Federal suit against tobacco close to trial

Monday, March 22, 2004

WASHINGTON -- Cigarette makers are no strangers to the courtroom, but after settling a lawsuit with states, they face Uncle Sam as the plaintiff this fall in what is shaping up as the biggest civil racketeering trial in history.

Repeated efforts to get the $280 billion case dismissed have failed. So has an attempt by the Bush administration to negotiate a settlement.

Last week, U.S. District Judge Gladys Kessler rejected the latest bid to have the case thrown out, and the government submitted a list of witnesses it intends to call. On it is a who's who of the tobacco industry.

Six years ago, 46 states settled their suit against the industry for $206 billion, payable over 25 years. Four states settled separately for a total of $40 billion. The states recovered costs for treating sick smokers.

Kessler ruled the federal government cannot do the same. Instead, she is letting the Justice Department sue the industry for allegedly conspiring to deceive the public about the dangers of tobacco and the addictive nature of nicotine. The government also claims the companies targeted children through advertising and then lied about it.

Government lawyers are pursuing the civil case under the Racketeer Influenced and Corrupt Organizations Act, known as RICO. The 1970 law was created to prosecute mobsters.

The suit was initiated in 1999 under President Clinton. The Bush administration has allowed it to continue after receiving criticism for publicly discussing the case's perceived weaknesses and attempting unsuccessfully to settle it three years ago.

"My sense is that through pressure from Capitol Hill and elsewhere, the case has been funded and that the career attorneys, not political appointees, have been permitted to make the major litigation decisions," said William Schultz, a former Justice Department lawyer who headed the case during the Clinton administration.

The department would not comment on the case or say how much is being spent on it. Observers say the cost to the government is tens of millions of dollars annually.

The defendants are Philip Morris USA Inc. and its parent, Altria Group Inc.; R.J. Reynolds Tobacco Co.; Brown & Williamson Tobacco Co.; British American Tobacco Ltd.; Lorillard Tobacco Co.; Liggett Group Inc.; Counsel for Tobacco Research-U.S.A.; and The Tobacco Institute.

Justice lawyers argue that the $280 billion amounts to "ill-gotten gains." Philip Morris attorney William Ohlemeyer called that "a made up number" and said there is no way the companies can pay that much.

Even if the government can show the money was earned through fraud, it also would have to prove the fraud was likely to continue, Ohlemeyer said.

"I think it's going to be impossible for the government to prove that there's a reasonable likelihood that these companies are engaged in fraud as we speak and likely to engage in fraud in the future," he said.

The industry is awaiting a ruling from the judge on that issue.

The government argues cigarette makers still make public statements that are out of step with prevailing medical views, including denying the dangers of secondhand smoke. Government attorneys also say the industry's past behavior is sufficient proof that future wrongdoing is likely.

Cigarette makers say that terms of the settlements with the states prevent bad behavior. For example, the settlement prohibits the companies from using cartoon characters or from advertising on public transportation or billboards.

David Bernick, Brown & Williamson's lead attorney in the case, said the government wants "to blink away the reality" of the state settlements' restrictions.

Federal attorneys say that limits in the state settlements are not enough. They want the judge to impose new restrictions, including banning vending machines and forbidding marketing terms such as "light" and "low tar," labels that government lawyers say give smokers false impressions.

The government wants restrictions on in-store promotions. It also says the industry should have to pay for new efforts to help smokers quit.

Justice attorneys say the companies repeatedly are violating the master settlement with the states. They point to one case in which a California judge fined R.J. Reynolds $20 million for violating the agreement by targeting teens through magazine ads.

Philip Morris' Ohlemeyer says judgments like that should reassure critics that a check is in place.

Kessler already has thrown out several motions to dismiss the case, including one that relied on evidence that the government knew about tobacco's dangers but sold cigarettes at federal facilities anyway.

Tobacco executives and industry critics agree that a trial is now inevitable.

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On the Net:

U.S. District Court for the District of Columbia: http://www.dcd.uscourts.gov/

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