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Wealth Creation and Destruction from Brooke Group's Tobacco Litigation Strategy


Sandeep Dahiya


Georgetown University - Department of Finance

David Yermack


New York University (NYU) - Stern School of Business

December 1999

NYU, Law and Economics Working Paper No. 00-007

Abstract:     
We examine value creation and destruction in the tobacco industry due to the radical litigation strategy pursued by Brooke Group and its CEO, Bennett LeBow. Brooke Group has a tiny market share, low margins, high leverage, and a high concentration of managment ownership. Beginning in 1996 the firm reached settlements in lawsuits brought against all cigarette companies by class action plaintiffs and U.S. state governmetns. Brooke Group's actions, which included promises to cooperate in litigation against its rivals, spurred other companies to reach settlements on less favorable terms. The settlements eventurally led to massive wealth destruction within the tobacco industry but impressive returns for sharehoders of Brooke Group.

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Date posted: June 7, 2000  

Suggested Citation

Dahiya, Sandeep and Yermack, David, Wealth Creation and Destruction from Brooke Group's Tobacco Litigation Strategy (December 1999). NYU, Law and Economics Working Paper No. 00-007. Available at SSRN: http://ssrn.com/abstract=231024 or http://dx.doi.org/10.2139/ssrn.231024

Contact Information

Sandeep Dahiya
Georgetown University - Department of Finance ( email )
3700 O Street, NW
Washington, DC 20057
United States
202-687-3832 (Phone)

David Yermack (Contact Author)
New York University (NYU) - Stern School of Business ( email )
44 West 4th Street
Suite 9-160
New York, NY 10012-1126
United States
212-998-0357 (Phone)
212-995-4220 (Fax)
HOME PAGE: http://www.stern.nyu.edu/~dyermack
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