Tobacco Documents Online

TOBACCO WEEKLY 1W94-10 March 10,1994 USE ACCOMMODATION & RESTRICTION MILITARY TO BAN WORKPLACE SMOKING WORLDWIDE On 3/$ the Department ofDefenso (DOD) announced a worldwide ban on smoking in all US military workplaces. The prohibition is scheduled to take effect 4/8 and will apply to roughly 2.6nm uniformed and civilian DOD employees, including about 26,000 at the Pentagon building, said spokesman Glenn Flood. The DOD's current policy requires designated smoking areas at workplaces. Under the new policy, smoking will be totally prohibited inside DOD (see BAN on page 2) KIPLINGER: NO FAST ACTION ON WORKPLACE SMOKING Reportedly, the Occupational Safety and Health Administration (OSHA) will take about five years to issue a regulation on workplace smoking. OSHA wants to make sure that several other matter am handled first, such as rules on repetitive-motion injuries, and tougher inspections and fines. Also an action that could cause delay would be if OSHA combines smoking with indoor air regulations (Kiplinger Washington Letter 3/4). (see USE ACCOMMODATION on page 2) EXCISE TAXES CRS: TAX HIKE NOT JUSTIFIED The increased health costs, sick leave, and other expenses that smoking allegedly costs society do not justify the Clinton administration's proposed 75¢ per pack Federal cigarette excise tax hike, the Congressional Research Service (CRS) said in its economic analysis, Cigarette Taxes To Fund tIealth Care Reform: An Economic Analysis (94- 214E). CRS found that existing State and Federal cigarette excise taxes, which average about 50¢ a pack, already cover average estimates of the alleged cost of smoking to society, contradicting statements made in President Clinton's fiscal 1995 budget submission. In fact, the CRS analysis reported that a 1991 study by Willard Manning made a "much stronger case" for taxing alcoholic beverages at higher rates and claimed that an increase in the cigarette tax would raise considerable revenues, but it would finance a continually (see NOT JUSTIFIED on page 3) STUDY: NO TOBACCO = MORE JOBS Using the Michigan economy as a model, two antismoking University of Michigan researchers claimed that states that do not grow tobacco would create new jobs and boost personal incomes if all tobacco sales ceased. Published in the 3/9 issue of the Journal of the American MedicalAssociation, the study contradicts other economic studies that said about 270,000 workers would lose their jobs if the Federal cigarette tax is raised by 75¢ per pack. Kenneth Warner and George Fulton used their model to plot what would happen if all smoking stopped and the 19,127 Michigan residents whose jobs depend on tobacco sales were suddenly forced to try and fred other means of income. Their conclusion: all those lust jobs would be replaced and 5,608 new jobs created. In addition, the researchers claimed that state residents would take home $226mn more in annual (see NO TOBACCO on page 3) ANTI-TOBACCO CAMPAIGNS KENNEDY CALLS FOR PROBE OF FDA, DAY ONE ALLEGATIONS; WAXMAN SECONDS On 3/7 Sen. Edward Kennedy (D-MA) called for a government probe of Food and Drug Administration (FDA) and ABC News Day One allegations that cigarette manufacturers deliberately make cigarettes addictive and target children as customers. Kennedy charged that cigarettes are not regulated by FDA because tobacco is not considered a drag, but the recent allegations that cigarette manufacturers "routinely add nicotine back to cigarettes in carefully calibrated mounts to ensure that