career attorneys in the department's civil division, to work on the settlement.

The lawyers were meeting for the first time Tuesday with the department's tobacco litigation team to begin talking about a potential settlement, sources said.

Officials emphasized that the department was not abandoning the lawsuit, saying it would continue to litigate the case even while pursuing a settlement agreement.

The recommendation to seek a settlement was made to Ashcroft by Stuart Schiffer, head of the department's Civil Division.

The Justice Department sued the tobacco industry to recover billions of dollars taxpayers have spent on smoking-related health care, accusing cigarette-makers of a ``coordinated campaign of fraud and deceit.''

The government alleged that the cigarette companies conspired since the 1950s to defraud and mislead the American public and to conceal information about the effects of smoking and the addictiveness of nicotine.

The lawsuit was filed against Philip Morris Inc., R.J. Reynolds Tobacco Co., American Tobacco Co., Brown & Williamson Tobacco Corp., Lorillard Tobacco Co., British American Tobacco Ltd., Liggett and Myers Inc., the Council for Tobacco Research-USA and the Tobacco Institute.

At the time the civil suit was filed, the Justice Department formally closed, without charges, a nearly 5-year-old criminal investigation of whether tobacco companies lied to Congress or regulatory agencies about the addictive nature of tobacco.

The idea of suing the tobacco companies to recover money spent for health care followed an expensive settlement that cigarette-makers reached with most state governments a year earlier, based on state outlays for health insurance. The industry agreed to pay the states more than $240 billion over 25 years.

The settlement with the states followed the collapse of an effort to write federal legislation that would have substantially increased the cost of cigarettes through taxes and would have restricted the marketing of tobacco.

The decision to seek a settlement comes in the wake of several setbacks in the case, including questions about whether sufficient money would be available to pay for the litigation and Kessler's decision dismissing two counts of the government's case.

Democrats accused the Bush administration of trying to kill the lawsuit by not requesting more money to pay for litigation. The administration earlier this year asked for $1.8 million to pay Civil Division salaries and staff costs for the tobacco litigation team. That was the same level of funding as had been requested by the Clinton administration, which brought the suit.

However, the Clinton White House had sought help from other agencies to cover the legal costs.

Ashcroft has said the Justice Department would proceed with the case and has suggested that it would be up to Congress to set aside more money for the suit. Lawyers within the department have said it would cost tens of millions of dollars to continue the suit.