Tobacco lawsuit is finally heading for court

By Marc Kaufman
The Washington Post

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WASHINGTON — It has taken five years of pretrial skirmishing, but testimony finally will begin tomorrow in the government's $280 billion racketeering case against the tobacco industry for allegedly defrauding and misleading the U.S. public for almost 50 years about the health risks of cigarette smoking.

Because of the size and breadth of the lawsuit, it has the potential to transform the tobacco industry, forcing it to increase cigarette prices sharply, to change how it markets and promotes its product, and to spend billions of dollars on programs to help people stop smoking.

The largest civil action ever brought by the Justice Department already has produced 645 court orders and 120 million pages of documents, and it has cost $135 million in taxpayer funds and untold more in industry legal fees.

The potential payoff for the government is enormous: The Justice Department is asking for $280 billion from the tobacco industry as repayment of its allegedly "ill-gotten" profits. But the suit also poses some risk to the tobacco-control effort.

Experts say proving the tobacco industry conspired to sow doubts about the reported health risks of their products will be difficult. As the industry points out, cigarette packs have had warning labels since the 1960s, and in 1998 the industry entered into a master settlement with 46 states — including Washington — that governs some of its most controversial behaviors. As a result, the stock prices of the tobacco companies have not been significantly affected by the case.

But tobacco-control advocates say the federal lawsuit is important in educating the public about the tobacco industry and potentially imposing penalties never before seen in years of tobacco litigation.

"What the government will argue is that the tobacco industry had a strategy to create doubt over health risks that make smokers more hesitant to quit, and those not smoking more likely to start," said William Schultz, a former Justice Department lawyer who helped develop the case. "The fraud is that the companies knew about the health risks but created doubt and controversy about them to maintain their sales."

The tobacco companies deny there was ever any fraud and say they have greatly modified their practices to reflect new information and legal agreements.

"Obviously, no company wants to be facing charges like these," said William Ohlemeyer, associate general counsel of Philip Morris USA, the nation's largest tobacco company and one of eight defendants in the case.
 
"But if there's any upside for us, it's that now the government will have to finally prove their allegations. We will have a chance to respond and show how much we've changed, and people — and the judge — will be able to see and evaluate for themselves."

The case will be heard by U.S. District Judge Gladys Kessler, who, by all accounts, has done an impressive job in moving the massive case forward.

While she disappointed government lawyers early on by throwing out two of their four counts against the industry, she has since ruled 10 times against industry motions to throw out the remaining racketeering counts. Those charges, which include an accusation of widespread fraudulent behavior plus conspiracy to commit the fraud, were brought under the 1970 Racketeer-Influenced and Corrupt Organizations Act (RICO), designed initially to fight organized crime.

Government lawyers will try to prove that the cigarette companies denied that nicotine was addictive even though they knew it was; that the companies promoted "light" cigarettes as safer than traditional brands despite knowing they were not; and that the companies continue to deny the extent of the harm from second-hand smoke.

In addition, the government will try to portray the work of the Tobacco Institute and the Council for Tobacco Research as a public-relations campaign to deny the harms of smoking. Both organizations have been disbanded, but the government will try to prove that the damage they created lives on.

In response, the tobacco companies have argued that whatever happened in the past, the industry has changed its ways and now accepts many of the public-health community's assessments regarding tobacco. Industry lawyers argue that under the civil RICO statute, the government will have to prove cigarette makers intend to continue the alleged fraud — a test they say cannot be met.

"The company made mistakes in the past, but that doesn't mean there was any fraud," Ohlemeyer said. "The government's case is wrong on the facts and wrong on the law."

All of these issues have been raised in earlier tobacco lawsuits, and it remains unclear how much new material and testimony will be presented at the federal trial. But Justice Department officials have suggested that significant new revelations will come.

Soon after taking office, Attorney General John Ashcroft spoke disparagingly about the government's case, and it was revealed that the government held talks with the industry about settling out of court. But those administration positions were roundly criticized by many state attorneys general, among others, and the case proceeded.

"Not only is this a case for large monetary awards and with the potential for modifying the industry's behavior, but the fact that it is being done under an administration normally seen as pro-business is stunning to a lot of people" on Wall Street, said Mary Aronson, a Washington litigation analyst who follows the tobacco industry. "The tobacco industry was beaten up continually during the '90s, and so it became politically difficult to drop it."

The Centers for Disease Control and Prevention estimates that cigarette smoking claims more than 440,000 lives a year — the single greatest cause of preventable death in the nation.

Cheryl Healton, president of the Legacy Foundation, which uses tobacco money from the 1998 master settlement to advertise against smoking, said the government lawsuit represents an "unprecedented opportunity" to impose changes on the industry that can work to bring the death toll down.

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

The list of defendants was provided by The Associated Press.