Federal Racketeering Case Against Big Tobacco Wraps Up Its First Phase [04/22-1]

Excerpts from: Government's Racketeering Case Against Tobacco Companies Wraps Up Its First Phase

By MICHAEL JANOFSKY New York Times [04/22/05]


After seven months of testimony, the federal government's racketeering case against the nation's largest cigarette companies reached the end of its first phase on Thursday as lawyers disputed whether the companies had misled the public about the health effects of smoking.

After a recess next week, the trial will move into its final stage, witness testimony on remedies that the judge, Gladys Kessler of Federal District Court, may apply if she decides in favor of the government.

The liability arguments on Thursday gave each side a chance to consolidate the enormous amount of evidence that has come before Judge Kessler as the government has tried to prove that the companies engaged in a conspiracy of fraud for more than 50 years.

Arguing first, lawyers for the companies insisted that the government had fallen short in its mission and had failed to take into account the changes the companies had made since 1998, when they signed the Master Settlement Agreement to end a series of lawsuits with the states over the medical costs of smoking.

Reviewing the "seven pillars" on which the government built its current case and trying to dismantle them through citations of testimony, David Bernick, a lawyer for Brown & Williamson, now part of Reynolds American, the second-largest tobacco company, said the government's effort was in "a shambles."

"Today, not a single one of those pillars stands strong and stable," Mr. Bernick said, adding later with a reference to the civil statutes of the Racketeer Influenced and Corrupt Organizations Act, "Even if you froze the facts as they were in 1999, they don't support a wire fraud case and certainly don't give rise to any RICO violations."

The government built its case on charges that the companies denied adverse health effects of smoking, lied about using independent scientific research, disputed the addictive nature of nicotine, manipulated nicotine content, marketed "low tar" cigarettes as safer, suppressed evidence that would have undercut public statements and took aim at young people in marketing campaigns.

Mr. Bernick cited evidence on each point that he said undermined the government's claim, suggesting that the companies did little or nothing wrong before the settlement imposed a wide range of changes on the industry. He said that no evidence showed company executives had plotted to deceive the public, that no company had ever taken a lawyer's advice to suppress evidence and that if the companies had been slow to acknowledge the impact of smoking and second-hand smoke, it was only because of conflicting scientific opinions.

Dan Webb, a lawyer for Philip Morris, made a case for his own company, the largest of the defendants, as "an illustration of the industry" as it now operates. Mr. Webb focused on what the companies perceive as the biggest obstacle to the government's gaining any remedy from the court: the need to demonstrate that fraud has continued since the 1998 settlement and will probably do so into the future. A central requirement of proving civil racketeering violations is demonstrating that current practices are a likely indicator of future violations.

"I don't know what other conduct the government wants remedied that is not remedied by the Master Settlement Agreement," Mr. Webb said.

Asserting that none of the pillars had been damaged, government lawyers used their arguments to focus on a few of them to make the point that strategies devised in the 1980's set the tone for continuing business practices and thus meet the standard of proof for civil racketeering.

Gregg Schwind, a Justice Department lawyer, argued that the companies destroyed some important documents to protect against litigation and suppressed others by shuttling them through lawyers to create attorney-client privilege. Stephen Brody, another Justice Department lawyer, said the companies had always known that low-tar cigarettes did not reduce health risks.

Mr. Brody disagreed with Mr. Webb's contention that few remedies remained beyond the requirements of the settlement agreement. "After seven months, liability has been established," Mr. Brody said. "And it threatens to continue in the next 50 years in the absence of remedies."

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