WASHINGTON,
March 17 — The Justice
Department is demanding that
the nation's biggest cigarette
makers be ordered to forfeit
$289 billion in profits
derived from a half-century of
"fraudulent" and
dangerous marketing practices.
Citing new
evidence, the Justice
Department asserts in more
than 1,400 pages of court
documents that the major
cigarette companies are
running what amounts to a
criminal enterprise by
manipulating nicotine levels,
lying to their customers about
the dangers of tobacco and
directing their
multibillion-dollar
advertising campaigns at
children.
Those
practices continue even today,
despite the industry's
repeated pledges to change its
ways, the Justice Department
said in filings in federal
court in Washington as part of
a federal lawsuit first filed
by the Clinton administration
in 1999.
The Justice
Department's aggressive attack
on the industry surprised many
legal analysts because
Attorney General John Ashcroft
has voiced public skepticism
in the past about the strength
of the federal lawsuit.
This is the
first time the federal
government has given a dollar
figure for what it believes
the tobacco industry should
have to forfeit in
"ill-gotten gains."
The $289 billion figure is
based partly on proceeds the
government says the industry
made from selling cigarettes
to an estimated 30 million
people who started smoking
regularly before the age of 18
beginning in 1954, when the
industry allegedly began its
illegal collusion.
That figure,
if endorsed by Judge Gladys
Kessler of Federal District
Court when United States v.
Philip Morris
et al. goes to trial next
year, would eclipse the $206
billion that the industry
agreed to pay 46 states in a
landmark 1998 settlement in a
separate lawsuit brought by
the states. If the Justice
Department were to win out in
its demands in the federal
case, the judgment could
threaten to bankrupt the
American tobacco industry,
lawyers and analysts said.
The five
principal defendants in the
lawsuit are: Philip Morris; R.
J. Reynolds; the
Loews Corporation's
Lorillard Tobacco; British
American Tobacco's Brown &
Williamson, and the
Vector Group's
Liggett Group.
A financial
analyst who covers the tobacco
industry said that if the
Justice Department were to win
anything approaching the $289
billion figure, cigarette
makers would, at the very
least, have to consider
raising their prices by about
50 cents a pack.
Even then,
the analyst said, "their
survival would be
problematic."
The new
filings lay out the details of
the government's case for the
first time and rely on
potentially incriminating new
documents from within the
tobacco industry. The Justice
Department filed seven volumes
of material on Jan. 29, along
with additional filings
earlier this month.
The tobacco
industry said the charges were
without merit, asserting in
new filings of its own that
its public pronouncements
about cigarettes were free
speech protected by the First
Amendment.
Moreover,
the tobacco industry, which
has been a major political
contributor to the Bush
administration, said it was
wrong for the Justice
Department to charge cigarette
makers with engaging in a
conspiracy when the federal
government has been an active
partner for years, subsidizing
cigarettes for military
personnel and reaping billions
in taxes and fees. Tobacco
lawyers also accused the
government of withholding
federal health documents
helpful to the industry's
case.
The lawsuit,
one of the biggest in federal
history, was initiated in 1999
by President Bill Clinton and
Attorney General Janet Reno.
Mr. Ashcroft, who opposed the
lawsuit when he was in the
Senate, has demonstrated
occasional resistance to it
since becoming attorney
general in 2001. Months after
he took office, he moved to
curtail financing for the
legal team working on the
case, and he said he wanted to
try to reach a settlement
because he was concerned the
case was too weak for trial.
But with the
Justice Department's senior
officials preoccupied with
terrorism for the last 18
months, Mr. Ashcroft let it go
forward and the lawyers
working on the case have
quietly sifted through reams
of documents to move toward a
trial date of September 2004.
Antismoking
groups said that given Mr.
Ashcroft's past positions on
the lawsuit, the scope and
volume of the department's
latest accusations surprised
them.
"For
this Justice Department to
pursue this case so
aggressively is very
significant," said
William V. Corr, executive
vice president of the Campaign
for Tobacco-Free Kids, an
advocacy group. "With
these filings, the Justice
Department has documented that
the tobacco industry continues
to violate the law by
marketing to our children and
by deceiving the American
public."
Mr. Ashcroft
does not appear to have
personally reviewed or signed
off on the latest filings,
officials said. Asked about
Mr. Ashcroft's current
thinking on the case,
officials said he has
delegated responsibility for
the lawsuit to the
department's civil division
and relies upon officials
there to direct its handling.
