Warning: Tobacco Settlements May Endanger The Integrity of Your Elected Officials


Regional/ Kansas City:


© Jack Cashill 1999

About once a month, usually over breakfast, my mother would lecture the four of us kids on the dangers of smoking.

"You see these fingers," she would say of her yellowed fingers. "You see these teeth." She'd bare her yellowed teeth. "You hear this cough." She would dredge up an ominous rattler from somewhere deep beneath her rib cage."It's a stupid, stupid habit. If I ever catch any of you smoking I'll ridicule you to death. "

Fast forward some 35 years to August of 1996. Surrounded by a Clintonian gaggle of anti-smoking youths, none of whom has ever seen a smoking commercial on TV, Kansas Attorney General Carla Stovall publicly enlists her state in a veritable Children's Crusade against big tobacco. Kansas, she tells the crowd, is now the 11th state to join the suit against six tobacco companies. The suit will recoup the presumed Medicaid cost of its dead and dying citizens and protect the young against the seductions of tobacco.

"Through a well-organized campaign of fraud, lies, intimidation and deception," Stovall continues, "the tobacco industry has avoided legal responsibility for manufacturing and selling the most deadly and harmful products in consumer history while reaping billions of dollars in profits."

What Carla Stovall does not tell the crowd, what she may not fully understand herself, is that the war against big tobacco is not being waged to end these profits but to rechannel them. In Kansas, as well as in Missouri, the profits will continue to flow but in some surprising, even scandalous new directions.

Understandably, too, Stovall chooses not to mention the sheer enormity of the profits. Indeed, if oil profits were once alleged to be "obscene," the profits to be derived by trial lawyers from the tobacco shakedown have the potential to go Triple XXX.

Nor does Stovall mention the tidy sums the state has long been collecting from the tax on tobacco sales, more than $30 million this past year alone.

Nor, to be sure, does Stovall dwell on the ideological gymnastics she and her party will have to perform in order to justify the newly bloomed nannyism of Kansas Republicanism and the unprecedented pillaging of a legitimate, if morally dubious, industry.

Indeed, there is a good deal Carla Stovall would rather not talk about.

The surrender of responsibility

Back to mom. With just an eighth grade education, she had managed to deduce the dangers of smoking long before the Surgeon General. Truth is, most smokers had figured this out. The everyday slang "cancer sticks" pre-dates the surgeon general's report by years, if not generations.

My mother understood that hers was a "habit," not an addiction, one for which she was fully responsible, both physically and financially. Indeed, America now boasts of some 40-50 million people who, of their own accord, have given up smoking. Unlike alcohol or drug abusers, not a one of them has had to visit a detox unit to do so.

America, alas, has surrendered much of its grit since my mother's salad days. Leading the surrender is the party for whose candidates my mother proudly voted, the Democrats. Its partisans have come to see citizens not as self- reliant individuals but as victims of "the system" and ultimately wards of the state, with only a thin pinstripe of trial lawyers--also known "as plaintiff's attorneys" or "tort lawyers"-- standing between them and the asbestos manufacturers, breast implanters, oil spillers, coffee warmers, tobacco execs, and other sinister capitalists hell bent on exploiting them.

Not surprisingly, trial lawyers have chosen to support the party whose philosophy they have helped inspire and whose policies, in turn, have helped enrich them. On the federal level, the Democratic party receives more than 90% of the trial lawyers' collective campaign contributions. Between 1989 and 1994, trial lawyers poured more money into Democratic coffers for federal elections than the five biggest labor unions combined, some $30.9 million. Few groups, if any, have more clout within the party or nation.

State Line left

It surprised no one when Democratically-controlled Missouri hopped on the anti-tobacco juggernaut. Nor did it seem out of character for Attorney General Jay Nixon to arrange an unbid, sweetheart deal for prominent plaintiff's attorney and campaign contributor, Tom Strong of Springfield. In fact, when the deal was inked, Strong stood to make as much as $480 million from the arrangement had Missouri's case against Big Tobacco gone to trial after January 1, 2000.

If the settlement had been reached after January 1, 1999, Strong still would have been entitled to a $412 million cut. This figure may seems fanciful, but it is frighteningly real. In Minnesota's earlier settlement of comparable size, one local firm netted a cool $440 million. Unfortunately for Strong, Missouri negotiated a $6.7 billion settlement (when adjusted for inflation over its 25 year life) in November of 1998. As is, Strong will apparently have to content himself with a $250 an hour fee for his work on the settlement, a rate roughly double the Springfield norm.

The only sustained protest of this arrangement came from Senator Kit Bond. During his successful 1998 run for the U.S. Senate against Jay Nixon, Bond claimed that Strong and his law firm had donated more than $17,000 to Nixon's campaigns over the years and generated thousands more as a fund raiser.

