In the largest suit yet, US sues the tobacco industry
The Justice Department seeks $280 billion, but companies say they've already made appropriate changes.
In 1953, a debonair Perry Como - advertising he was a two-pack-a-day smoker - helped Chesterfield spread the message that "a medical specialist" found no nose, throat, or sinus problems among people smoking its brand for 10 years.
That same year, executives of the major tobacco companies met at the Plaza Hotel in New York with the public-relations firm of Hill & Knowlton to devise a strategy to raise doubts about the growing evidence that smoking was linked to serious medical problems. As a result of the meeting, the industry said it would conduct "independent research."
Starting tomorrow, the Department of Justice will sue the tobacco industry under civil RICO statutes, seeking the largest damages award ever for a US civil suit. The Justice Department will use racketeering charges - which are usually brought against organized crime - to allege that tobacco companies misled the public over the past 50 years. And it will ask a federal judge in Washington to order the industry to pay back $280 billion in past profits - an amount that the industry says would drive it into bankruptcy and that is slightly more than the industry agreed to pay states in their 1998 settlement with attorneys general.
If the Department of Justice is successful, the suit could also result in new restrictions on the behavior of the industry, potentially changing how tobacco is produced, sold, and marketed.
"These other equitable remedies that the court has available to it are very important because they directly address the fundamental behavior of the tobacco industry that is at issue," says William Corr, executive director of the Campaign for Tobacco-Free Kids. "Through those remedies we believe that thousands and millions of lives will be saved."
The tobacco industry, for its part, calls the suit "ill-founded." It argues that the industry has already changed its stripes, now calling cigarettes dangerous and addictive.
Their own websites, for example, have links to organizations that provide information on quitting. And after the state settlement, the industry pulled ads from many youth- oriented magazines, stopped distributing free T-shirts and hats, and eliminated some sponsorships.
It even admits that secondhand smoke is dangerous. "If you look at the injunctive relief and stack it up against the Master Settlement Agreement [the 1998 state settlement], all the issues were taken care of," says Mike Pfeil, vice president of corporate communications at Altria, the parent of Philip Morris, the nation's largest tobacco company.
The new suit, which has taken five years to get to court, almost didn't happen after President Bush was elected. Initially, the administration tried to withhold funds from the Department of Justice to pursue the case. However, Attorney General John Ashcroft changed his mind, and the lawsuit continued.
"It was a unanimous decision by the lawyers who looked at it," says William Schultz, former US deputy attorney general and part of the legal team that filed the lawsuit in 1999.
The case is one of the most expensive ever litigated. According to the Department of Justice, it has spent $135 million so far on the litigation. That is far more than the antitrust suit against Microsoft, which at one point the Justice Department said cost $9 million but other some news reports estimated at $30 million to $60 million.
Much of the expense is from managing and reviewing documents. So far, the government has made available to the defendants 80 million pages of documents that it may use. Philip Morris and R.J. Reynolds estimate they have shown the government 42 million pages.
Even so, Judge Gladys Kessler fined Philip Morris USA $2.75 million this summer for the possible loss of some e-mails by employees.
William Ohlemeyer, associate general counsel of Altria Group, says the lawsuit is easily twice as time consuming as any of its past cases. "More time and more people means more money," he says.
Besides Philip Morris, the other defendants in the case are R.J. Reynolds, Brown & Williamson, Lorillard, British American Tobacco, and Liggett Group.
So far there have been substantial legal skirmishes in pre-trial maneuvers. Judge Kessler has thrown out a key feature of the lawsuit - the government's attempt to be reimbursed for money spent by Medicare to treat tobacco-related diseases. The tobacco companies are also appealing her decision that the government can seek disgorgement of past profits. That decision may come down during the trial.
According to Mr. Ohlemeyer, the government came up with its estimate of possible profits by estimating the amount of money spent by anyone under the age of 21 who smoked five cigarettes a day. This comes to $70 billion. Then, the government estimated the economic benefit to the tobacco companies of having this cash, resulting in a total of $280 billion.
A spokesman for the Department of Justice refused comment since the issue is under litigation.
Tobacco companies maintain that the government would be hard-pressed to prove that every dollar they earned was the result of fraud, especially since cigarette packs have had health warnings on them since 1966. "Not only were our actions completely legal, but much of it was regulated over that period of time," says Mr. Pfeil.
However, the industry will also have to defend its actions, which included raising doubts that cigarettes caused cancer. For example, in 1987, Brennan Moran, a spokeswoman for the Tobacco Institute, one of the non-company defendants in the case, told a Monitor reporter that claims of health problems related to secondhand smoke were "unsubstantiated."
Even as late as 1993, the industry was trying to raise doubts about an EPA report on secondhand smoke. "This is a report which has been criticized by a number of scientists in a number of disciplines," said Ms. Dawson (nee Moran).
Now, Philip Morris among others calls secondhand smoke dangerous.