Justice sues tobacco companies to recover billions

Wednesday, September 22nd 1999, 12:00 am
By: News On 6

WASHINGTON (AP) -- The Justice Department sued the tobacco
industry today to recover billions of dollars taxpayers have spent
on smoking-related health care, accusing cigarette-makers of a
"coordinated campaign of fraud and deceit."

The lawsuit filed in U.S. District Court here alleges the
cigarette companies conspired since the 1950s to defraud and
mislead the American public and to conceal information about the
effects of smoking.

"Smoking is the nation's largest preventable cause of death and
disease, and American taxpayers should not have to bear the
responsibility for the staggering costs," Attorney General Janet
Reno said. "For more than 45 years, the cigarette companies
conducted their business without regard to the truth, the law, or
the health of the American people."

The suit names Philip Morris Inc.; Philip Morris Companies; R.J.
Reynolds Tobacco Co.; American Tobacco Co.; Brown & Williamson
Tobacco Corp.; British-American Tobacco P.L.C.; British-American
Tobacco (Investments) Ltd.; Lorillard Tobacco Co. Inc.; Liggett and
Myers Inc.; The Council for Tobacco Research U.S.A. Inc.; and the
Tobacco Institute Inc.

In the complaint, the U.S. government alleges that "for the
past 43 years, the companies that manufacture and sell tobacco have
waged an intentional, coordinated campaign of fraud and deceit."
The long-anticipated lawsuit alleges the companies engaged in a
conspiracy in violation of the federal law against civil

President Clinton issued a written statement declaring that
"the Justice Department is taking the right course of action. It
is time for America's taxpayers to have their day in court."

Reno announced the department is formally closing, without
charges, a nearly 5-year-old criminal investigation of whether
tobacco companies lied to Congress or regulatory agencies about the
addictive nature of tobacco.

"We are moving forward," Reno, joined by acting Assistant
Attorney General David Ogden, told a news conference today.

"We filed a (civil) lawsuit that seeks to recover from the
tobacco companies the billions of dollars that American taxpayers
spend each year on tobacco-related illnesses," she said. "On
behalf of the taxpayers, we are asking the tobacco companies to pay
their fair share."

"As our complaint also asserts," Reno said, "the
cigarette-makers have also realized since 1953 that the truth
represents a mortal threat to their business. ... At every turn,
they denied that smoking causes disease and denied that it is

Citing internal company documents, Odgen traced the alleged
conspiracy to a meeting of cigarette company chief executives at
the Plaza Hotel in New York in January 1954. They "agreed there to
wage a long-term public relations campaign based on fraud and based
on deception," Ogden said.

"For decades, they repeatedly and consistently denied that
smoking cigarettes causes disease despite their knowledge that it
does, ... denied that cigarettes are addictive even though they
have long known and deliberately exploited the addictive properties
of nicotine," Ogden said.

Ogden said the government spends more than $20 billion a year
treating smoking-related illness, but could not estimate how much
money the lawsuit might recover. He said they could only recover
amounts they could prove resulted from illegal conduct but that
there is no limit under the federal civil racketeering statute on
how far back in time they could go to try to force the companies to
disgorge any ill-gotten gains.

"The federal government now spends an estimated $22 billion
each year on smoking-related illnesses," the association said.
"More than half of it is paid by Medicare. For too long, these
costs have been unfairly borne by U.S. taxpayers. Tobacco companies
must be held accountable for the death, disease and economic
burdens caused by their products."

Stocks of the leading cigarette producers were down in trading
this morning on the New York Stock Exchange. Philip Morris Cos. was
off 4 percent, or by $1.561/4, at $34.061/4 a share and RJR Reynolds
Tobacco Holdings was off 2 percent, or by 561/4 cents, at $27.933/4 a

Tobacco industry spokesmen have questioned whether the
government has authority to bring such a lawsuit, particularly
given more than three decades of federal government warning to the
public about the health dangers of smoking.

"From a legal standpoint, it's just pure politics," said
Michael York, a lawyer for Philip Morris, the nation's largest
cigarette-maker. "When we look back we'll find the best legal
minds in the Justice Department thought the facts and law didn't
support it. It's hypocrisy to think the tobacco companies misled
the federal government about the risks of smoking."

The idea of suing the tobacco companies to recover an estimated
$25 billion spent by federal civilian and military health insurance
programs on smoking-related illnesses was a surprise element in
Clinton's State of the Union speech last January.

It followed an expensive settlement by the cigarette-makers with
most state governments last year, based on their outlays for health
insurance. The industry agreed to pay the states more than $240
billion over 25 years.

The settlement with the states followed the collapse of an
effort to write federal legislation that would have substantially
increased the cost of cigarettes through taxes and would have
restricted the marketing of tobacco. Congressional Republicans
blocked that bill.

The civil lawsuit follows a stalled Justice Department criminal
investigation that the department began scaling back this spring.
This summer, several deadlines for filing criminal charges passed
without action.

Department officials have been debating whether any of the
evidence gathered during the criminal investigation could be used
by the task force preparing the civil lawsuit. One official said
department lawyers have decided to try to use that data in the
civil suit but believed they needed permission from the U.S.
District Court which supervises the grand jury which obtained it.
It was not clear whether that permission has been obtained.