The Fall of the House of Zeus (11 page)

    Wigand’s testimony, based on his experiences at a high level in the industry, gave credibility to the case against tobacco. While Mississippi pursued litigation in state court, the fight took on wider proportions, and the major battleground shifted to Washington.

With the strength of other states behind them, Moore and Scruggs were working to increase pressure on the industry and force surrender. As a goal, they envisioned a national settlement so vast in its sweep that it would involve hundreds of billions of dollars. But it would require congressional action that would, among other things, ensure the tobacco companies’ protection against future lawsuits based on health issues.

In the fall of 1995, Scruggs called upon his best contact in the nation’s capital, his brother-in-law, the second-ranking Republican in the U.S. Senate. He told Senator Lott of a possible breakthrough against tobacco. The Liggett Group, a traditional name in the tobacco trade,
seemed to be considering a settlement. The company’s share of the market had been reduced over the years, and the prospect of an expensive legal struggle projected further losses. Scruggs hoped to use Liggett’s weak link in tobacco’s united front to strike for greater concessions. He solicited Lott’s help.

The tobacco issue did not thrill Lott. As a deeply conservative, pro-business lawmaker, he was philosophically opposed to the profession of trial lawyers and the idea of mass torts. Over the years, he had become friends with many of the chieftains in the tobacco industry. But like his brother-in-law, Lott enjoyed swimming in political back channels and consummating deals behind closed doors. There could be something in it for him. A business connection. A political IOU. The satisfaction of brokering an important agreement.

The process would introduce Scruggs to the Washington branch of the Mississippi network he thought of as “the dark side of the Force,” a consortium of political interests led by Lott and his principal factotum in Washington, Tom Anderson. Although he no longer had a place on the congressional payroll, Anderson continued to handle affairs for Lott. Among Mississippians in Washington, he was regarded as Lott’s “hatchet man.”

Lott and Anderson served as Scruggs’s entrée to men with connections to the tobacco industry, to Washington operators who could prove helpful when Scruggs decided to pounce.

After Liggett settled with the anti-tobacco forces in March 1996, others in the business appeared to be looking for the best way out of their dilemma. Steven Goldstone, the chief executive officer of RJR Nabisco, the parent company of R.J. Reynolds, floated a trial balloon in an interview with the
Financial Times
of London. The tobacco industry did not have “such a fight-to-the-death mentality that it would ignore eminently reasonable solutions,” Goldstone said. Though Reynolds would not follow Liggett’s course, he said, the CEO clearly opened the door to compromise, speaking of “legislative, executive, political, social and other sources” that might come together to resolve the issue. That was, of course, the way things worked in Washington, through legislative, executive, political, and social means.

At Lott’s suggestion, Scruggs hired Anderson and his associate John Sears, a well-known Washington political figure, to serve as intermediaries to the tobacco industry.

After seventeen years as Lott’s chief of staff on Capitol Hill, a span interrupted by a stint as American ambassador to a collection of
Caribbean islands during the Reagan administration, Anderson became head of Team Washington, Inc., an operation that held the franchise for a chain of Domino’s pizza outlets in the area and delivered free pizza to friendly Republican congressional offices.

Over the years, Lott and Anderson managed to keep each other comfortable. Lott and his son Chet invested in Domino’s pizza parlors themselves, while in 1995 Team Washington paid for a five-day excursion to Aspen for the senator and his wife that attracted the interest of journalists. Anderson could afford to operate on the same level as his old boss because he had been able to accumulate great wealth and an estate in horse country outside Washington. Like so many former congressional aides, Anderson had become a classic insider in the commerce of the nation’s capital.

But Sears had more political pull. He had served as a White House lawyer under President Richard Nixon and went on to become the national campaign manager for Ronald Reagan. Though he led Reagan to the brink of the Republican presidential nomination in 1980, Sears was overthrown during a campaign makeover by Reagan. Still, he retained celebrity as a Republican insider. His Notre Dame degree helped extend his social circle to some Democrats, and journalists enjoyed his company at long liquid lunches in Washington’s better restaurants.

Though both Anderson and Sears had separate offices in Washington, they were partners with a prominent figure in Florida’s Jewish community named Joel Hoppenstein, in an enterprise called The Developing Markets Group. The firm had stationery indicating an office on Van Ness Street in Washington.