new customers (see PROBE on page 3) PRODUCT STANDARDS INVESTIGATION ON "FIRE-SAFE" ClGARETrES LAUNCHED BY JUSTICE DEPARTMENT Reportedly, the antitrust division of the US Department of Justice is investigating whether cigarette manufacturers have illegally agreed to keep "in'c-safe" cigarettes offth¢ market. RJR Nabisco Holdings Corp. disclosed the investigation in a recent filing with the Securities and Exchange Commission. Gina Talamona, a spokeswoman for the Justice Department, confirmed that "the antitrust division is conducting m~ investigation into the possibility of agreement among cigarette companies to suppress product (see INVESTIGATION on pages 4 & 5) ~ MERC~S ~SOC1ATION OF IHE U S PO ~ B019 PRINCEIO~. N .l OB543-801g FAX ~0@) 275~3~ TI56460990

BAN co~.'l~ ~om ~e 1 buildings and other wo~la~, s~h ~ a~ h~ ~d ~ Hood ~ ~ ~e ~e ~~ b~, n~ all ~ ~11 be ~mid~ wor~l~, ~d ~o~ ~1 be periled ~ d~i~a~ ~ of b~c~, c~bs, ~d re~eafiunal ~flifies onb~. ~e Pen~on's chief of en~en~l s~W, She~ G~ ~ ~e new re~lafion would save money on m~c~ b~ ~d p~duce he~ier, fiR~ fi~g forces. ~e new relations ill~ how ~ ~e ~ fo~ have ~me s~ce ~e ~ys when soldiers receiv~ a small pack of tigress ~ ~e~ C- ~tions, however, Goo~ s~essed ~at ~e mili~ will ~s~e bo~ ~ok~s ~d nonsmoke~ cont~ue ~ be ~ted ~e s~e pe~od of~e for rest br~s d~g ~v day. ~e ~e~c~ L~g Association p~ised ~e smok~g b~ say,g: "~e DOD ~ one of~e l~gest employers ~ ~e world. By b~g ~ok~g ~ i~ wor~laces, DOD is se~g ~ excellent ex~ple for o~er employem, ~clud~g the rest of~e fede~l gove~ent." ~e step is ~e In, st ~ a series of moves by DOD over ~e p~t decade to r~uce smok~g, ~g ~d use ofilleg~ ~ ~ ~v mili~. Periodic su~eys ~en by ~e Pennon have reposed a decre~g ~end ~ ~g ~d smok~g. C~ently, ~ ~e M~e Co~s 39% smoke; ~ ~e Na~, 37%, accor~g to Re~ A~. Willi~ Buckendoff, ~e Na~'s ~si~t s~geon geneS. ~ ~e ~y, 37% smoke, w~le 29% smoke in ~e Air Force. (Reuters 3/4, AP 3/7, WSJ 3/8, ~ 3/7,8,9, ~T 3/9). US~ ACCMMODATION continued ~m rage 1 IN: GOV. OPPOSES LOCAL PREEMPTION BILL On 3/3 ~ Gov. Evan Bayh's (D) spokesm~, David Dawson, con~ed ~at Bayh is opposed to S 242, a bill ~at would b~ local smok~g res~ctiun ord~ces. As orig~ally ~oduced, S 242 would have b~ed smok~g ~ groce~ stores ~d ~g stores, but w~ ~ended to ~clude ~e local preemption provision. Me,while, a sales prohibition to m~ors enforcement bill, H 1391 -- a bill Gov, Bayh is inte~sted in see~g approved because it would enable Indian to meet a Fede~ requirement to actively enforce a tobacco sales b~ to perso~ ~der 18 -- may become ~e vehicle for ~e local smok~g res~iction preemp~on (~i~t-~dder 3/4). ~: ~AST-FOOD F~NCHISES BALK AT SMOKING BAN ~ile some n~onal ~t-fo~ r~t cha~s l~e McDonald's ~d A~y's ~o~c~ b~s on among at ~e~ comp~y-o~ ~~, ~chise o~ ~ Ken~c~ ~ve d~id~ W ~n~ue ~ pe~it smog. A~r B~ Sweet ~d he would ~ ~ok~ ~ h~ fo~ ~y's, phone calls ~d le~m s~ ~m~ ~ p~ ~s d~bion. "I spoke ~ soon. We'~ go~ to w~t ~d see," Swat ~id. "At ~t b~ I w~ ~1 for iL but ~ is l~e ~ ~ ~ ~ ~d apple ~ ~ ~." T~o this past sea.son's barley sales, which ended this week. PlnTap Morris employs about 2,9e0 people at im Louisville c.'tgarette plant, and hundreds of other people are employed in the dozens of tobacco warehouses throughout the State. In many Kentucky counties, tobacco is the leading industry. These facts are not lost on the State's fast-food restaurant owners. Dan Orangias, general manager and ceo of McDonald's of Greater Louisville, said he has no plans to ban smoking at his company's 37 franchises (Gannett News Service 3/7). LOCAL ANTI-TOBACCO ACTIVITIES ~ California, the ~ Unified School District joined a growing number of Southeast-area districts that have banned smoking on all district-owned property. The school board decided to ban smoking and the use of other tobacco products on all campuses, at sporting events and in district vehicles, effective 7/96. Currently employees are permitted to smoke in designated areas. On 3/8 the Los Axlg¢.