Cornered (45 page)

Officially, the tobacco companies claimed no knowledge of the proposal. RJR Nabisco said firmly, “Our tobacco subsidiary is not interested in—and has no intention of—settling cases against it and remains confident in the strength of its defenses.” It was not true, of course. A spokesman for Goldstone admitted only to “the world's shortest conversation” with intermediary John Sears as a “favor to someone.”

The August leak killed progress on the talks until after the elections. But the contacts had been made, and the two sides would continue to talk. Scruggs's phone call to Trent Lott had given rise to an idea that was to mature, slowly and often painfully, over the next year. By June 1997 there would be a proposal to restructure the commercial operations of the tobacco companies, end the culture of denial about the harmful effects of smoking, kill off Joe Camel and the Marlboro Man, and propose the costliest compensation and fines—$368.5 billion—in American business history.

*   *   *

T
HE
W
HITE
H
OUSE
would play a pivotal role in the negotiations. Clinton had already been persuaded by Vice President Al Gore and then-presidential adviser Dick Morris to support the FDA's drive to curb teenage smoking. White House counsel Bruce Lindsey would coordinate the efforts. For its part, the industry longed for a change in the presidency, of course, and, for the first time, the Republicans were receiving by far the greatest share of tobacco money. In the past, the industry had been quite evenhanded with its funds, hedging bets between the parties. In the 1988 congressional campaign, for example, it gave slightly more to Democratic political action committees and party organizations than to Republican coffers. But in 1990 the money began to shift. By the 1996 campaign, the Republicans received nearly $7.1 million, more than four times the Democrats' $1.6 million. In the Senate, the largest PAC contributions went to three Republicans, Jesse Helms of North Carolina ($57,250), John Warner of Virginia ($39,150), and Fred Thompson of Tennessee ($47,000). In the House, Thomas Bliley of Virginia received $34,675, Edward Whitfield of Kentucky $33,600, and Charlie Norwood of Georgia $33,500, all from tobacco-growing states. During nearly three decades in the U.S. Senate, Bob Dole had accepted more than $400,000 in tobacco-related campaign contributions. (At presidential campaign rallies, Democrat activists plagued him with “Mr. Butts”—a supporter dressed up as a cigarette to look like the Gary Trudeau cartoon character.)

Al Gore, who had taken tobacco money when he was a senator from Tennessee and whose family had once grown tobacco, nevertheless became Clinton's point man against the industry, making an emotional speech at the Democratic convention in Chicago recalling his sister's death from lung cancer. On the campaign trail, he kept goading Dole to say whether nicotine was addictive. Dole ducked the issue—but then made one of the great bloopers of the campaign by suggesting that nicotine might be no worse for some people than milk.

In public, the industry would continue to deny any involvement in a deal for the next seven months, although Trent Lott's messengers, Sears and Anderson, were still busily acting as intermediaries between them and Scruggs. “This industry has no history of settling litigation,” declared RJR's spokesperson, Peggy Carter. “We are certainly not going to start with litigation that has no basis in fact,” she added, repeating the industry's view of the state Medicaid cases. Philip Morris was silent. Scruggs said, “The industry had to have deniability that we were talking. And I wanted it, too. We just did all our talking through John Sears.”

Considering their unfamiliarity with the ways of Washington and Capitol Hill, the two Mississippi law-school buddies, Scruggs and Moore, would cut an extraordinary swath through the national political landscape. It did not turn out to be the instant “global settlement” the two bold architects of this grand compromise had once believed it could be, but from the days when the lonely plaintiff fought against impossible odds, it was a gigantic step forward. The “term sheet” would become a blueprint for a national policy to deal with the tobacco epidemic.

Scruggs and Moore would spend the next three months crisscrossing the country, drumming up support for the settlement among the other attorneys general, and picking up clients, at the same time. Wherever they went, Ron Motley would not be far behind (sometimes even in front) offering his services as co-counsel. He also went to state capitals that they didn't have time to visit. Scruggs would end up being co-counsel to twenty states besides Mississippi; Motley to thirty.

