Wealth Creation and Destruction from Brooke Group's Tobacco Litigation Strategy
Georgetown University - Department of Finance
New York University (NYU) - Stern School of Business
NYU, Law and Economics Working Paper No. 00-007
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.
Number of Pages in PDF File: 45
Date posted: June 7, 2000