"This is truly politics at its worst," Bond claimed. "Jay Nixon is trading state dollars for political contributions."

True, the Nixon campaign had returned Strong's most recent $2,000 donation due to the appearance of conflict. But it had refused to refund the $6,000 raised from Strong's partners.

"The contract is with Tom Strong, not his law firm," argued Nixon aide Chuck Hatfield. Yet, ironically, Strong's backers have justified the size of his fee by citing the team of up to 40 private lawyers he would have had to retain to make his case, presumably some of whom would have come from his own firm.

Once the settlement was reached, however, the faint sounds of protest were drowned in the clamor over how to spend the tobacco booty. Amidst the cries for new roads and new schools--and from the Republicans, taxpayer refunds--some legislators were actually heard to be arguing for anti-smoking programs and Medicaid reimbursement. Indeed, about the only thing that could shock Missouri's more cynical pols is if the state spent the money on the problems for which it allegedly brought suit.

State Line right

One hears less of a din out of Kansas, but the absence of noise deceives. As one state representative puts it, "why protest when no one can hear you." If the waters seem more still here, the politics are muddier and the unrest deeper than in Missouri. There are several reasons this is so.

Most obviously, the tobacco settlement runs against the grain of the party that controls Kansas state government, the Republicans. Conservative publications, local and national, routinely denounce the state settlements and the trial lawyers who brought them. On the talk radio front, the one unfiltered Republican medium, callers reject the tobacco crackdown almost to a person. They resent the denial of personal responsibility, the usurpation of personal freedoms, the end run around legislation, the political extortion of a private industry, and the fattening of the state coffers.

What troubles conservatives all the more is the state's implied ownership of the individual and its assumption of his debts and rewards. State Rep and Appropriations Chairman Phill Kline of Shawnee describes this soft-core totalitarianism as "a brute exercise of government powers to obtain moneys while denying the people harmed their own day in court."

Although the resentment runs deep within the Kansas House, few speak out publicly against the settlement. Among those who have is State Rep Tony Powell, a conservative Republican from Wichita. As Powell sees it, the Attorney General's office circumvented the legislative process and presented the legislature with a fait accompli in the form of a settlement. The only question left was the nearly moot one: "Do you defund the lawsuit or accept the settlement?" "Conservatives are in a minority here," Phill Kline notes."We don't have votes enough or courage enough to not accept it."

Other reps have chosen to stay mum on this issue. As one told me off the record, "Tobacco is not the hill I choose to die on." Needing all the support they can muster for projects closer to their heart, many conservatives have chosen not to launch a losing battle against a superficially popular cause, the plundering of big tobacco. To be fair to Kansas, no state house in America, Republican or Democrat, has mustered enough moxie to reject the manna-like descent of tobacco money.

The triumph of moderation

Even were the conservatives to squawk, the local media would not likely provide them a soapbox. The Sun Newspapers and The Kansas City Star , in particular, are conspicuous in their preference for "moderates," high among them Carla Stovall. Indeed, with strong media support, Stovall raked in more votes than even Governor Bill Graves in the 1998 election. What makes her attractive? As Star columnist Steve Kraaske notes with approval, she is"anathema to the far right wing of the Republican Party." For many in the media, that's enough.

But moderation is an elusive philosophy. Lacking fixed principles, its acolytes drift in a tautological flux: their chosen positions are often ones that moderates of either party agree on at a given point of time. Of late, for no coherent reason, they have come to the consensus that smoking is not just stupid, but evil, and the punishment of tobacco producers a public good.

If in the pursuit of this good, a Republican AG ignores her party's commitment to individual liberties and responsibilities, so be it. If the Democratic AG denies the tobacco companies their genuine first amendment rights like free speech, voluntary association, and the ability to petition the government--as well as niggling prohibitions against "cartoon characters" and ball caps with cigarette logos--so be it. If both parties trample on the constitutional niceties that used to proceed prohibitions of any kind, so be it too.

"Moderate" reporters and editors choose not to notice or lack the discernment to do so. Likewise, they choose not to explore the temptations that can easily detour a politician with no fixed course.

Carla Stovall has benefited greatly from this largesse. Her status as a moderate, and as a woman at that, has given her a measure of deference that few politicians enjoy. She needs it.

Legal minimums
In awarding legal contracts, Stovall has gone beyond the time-honored sleaze of rewarding one's campaign contributors. She has, in fact, embarked on the boldest bit of public piratehood since Teapot Dome--bestowing the ill-gotten tobacco booty on her own former law firm, Entz & Chanay of Topeka. This she did without the benefit of competitive bidding. "I don't think the low bid is the way to choose your lawyers," she told a Legislative Budget Committee in the summer of 1997 a year after the decision was announced. I guess not.