And the Castano lawyers would return to center stage. At first, Scruggs had purposely excluded the group; it was too unwieldy to have representatives in the initial discussions. But the wily Gauthier would make his own way to the negotiating table. The names on the guest list at the 1994 Antoine's Christmas dinner would reappear: Stan Chesley, Russ Herman, and John Coale. Elizabeth Cabraser, Professor Dick Daynard, and Dianne Castano, Peter's widow, would all surface in one way or another. And there would be yet another Gauthier surprise. Hugh Rodham, Hillary Clinton's brother and a Florida lawyer, would become the latest member of the Castano executive committee and provide the Castano group with special access to the White House.

*   *   *

D
URING THE SUMMER
, Tom Mellon, a personable young Castano attorney from Pennsylvania, had been working on a case in Florida with Hugh Rodham's law firm and had reported back to Gauthier that Rodham was interested in joining the Castano group. Gauthier was only too happy. “I felt that Dicky Scruggs had Trent Lott as his brother-in-law, so we one-upped him. I told him, ‘Dicky, don't worry, we just out-brother-in-lawed you.'” Rodham, however, had a reputation for not making use of his family connections. He was in Florida and mostly stayed there. He had run for the state senate and lost. Rodham didn't know any of the Castano lawyers, so Gauthier gave Coale the job of introducing him. The two quickly became friends.

Coale recalls one September evening in New Orleans when the two of them were at the Bombay Club, waiting for Gauthier and some other Castano lawyers to turn up for dinner. “Wendell's never on time, so we were having fun,” said Coale, “and we got to talking about what to do with all these lawsuits, and Hugh agreed he would talk to the president over Thanksgiving, the next time he was scheduled to see him for a family meal.”

In the meantime, Coale concocted his own version of how to get negotiations moving—a plan that was bound to clash, sooner or later, with Scruggs's efforts. Coale put together a group of worthies—the “Three Wise Men,” he would call them—to oversee the settlement proposals on behalf of the White House. He chose two former U.S. senators, Howard Baker, a Tennessee Republican whose first wife, Joy, died of lung cancer, and Howell Heflin of Alabama. Heflin had been a successful trial lawyer before being elected to the Senate in 1978 as a Democrat. He had a reputation as a details man on the Judiciary Committee. The third man was Leon Panetta, the departing White House chief of staff. Gauthier embraced the plan and made it part of the Castano group's approach, but before anything could come of the idea, word spread. Scruggs immediately called Gauthier, who was not in his office or at home.

Scruggs was told he was duck hunting on the Chesapeake Bay with his Louisiana buddies, Calvin Fayard and Mike St. Martin—
and
Tommy Boggs, a well-known Washington lobbyist for the tobacco industry. They were at a tobacco-industry playground called Tobacco Stick Lodge. Scruggs couldn't believe what he was hearing. What was Gauthier doing spending a weekend with Boggs?

According to Gauthier, Scruggs tracked them down at the lodge, finally getting through and announcing that he was flying in to join them. (According to Scruggs, he didn't “track down” Gauthier. “Wendell got word from the hunting lodge that I had been calling, and he called me back. I thought it was just typical Wendell.”)

“But Dicky, you can't come down here, this is a social weekend,” Gauthier told Scruggs. In fact, there were no “talks” with Boggs, but Gauthier mischievously left open the possibility there might have been.

Exasperated, Scruggs asked when Gauthier would be back in New Orleans. “Well, I'm getting home late on Sunday. How about Monday?” They agreed to meet.

The meeting was frosty. Scruggs asked Gauthier to drop Coale's “Three Wise Men” concept; the plan with Sears and Anderson had the cooperation of all the other parties and he didn't want to upset it. Gauthier held his ground; whatever Scruggs was doing would not interfere with what he was doing, and since he didn't know exactly what Scruggs was doing, he didn't see any point in stopping the Castano group's initiative. Scruggs quickly regrouped, suggesting that the two camps join forces. “It'll be fifty-fifty,” Gauthier remembered him saying. “Dickie would swear to us a hundred times that it would be fifty-fifty and backed out of it every time,” Gauthier said later.

Scruggs flew back to Pascagoula. Gauthier then set up a conference call that included John Coale. According to Coale, “The call got a little heated. Scruggs said the real problem he had with the Castano group was that the attorneys general didn't like the idea of joining forces with the Castano lawyers. They claimed their cases were stronger—and they had real, easily quantified Medicaid expenses to recoup. The Castano lawyers were only in it for the money. He mentioned Ciresi had said we were terrible people.”

This time, it was Coale's turn to erupt. “That Ciresi. He's a good lawyer, but as a person he's a piece of shit,” he recalled saying.

