Tolls on Tobacco Road
Tolls on Tobacco Road
Behind the multibillion-dollar war over tobacco--a battle that's roiling Washington and has lawyers scrambling for a payday.Newsweek
June 22, 1998
Nation
By Matthew Cooper
Copyright 1998 Newsweek
Dick Scruggs had boarded his Learjet and flown himself to Washington largely for the hell of it. For more than a year, Scruggs has been piloting his private plane from his home in Pascagoula, Miss., to the Beltway. As the country's most prominent anti-tobacco lawyer--and one of the architects of last year's settlement between states' attorneys general and the tobacco industry--Scruggs had become a capital fixture. He's logged more than 150 nights at Washington's ANA Hotel, more time than he's spent at his stately, manicured house across the street from the Gulf of Mexico and just yards from the home of his brother-in-law, Senate Majority Leader Trent Lott.
Last week, the former Navy pilot had come up to watch the Senate debate the issue of capping lawyers' fees in the national tobacco legislation. Sitting in the VIP section of the Senate balcony, he listened as Sen. Mitch McConnell, the Kentucky Republican, skewered him as a greedy ambulance chaser trying to grab billions from the public treasury. The "Sultan of Smoke," McConnell called him. While it's true that Scruggs could make tens if not hundreds of millions from a tobacco deal, he could only laugh. "Should I put a bag over my head?" Scruggs joked. At least this day the 52-year-old got the last laugh. For the second time in a month, the Senate declined to limit the tobacco lawyers' fees as part of the bill.
Of course, that's assuming there is a tobacco bill. The sweeping smoking legislation, sponsored by Republican John McCain, has become a game of "Beat the Clock." McCain is scrambling to save the measure before time runs out in this truncated congressional year. Chances are good the Senate will vote on the law this week. Whether the measure can make it through the House of Newt is another matter: the cigarette companies, which walked away when the per-pack tax kept rising, are producing TV and print ads decrying the bill. Still, no one is writing off tobacco reform. Congress and Clinton want the billions it could produce.
If there is tobacco reform that raises cigarette prices and bans the Marlboro Man, Scruggs will have had more to do with it than just about anyone. He was the first lawyer to lead a state fight against the tobacco industry, and he now represents 29 states. Trial lawyers have been the heroes and the villains of the tobacco story. On one hand, they have performed an enormous public service by forcing the cigarette makers to fork over documents that revealed their efforts to market to young people. On the other, they stand to become phenomenally--some say obscenely--rich off a major tobacco deal. Scruggs's battle for a national deal, and for a big payday, illustrates the torturous progress of the biggest domestic issue of Clinton's second term.
Scruggs knows that trial lawyers aren't much more popular than Big Tobacco. In Washington, chances are pretty good that Congress will, in the end, put some kind of cap on attorneys' fees. Republicans will see to that: they know that trial lawyers are among the most generous donors to the Democratic Party. (Scruggs himself voted for Reagan and Bush before backing Clinton.) Meanwhile, the GOP doesn't mind sticking it to the president. Among the other lawyers in the tobacco controversy is Hugh Rodham, the First Lady's brother, who makes no secret of his access. (He often wears sweaters with the White House seal and tells friends that they can reach him at "the House.") The same anti-lawyer fever is hitting the states. In Texas, Gov. George W. Bush is fighting with Dan Morales, the attorney general, over the billions in fees lawyers could collect as part of the state's settlement with tobacco.
Scruggs didn't find the tobacco issue; in the intimate fraternity of Southern lawyers and pols, it found him. In 1994 Scruggs got a call from his classmate at Ole Miss, Mississippi Attorney General Mike Moore. Moore had been approached by another Ole Miss alum, Mike Lewis, with a novel idea: instead of suing on behalf of individual plaintiffs, why not sue on behalf of the taxpayers who had lost billions paying for Medicare and Medicaid treatment for smokers? The distinction was crucial. While juries had long had little sympathy for individual smokers, they might be more receptive to a state's case brought by a state. The jurors were, after all, taxpayers: this was their money. A legal strategy that appears so obvious in hindsight seemed ludicrous at the time--akin to suing candymakers for a state's dental bills. Still, Scruggs listened. He signed up, risking his own cash to pay for Mississippi's gamble. To date, he's invested 15 million of his firm's bucks.
Under Scruggs and Moore, the movement went from a Dixie peculiarity to a national pattern. Other states were intrigued; about the same time, Lott introduced Scruggs to his consultant: Dick Morris. Morris helped Scruggs with jury selection. When he became Bill Clinton's Svengali after the 1994 elections, Morris urged Clinton to take on kids' smoking. The president's top aides thought it suicidal. Morris asked Scruggs to pay for a poll that would show otherwise. The Scruggs-financed survey helped turn Clinton into the most anti-tobacco president in American history. Scruggs had other triumphs. He helped with the defection of the tobacco industry's most prominent defectors, Merrell Williams and Jeffrey Wigand, who is the subject of an upcoming movie starring Al Pacino. (Scruggs, much to his dismay, was rejected for the role of himself.) And it was Scruggs and Moore who forged a settlement with Bennett LeBow, the head of Liggett Myers. Their secret meetings led to Liggett's agreement to pay $26 million in exchange for immunity from several state suits--which presaged the settlement in 1997 between the rest of the cigarette industry and state attorneys general.
That was just the beginning. Since the tobacco deal, Scruggs has tried to get Congress to ratify the agreement. He's hired lobbyists, and was in on the marathon weekend session when McCain, who didn't limit fees, drafted his bill. (The tobacco companies were shut out, and later lost what they were getting in the deal--immunity from lawsuits--when they left the table in April.) Scruggs swears he hasn't collaborated with his brother-in-law Lott--though he acknowledges once using Lott's fax machine and phone. "We just don't talk about it," Scruggs says. McCain backs him up: "I've never seen Trent try and help out Dickie." Still, tobacco-industry types are quick to note that Scruggs hired Lott's former chief of staff to be one of his lobbyists.
Scruggs knows to watch his back. The pressure for a cap on lawyers' fees is growing, although some--like Massachusetts Sen. John Kerry--say Congress shouldn't bust up agreements lawyers have made with states. It's unclear how much Scruggs might make from the deal, but it could run into the hundreds of millions. Under McCain's bill, fees can be settled by an arbitration panel. Scruggs has voluntarily allowed a judge to decide his compensation for Mississippi's recent tobacco settlement.
Not surprisingly, Scruggs defends the big bucks. "We took an enormous risk. We achieved an enormous result. That's the American way," he says over iced tea and tuna in the Members Dining Room of the Senate. After all, he thinks of himself as the person who made the tobacco companies cry uncle even while Uncle Sam did nothing. And if the deal dies, hell, Scruggs will still make money from individual states--probably more. (Last week Brown & Williamson lost a lawsuit in Florida--demonstrating how Big Tobacco remains a Big Legal Target.) But that's speculation. For now, he's working congressional corridors. "Hey, Tobacco Man! What's up?" asks a guard. "Hey, the good guys are here," replies Scruggs. Whether he's good depends on whom you ask. And like any risk taker, Dickie knows that what happens to his tobacco bill--and his money--is anybody's guess.
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