Big Tobacco Concludes Liability Defense in DOJ Fraud Case [04/26-2]

Excerpts from: Tobacco Concludes Liability Defense To DOJ Fraud Case

By Brian Blackstone Dow Jones Newswires [04/25/05]


Tobacco lawyers on Monday called the final witness of their seven-week liability defense to civil racketeering charges brought by the Justice Department, with testimony from a Federal Trade Commission economist.

In written direct testimony filed with U.S. District Court Judge Gladys Kessler, who's hearing the nonjury trial here, FTC Economist Joseph Mulholland said that in his personal view, "epidemiological evidence supports the conclusion that low-tar cigarettes have reduced health risks in comparison with higher-tar or full-flavored cigarettes."

He added that in his own opinion, compensation isn't complete for most smokers, meaning they don't inhale more deeply to get a fuller drag from light cigarettes.

Mulholland has been with the FTC for 35 years and worked on smoking-related issues from the mid 1980s until 2002. He has written four papers on the issue of low-tar cigarettes.One of the seven "pillars" of the government's case - which was brought under civil racketeering statutes - is that companies falsely tout the health benefits of low-tar cigarettes.Tobacco lawyers have countered that companies have simply followed rules set by the government on research and marketing of low-tar cigarettes and that the industry concedes now that there's no safe cigarette.

Defense lawyers also note that the FTC sets the testing method for classifying whether cigarettes can be branded as "mediums," "lights" or "ultra lights" and has oversight over how those descriptors are advertised.

Calling Mulholland as a witness seemed to have a larger purpose for defendants beyond the issue of low-tar cigarettes.

On other of the government's fraud-related complaints - such as past industry claims on health and addiction and its current position that health effects of second-hand smoke remain unclear - tobacco lawyers contend that since there hasn't always been uniformity among public-health or oversight agencies, the industry shouldn't be guilty of racketeering fraud for holding views in conflict with public-health authorities.

Mulholland's testimony was blunted by a series of objections lodged by FTC lawyers - and upheld by Kessler - that parts of the testimony be restricted because it involved the agency's deliberative process.

Mulholland's responses also contained a repeated caveat that questions posed by tobacco lawyers were beyond the scope of the four papers he wrote on cigarette issues.

And Kessler herself noted that though Mulholland had much experience on the subject of low-tar cigarettes, he was only a staff member of the agency and didn't have a policy-setting role.

DOJ Lawyer Sharon Eubanks emphasized that point, noting that the FTC economist "never had a management position" during his 35 years with the agency.But Eubanks was thwarted in her attempt to delve into the "culture" at the FTC.

She tried to enter into evidence a list of FTC employees and officials who either previously worked for tobacco companies or went on to become industry consultants after leaving the FTC.

Kessler sustained objections from Philip Morris USA Lawyer Dan Webb, noting that allowing the testimony would mean "a political and not a legal judgment on the FTC."

The trial, which began in September, resumes next week with the remedies phase. Kessler previously postponed the remedies case in the wake of an appeals court panel's ruling in February rejecting DOJ's attempt to disgorge $280 billion in past industry profits as a remedy.Last week, the full D.C. appeals court declined to review the panel's 2-1 ruling.

DOJ's remedies witnesses next week include Timothy Wyant, who'll testify on health-care costs related to smokers who became addicted as youths, U.S. Surgeon General Richard Carmona and Max Bazerman, who'll testify on using industry monitors as a remedy with the power to remove senior executives.

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