updated 8/17/2006 6:21:43 PM ET 2006-08-17T22:21:43

A federal judge ruled against big tobacco Thursday in a long-awaited racketeering decision but didn’t order financial penalties, sending share prices up in aftermarket trading and increasing the likelihood that Altria Group Inc. will begin its planned spin-off as soon as this month.

The decision from U.S. District Judge Gladys Kessler was the last major legal obstacle the industry faced. Removing a degree of uncertainty by resolving an undecided case, the verdict was also a final hurdle for Altria, the world’s biggest cigarette maker.

It can now start to break itself into three separate businesses, Citigroup analyst Bonnie Herzog wrote in a research note.

“Even if the judge orders the industry to pay $14 billion over 10 years, we believe this decision is favorable enough for the board to give the green light to management,” she wrote. “Therefore, it is likely that an announcement regarding the spin-off of Kraft Foods could be announced during the company’s board meeting on Aug. 30.”

Herzog reitered a strong buy rating on Altria.

Kessler ruled that the cigarette makers violated racketeering laws, and ordered them to use advertisements and packaging to warn consumers of the addictiveness of tobacco. She ruled that over decades cigarette makers conspired to deceive consumers about the health hazards of smoking. The companies in turn deny they committed fraud.

However, Kessler said she was unable to order financial penalties, due to a previous ruling by an appeals court.

Edward Sweda, a senior attorney with the Tobacco Products Liability Project at Northeastern University, said, “This is obviously an incredible important milestone. The ruling means, among other things, that from this day forward, the tobacco company defendents are adjudicated racketeers. That finding will reverberate throughout the country and the world.”

The share prices of the major American tobacco producers rose slightly in aftermarket trading on Thursday.

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