The settlement could involve a payment of $180 billion to $200 billion by tobacco companies to states to cover costs of treating sick smokers, Gary Black of the investment firm Sanford C. Bernstein & Co. said in a report released Thursday.
In exchange, states would drop their claims.
There was no independent corroboration of Black's report, despite calls to state attorneys general suing the industry, anti-tobacco lawyers, and members of Congress following the issue. Several states have said they would not settle for a more lenient deal than was scuttled by Congress last month.
A settlement could help tobacco stocks by reducing the risk that a state could win a huge payment from the industry in court. The investment management operation at Black's firm has stock in tobacco companies.
Black cited "discussions we have had with counsel on both sides" in his report and said "the industry appears to be moving full speed ahead with plans to announce" the pact by late summer.
He estimated the payment would be financed by a 35 cents-a-pack increase in cigarette prices over five years. The defeated Senate bill would have added $1.10 to the price of a pack over the same time period.
In an interview, Black said "the whole deal could blow up" and that it was being discussed at the moment only by key representatives of both sides.
"Nothing in here is nailed down yet," he said.
A spokesman for the nation's biggest tobacco company, Marlboro maker Philip Morris, referred calls to the industry's public relations firm in Washington, D.C. A call to the firm was not returned Thursday.
A spokesman for RJR Nabisco, which owns the Camel and Winston brands, declined comment.
The reported discussions come in the wake of the Senate's failure last month to approve a tobacco settlement bill that would have required tobacco companies to pay $516 billion to resolve legal claims and finance anti-smoking programs aimed at discouraging underage smoking.
That legislation resulted from efforts to implement last summer's agreement by the industry, a group of state attorneys general and anti-smoking forces on a $368.5 billion tobacco settlement plan.
Black said the settlement now under discussion would be limited to the states and would not require approval by Congress.
Unlike last summer's settlement, Black said the latest discussions don't involve giving the Food and Drug Administration specific authority to regulate cigarettes because of their nicotine content, for example.
The industry has already reached settlements with Mississippi, Texas, Florida, and Minnesota over claims for the states' costs of caring for sick smokers.
Written by Skip Wollenberg, AP Business Writer