Judge: Tobacco companies lied to smokers about hazards

Friday, August 18, 2006

WASHINGTON -- A federal judge ruled Thursday that the nation's top cigarette makers violated racketeering laws, deceiving the public for years about the health hazards of smoking, but said she couldn't order them to pay the billions of dollars the government had sought.

U.S. District Judge Gladys Kessler did order the companies to publish in newspapers and on their Web sites "corrective statements" on the adverse health effects and addictiveness of smoking and nicotine.

She also ordered tobacco companies to stop labeling cigarettes as "low tar," "light," "ultra light" or "mild," since such cigarettes have been found to be no safer than others because of how people smoke them.

In her ruling in the long-running case, the judge said, "Over the course of more than 50 years, defendants lied, misrepresented and deceived the American public, including smokers and the young people they avidly sought as 'replacement smokers,' about the devastating health effects of smoking and environmental tobacco smoke," or secondhand smoke.

Kessler, who presided over the nonjury trial in the case, said that adoption of a national stop-smoking program, as sought by the government, "would unquestionably serve the public interest" but that she was barred by an appeals court ruling that said remedies must be forward-looking and not penalties for past actions.

The government had asked the judge to make the companies pay $10 billion for smoking cessation programs, though the Justice Department's own expert said $130 billion was needed.

That reduction in recommended remedies led to accusations that Robert McCallum, an associate attorney general appointed by President Bush, had tried to weaken the case. An internal Justice Department investigation cleared him of wrongdoing, however, saying he was supporting a figure he thought could be sustained on appeal. McCallum is now U.S. ambassador to Australia.

Kessler's decision came nearly a decade after the states reached legal settlements with the industry worth $246 billion and aimed at recovering health- care costs. Those settlements imposed some restrictions on the industry, such as banning ads on billboards and public transportation.

In the federal case, tobacco companies had denied committing fraud and had said changes in how cigarettes are sold now make it impossible for them to act fraudulently in the future.

In addition to saying she could not force the companies to pay for a quit-smoking program, Kessler rejected a government bid to impose fines on the industry if youth-smoking rates fail to drop in the coming years.

Mark Smith, a spokesman for R.J. Reynolds Tobacco Co., said company officials were "gratified that the court did not award unjustified and extraordinarily expensive monetary penalties."

At the same time, Smith said, the company was disappointed by Kessler's finding that the companies had conspired to violate federal law and deceive consumers. He said company lawyers would analyze the decision and decide a next course of action.

The Justice Department, which filed the lawsuit, expressed disappointment in Kessler's decision not to impose financial penalties against cigarette makers.

"Nevertheless, we are hopeful that the remedies that were imposed by the court can have a significant, positive impact on the health of the American public," the department said.

Sharon Eubanks, who recently stepped down as the head of the government's tobacco team said, "We won. It's clear the government won. This is the first time they've been found to violate the racketeering statute. For crying out loud, that's significant. They're racketeers."

The government filed the civil case under a 1970 racketeering law commonly as RICO used primarily to prosecute mobsters in cases in which there has been a group effort to commit fraud.

The tobacco companies -- except for one defendant, Liggett Group Inc. -- were ordered to pay the government's cost for pursing the lawsuit. The government's costs, according to the most recent Justice Department estimate, were more than $140 million.

The suit was first filed in 1999 during the Clinton administration. The Bush administration pursued it after receiving early criticism for openly discussing the case's perceived weaknesses and attempting unsuccessfully to settle it.

A separate court issued an interim ruling last year, finding that civil racketeering laws did not permit the government to seek $280 billion from the companies for money they allegedly earned over many years through fraud.

During the trial, Kessler heard accusations that the companies established a "gentleman's agreement" in which they agreed not to compete over whose products were the least hazardous to smokers. That was to ensure they didn't have to publicly address the harm caused by smoking, government lawyers said. Tobacco lawyers denied the contention.

The defendants in the federal lawsuit were: Philip Morris USA Inc. and its parent, Altria Group Inc.; R.J. Reynolds Tobacco Co.; Brown & Williamson Tobacco Corp.; British American Tobacco Ltd.; Lorillard Tobacco Co.; Liggett Group Inc.; Counsel for Tobacco Research-U.S.A.; and the now-defunct Tobacco Institute.

The only cigarette maker excluded from Kessler's ruling was Liggett.

Kessler credited Liggett with coming forward in the 1990s to admit smoking causes disease and is addictive and for being the only company to disclose the ingredients of its cigarettes on its cartons. She also said the company had been helpful as state and federal officials pursued claims against the industry.

"Liggett is pleased with the court's decision to award no remedies against the company," said Carrie Bloom, a spokeswoman for Liggett, which is based in Mebane, N.C., and makes discount brands.

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