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Leaf firms ready to fight / Suits ask return of Medicaid funds states spent on smokers

Saturday, April 25, 1998

BY DAVID RESS
Times-Dispatch Staff Writer

Related:Tobacco growers

remain skeptical

Tobacco companies are ready to fight states' lawsuits for billions of dollars for Medicaid spending on smokers all the way to the U.S. Supreme Court, a top executive said yesterday.

Steven F. Goldstone, chairman and chief executive officer of RJR Nabisco Holdings Corp., took the industry's aggressive, 2-week-old campaign against federal tobacco control initiatives to Wall Street yesterday.

He told a group of New York ana-lysts those initiatives were simply a grab for tax revenue.

Legislation sponsored by Sen. John McCain, R-Ariz., calls for billions of dollars more in industry payments than did the industry's settlement last year with 40 state attorneys general.

The states were suing the companies to recover Medicaid funds spent caring for smokers.

Goldstone said that if Congress passes the McCain bill, the industry would challenge it in court.

And Goldstone, who this month declared the settlement with the states to be dead, said he had "no doubt" the industry would fight any state Medicaid lawsuits all the way to the Supreme Court.

Goldstone said the McCain bill would be the biggest single tax bill in American history, raising more than $500 billion. The bill would raise excise taxes on a pack of cigarettes by $1.10 over five years.

"Here's Washington's plan for Wall Street: to invest capital and take risk but let the government get the return," Goldstone said.

His tough talk hit the themes tobacco executives have said they'll present to the public as they campaign against the McCain bill: that the bill creates new bureaucracy, imposes censorship and would create a huge tax increase on lower income Americans that will finance a tax cut for the wealthy.

Health advocates say the tobacco industry has little credibility with the American people when it makes such claims, especially as a series of documents released through lawsuits and now posted on the Internet shows that the industry knew about the health risks of smoking for decades.

A Wall Street Journal/NBC News poll published yesterday said a majority of Americans, 58 percent, felt Congress should push cigarette prices higher and tighten regulation. But 44 percent of Americans feel the government is doing too little to control alcohol compared with 38 percent who say the same of government control of tobacco.

Health advocates, meanwhile, also dismiss the industry's warnings that the McCain bill could force bankruptcies.

But asked about bankruptcies and the chance that his company might spin off its huge food business, Goldstone told the analysts yesterday that his first response if the McCain bill passes would be to challenge it in court.

He said the financial risk to the industry was severe, and that federal officials had underestimated the financial impact of the McCain bill.

"This process in Washington is now open, it is not careful, it is way off the rails," Goldstone said.

© 1998, Richmond Newspapers Inc.