By John Schwartz
Washington Post Staff Writer
Saturday, November 21, 1998; Page A06

While the eyes of the world yesterday were on the massive $206 billion settlement between the tobacco industry and state attorneys general, a smaller transaction all but escaped notice.

Brooke Group Inc., the parent company of cigarette maker Liggett Group Inc., announced that it was selling three brands to tobacco giant Philip Morris Inc. In the sale, which will have to be cleared by federal antitrust officials, Philip Morris would get L&M, Lark and Chesterfield -- brands that have sold poorly for years -- for a whopping $300 million. Liggett gets to keep its one successful brand, Eve, and its discount and private-label business.

"This is the deal of the century," said one tobacco company adviser, who noted that the total market capitalization of Brooke Group is just $200 million.

Liggett, while the smallest of America's major tobacco companies, has played a large role in the long-running battles against the industry. Liggett made waves by settling in 1996 with the 22 states that had filed suit by then, and agreed to cooperate with the attorneys general as they went up against the larger companies. Brooke Group Chairman Bennett S. LeBow testified in suits against the industry, and witnesses from Liggett testified in Washington state's case.

Liggett also signed on at the last minute as a party to the $206 billion deal, substituting the terms of the new agreement for its old one. Massachusetts and other states had fretted that the original Liggett settlement would leave the opportunity for a major company to buy Liggett and adopt the less stringent rules of that deal. Massachusetts Attorney General Scott Harshbarger's staff and others worked to bring Liggett to the table, and the company agreed to sign on to the national deal. Until then, Liggett had been protesting the terms of the new national settlement, and LeBow had threatened to lobby against it.