THE DEAL? DON'T DEAL!
by David Sisler
About face! Forward march!
Did they miss a step? I didn't think so.
The tobacco industry is nothing if not unified, except for upstart Liggett, of course. Stand up in Congress, gentlemen, raise your right hand, and repeat after me, "The testimony I am about to give will be the truth, the whole truth, and nothing but the truth. So help me profits." Based on such an oath, maybe you could believe their straight-faced lies.
Interestingly, none of the tobacco CEO's who stood and lied to Congress — no, this stuff is not addictive, and, of course, we did not put anything into it to make it more so, since it was not addictive in the first place — are around for The Deal.
Here it is. The tobacco companies are going to admit, what we all knew all along, and what former Surgeon General C. Edward Koop made them put in writing (with their fingers crossed): Cigarettes will kill you. And to make it up to all of the former smokers with health problems related to their nicotine habit, they are going to cough up $300 billion.
Before anyone celebrates, do the numbers.
Number one: when word leaked out that a deal was in the offing, that the tobacco industry was going to admit guilt (sort of) and make a huge payment to its victims, tobacco stocks jumped. Wall Street reacted with enthusiasm — even though the industry is talking about taking a massive liability payment. Philip Morris Company shares were up, that first day, $4.25 or 11 percent. RJR Nabisco Holdings Corporation closed up $3.25 or an equal 11%, in New York Stock Exchange composite trading. And although the gains have slowed, they certainly have not stopped.
Number two: How much is $300 billion? According to Time, "it would make every resident of Buffalo, NY an instant millionaire. It equals 40 years of profit for Exxon."
But $300 billion is really not a lot of money. Not to the tobacco industry.
Roy Burry, an analyst for Oppenheimer, calculated that the $300 billion figure would not exact a harsh toll on the industry. The industry could come up with $300 billion by paying $6 billion in the first year and increasing the payout by five percent each year thereafter. They are not going to dip into the profits pool to pay that either. Those who are hooked on cigarettes will continue to pay the bill because the price of one pack of cancer sticks will go up at least twenty-five cents. That would result in a 6 percent drop in cigarette demand in the U.S., but industry leader Philip Morris's earnings would drop by only 2 percent, Mr. Burry said. With adjustments figured in, they will actually make a profit.
Number three: when the $300 billion figure is put up against the dollar cost to our nation's health, there is no bargain here either. Richard Daynard, chairman of the Tobacco Liability Project, calculates that smoking costs the American public $50 billion a year directly, and $100 billion a year indirectly, in lost productivity. By those estimates, $300 billion a year over a 25-year period — or an average of $12 billion per year — "comes to 10 cents on the dollar."
Number four: if the $300 billion payoff is approved, the tobacco industry will clear its legal slate completely. The tobacco industry is asking to be set up a novel mechanism akin to workers' compensation for paying smokers' claims, in return for generally prohibiting liability suits against cigarette makers. If the industry's proposed plan is approved, they will admit fault, place larger warnings on its product, and then never be required to pay another nickel in damages.
Seattle attorney Steve Berman, a participant in the negotiations, stated that lawyers have not yet resolved the contentious issue of precisely how much immunity from lawsuits the tobacco industry should get.
How much immunity? No one ever placed a gun beside of a smoker's head to get him or her to light up, but the tobacco industry did everything in its power to hook smokers and keep them hooked. If there is justice, the tobacco company will get no immunity. They are liars, and they know it. They have been hurting people, and they know it. If they get immunity, they will continue to pedal their poison with impunity.
The tobacco industry has started to crack. The mere discussion of such concessions is a measure of the industry's collapsing position. The fact that the chairmen of both companies attended the opening session, and that a key White House aide is monitoring the proceedings, is proof this is more than a sparring match.
The Washington Post recently editorialized: "Maybe at some point it will be in the public interest to cut a deal with the [tobacco] companies. But not now. They seek protection they do not deserve from a blow that they have yet to feel. Why give it to them? "
Now is the time hold firm. In the words of Paul to the Ephesians, "Having done all to stand, stand!" It will be a bad deal for Joe Public, if Joe Camel gets away with The Deal.
Published in the Augusta Chronicle 5/17/97
Copyright 1997 by David Sisler. All Rights Reserved.
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