Companies agree to pay US states $206 bn in tobacco deal

"It is a great day for the attorneys general," said Washington State Attorney General Christine Gregoire, the lead state negotiator who announced that a deal had been struck. "I don’t think anyone can deny this is a huge victory for the attorneys general and a huge loss for the industry."

In addition to the marketing restrictions and payments to the states, the tobacco companies have agreed to pay $1.5 billion over the next five years to fund anti-smoking education programs. They will also pay $300 million every year after that to maintain the programs.

The industry will also pay $250 million over the next 10 years to create apublic health foundation, affiliated with a university or hospital and aimed at reducing smoking.

The cigarette makers, Philip Morris Cos, the world’s largest, RJR Nabisco Holdings Corp, Brown and Williamson Tobacco Corp and Lorillard nc as well as smokeless tobacco maker UST Corp will participate in the deal. The deal includes Bennett LeBow’s Brooke Group, owner of the Liggett cigarette company, which broke from the rest of the industry and became the first tobacco company to settle with the states in 1996 and 1997.

Gregoire said the deal could lead companies to increase the cost of cigarettes by 35 to 40 cents over the next five years, but they could also choose to absorb the costs.

The settlement will cover all 46 states that have reimbursement claims against the industry as well as those that have not sued. Four states have settled cases against cigarette makers seeking to recoup the costs of treating sick smokers.

Washington just concluded the ninth week of a trial in its case against theindustry and Gregoire said she hopes to get a court order as early as Tuesday ending the state trial.

The industry released a brief statement saying it had been advised that all states and jurisdictions agreed to the proposal. "We intend to sign the settlement on Monday, November 23, as planned," the companies said.While the deal resolves a big liability risk to tobacco companies, their woes are far from over.

They are currently the defendants in a huge smokers’ class action trial in Florida and they face about 800 other lawsuits throughout the country.In addition, tobacco companies are under investigation by the justice department for possibly concealing the risks of smoking or misleading Congress and regulators.

Congress could also pass legislation with tougher restrictions including Food and Drug Administration regulation of cigarettes, a move that state attorneys general support.

New Mexico Attorney General Tom Udall said he hopes as a newly elected member of Congress next year he will be able towork on just such legislation.

"I’m pushing to get on the committees in Congress that will be dealing with some of these matters," Udall said.

While Friday’s deal is narrower than the failed $368.5 billion proposal reached by the parties last year and killed by Congress, the attorneys general said it provided public health protections that they could never win in court battles.

"These are the single most restrictive set of rules for an industry," Gregoire said. She said some of the marketing and advertising concessions required the industry to waive their constitutional free speech rights."No court would provide for those First Amendment restrictions," she said.

"This was more about the conduct of an industry than a product. It’s about making them live by the laws of our states."

The restrictions ban all outdoor advertising including billboards in arenas, stadiums and shopping malls, and bars distribution and sale of clothing and merchandise such as caps, T-shirts and backpacks with brand namelogos.

Tobacco companies will also no longer be able to use cartoons in the advertising and packaging of tobacco products. The tobacco case has been hanging fire for quite some tome in the US courts.