At the time of the announcement, Stovall advanced two reasons for the choice of Entz & Chanay. The first was that the firm had expertise in handling Medicaid reimbursement claims. That would be well and good, retorts Tony Powell, Chair of the committee that reviews the judicial budget, if this were a Medicaid case. But as he notes, the case actually involves tort theory, "a totally different issue."

According to Powell, Stovall had originally suggested that no other firm expressed interest in the work. This too, Powell claims, is false. Hutton& Hutton, a Wichita firm with a good deal more experience in product liability than Entz & Chanay, was keenly interested as others might have been had the bidding been open. Stovall would later argue before The Legislative Budget Committee that Hutton & Hutton fell short on any number of accounts, among them fees and lack of expertise in handling Medicaid cases. But, Powell insists, "The lawsuit has nothing to do with Medicaid."

How much does Entz & Chanay expect to make? That is a good question, and right now no one is quite certain. "We can't get that out of her," Appropriations Chair Phill Kline says of Stovall. "We don't even know."

In the summer of 1997, by voice vote, the House passed an appropriations proviso to cap attorney fees at $20 million. Entz & Chanay resisted. "I think," argued partner Jeff Chanay, "the legislature would have difficulty abrogating a contract that was entered into freely by the attorney general." According to Powell, this issue has yet to be resolved.

Chanay's protest is hardly irrational. Under the terms of its contract, his firm stands to make 12.5% of the $1.57 billion that the state is expected to receive--a truly astonishing $196 million. But that's just the half of it. Literally. Two out-of-state firms have also contracted to split another $196 million.

Not to worry. As Stovall told a legislative committee in November, "None of the attorneys' fees will come out of the state's share." They will come instead, she claimed, from a $1.25 billion treasure chest set aside by the tobacco companies for the attorneys of all the states in the settlement. What she does not say, of course, is that the money tobacco companies set aside for the attorneys is money that they can not and do not give to the state.

More troubling to many Reps is that the attorneys submit their bills directly to the tobacco companies. These bills fall outside the purview of the Records Act. According to Kline, the state legislature has no right to examine them.

This circuitous billing process may provide necessary cover for Entz & Chanay. The two out-of-state firms have already done extensive original work in settling state tobacco claims. It's hard to imagine what lawyering Entz and Chanay could do to make a $20 million settlement--let alone a $160 million one--seem "reasonable." For the record, the latter figure represents an incredible 400 man-years of work at a generous $200 an hour. Again, no cause for concern. Entz & Chanay, The Topeka Capital-Journal reports, holds Stovall's "utmost trust in protecting the interests of Kansas taxpayers."

To be fair to Stovall, a Legislative Post Audit in 1997 did not find that she had violated any of the state's lax conflict-of-interest laws in awarding contracts. Although the audit noted that more than 2/3 of the outside counsel she had hired were, in fact, contributors to her 1994 campaign, Stovall had apparently no "substantial interest" in any of those firms, Entz & Chanay included. Said Stovall in a stunningly disingenuous response to the report,"I don't play favorites."

As of this writing, it is hard to say for sure who will get what. (Stovall's office has not responded to my inquiry). Stovall has claimed that the lawsuits were filed to "stop the marketing of tobacco products to children and to recoup the state's portion of the Medicaid expenditures attributable to smoking ailments." But this may not happen as planned. The Federal government threatens to sue for the roughly 60% of Medicaid costs it covers. Hospitals and individuals protest that the state's settlement blocks them from suing independently. The Kansas public health community complains loudly that the settlement short shrifted its needs. The tobacco companies can declare bankruptcy, and the state's claims against them would be dischargeable. As to the attorneys, their fees represent a lien on whatever money is generated (Though Powell and others in the legislature are threatening to tax those fees at 50%.)

In sum, if Stovall succeeds in driving legal tobacco out of the market place, as she presumably hopes to, the state will not get paid, but the attorneys most likely will. Her successors will also inherit a good deal more genuine police work--fighting the crime that organizes around the new black market in tobacco.

"This is not about children. It's not about punishing the tobacco companies,"Tony Powell argues passionately and succinctly. "It's just a money grab."

• • •

Surrounded by friends and family, my mother died at 70 of lung cancer. She did not linger long. On her last day, I asked her if she had any regrets,"Yea, she said. If I had known those damn cigarettes were going to kill me, I wouldn't have given'em up five years ago." That was it.

In that same year, her mother, my grandmother, died of "complications" at age 92. She never smoked. She spent the last several years of her life in nursing homes. If we are forced to measure life in fiscal terms, my grandmother "cost" the state at least ten times as much as my mother. How, really, could it be otherwise? We all die sooner or later. The financial culpability theory driving tobacco settlements represents politicized junk science at its worst.

P.S. My mother scared the hell out of us. None of the four of us ever

© Jack Cashill 1999

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