~ City Council received a Governmental Efficiency Committee report on the impact a total smoking ban might have on the City's business community (Los Angeles Times 3/3, UPI 3/8). • In ~, a three-month-old Howard County. smoking and vending machine restriction ordinance was challenged in Circuit Court by a Columbia restaurant and a Beltsville distributor of cigarette vending machines. Only the General Assembly has the power to regulate the sale of cigarettes through vending machines, claimed Bruce Bereano, a state lobbyist representing the businesses. The lawsuit does not focus on the ordinance's smoking restrictions, but instead asked the Court to overturn regulations on vending machines. Bereano, however, would like to see a judge nullify the entire statute because of what he called the legal defect related to vending machines. Under the ordinance, restaurant and bar owners must ban smoking on their premises beginning in 1/96 unless they can fashion a separate bar area and equip it with a special ventilation system (Washington Post 3/3). • In Arlin~on. Texas, a smoking ban in restaurants that did not install special ventilation systems took effect recently. The systems can cost up to $80,000. The City Council approved the ordinance in 1/94 (USA Today 3/2). TW94-10 T156460991

NOT .)L~TIF1ED ~;:on'fMued from page I sinai|or sha~ ofl~Ith ca~ c~sts. Aider 15 y~rs, tax coll~ous would drop by about 10% below the L~t~l $I 1.4bn amnnal budget estimate, CRS said (Daily Report fur Executives 3/10). NO TOBAGGO continued from oage 1 income. The study said money spent on tobacco would be steered into other goods and services, creating new jobs. About half the money spent on tobacco products in Michigan are exported to tobacco-growing States, the study said. Warner and Fulton asserted results would be similar in other states where tobacco is smoked but not grown. "In most or possibly all non-tobacco States, the reallocated spending might be expected to produce more employment than does tobacco," however, the researchers acknowledged that the Federal and State governments would lose millions of dollars each year in tobacco excise tax collections without tobacco (UPI 3/8). CIGARETTE TAX PROTEST More than 16,000 tobacco workers and smokers traveled to Washington, D.C. on 3/9 to protest President C]inton's proposed cigarette and OTP tax increases. The protest organizers said a 75¢ per pack Federal cigarette tax increase could cost more than 31,000 jobs in North Carolina alone. "We want the President and his wife to come meet at least some of the 270,000 people who they are trying to put out of work with the proposed tax increases," said Jim Ellis, a member of the Tobacco Action Coalition, the sponsor organization of the rally. "I think we're due an explanation of how a national, multi-billion-dollar program is going to be funded solely by a tax on one product. And I think those of us who may wind up on the unemployment lines as a result of his tax are owed a personal explanation from Mr. and Mrs. Clinton." The rally, which