Judge Rules Cigarette Makers Deceived Smokers
WASHINGTON, August 18, 2006 - A federal judge says the nation's top cigarette makers conspired for decades to mislead the public about the health hazards and addictive nature of smoking, but she says there's not much she can do to make them pay.
U.S. District Judge Gladys Kessler sided with the government Thursday in its seven-year-old civil racketeering case against the tobacco industry. However, she rejected a bid by the Justice Department to make tobacco companies pay billions of dollars in remedies.
Kessler, who presided over a nonjury trial, said she was barred by an appeals court ruling that remedies must be designed to prevent future wrongdoing and not to punish bad behavior.
Kessler rejected a government proposal to impose fines on the industry if youth smoking rates fail to drop in the coming years, despite finding that the companies marketed to teens and lied about it.
The judge did order the companies to stop labeling cigarettes as "low tar," "light," "ultra light" or "mild," saying they have used those terms to mislead consumers.
"They distorted the truth about low tar and light cigarettes so as to discourage smokers from quitting," Kessler said.
"They suppressed research. They destroyed documents. They manipulated the use of nicotine so as to increase and perpetuate addiction," Kessler wrote in the ruling, which often referenced internal industry memos.
The government had asked the judge to make the companies pay $10 billion for smoking cessation programs, though the Justice Department's own expert said $130 billion was needed.
That reduction in recommended remedies led to accusations that Robert McCallum, as an associate attorney general appointed by President Bush, had tried to weaken the case. An internal Justice Department investigation cleared him of wrongdoing, saying he was supporting a figure he thought could be sustained on appeal. McCallum is now U.S. ambassador to Australia.
Kessler's decision came nearly a decade after the states reached legal settlements with the tobacco industry worth $246 billion and aimed at recovering health care costs. Those settlements imposed marketing restrictions on the industry, such as banning ads on billboards and public transportation and banning cartoon characters.
In the federal case, tobacco companies had denied committing fraud and had said changes in how cigarettes are now sold make it impossible for them to act fraudulently.
A lawyer for the parent company of Philip Morris USA Inc. said the cigarette maker plans to appeal the ruling.
William S. Ohlemeyer, Altria Group vice president and associate general counsel, said the company believes the decision and order "are not supported by the law or the evidence presented at trial."
Mark Smith, a spokesman for R.J. Reynolds Tobacco Co., said company officials were "gratified that the court did not award unjustified and extraordinarily expensive monetary penalties."
Yet, Smith said, the company was disappointed by Kessler's finding that the companies had conspired to violate federal law and deceive consumers. He said company lawyers would analyze the decision and decide whether to appeal.
Kessler said tobacco industry lawyers played a central role over the years in conspiring to defraud the public. She said lawyers directed research into science, vetted research papers and public relations materials, identified friendly scientific witnesses and destroyed documents. "What a sad and disquieting chapter in the history of an honorable and often courageous profession," Kessler wrote.
The Justice Department expressed disappointment in Kessler's decision not to impose some of its key remedies.
"Nevertheless, we are hopeful that the remedies that were imposed by the court can have a significant, positive impact on the health of the American public," the department said.
Sharon Eubanks, who recently stepped down as the head of the government's tobacco team, said: "We won. It's clear the government won. This is the first time they've been found to violate the racketeering statute. For crying out loud, that's significant. They're racketeers."
The government filed the civil case under a 1970 racketeering law, commonly known as RICO, used primarily to prosecute mobsters in cases in which there had been a group effort to commit fraud.
The tobacco companies - except for one defendant, Liggett Group Inc. - were ordered to pay the government's cost for pursing the lawsuit, estimated by the Justice Department at more than $140 million.
Public health groups said they were pleased the judge sided with the government but disappointed the ruling didn't include tougher sanctions.
"Their misdeeds have finally been exposed. However, the court's remedies are weak. It's like a criminal act worthy of a life sentence, but instead they got a slap on the wrist," said M. Cass Wheeler, CEO of the American Heart Association.
The suit was filed in 1999 during the Clinton administration. The Bush administration pursued it after receiving early criticism for openly discussing the case's perceived weaknesses and attempting unsuccessfully to settle it.
The defendants in the federal lawsuit were: Philip Morris USA Inc. and its parent, Altria Group Inc.; R.J. Reynolds Tobacco Co.; Brown & Williamson Tobacco Corp.; British American Tobacco Ltd.; Lorillard Tobacco Co.; Liggett Group Inc.; Counsel for Tobacco Research-U.S.A.; and the now-defunct Tobacco Institute.
The only cigarette maker excluded from Kessler's ruling was discount manufacturer Liggett, which Kessler credited with coming forward in the 1990s to admit smoking causes cancer and for being helpful to state and federal officials pursuing claims against the tobacco industry.
