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Attorney: Libya's Pan Am 103 settlement on track

NEW YORK (CNN) -- A $2.7 billion settlement between the Libyan government and families of 270 people killed when Pam Am Flight 103 was blown up over Scotland in 1988 is still on track, despite Wednesday's denial by the Libyan government that it had agreed to provide compensation, an attorney for some victims' families said late Wednesday.

"We have reached a deal. We have an understanding," said Lee Kreindler, who represents families of 118 victims, on CNN's Crossfire. "I have confirmed with my counterpart in Libya that we are still very much in business, and we are proceeding according to plan."

Kreindler said that under the agreement, Libya would pay the $2.7 billion into an escrow account. However, families would not have access to all of the money -- about $10 million per victim -- until after U.N. and U.S. sanctions are lifted and Libya is removed from the State Department's list of state sponsors of terrorism.

Pam Am Flight 103, en route from London to New York, was brought down by a bomb over the Scottish hamlet of Lockerbie in December 1988. All 259 people on the plane were killed, as well as 11 people on the ground.

Sanctions were slapped on Libya after U.S. and British investigators alleged that Libya was behind the Pan Am disaster. A Libyan intelligence agent was convicted last year of masterminding the bombing.

Kreindler said the settlement agreement, which he said is in writing, was hammered out by attorneys for the families and a committee of Libyans authorized by the Libyan government to negotiate. The victims' representatives have not had direct access to Libyan leader Moammar Gadhafi and other government officials, but Kreindler said the Libyan government was engaged throughout the negotiating process.

After news of the settlement broke, the Libyan government denied that it had made any official offer of compensation. However, members of the government said an unofficial offer might have been made by a "non-governmental" negotiator.

Kreindler characterized the statements as a "cultural phenomenon" perhaps related to Libyan politics. But he insisted that the deal is set.

Asked how much of the settlement would go to attorneys for legal fees, he told Crossfire, "I have no idea. I haven't even thought about that."

Under conditions set by the United Nations for lifting sanctions, Libya must:

Kreindler said the settlement with Libya will settle the first condition and clear the way for Libya to accept responsibility, perhaps as early as June during a meeting with diplomats from Britain and the United States.

"We are acting on behalf of these people to put an end to a lasting tragedy," he said. "We are also acting to avoid future terrorism ... if you make it sufficiently expensive, then you will deter terrorism."

But family members of some victims expressed outrage at the idea of settling with the Libyan government.

Susan Cohen, whose only child, Theodora, 20, died in the crash, called the offer "absolutely disgusting and terrible."

"I will not sit quietly for it," she said. "What purpose does this serve? This is not anything but blackmail. They're simply trying to buy their way off the terrorism list, and I will fight as hard as I can to keep them on. I don't care how much they will try to bribe us."

Asked if she believed other families might support the agreement, she said, "I'm not going to kid myself. Do you think that if somebody dangled $6 million in front of you, some people wouldn't say, 'Let's make peace.'?"

Kathleen Flynn, whose 21-year-old son, John Patrick, died in the bombing, said she believes Libya should accept responsibility for the incident before engaging in a discussion of a settlement. She said no amount of money "will ever compensate me for the loss of my child."

"I think the majority of the families in their heart want Gadhafi and the Libyan regime that murdered their children to be held accountable. And if for some people $10 million holds them accountable, that's fine. I don't see it that way (but) that's a big carrot to dangle in front of people. And there is a punitive side to it."

Jack Shultz, who lost his son, Thomas, 21, on the flight, also said Gadhafi must accept responsibility before any settlement is reached.

"He has to get out of the terrorism business and take responsibility," Shultz said. "The money isn't the issue. It's his taking responsibility and swearing off terrorism. Now he has to come clean and help us."

State Department officials said the U.S. government has not been involved in the negotiations over compensation, which is a matter between Libyan and victims' families. The U.S. position is that its unilateral sanctions against Libya will not be lifted as long as the U.N. sanctions are in place.

--CNN's Andrea Koppel, Elise Labott and Mike Ahlers contributed to this report.