began at noon, was followed by individual calls on the offices of each member of Congress (PR 3/3,9, BW 3/4). HOUSE SUBCOMMITTEE STARTS WORKING ON HEALTH PLAN; $2 A PACK BILL FILED On 3/8 Rep. Pete Stark (D-CA) began work in his House Ways and Means Subcommittee on Health on an alternative health reform plan. Reportedly, Stark's bill would expand the Medicare program to cover all the poor and uninsured, but Democratic colleagues said Stark does not have the votes for his proposal. Rep. Jim McDermott (D-WA), a sabcommittee member who has introduced his own "Canadi~" style plan, characterized Stark's tauposal as "very skimpy," while ranking minority member WRliam Thomas (K-CA)and some Democratic panel members criticized Stark because he began consideration of the bill without a full CBO economic assessment of its provisions. "I'm troubled we're beginning the process without [the appropriate] tools," Thomas said. Stark said the subcommittee would receive a full CBO economic analysis of the proposal by 3/11. That would allow the subcommittee to move from its current walk-through of the document to consideration of amendments and substitutes. Stark's health care package would be considerably less generous than Clinton's and would retain the 75¢ per pack cigarette tax increase. • Meanwhile, on 3/3 Rep. Miller (D-CA) introduced HR 3960, the "American Health Security Act of 1994." His bill would raise the cigarette tax to $2 per pack, increase the little cigar tax rate to $9.38 per thousand and the large cigar tax to 106.25% of the price for which sold but not more than $250 per thousand, cigarette papers to 6.25¢ for each 50 papers, cigarette tubes to 12.5¢ for each 50 tubes, snuffto $3 per pound, chewing tobacco to $ I per pound, and pipe tobacco to $5.63 per pound. HR 3960 was referred to a host of committees for possible consideration. • On 3/2 House Energy and Commerce Chairman John Dingell (D-MI) decided to by-pass Energy and Commerce subcommittees and lift consideration of the Clinton plan to full committee. Also, House Health Subcommittee Chairman Henry Waxman (D-CA), citing time constraints and an apparent lack of consensus, indicated that full committee consideration may commence after the Easter recess. However, House Majority Leader Richard Oephardt (D-Me) said Democratic leaders have uo intention of short-circuiting the committee process, and downplayed suggestions of a leadership-brokered summit, saying he does not think that House committees now working on the health plan will produce vastly different bills (AP 3/8, STC Spotlight 3/4, National Journal 3/8,9,10, TMA Leg- database). WY: TOBACCO TAX BILL DEFEATED On 2/25 the Wyoming House killed a bill, H 165, that would have raised the State cigarette excise tax by 8¢ (from 12¢ to 20¢) per pack and imposed a new 15% tax on the wholesale price of other tobacco taxes. New revenue would have been earmarked for health programs (Daily Report for Executives 3/4). PROBE continued from oaoe 1 become addicted to the product" sheds a different light on the product. He has ordered the General Accounting Office to investigate the allegations and report by early 4/94. • On 3/10 Kep. Henry Waxman (D-CA) asked for a Justic. Department probe into the allegations made by Day One. In a statement, Waxman said he was calling on Justice to investigam "passible civil and criminal liability few failure TW94-10 to comply with the mandates of the Federal Cigarette Labeling Advertising Act (AP, Reuter 3/7, National Journal 3/10).

