WASHINGTON (Reuters) - The U.S. House of Representatives voted on Monday to block funds for the Justice Department's landmark lawsuit against the tobacco industry, despite warnings from Attorney General Janet Reno that she may have to drop the case withou

Congress last year denied the Clinton administration's request to earmark $20 million for the first phase of the suit to recoup some of the money the federal agencies spend on smoking-related disease. So the Justice Department drew on its regular annual funds and also took advantage of a federal rule that allows other agencies to chip in for litigation costs if they will be directly affected by a case. But House Republicans and some Democrats from tobacco-producing states moved on Monday to block that practice, barring the Department of Veterans' Affairs from helping to foot the bill for the lawsuit. Similar votes are pending on spending bills affecting other contributing agencies. The effort to lift the restrictive language, led by longtime anti-tobacco crusader California Democrat Henry Waxman, failed by a 207-197 vote. About 30 lawmakers on each side crossed party lines. Reno had warned Congress that she could not continue the suit without financial help from elsewhere in the government. President Clinton, in a statement issued while traveling to Texas, also appealed to Congress to permit the spending. ``Without these critical funds we will have no choice but to seek to dismiss this litigation,'' Reno told a news conference in the Capitol. ``That will be a very grave disservice to the American taxpayer and to the agencies that have had to shoulder the burden of paying to treat those with tobacco-related illnesses.'' Administration To Keep Fighting ``It's unfortunate that Congress has decided to side with Big Tobacco rather than the veterans and the American taxpayers,'' said White House Office of Management and Budget spokeswoman Linda Ricci. She said the administration would keep fighting for the funds as Congress progressed on the spending bills. The Senate has similar language blocking lawsuit funding in one of its annual spending bills, and it is not yet clear whether opponents will be able to remove or soften it. Backers of the ban on spending by the veterans department argued that they were not stopping the lawsuit. ``Nothing in this bill prohibits the administration or the Department of Justice from moving forward with the lawsuit,'' said New York Republican James Walsh, chairman of the appropriations subcommittee that handles veterans affairs. ``These (veterans') funds are precious and they are dear. Let the Justice Department take it out of their own hides. That's their jobs. They're the lawyers,'' he added. But Waxman said the money would come from administrative and legal spending, not from health care, and that a successful lawsuit would bring in more money for veterans' care. Wisconsin Democrat David Obey, the top Democrat on the appropriations committee, said the vote was part of a piece-by-piece strategy to kill the lawsuit. ``You know that it is shutting down and closing down every door available to pursue that suit,'' he said. This year, the Justice Department got money from the Defense, Veterans' Affairs and Health and Human Services Departments, each of which shoulders a portion of the estimated $20 billion annually that the government spends on smoking-related illness. Reno wants those agencies each to contribute about $4 million in the next fiscal year. But her opponents said that the federal rule about cost-sharing should apply when the government is the defendant, not the initiator of litigation. Some have also objected to the overall cost of the case, which will be an estimated $40 million over two years -- although the tobacco companies could pay damages that run far higher if the suit is successful. Many leading veterans' and public health groups supported Waxman's initiative, and the Center for Tobacco Free Kids complained it was wrong for Philip Morris to lobby against funding a lawsuit in which it was a defendant. ``It is highly inappropriate that a defendant in a federal lawsuit would ask Congress to interfere politically and block the lawsuit rather than allow it to be decided on its merits in court,'' center official William Corr said recently. Philip Morris spokesman Tom Ryan said the cigarette maker ''not only has a right but a responsibility to represent the views of this company on behalf of our employees, our shareholders and our consumers. We will continue to represent those views before Congress.'' Among those named in the government suit were Philip Morris Cos. Inc.; R.J. Reynolds Tobacco Co.; Brown & Williamson Tobacco Corp.; British-American Tobacco Plc; Loews Corp.'s Lorillard Tobacco Co. Inc.; Brooke Group Ltd.'s Liggett Group Inc.; the Council for Tobacco Research U.S.A. Inc.; and the Tobacco Institute Inc.

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