Edited by Douglas Harbrecht

CLINTON IS CLOSER TO BACKING THE TOBACCO DEAL, IF...

It's been a smoke-free vacation for President Clinton. Not only has he refrained from lighting up one of his favorite stogies on the golf course but he's also tried to avoid one of the hottest political topics in Washington -- whether to endorse the controversial agreement between Big Tobacco and state attorneys general.

But that will soon change. Sources tell Business Week Online that the President will act shortly after returning to the White House on Sept. 8 from Martha's Vineyard, Mass. And he likely will conditionally approve the settlement, sources say, if Congress toughens certain provisions, including Food & Drug Administration oversight of tobacco and fines against the tobacco companies in case goals to reduce youth smoking are not met.

With the exception of a five-minute chat with former Surgeon General C. Everettt Koop, Clinton has had no meetings or conversations about the pending deal while on vacation, White House spokesman Joe Lockhart said on Sept. 4.

Lockhart said an Administration review team, headed by White House domestic policy adviser Bruce Reed, Health & Human Services Secretary Donna Shalala, and Deputy White House Counsel Bruce Lindsey, will present its recommendations to the President. A Presidential decision will be reached "within the first couple of weeks" that Clinton is back in Washington.

Final congressional action on the settlement is not expected until 1998. Some state attorneys general are worried that a lengthy delay could destroy the fragile agreement. But Lockhart noted that it is "a complicated piece of business" that will take months for Capitol Hill to review. "If it does slip to next year," he said, "...we don't view that as negative or harmful to the ultimate success of passing legislation."

By Richard S. Dunham in Washington