PM: DAY ONE DISREGARDED FACTS On 3/7 l~i~ip Morris issued another statemeat ~ ~C ~s's D~ ~, a~e~o~ c~cem~ i~ ~v~o on ~co~e ~d c~ ~ien~. PM s~t a 1~ cl~ ~e m~r of cig~¢~ ~¢n~ ~or to ABC's cig~c~ ~ed~¢n~, howcvor, ~c~ ~d chose ins~ad to a~ ~acc~ ~d pro~s wi~out ~fe~g to or ac~owlodg~g i~ recdpt of~c ~o~ado~ PM said @R 3~). COSH FILES PETITION WiTH FDA On 3/? the antismoking group Coalition on Smoking OR Health (COSH) fred another petition with the Food and Drug Administration (FDA) asking that it regulate cigarettes as drugs. COSH sent FDA Commissioner David Kessler copies of industry letters that COSH believes constitutes sufficient proof that cigarette manufacturers intentionally regulate nicotine content "to cause addiction.'" But Tobacco Institute spokesman Thomas Lauria cited a recent New England Journal of Medicine study that found the nicotine content of domestic cigarettes dropped 60% in the last 30 years. Among the industry letters COSH sent to the FDA were: a 1973 Philip Morris memo on nicotine content; a 1986 ~ patent for a machine that regulates the amount of nicotine in tobacco; and an advertisement for a process that "permits adjustments of nicotine" (AP 3/8). AMA SUPPORTS FDA REGULATION On 3/7 the American Medical Association (AMA) announced its support of a filed Coalition on Smoking OR Health petition which calls for the regulation of cigarette manufacturers by the Food and Drug Administration (FDA). In addition, the AMA supports FDA Commissioner David Kessler's request that Congress immediately investigate the manufacture of cigarettes, based on the recent allegations that tobacco companies control the amount of nicotine and other ingredients in their products (US Newswire 3/7). HOUSE PASSES ANTI-TOBACCO PROVISION IN EDUCATION BILL On 3/9 the US House of Representatives passed an amendment to the Elementary and Secondary Education Act, HR 6, that would require school drug prevention programs to include education on the alleged addictive nature of nicotine and the alleged health risks of starring. R~p. Ridmrd Dm~in (D/L) ~d the am~ndm~t and accused the tobacco ind~a'y of lm'iag children to tak~ up the tobacco habit. Rep. Cuss Ballenger (R-NC) led the opposition, accusing the "politically correct Clinton administration" of setting its sights on the American tobacco industry. "Under the Durbin amendment, tobacco is equated with an illegal controlled substance," Ballenger said. "Tobacco has never been considered a controlled substance" (AP 3/9). NC: LEGISLATOR CRITICIZES ECU'S INVITATION TO ELDERS ~ State Rep. Zeno Edwards (R) wrote a letter to the dean of the East Carolina University Medical School protesting the dean's invitation for Surgeon General Joyeelyn Elders to speak. Edwards said Elders, an opponent of tobacco, should not be invited to a region that produces the most flue-cured tobacco in the world. "Any other university -- except Duke -- could do this with no repercussions-- not ECU," Edwards wrote in the letter. "You must realize that tobacco built ECU in a large sense. This is a slap in the face for a large part of the economy in our area." Edwards' letter said the invitation to Elders to address the medical school convocation on 5/6 should be withdrawn, however, Dean Halleck said he would "absolutely not" withdraw the invitation (Raleigh [NC] News & Observer 3/3). NATIONAL SMOKERS ALLIANCE LAUNCHED Smokers around the country have united to form a national organization -- the National Smokers Alliance (NSA)-- dedicated to protecting their rights by promoting policies of accommodation. "Respect for individual rights, which is a tradition in America, has been replaced with intolerance and infringement on personal freedoms," said William Althaus, the former mayor of York, Pennsylvania, who is serving as the chairman of the NSA National Board of Advisors. "Smokers are the most prominent target of this movement, making the NSA an essential voice in the fight to protect individual rights." In addition to serving as a national platform, the NSA will provide members with a wide variety of services, including a bi-monthly newsletter, special alert bulletins and an 800 number where members can get current information on issues affecting their rights (PR 3/7). INVESTIGATION continued from page 1 research and development regarding "fir~safe" cigarettes." Philip Morris and R JR confirmed that they received requests for documents fi'om the Justice Department in the last month or so. Steven Parrish, general counsel for PM, confirmed the investigation but d~mied allegations that PM suppressed information in development of"fire-safe" cigarettes. R