U.S., Tobacco Firms Said to Be in Talks

U.S. government lawyers have begun talks with cigarette makers to try to settle the government’s racketeering case against the industry, a person close to the matter said Tuesday.

The Justice Department has met at least once with tobacco industry lawyers and a court-appointed mediator, but the person said both sides were under orders by the presiding judge not to discuss the settlement efforts.

The talks came at the request of the trial judge in the case, U.S. District Judge Gladys Kessler, said the person, who declined to be identified.

Representatives of the tobacco companies either declined to comment on the settlement talks or were unavailable. A spokesman for the Justice Department declined to comment.

The talks, first reported by the Wall Street Journal, come at a time when both sides are under pressure to resolve the five-year legal battle.

Lawyers for the government have more incentive to settle since a Feb. 4 federal appeals court panel ruling that barred them from seeking billions of dollars in industry profits.

The government had been seeking the disgorgement of as much as $280 billion in profits. It has since asked the full appeals court to reconsider last month’s ruling.

For Altria Group Inc., the parent company of industry leader Philip Morris, a settlement would help clear the way for a planned spinoff of its Kraft Foods Inc. affiliate.

Altria Chairman Louis Camilleri said in November that any such spinoff would have to wait until U.S. tobacco litigation hurdles were cleared.

The case has been in trial before Kessler since September. The Justice Department has called dozens of witnesses, trying to prove that the industry conspired to mislead the public for decades about the dangers of smoking.

Targeted in the government’s lawsuit, filed in 1999, are Altria and Philip Morris; Loews Corp.’s Lorillard Tobacco unit, which has a tracking stock, Carolina Group; Vector Group Ltd.’s Liggett Group; Reynolds American Inc.’s R.J. Reynolds Tobacco unit; and British American Tobacco unit British American Tobacco Investments Ltd.

The tobacco firms deny that they illegally conspired to promote smoking and say the government has no grounds to pursue them after they overhauled marketing practices as part of the 1998 settlement with state attorneys general.