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Just two years ago, it seemed as if nothing could go right for cigarette manufacturers. The Senate was in high gear over legislation that would have drastically regulated them, lawsuits were springing up all over the country, and tobacco stock prices were depressed. And while this year has had its share of ups and downs, tobacco executives and their lobbyists are breathing easier. “When we are not in the newspapers every day, people forget about it. People assume that it’s over and done with,” says a lobbyist for a major tobacco company. Indeed, tobacco was hardly mentioned in the election, and lobbyists and Wall Street don’t expect action in the next Congress. The industry’s hold on Congress is still very strong, and passage of any legislation is unlikely, says David Adelman, a tobacco analyst for Morgan Stanley Dean Witter. “The only reason it came before Congress in the first place was because the industry put it in their lap,” says Adelman, referring to the 1998 settlement agreement with state attorneys general that the industry tried to get Congress to ratify. Similarly, the one piece of new legislation that appears at all likely to come up — giving the Food and Drug Administration the power to regulate cigarettes — could also surface at the industry’s behest. Since the U.S. Supreme Court ruled last spring that the FDA did not have such authority, Rep. Henry Waxman, D-Calif., and others in Congress have been pushing to grant it to them — so far to no avail. Ironically, Waxman may find support from the Philip Morris Cos., which has introduced a new product that it wants to market as a safer cigarette. As things stand now, the company is hampered in its marketing efforts because as soon as it makes health claims for the new cigarette, it gives the FDA free reign to oversee the product. So Philip Morris lobbyists have been working on legislation to give the FDA limited authority over cigarettes — thereby setting the rules that bind the agency while freeing up their own marketing efforts for the new product. Lobbyists for some of the other tobacco companies are skeptical about giving the FDA any authority, however. It is the “camel’s nose under the tent” scenario, says one lobbyist. The industry is also battling a proposed treaty by the World Health Organization that would impose strict regulations on tobacco marketing and smuggling around the globe. The cigarette makers have not been invited to take part in negotiations, so they have waged a country-by-country lobbying campaign to undermine the treaty. The biggest immediate problem for the companies remains lawsuits. RICO suits by labor unions appeared to be a problem at the beginning of the year, but seven of those have already been thrown out. In Florida, however, the cigarette makers were hit with a $145 billion jury verdict, which they are appealing. The effect of that case was leavened by a pre-emptive lobbying effort in the Florida legislature, which passed a law right before the decision saying that plaintiffs had to post a bond of up to only $100 million, as opposed to the full amount of the judgment. The companies have been successful in passing similar legislation in other states where they have operations. The other major threat looming on the horizon is from a planned lawsuit by the U.S. Department of Justice. Tobacco lobbyists have been successful in preventing Congress from funding the department’s suit. Justice is still allowed to proceed with the suit, but without funding, it is severely hampered. Finally, the tobacco companies have begun the 10-year payout of $246 billion to state governments that they agreed to two years ago. The amount to be paid by the companies is pegged to the volume of cigarette sales — providing state officials with a distinct disincentive to curtail smoking in their states. A lobbyist for one major cigarette company believes that payout structure is one of the reasons Congress laid off its anti-tobacco efforts. “They don’t want to do anything to rock the boat,” says the lobbyist, “and at any level of government the thirst and appetite for money is the greatest aphrodisiac out there.”

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