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Suit Alleges Philip Morris Hid Cigarette-Fire Risk [04/23-3]
Excerpts from: U.S. Suit Alleges Philip Morris Hid Cigarette-Fire Risk
By VANESSA O'CONNELL The Wall Street Journal [04/23/04]
In the summer of 2000, Philip Morris USA introduced a new cigarette that was supposed to save lives.
The product, sold under the company's Merit brand, was designed to cause fewer fires if left unattended. Company executives hoped the safety angle -- played up in advertising -- would boost sales as well.
But then the executives got bad news. A company scientist assigned to analyze the new Merits says he found that they were more of a risk for fire and injury than conventional cigarettes.
Philip Morris took action. In early 2002, it fired the in-house scientist. The company has continued to market the purportedly safer Merit, although without the special advertising.
Now, for the first time, the Merit affair is about to get a public airing. A U.S. Department of Justice lawsuit accuses Philip Morris, the nation's biggest tobacco company, of getting rid of the scientist as part of a broader effort to conceal the dangers of what was supposed to have been a safer smoke. And the dissenting scientist, Michael Lee Watkins, has turned on his former employer to become a government witness.
While smoking hazards such as cancer receive far more attention, cigarettes are also the leading cause of fatal fires in the U.S., according to the National Fire Protection Association, a nonprofit advocacy group in Quincy, Mass. Nearly one in four fire deaths -- which works out to 800 to 1,000 fatalities a year -- can be traced to cigarettes, the group says. Unlike pipes and cigars, which go out quickly when not actively smoked, unwatched cigarettes can keep burning and ignite clothing, upholstery or trash.
The Justice Department's allegations about Merit and Dr. Watkins are just one element of a broad civil-racketeering suit in which the government is accusing Philip Morris and its four major rivals of a range of deceptions intended to cover up the dangers of smoking. Filed in 1999 in federal court in Washington, the suit seeks "disgorgement" of $280 billion in allegedly ill-gotten gains and is expected to go to trial in September.
The cigarette companies have denied wrongdoing in the case, which follows multibillion-dollar industry settlements with state attorneys general in the late 1990s. Philip Morris, a unit of Altria Group Inc., says Dr. Watkins never definitively proved that the new Merit cigarettes were dangerous. He was fired for unrelated reasons, the company says. It adds that Dr. Watkins didn't describe the flaw in Merits as a serious safety hazard until after he left the company.
Philip Morris acknowledges, however, that Dr. Watkins did identify a problem: chunks of smoldering tobacco that tended to fall off the tip of the new Merits. But the company says it fixed the flaw in the spring of 2002 -- after Dr. Watkins left Philip Morris -- by using different paper for the outer wrapping.
In the 1990s, pressure for a fire-safe cigarette mounted. Public-health officials and politicians called for legislation. Plaintiffs' lawyers filed suits concerning cigarette-related fires. Most of the suits failed, but they cast more bad light on a reviled industry.
By 1999, Philip Morris had developed what it considered the first self-extinguishing cigarette. When it wasn't being puffed, it was supposed to put itself out. This was accomplished by embedding two barely visible bands of thicker paper within the regular paper wrapper. The bands were designed to slow the burning of an unattended cigarette until it put itself out. Philip Morris patented the approach and in July 2000 put it on the market under the already-established Merit brand. The company spent $50 million to develop the banded-paper technology and another $50 million to upgrade paper-factory equipment, according to Mr. McCormick, the spokesman.
The company put a new "PaperSelect" logo on every Merit pack and enclosed a leaflet touting the advantages of the design. A $20 million advertising campaign in the fall of 2000 announced that the new Merit "may be less likely to ignite certain fabrics." The cigarette "may even put itself out when resting in an ashtray," Philip Morris said in the ads. The National Association of State Fire Marshals urged all cigarette manufacturers to license the new technology from Philip Morris or create their own.
But there was one problem. While new Merits did extinguish themselves, some smokers who bought them complained to Philip Morris that bits of glowing-hot tobacco were spontaneously dropping off the tips of their lit cigarettes, burning skin and scorching clothing, carpets and car seats. In the industry, the phenomenon is known as "coal drop-off."
"This is dangerous," one Philip Morris customer-service employee wrote after speaking to a smoker in Jamaica, N.Y., according to a 2000 company complaint log made public as a result of the earlier state tobacco litigation. "When you flick the ash, what is burning falls off," reported another employee, who spoke to a smoker in Batavia, N.Y. An Arvada, Colo., caller reported that with at least half the Merits he smoked, a "fire would fall off," burning "his pant leg as well as his leg," the complaint log said.
Monthly coal drop-off complaints about new Merits hit a peak of about 247 complaints per billion cigarettes in October 2000, up from 5.8 complaints per billion in 1999, before the new design hit the market, Mr. McCormick says.
Tumbling Clumps
It was this sharp increase in complaints that Dr. Watkins was instructed to examine in 2000. A 15-year Philip Morris veteran who worked at the unit's sprawling Richmond, Va., facility, he ran a series of tests using high-tech thermography and magnetic-resonance imaging, according to court filings. His conclusion: The banded-paper design caused clumps of partly-burned tobacco to tumble from the ends of the lit cigarettes. Reconfigured Merits were seven times as likely as conventional cigarettes to have coal drop-off when the lit end reached a band, he found. The reason, he told government lawyers in his deposition, could be that the burning of the bands resulted in a longer and heavier coal -- one more likely to fall off.
The results alarmed him, Dr. Watkins said in his deposition. He knew that his employer's marketing plan for Merit, as well as new safety standards expected to go into effect in New York, made it likely that banded-paper cigarettes would soon be marketed far more broadly.