Hoppenstein’s curriculum vitae listed him as a lawyer specializing in structuring financial transactions. In one deal, Hoppenstein and Sears were involved in the sale of a Red Sea resort, built in disputed Sinai territory when it was controlled by Israel, to the Egyptian government after the land changed hands following the Camp David Accords.

There was never any formal mention of him, but P. L. Blake turned out to have a silent role with The Developing Markets Group.

Without the knowledge of his partners in the Mississipppi team, Scruggs met with Anderson and Sears in the spring of 1996 to discuss inroads to the tobacco industry, explorations that might include a meeting with the RJR Nabisco CEO Steven Goldstone, to feel him out about a settlement.

There were contacts between Sears and Anderson and the tobacco interests, but apparently the only fruit the meetings produced turned
out to be a distasteful quarrel between Sears and Scruggs over millions of dollars Sears claimed to have been owed for his services.

    Scruggs and Moore operated more openly in Washington with another powerful Republican, Senator John McCain of Arizona. McCain was not only one of the biggest champions of the anti-tobacco effort in Congress, but he held a position as chairman of the Senate Commerce Committee. He and Scruggs, both former navy pilots, struck up an easy friendship that led to an invitation for Dick and Diane Scruggs to spend a weekend with McCain and his wife, Cindy, at their home in the Arizona desert. More important to the campaign against tobacco, McCain allowed Scruggs and Moore to set up a war room inside the Capitol Hill offices of the Commerce Committee.

His access to working space in the halls of Congress, coupled with the knowledge that other Capitol Hill doors were opening to him, put Scruggs in his element. He loved politics, and this seemed infinitely better than doing business with the rinky-dink operators back in Mississippi. Still, some of those old relationships proved helpful to him in Washington. Especially those with P. L. Blake and Steve Patterson.

In the years since Scruggs escaped the clutches of the dark side of the Force, he had learned how to navigate Mississippi politics. To keep his initiatives afloat, he knew it was necessary to establish links with some of the same people who had once plotted to indict him. There was something a bit louche about these connections, Scruggs realized, but consorting with rogues was far more fascinating than wallowing in the drudgery of bankruptcy law.

Patterson, who had worked a decade earlier on Joe Biden’s failed attempt to win the Democratic presidential nomination, opened doors to the Delaware senator. It was important to win support among Democratic liberals such as Biden, who generally opposed Big Tobacco but were skeptical of any settlement—such as the one Scruggs seemed to be forging—that might immunize the tobacco industry against future lawsuits.

It helped that Scruggs agreed to Patterson and Blake’s suggestion to hire the senator’s brother Jim Biden as one of those assigned to the “legislative, executive, political and social” campaign in Washington on behalf of the anti-tobacco team.
Before the struggle ended, Scruggs would pay thousands of dollars—he was never sure exactly how much—to Jim Biden’s lobbying operation, Lion Hall Group.

·    ·    ·

    Scruggs courted other Democratic allies at the highest levels in Washington. At the White House, he felt Vice-President Al Gore would be a strong advocate. Gore’s sister, Nancy, had died from lung cancer after years of smoking, and her widower, Frank Hunger, was an acquaintance of Scruggs who had been a lawyer in Mississippi before coming to Washington to take over the civil division of the U.S. Department of Justice.

The Mississippi team had another connection to Gore, through David Nutt, the Jackson attorney who had come to their financial rescue. Nutt hosted a private dinner for the vice-president at his Mississippi home and invited members of the HALT group to come discuss with Gore their anti-tobacco litigation.

At the same time, Trent Lott helped arrange secret White House meetings for Scruggs. Though the Senate leader of the opposition party, Lott was in regular contact with President Clinton’s chief of staff, Erskine Bowles, crafting compromises before congressional issues blew into political crises.

Negotiations between anti-tobacco lawyers, industry representatives, and political leaders seemed to be making progress. Scruggs, who had never been gifted as an orator in an actual trial, preferred out-of-court settlements and, in August 1996, felt that the various sides were on the verge of an acceptable plan. It would cost the tobacco interests billions of dollars in payments each year to a settlement fund, but it would protect the industry from future lawsuits.

