|Tobacco Escapes Huge Penalty
U.S. Seeks $10 Billion Instead of $130 Billion
By Carol D. Leonnig
Washington Post Staff Writer
Wednesday, June 8, 2005
After eight months of courtroom argument, Justice Department lawyers
abruptly upset a landmark civil racketeering case against the tobacco
industry yesterday by asking for less than 8 percent of the expected penalty.
As he concluded closing arguments in the six-year-old lawsuit, Justice
Department lawyer Stephen D. Brody shocked tobacco company representatives
and anti-tobacco activists by announcing that the government will not seek
the $130 billion that a government expert had testified was necessary to
fund smoking-cessation programs. Instead, Brody said, the Justice
Department will ask tobacco companies to pay $10 billion over five years to
help millions of Americans quit smoking.
Before it was cut, the cessation program was the most significant financial
penalty still available to the government as part of its litigation, which
had been the largest civil racketeering and conspiracy case in U.S.
history. The government contended that six tobacco companies engaged in a
50-year conspiracy to defraud and addict smokers and then conceal the
dangers of cigarettes.
"We were very surprised," said Dan Webb, lawyer for Altria Group's Philip
Morris USA and the coordinating attorney in the case. "They've gone down
from $130 billion to $10 billion with absolutely no explanation. It's clear
the government hasn't thought through what it's doing."
The Justice Department offered little explanation for the figure. Associate
Attorney General Robert D. McCallum Jr. and members of the trial team
declined to answer questions as the court session ended. In 2001,
then-Attorney General John D. Ashcroft tried to settle or shelve the
government's racketeering case against the industry before a public outcry
forced its revival.
"It feels like a political decision to take into consideration the tobacco
companies' financial interest rather than health interests of 45 million
addicted smokers," said William V. Corr, director of the Campaign for
Tobacco-Free Kids. "The government proved its case, but the levels of
funding are a shadow of the cessation treatment program that the
government's own expert witness recommended."
Sources and government officials close to the case said the trial lawyers
wanted to request $130 billion for smoking-cessation programs but were
pressured by leaders in the attorney general's office, particularly
McCallum, to make the cut. Arguments within the Justice Department
continued behind the scenes through yesterday morning, according to the
sources, who spoke on the condition of anonymity because of the controversy
over the matter.
When the case began in 2004, the government sought to force the tobacco
industry to pay $280 billion in allegedly ill-gotten profits. But in
February, a federal appeals court ruled that the administration could not
seek that penalty.
Michael Fiore, the government expert who recommended $130 billion for
cessation programs, is a medical professor and director of a tobacco
research center who chaired the subcommittee on tobacco cessation in the
Department of Health and Human Services' Interagency Committee on Smoking
His testimony was widely considered to represent the sum the government was
seeking for a cessation program, though Justice Department lawyers had made
no formal demand until yesterday.
The strength of the government's case hinged on a large collection of
internal tobacco company documents, many of which were never before made
public. The government began its case in September by showing on an
oversized projection screen the written memos of tobacco executives and
scientists as they described their plans to keep customers in the dark
about whether their habit was addictive or dangerous and to encourage young
people to smoke.
Facing those same internal documents in another suit,the tobacco industry
in 1998 agreed to pay $246 billion to settle a lawsuit filed by states to
recover their costs for the medical treatment of smokers.
Justice Department spokeswoman Cynthia Magnuson said the department could
ask the court to force the industry to pay more in future years for
cessation programs, which include a staffed help line for smokers,
treatment programs and possibly free medications. She suggested the penalty
was designed to comply with the recent appeals court ruling that such
penalties could not be used to punish past fraud. Sources close to the case
said the cessation program is either a valid penalty or it's not; the
dollar figure should not change that.
"This proposal has been designed to be a forward-looking remedy to prevent
and restrain future wrongful conduct consistent with the recent Circuit
Court opinion in this case," she said.
U.S. District Judge Gladys Kessler, who is presiding over the case, is
expected to decide in the next few months whether the government proved its
case of an industry-wide conspiracy and whether to order any penalties
against the companies. Among the other remedies the government is still
seeking are an industry-funded anti-smoking educational campaign and a
court injunction to stop the companies from targeting youth in their marketing.
The government also wants the judge to appoint a court monitor to watch
over industry practices and ensure that tobacco companies do not commit
fraud in the future. Kessler has repeatedly expressed concern about how
such proposals would work.
Defendants in the case include Philip Morris USA; R.J. Reynolds Tobacco Co.
and Brown & Williamson, which have merged to form Reynolds American Inc.;
British American Tobacco; the Lorillard Tobacco unit of Loew's Corp.; and
Vector Group Ltd.'s Liggett Group Inc. They began their closing arguments
Anti-smoking advocates assailed the decision as a self-inflicted blow that
would help the tobacco companies' bottom line and miss a well-earned chance
to help American smokers.
William B. Schultz, a former Justice Department official who oversaw the
lawsuit under the Clinton administration, said that "it's disappointing, to
say the least, that at the final stages of this litigation they have pulled
their punches in such a significant way. This is the loss of a significant
opportunity to advance public health. Smoking is the number one preventable
disease. It kills 400,000 people a year."
Lead government attorney Sharon Eubanks had summed up the trial early
yesterday, saying the government had proved the industry engaged in a
"decades-long pattern of . . . misrepresentations, half-truths, deceptions
and lies that continue to this day."