"The attorney general
committed in his confirmation
hearing to pursue the tobacco
litigation despite his policy
concerns about its filing as a
legislator. His role as
attorney general is different
than that of a senator,"
a department official said.
The Justice
Department's new filings,
which represent its
"proposed findings of
fact," rely heavily on
the tobacco industry's own
words, quoting extensively
from more than 38 million
pages of documents turned over
by cigarette makers since the
litigation began three and a
half years ago.
Among the
documents, the Justice
Department said the industry's
own research showed that
cigarettes marketed as
"low tar" can be
just as harmful as regular
cigarettes. Although the
Federal Trade Commission's
automated testing may produce
a "low tar"
read-out, the industry's
research has shown that people
smoking such brands are likely
to inhale more deeply and
smoke more cigarettes to
satiate their nicotine fix,
the Justice Department said.
A 1982
interoffice memorandum from
officials at the R. J.
Reynolds Tobacco Company,
discussing a competitor's new
"low tar" brand,
said: "Such products
could (and would) be
advertised as `tar-free,'
`zero-milligrams F.T.C. tar,'
or `the ultimate low-tar
cigarette,' while actually
delivering 20-, 30-, 40-mg or
more `tar' when used by a
human smoker!" the
Justice Department quoted the
memorandum as saying.
"Such
cigarettes, while deceptive in
the extreme, would be very
difficult for the consumer to
resist, since they would
provide everything that we
presently believe makes for
desirable products: taste,
`punch,' ease of draw and `low
FTC tar,' " the
memorandum said.
A number of
other industry memorandums, as
well as marketing data from
the last few years, document
the industry's interest in
playing to under-age smokers,
the Justice Department said.
A 1981
report from Philip Morris
researchers, for instance,
stressed that smokers often
develop an "initial brand
choice" in their teens.
"Today's teenager is
tomorrow's potential regular
customer, and the overwhelming
majority of smokers first
begin to smoke while still in
their teens," the report
said, according to the Justice
Department.
The
government charged that
tobacco companies, despite
public denials and promises,
continue to do extensive
research and marketing to woo
teenagers, advertising in
youth publications and using
imagery and messages and
appealing to children. Last
year, a state judge in
California fined R. J.
Reynolds $20 million for
violating the terms of the
1998 tobacco settlement by
running magazine
advertisements intended for
teenagers, a case now on
appeal.
The Justice
Department also cited a 1971
research report by Philip
Morris that acknowledged the
difficulties of quitting
smoking, despite the
industry's long-held
contention that smoking was
not addictive. The research
said withdrawal could cause
depression, irritability and
other "neurotic
symptoms," and it mocked
an antismoking commercial that
depicted an exuberant couple
leaping for joy after they
quit smoking, the Justice
Department said.
"A more
appropriate commercial,"
Philip Morris researchers
wrote, "would show a
restless, nervous, constipated
husband bickering viciously
with his bitchy wife who is
nagging him about his slothful
behavior and growing
waistline," according to
the filings.
The Justice
Department said that "in
short, defendants' scheme to
defraud permeated and
influenced all facets of
defendants' conduct —
research, product development,
advertising, marketing, legal,
public relations, and
communications — in a manner
that has resulted in
extraordinary profits for the
past half-century, but has had
devastating consequences for
the public's health."
But Kenneth
N. Bass, a lawyer for Brown
& Williamson, said he
believes the Justice
Department is overreaching.
The $289
billion demand "is a
ridiculous figure. It bears no
relation to reality," he
said in an interview.
"And many of the Justice
Department's proposed findings
don't bear any relationship to
the law. They've put
everything and the kitchen
sink into these documents in
the hopes that something
sticks."
Mr. Bass
said the industry plans to
defend its case vigorously
against the charges, and he
sees little chance for a
settlement. Based on the
latest round of government
filings, he said, "we're
light years apart."
Mr. Bass
said that if Judge Kessler
were to side with the Justice
Department, a case of this
type should allow her
significant discretion to
consider the financial impact
on the defendants in
determining an award.
If Judge
Kessler were to order the
defendants to pay $289
billion, he said: "It
would certainly cast a pretty
big cloud over the industry. I
don't want to say it would or
wouldn't bankrupt the
industry, but it probably
exceeds the net worth of all
the defendants. It's a pretty
dire scenario."