As you might already know, Philip Morris was recently hit with a $10-billion judgment down in trial-lawyer-friendly Madison County. If you're sued and you lose, Illinois law requires you to post a bond before you can appeal the verdict. The judge in this particular case has ordered Philip Morris to post a $12-billion bond before it can appeal.
The lawsuit has garnered worldwide attention. Philip Morris is a huge and important company, and the lawsuit could force it into bankruptcy, so financial markets all over the globe are watching Illinois closely for any sign of the company's fate. But relying on financial wire services to report on obscure committee hearings in a Midwest state is not sufficient. Traders are always looking for an advantage of even a few seconds. So, perhaps taking their cue from cable news' 24/7 coverage of the war in Iraq, the traders have reached out to Illinoisans who are already "embedded" in the legislative process. (I was actually approached by the manager of a New York hedge fund to watch a bill's progress, but so far I haven't agreed to take his money.)
Philip Morris says it can't afford to pay the $12-billion appellate bond, even though its after-tax net profits last year were a little more than $18 billion. So the company hired former Governor Jim Thompson to convince the legislature to pass a bill that would drastically lower the state's appellate-bond requirements for gigantic judgments. The company has gotten pretty much nowhere, mainly because of the clout of the trial lawyers in this state, but also because it has refused to offer a realistic alternative. At one point, PM wanted the law changed to allow it to post a paltry $25-million bond. That idea was laughed out of the statehouse.
Senate Democrats decided last week to craft a compromise bill that they conceded from the beginning would not be popular with anyone. Shortly before 1 o'clock Thursday afternoon, the Senate Dems announced they would run their bill in the Executive Committee in a few minutes. The legislation would have allowed the company to post a $1-billion appellate bond - much more acceptable to Philip Morris.
Statehouse cell-phones must have started cranking out calls to New York traders right away. If you look at Philip Morris parent company Altria's stock-price fluctuations from Thursday, you'll see what happened.
Just before the 1 p.m. hearing, Altria's stock spiked upwards, obviously on the news from the embedded Springfield "reporters" that the Senate Dems planned to run a bond-cap bill through a committee that almost always does whatever party leadership demands.
The stock price dropped a bit a few minutes later, perhaps because of computerized trading, but then went back up, where it stayed throughout the committee hearing.
But then something unexpected happened. The attorney general's office testified against the bill and did such a good job picking it apart that the legislation died in committee. The judge in the case has awarded $3 billion to the state as part of the judgment, and the attorney general's office doesn't want anything to happen to that dough.
Plus, there's a feeling in Springfield that Philip Morris ought to cough up some big bucks for the state's ailing budget before the General Assembly allows it to proceed with its appeal. Florida got $500 million when that state's legislature lowered its appellate-bond requirements. If Philip Morris shows up with a billion dollars in hand, maybe it will get what it wants here, too.
Anyway, the second the vote was taken and the bill had died, the cell-phone calls to New York started once again.
Boom! Altria's stock price dropped like a rock almost instantaneously, fluctuating wildly down and then up and then down again in just a few minutes. Millions of shares were traded in the hour after the committee meeting. Lots of money was made by people who had access to the real-time "news" emanating from the statehouse. And some people in Springfield made a few easy bucks. Everyone had a good day, except, of course, Philip Morris and the folks who didn't have the money or foresight to buy their own reporter.
Rich Miller also publishes Capitol Fax, a daily political newsletter. He can be reached at (http://www.capitolfax.com).