According to Coale, Scruggs also said he was under pressure from Trent Lott to come up with a deal. “The theory was that if they could come up with something that might be acceptable to the industry, they would ram it through Congress and it would be a done deal,” said Coale. “I always thought that was extremely unrealistic because it doesn't happen like that in the real world, other agencies would have to be involved, the FDA, the health groups, and, of course, the White House.”

*   *   *

N
ONETHELESS
, from this point on the Castano team would be part of the secret talks. Relations between Scruggs, the attorneys general, and the Castano lawyers would always be tense, however. In one confrontation, the seemingly unflappable Scruggs would throw up his hands in despair and say, “We'll do this without you.” But Coale claims he came to the rescue: “Don't walk, Dicky, we can sort it out. I'll deliver the boys.” He talked Scruggs into keeping the team together, but to placate the Castano lawyers they had to stage a “reconciliation.” Scruggs and Coale agreed that Moore would pretend to make a special trip to Florida to see Rodham and patch up the quarrel. They did meet but Moore was going anyway and the issue had been resolved beforehand. “The meeting was basically a showpiece,” said Coale. But it worked. The team was back together again.

Over the next few weeks and into the new year of 1997, a small group—essentially Scruggs, Moore, Coale, Russ Herman (from New Orleans), and Rodham, and occasionally Matt Myers—met at the ANA hotel in Washington. Another draft was completed. The message via Sears was that the industry was now prepared to raise the ante—$250 billion over twenty-five years—plus make concessions on marketing and basically follow the FDA rules without FDA regulation. In return, they expected full immunity from lawsuits.

In February, Mike Moore went to the White House to meet Bruce Lindsey, who, as presidential counsel, had been assigned the role of presidential liaison. Coale and Rodham were there as well. Coale recalled that Moore was “very self-assured, like he is everywhere. He was shaking hands with everyone. He's a great politician.”

Throughout the discussions there was no direct contact with the tobacco companies. Instead, R. J. Reynolds arranged for another message carrier: J. Philip Carlton, the son of a tobacco farmer, a country lawyer, and a close friend of the key tobacco state's governor, North Carolina's Jim Hunt. Carlton's appointment emphasized the increasing importance of contacts with the White House. He had helped run the gubernatorial campaign of Hargrove Bowles, father of President Clinton's chief of staff, Erskine Bowles. The dapper Carlton, with his natty suits and pocket handkerchief, would become a fixture in the negotiations and an important referee during the final stages of the talks. A further indication of the industry's increasing interest was the hiring of the influential Washington law firm of Liifert, Bernhard, McPherson and Hand to begin talking up the benefits of a settlement in Congress. One of the firm's partners is George Mitchell, the former Maine senator and Democratic majority leader.

In March, the enterprise received an added boost from the second Liggett settlement. At first, Scruggs had doubts about making a second deal with LeBow. He simply didn't think that the “privileged documents” that LeBow was now offering in return for a broader settlement could be as important as LeBow, and others, said they were. Like Gauthier, Scruggs felt there was already enough evidence against the industry. As he had said when he first looked at the Merrell Williams documents, “These guys are toast.” (As it turned out, Scruggs and Gauthier were right; the documents that were released, at least initially, did not add much to the weight of evidence.)

But Scruggs's real concern was that Philip Morris and RJR would hear about the new negotiations with LeBow and that would affect his settlement talks. “I thought it would crater my discussions,” is how he would put it, using a bomber pilot's term for wrecking an airfield runway. But finally, Scruggs gave in: “We decided, in the end, it was a good insurance policy that really had no downside. LeBow was willing to produce these documents; so what if they're not great? He's not getting much out of it—except a promise for not being burned during a national settlement.” That clause would come back to haunt LeBow and Scruggs. Essentially, LeBow wanted to make sure that in any national settlement, his tiny Liggett company would not have to pay more than he had agreed in his own settlement. Otherwise, his company would simply go bust. The clause in the second Liggett deal said the attorneys general would make their “best efforts” to ensure Liggett was not harmed. It didn't quite turn out that way—at least as far as LeBow was concerned. But far from hindering Scruggs's talks, the Liggett deal actually spurred them on. “It raised the level of the debate and energized Governor Hunt to get onto the White House and the president and get things moving,” Scruggs said later.