The deal was set back by a story in
The Wall Street Journal
that described specific provisions of the proposal and reported that “formidable opposition” to the plan was developing. Scruggs felt the information had been turned over to the newspaper by a California congressman, Henry Waxman, the ranking Democrat with oversight on the issue in the House. Waxman was a staunch critic of tobacco, and another of the Democratic liberals unwilling to give immunity to the industry.

Scruggs felt betrayed. Early in the struggle against tobacco, he and Mike Moore had entrusted Waxman with the Brown and Williamson papers provided by Merrell Williams. And Scruggs had shared with Waxman a draft of the prospective settlement.

Negotiations got back on track, but nearly another year would be needed to complete the deal.

    By the spring of 1997, thirty-nine other states had joined Mississippi in the campaign against the tobacco industry. With Moore and
Scruggs handling the case for the coalition, a series of private talks were held with industry attorneys. It was high drama, albeit behind closed doors. To ensure privacy, the meetings took place in out-of-the-way hotel conference rooms around the country.

On June 20, an agreement was finally reached. Over a twenty-five-year period, Big Tobacco would pay out $368 billion to compensate for health costs related to smoking. The industry would also submit to tougher regulations and put an end to much of its advertising. In exchange, tobacco would no longer face massive class action suits, eliminating the danger of crippling punitive litigation in the future. When Moore announced the settlement, he called it “the most historic public health agreement in history.”

But the agreement still needed congressional approval.

Anxious to resolve the dispute, the tobacco industry began to make a separate peace with the various states. An agreement was reached within two weeks with Mississippi that gave $3.4 billion to the state.

For the members of HALT, this represented the ultimate big lick. They had risked their own money to represent the state at a time when state officials—other than Moore—were unwilling to challenge Big Tobacco. And the fees that they reaped did not come directly out of the state’s windfall, but were assigned by independent arbitration panels.

For the next twenty-five years, each of the Mississippi attorneys who had signed on for the fight would be paid millions of dollars. A 10 percent share in HALT, such as those held by Crymes Pittman and Mike Lewis, would be worth roughly $140 million.

Scruggs’s big lick would be even bigger, for he had a greater share in HALT and was involved in additional litigation on behalf of Florida, Texas, and others. Tobacco was settling with these states, too. The total amounts coming to Scruggs seemed incalculable. Some news accounts had him getting as much as $848 million, leading to descriptions of him as a billionaire. The lick was never that big, but far more than most Americans would earn in a lifetime.

Looking back on the period a few years later, Scruggs would tell a friend, “The money was obscene. Nobody thought we’d make money like this. It was a frenzy.”

    Even though the national settlement, announced with great fanfare in 1997, broke down in Congress the next year, the victim of legislation that had become top-heavy (tobacco’s liability had grown
to more than $500 billion), the industry had been dealt a severe blow, and Scruggs had been given a title: King of Torts. It complemented his college nickname, Zeus, king of the gods.

But the crown did not rest easily on him.

Instead of enjoying his riches in comfort, he was forced to fight rearguard actions to protect his interests. During the four-year struggle over the tobacco litigation, Scruggs agreed to assign various percentages of his eventual payout to others. Some of the promises were sealed with nothing stronger than a handshake, leading to bitter quarrels over disputed terms. Later, questions would arise about payments to agents of the dark side of the Force.

    No better example of the curious deals and money frenzy exists than Scruggs’s agreement with a prominent North Mississippi trial lawyer named Joey Langston.

Less than two months after the tobacco interests began to reach agreements with various parties to the conflict, Scruggs was alarmed by an article in
The Wall Street Journal
that touched on a problem that could wreck the process. The story reported that Ron Motley, one of Scruggs’s chief partners in the tobacco fight, had been sued for $1.5 billion by a former client in Jones County, Mississippi. The plaintiff was the widow of a small-town barber named Burl Butler who had died of lung cancer after a career of inhaling smoke in a barbershop dense with the discharge of cigarettes. Initially, Mrs. Butler had been represented by Motley, who had boasted of the suit’s unpredecented nature—the first to claim that death had been caused by secondhand smoke. After Motley emerged as one of the lawyers involved in a settlement that would spare the industry from suits such as Mrs. Butler’s, she accused him of undermining her interests.