JR dedin~l commeat on th~ investigation, cil~g SEC restrictions tied to a stock regiS. The antitrust investigation, which reports described as unusual, is seen as the latest Clinton administration blast at the tobacco industry and has tobacco executives reportedly privately complaining about a coordinated attack by the White House. The administration, which is fighting to triple the Federal excise tax on cigarettes, is by far the most antagonistic that the tobacco industry has faced. In recent weeks, the FDA said that it is considering evidence that would result in the FDA r~gulating cigarettes as a drug, and S~ Ge~ral Joyeelyn Eldecs urged a b~ on cigarette 4 TW94-10 TI56460903

kapp~aing by coincidence," sai~ an execafive at a ci~j~tte company who asked not to be identified. '~ere is a lot going on, and it's wdl-ptmmed and well-coordinated. You can't d~scount the possibility that it is tied to the proposal to increase the Federal excise tax" (WS~, AP 3/~). CORPORATE FtNANCE UNIVERSAL REPURCHASES STOCK On 3/8 Uzdversal Corp. annoimceff that ~ Board of Directors has authorized the repurchase of up to 2ran shares of its common stock, which includes 300~000 sl~ares approved for repurchase in 12/93. Harry Hatrell~. Chairman said: "At recent trading leeds we believe our stock is an attractive investment opportunity" (PR 3/8). INVESTORS REACT TO RJR'S OFFERING Investors are reacting cautiously to ~ Nabisco Holdings Corp.'s filing for an offering of 300rrm depository shares of preferred equity redemption cumulative stock (see TW94-09). Rig is attempting to raise $2bn through the preferred offering, but some investors are worried about the future 20% earnings dilution once the shares convert to ILIP, common stock. Others said there is a risk because the new preferred shares are tied to 1LIR's tobacco business iflUR executes a contemplated breakup of its food and tobacco units. Goldman, Sachs & Co. analyst Marc Cohen lowered h~s 19941UR earnings e~imat~ by 4f~ a share to 40f~ and said he was "som~whaf disappointed" that R JR is issuing additional equity, but continues to recommend the stock (WSJ 3/9). BROOKE EXTENDS EXCHANGE AGREEMENT WITH NEW VALLEY DEBT HOLDERS Brooke Group L~. said on 3/3 that the previously announced agreement, under which Brooke and its wholly owned subsidiary BGLS would exchange with certain debt holders Brooke's stake in New ValIey Corp. for a package of $22mn in cash and $89mn of BGLS debt securities, has been revised and its termination date extended to 9/30. The agreement, which was originally set to expire on 3/31, was extended in response to developments which slowed the pace of the New Valley Chapter 11 proceeding (PR 3/3, WSJ 3/4). LEAF & TRADE GEPHARDT: GATT MAY NOT PASS THIS YEAR On 3/10 House Majority Leader Richard Gephardt cast doubt on Congress's ability to pass legislation this year to implement the Uruguay Round of GATT, claiming it would be difficult to t-rod sufficient funding with other high-priority measures fighting for the same dollars. Gephardt said Congress will need to raise about $ ISbn to pay for GATT in the first five years, and a total of $40bn over 10 years. Those figures include not only the cost of offsetting Iower tariffs, but also the possibility of adding other initiatives to the implementing legislation. For the first five years, that would mean about $13.2bn to offset tarifflosses, another $2.5bn to $3bn to renew the US Generalized System of Preferences programs, and additional funds for miscellaneous initiatives, such as Caribbean Basin Initiative parity. EXPORT STRATEGY Reportedly, President Clinton's export promotion strategy will target emerging markets in Mexico, Brazil, Argentina, India, Indonesia, Turkey, South Korea, China, Hong Kong, Taiwan, South Africa and Poland. Clinton sees big growth there and believes that since US exporters know traditional markets well -- Canada, Europe and Japan -- the government can be most helpful in newer markets (Kiplinger Washington Letter 3/4). IN COURT CA: ETS WORKPLACE SMOKING LAWSUIT On 3/1 a Los An_~eles. California Superior Court areas of the office. According to Smokefi'ee Air For Commissioner denial defense motions to dismiss a lawsuit Everyone, the ruling means ETS, like sexual harassment, is filed by Andrea Portenier, who su~l the insurance broker not part of the job and workers' comtmnsation is not the only she worked for, its parent company and its cfo for assault remedy an individual can seek (BW 3/4). and battery becaus, smoking was permitted in designat, d TWg¢-10 5 TI564~z~4

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