Big Tobacco Lied to Public, Judge Says
Industry Avoids Huge Penalties but Is Ordered to Correct False Advertising!

Friday, August 18, 2006

By Henri E. Cauvin and Rob Stein, Washington Post Staff Writers

A federal judge ruled yesterday that tobacco companies have violated civil racketeering laws, concluding that cigarette makers conspired for decades to deceive the public about the dangers of their product and ordering the companies to make landmark changes in the way cigarettes are marketed.

But U.S. District Judge Gladys Kessler said that under a 2005 appellate court ruling, she could not impose billions of dollars in penalties that had been sought by the Justice Department in its civil racketeering suit against the eight defendant tobacco companies All she could do, she said, was try to deter future illegal acts by the companies, and to that end, she ordered them to stop using terms such as "low tar," "light" and "mild" and to undertake a massive media campaign in an effort to correct years of misrepresentations.

It is a penalty that will cost the industry millions of dollars -- a fraction of the cost of sanctions the companies faced at the outset of the case, when the Justice Department sought $280 billion from the industry.

In the opinion, which runs 1,742 pages and was more than a year in the drafting, Kessler wrote that there is "overwhelming evidence" of most of the charges leveled at the industry -- that it conspired to violate, and indeed violated, federal racketeering laws.

"In short," she wrote, "defendants have marketed and sold their lethal product with zeal, with deception, with a single-minded focus on their financial success, and without regard for the human tragedy or social costs that success exacted."

Tobacco company officials indicated that they will appeal at least parts of the decision. David Howard, a spokesman for R.J. Reynolds Tobacco Co., said the judge was wrong. "We are disappointed and disagree with the judge's ruling," he said.

At the same time, Howard said, the firm is "gratified that the court did not award any unjustified and extraordinarily expensive monetary penalties that had been sought by the government."

Long-awaited, the ruling was a significant, if incomplete, victory for the government and for anti-smoking advocates.

"It's an historic decision of major importance," said David A. Kessler of the University of California at San Francisco, who as commissioner of the Food and Drug Administration during the Clinton administration led an unprecedented effort to regulate tobacco in the same way that agency places controls on some drugs.

"It ends any debate about what the industry knew and what they did for decades," said Kessler, who is not related to the judge. "This was the greatest conspiracy to put the public's health at risk, and this decision makes that exceptionally clear."

In a statement, the Justice Department said officials were "pleased" with the decision to find the industry liable, but "disappointed that the Court did not impose all of the remedies sought by the government. 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."

Eight years ago, the industry agreed to pay states $246 billion in compensation for the public money spent on treating the health effects of smoking. A year later, the Justice Department filed its racketeering suit in federal court. Anti-tobacco activists predicted that government and private litigation would ultimately cripple the industry.

But after yesterday's decision, and last month's Florida Supreme Court decision overturning a $145 million judgment against tobacco makers, some said the industry may not be as threatened as it once appeared to be.

"This was the last big, really major case against the industry. Individual smokers will continue to sue, but that's going to amount to static. I don't think there's going to be another big case like this," said Mary Aronson, a tobacco litigation analyst in Washington.

But other experts said the industry is not yet out of the woods. If the decision is appealed by either side, and the appeals court limits on the penalties are overturned, Kessler's decision could provide the groundwork for imposing staggering fines.

"If it's appealed, and the government wins its remedies, then this will hit the industry," said G. Robert Blakey of Notre Dame Law School.

William B. Schultz, who as a deputy assistant attorney general in the Clinton administration oversaw the early stages of the case, said Kessler's ruling was nevertheless an unquestioned blow to the industry.

"It's the first time that a court has granted broad injunctive relief against the tobacco industry," he said.

The Justice Department lawsuit originally sought $280 billion in what the government argued were the tobacco industry's ill-gotten gains from the marketing of a harmful, addictive product.

But the U.S. Court of Appeals for the District of Columbia Circuit ruled that, under federal civil racketeering law, a company could not be forced to turn over past profits as a way of preventing future misconduct.

The Justice Department subsequently proposed a $130 billion penalty to pay for anti-smoking programs, but as the nine-month trial came to a close last summer, it scaled that back to a total of $14 billion -- $10 billion to help people quit smoking and $4 billion to educate the public about the risks of smoking.

Critics inside and outside the department saw the huge cut in the proposed remedy as part of a political effort to insulate the companies from a larger penalty.

In the end, Kessler said, the government proved that the tobacco companies engaged in a massive scheme to defraud the public.

"Put more colloquially and less legalistically, over the course of more than 50 years, defendants lied, misrepresented and deceived the American public, including smokers and the young people they avidly sought as 'replacement smokers,' about the devastating health effects of smoking and environmental tobacco smoke," she wrote.

Kessler added that the companies "suppressed research, they destroyed documents, they manipulated the use of nicotine so as to increase and perpetuate addiction . . . and they abused the legal system in order to achieve their goal -- to make money with little if any regard for individual illness and suffering, soaring health costs, or the integrity of the legal system."

Kessler said she intends to keep a careful watch on an industry whose product, she said, leads to "a staggering number of deaths per year, an immeasurable amount of human suffering and economic loss, and a profound burden on our national health care system."

Not only will the companies have to abandon misleading terms such as "low tar" and publicly correct their previous misinformation, but they will have to provide the court with detailed marketing data for the next 10 years. Kessler ordered them to put "corrective statements" in advertisements in newspapers and on prime-time television, on their Web sites and on cigarette packs themselves.

The judge saved a few pointed comments for the lawyers who have represented the tobacco industry over the past 50 years.

"At every stage, lawyers played an absolutely central role in the creation and perpetuation of the Enterprise and the implementation of its fraudulent schemes," she wrote. They "hid the relationship between . . . witnesses and the industry; and they devised and carried out document destruction policies and took shelter behind baseless assertions of the attorney client privilege," the judge wrote.

"What a sad and disquieting chapter in the history of an honorable and often courageous profession."

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