Tobacco industry fraud trial begins; $280 billion at stake
September 21, 2004
WASHINGTON (AP) – The nation’s biggest tobacco companies worked together for decades to mislead the public about the dangers of smoking, a federal lawyer alleged Tuesday at the start of a civil racketeering trial in which the government seeks a record $280 billion from the industry.
In his opening statement, Justice Department attorney Frank Marine said starting in the 1960s the industry spent hundreds of millions of dollars on organizations set up to counter the growing body of scientific evidence linking smoking to cancer.
He cited internal industry documents showing company executives knew they were trying to deceive the public.
“The problem to them was that the public might stop smoking because of health concerns,” he said.
The industry created the Center for Tobacco Research and the Center for Indoor Air Research to rebut scientific findings about smoking and the dangers of second hand smoke, and set up the Tobacco Institute to promote their findings and otherwise serve as a public relations and lobbying arm, he noted.
Marine said the goal was to create a controversy where none existed. He said the “massive scheme” was successful and has had devastating consequences, citing the nearly half-million Americans who die from smoking-related illnesses each year.
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The government’s opening statement was expected to take all day Tuesday. Industry lawyers were scheduled to make their opening statement Wednesday.
The defendants in the case 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.
Industry lawyers have acknowledged tobacco executives may have expressed doubts about public health concerns in the past, but say that doesn’t amount to fraud.
“Fraud is, ‘I have a specific intention to mislead you or take money from you by deceiving you,”‘ said Philip Morris USA attorney William Ohlemeyer. “Fraud is a very high bar.”
The industry settled lawsuits with the states over smoking-related health costs for $246 billion. Those agreements, reached in the late 1990s, led to limits on advertising and marketing and shuttered industry lobbying and research organizations.
The government brought the racketeering case in 1999, when the Clinton administration was in power, and has spent $135 million pursuing it. The non-jury trial is being heard by U.S. District Judge Gladys Kessler and is expected to take up to six months.
In a statement issued just before the start of the trial, Attorney General John Ashcroft called the case “an important effort to prevent fraudulent activity and uphold corporate integrity.”
In addition to disagreeing about whether fraud occurred in the past, cigarette makers and Justice lawyers also disagree on what the government must demonstrate about the future to win the case.
The industry says following the settlement with states companies significantly changed the way they sell and market cigarettes. They say that makes it impossible for the government to prove fraud is likely to occur in the future, something the government must show to win its case.
Justice lawyers argue that evidence of past fraud is enough to conclude that future wrongdoing is likely to occur.
David Bernick, attorney for Brown & Williamson Tobacco Corp., says the government’s case ignores those reforms.
“It blinks away the reality of the profound changes that have taken place both within the tobacco industry and in how tobacco is perceived by people outside the industry,” Bernick said.
Like the states, the government initially sued to recover the costs of treating sick smokers. Kessler ruled the government couldn’t do that but did allow the Justice Department to sue under the Racketeer Influenced and Corrupt Organizations Act.
The government is relying on RICO, originally crafted to go after mobsters, because that law is designed to achieve remedies where there has been a group effort to violate fraud statutes, said William Schultz, a former Justice Department lawyer who headed the case during the Clinton administration.
The government is seeking $280 billion in “ill-gotten gains” earned by the industry. Justice lawyers also want new restrictions on the industry, which might include limiting in-store promotions or banning product descriptions such as “low tar” or light.”
The judge has said the government can go after the companies’ old earnings, but the industry appealed that ruling. A higher court is considering the issue even as the trial gets under way.
“If you steal something, or you take something by fraud that doesn’t belong to you, you should not profit from that,” said Robert Kline, a senior attorney at the Tobacco Control Resource Center, a think tank at Northeastern University in Boston.
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