But more senior company scientists said they didn't agree with his analysis. John R. Nelson, president of operations and technology, says in an interview that Philip Morris wasn't sure how much of the increase in consumer complaints could be attributed to people paying more attention to coal drop-off because of the special advertising for Merit. Complaints often rise when the company makes major changes to a brand, he says. Phone calls about coal drop-off began to subside by early 2001, according to Philip Morris. By then, the company had stopped its special advertising and removed the leaflets from Merit packs. The number of monthly complaints ultimately fell to an average of 4.5 per billion cigarettes during 2002 and 2003, according to Philip Morris.
The company ran experiments separate from the Watkins research in which Philip Morris used an "impact machine" to slam a metal bar holding a row of lit cigarettes onto a flat surface 20 times a minute, according to the May 2002 deposition of Tyrone W. Murray, then Dr. Watkins's boss. The aim of this test was to compare how easily coals can be knocked off of different types of cigarettes, according to Philip Morris. The impact tests didn't support the Watkins theory about the bands causing coal drop-off, Mr. Murray said in his deposition.
Dr. Watkins, by then promoted to senior research scientist, disputed the appropriateness of the impact tests, saying they exaggerated the force any smoker would use to put down a cigarette. He pressed on with more research, focusing on the effect of vibrations on cigarettes, among other approaches. Philip Morris says it instructed him to do this.
New York Encounter
In November 2001, Dr. Watkins flew from Richmond to New York on the corporate jet for a meeting at Altria headquarters on Park Avenue, he said in his deposition. There, he showed Philip Morris USA CEO Michael E. Szymanczyk and other senior executives slides citing smoker complaints. He told them that the banded-paper cigarettes could hurt people. "I stated that this is of the greatest concern of the various complaints because it has the potential to harm individuals," he said in the deposition.
By the end of 2001, Dr. Watkins and another scientist were removed from the banded-paper program, he said in the deposition. Philip Morris says he was shifted to higher-priority research on cigarettes intended to produce less toxic smoke. The Justice Department said in court documents that Dr. Watkins was demoted to an office in Richmond with no telephone line and nothing to do. In early 2002, he was fired.
Philip Morris justified the dismissal as reflecting a failure to attend meetings, negative remarks about colleagues and research that went unverified, according to court filings. The company said in its filings that other scientists concluded that "the porosity of the base paper" of Merits, not the special bands, was the major cause of coal drop-off. Even though consumer complaints had subsided, Philip Morris began in 2002 to use a less porous and therefore stronger paper while keeping the bands, Mr. McCormick, the spokesman, says. He adds that only after Dr. Watkins left did he inform the company, through a lawyer, that he saw the new Merits as a serious safety hazard.
After he was fired, Dr. Watkins contacted the Justice Department. In January 2003, department lawyers filed documents with the court in Washington describing how they planned to cite Dr. Watkins's research in their fraud case. The government alleged that Philip Morris "never warned consumers in any respect" about coal drop-off and "fired the scientist whose research pointed to the bands as the cause" of the problem.
Earlier this month, Philip Morris denied the allegations in its own filing. It asked the court to exclude any evidence about coal drop-off from the case. The company said it had addressed the coal drop-off issue in good faith and had informed regulators at the New York State Office of Fire Prevention and Control and at the U.S. Consumer Product Safety Commission of its actions. Neither agency "criticized" the way it handled the situation, Philip Morris told the court.
Eric Criss, a spokesman for the federal safety agency, says in an interview that Philip Morris executives met with commission employees in August 2002. But he says agency officials don't recall any detailed discussion about coal drop-off. He notes that the agency by statute lacks any jurisdiction over cigarettes.
New York state fire officials say that in December 2002, Philip Morris executives told them about a wide range of complaints about Merits, including concerns about dislodged coals. But the company didn't mention that coal drop-off might be a fire hazard, the state officials say. "We don't have any information that Philip Morris ever brought this to our attention as a safety issue," says Peter Constantakes, a spokesman for the state fire-control office.
New York fire officials say they learned about the potential coal drop-off hazard only after Philip Morris rival R.J. Reynolds Tobacco Holdings Inc. wrote them a letter in April 2003, seeking to stop the implementation of New York's new law on fire-safe cigarettes. The letter mentioned the allegations about Merit in the Justice Department's suit. "Banded cigarette paper used by Philip Morris USA may significantly increase the potential for the lit coal of a cigarette to drop off, potentially increasing the fire hazard to furniture and other materials," RJR lawyers wrote to New York officials.
But after reviewing the court papers in the suit, New York officials said they weren't deterred from putting the new law into effect. "The federal brief describes the potential for an increased number of clothes and (localized) skin burns from detached cigarette coals," the state said in its September 2003 response to RJR. A dropped cigarette coal would cool off more quickly than an unattended full-length burning cigarette, the state said, implying that it views coal drop-off as a smaller fire risk. "There's no good data on this at this point," Mr. Constantakes says. "If more become available, we'll look at it."
New York will require tobacco companies by June to test samples of 40 unpuffed cigarettes from each of their brands and certify to the state that they extinguish themselves three-quarters of the time before burning down to the filter. The more than 27,000 licensed cigarette retailers in the state have a modest grace period to sell off all of their existing inventory of traditional cigarettes.
In anticipation of the June deadline, all of the major tobacco companies are hurriedly trying to modify production lines to make banded-paper cigarettes similar to Merit. Even R.J. Reynolds, which argues the changes won't improve safety, says it's moving ahead with a version of banded paper.
Philip Morris says that it has discovered this year that as currently made, Merits wouldn't meet the New York standards. But the company isn't giving up on the approach. "We intend to lower the ignition propensity of our cigarettes even more, using banded-paper technology," Mr. McCormick, the spokesman, says. The company isn't saying how it will accomplish this, he adds.
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