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Last night the President announced that the Federal Government would be suing the tobacco industry to recover the money it was forced to pay out for tobacco- caused diseases.

The major arguments in favor of the suit, and some of the major legal theories which are likely to appear when the law suit is filed, are outlined in the memo below which was prepared for Senator Richard J. Durbin [D-IL] and distributed by Action on Smoking and Health (ASH).

Please note that the very extensive footnotes have been omitted, and that some of the punctuation symbols were inadvertantly altered in preparing the document for this web site.

WHY THE FEDERAL GOVERNMENT SHOULD SUE THE TOBACCO INDUSTRY

A Memo Prepared for Action on Smoking and Health (ASH) by
Clifford E. Douglas, President,
Tobacco Control Law & Policy Consulting, Ann Arbor, Michigan*

* The author wishes to acknowledge the assistance of Brent H. Hall, J.D. candidate, 
University of Michigan Law School.

              The evasions, lies, and transfer of documents overseas by
       the tobacco industry to prevent any Government agency or
       cigarette-injured patient from finding them has distorted U.S.
       Government policy for 30 years.

              Had the administration and the Congress known [in 1965]
       what the tobacco industry knew, the warnings in the public health
       program of the U.S. Government would have been much stronger.

              Had we known what the tobacco companies knew and
       had we been privy to their research on the addictive nature of
       nicotine and their ability to manipulate the amount of nicotine in
       cigarettes, the 1979 Surgeon General's report would have found
       cigarettes addictive and we would have moved to regulate them. 
       Unfortunately, the President of the United States, the Secretary of
       Health, Education, and Welfare, and the Surgeon General of the
       United States were all victims of the concealment and
       disinformation campaign of the tobacco companies.
              
                                  From testimony of Joseph A.
                                  Califano, Jr., former U.S.
                                  Secretary of Health, Education,
                                  and Welfare, before the House
                                  Energy and Commerce
                                  Committee's Subcommittee on
                                  Health, May 17, 1994


I.     Introduction

       Should the U.S. Department of Justice sue the U.S.
tobacco industry to recoup the costs incurred by the federal
government for the medical treatment of individuals made ill
by the use of tobacco products?  Members of Congress, senior
White House officials and leaders in the public health
community have urged the U.S. Department of Justice to take
such action for two primary reasons:  1) to recover tobacco-
related health care costs borne by the government; and 2) to
hold the tobacco industry accountable for decades of
conspiratorial and fraudulent conduct that has cost the health
and lives of millions of Americans.  As discussed in the
following pages, it is a well-settled legal principle that the
United States can sue to recover monetary losses from those
whose tortious acts caused such losses.
       
       The need for such action has become more acute in the
aftermath of the industry's successful campaign to defeat
landmark federal tobacco control legislation last June and the
tobacco industry's settlement with the state attorneys general in
November 1998.

        The settlement of the state attorneys general came in
response to the demise of the so-called McCain bill, which was
defeated in part by a tobacco industry advertising campaign
that had cost $40 million by the time the bill died and
millions more in the subsequent months leading up to the
November election.  Its death was also presaged by the fact
that, from 1987 to 1996, the tobacco industry showered more
than $30.4 million on Capitol Hill lawmakers and their national
party committees, and because tobacco interests made
political contributions of more than $4 million in 1997 alone. 
It was also derailed because influential former lawmakers,
including three former Senate Majority Leaders -- Republicans
Robert Dole and Howard Baker, Jr., and Democrat George
Mitchell -- lobbied on behalf of the tobacco industry.  As put
succinctly by Charles Lewis, executive director of the non-
profit Center for Public Integrity, "[d]espite the media spotlight
on the industry since the seven tobacco executives stood before
Congress in April 1994, despite the litigation, despite
revelations about the industry's decades of lying to the
American people, Congress's addiction to money continues."
       
       What, specifically, can the Justice Department do? 
There are several legal approaches that it could take in a cost
recovery lawsuit.  In addition to asserting common law
theories, action could be taken under one or more of the
following federal statutes, each of which is discussed in this
analysis: 

       The Federal Medical Care Recovery Act, 42 U.S.C.
          2651-53

       The Sherman Act, 15 U.S.C. 1

       The Racketeer Influenced and Corrupt Organizations
          Act, 18 U.S.C. 1962

       In the event that the Justice Department decides to
proceed, how much should it seek to recover?  Several sources
offer some guidance:
       
       According to an analysis published recently by leading
          health economists and funded by the U.S. Centers
          for Disease Control and Prevention, it cost $72.7
          billion in 1993 to treat smokers for medical
          problems caused by cigarettes, a figure that dwarfs
          the recent settlement with the state attorneys general. 
          The 1993 figure translated into approximately 11.8
          percent of total United States medical expenditures
          that year.

       In an analysis presented in testimony before the Senate
          Agriculture Committee, M.I.T. economist Jeffrey E.
          Harris, M.D., Ph.D. conservatively estimated that,
          over the next 25 years, the present discounted value
          of smoking-attributable Medicare expenditures would
          reach $192.3 billion.  He noted that this estimate
          "did not include the past costs to the Medicare
          program that resulted from smoking-related illness,"
          adding that "[t]he illness and injury caused by
          tobacco use result not only in increased spending on
          medical care, but also in disability and lost
          productivity.  Higher rates of disability mean higher
          rates of eligibility for Medicaid, Medicare, and other
          federal entitlement programs, including the
          compensation program administered by the Veterans
          Benefits Administration."  Moreover, past smoking-
          attributable costs, since the inception of the
          Medicaid program in the 1960s, would total
          hundreds of billions of dollars, according to Dr.
          Harris.

       The Treasury Department estimated the total annual cost
          of treating tobacco-related illness at $60 billion, of
          which about $21 billion is borne by the federal
          government.
       
       Leading Wall Street tobacco analysts predicted that a
          Medicare recovery action could total $500 billion
          over 25 years.

       In short, the fiscal harm experienced by the United
States government, and by extension the taxpayer, is immense. 
Fortunately, the recent disclosure of tobacco industry
documents, the testimony of tobacco industry whistleblowers
and the historic tobacco investigation conducted by the Food
and Drug Administration have greatly improved the
governmentþs understanding of the intentional malfeasance of
the tobacco industry and its proximate role in creating and
perpetuating such costs.  In the light of such disclosures, it
would be unfortunate if the government failed even to attempt
a thoughtfully crafted recovery action.
       
       As noted by Harvard Law School Professor Laurence H.
Tribe, "If you wanted only to bring suits that are guaranteed to
succeed, you wouldn't say this is a slam dunk.  But ... at a
minimum, this would certainly be a serious and perfectly
responsible suit for the federal government to bring." 


II.    The Legal Bases for Federal Legal Action Against the
Tobacco Industry

       A. Background 

       Tobacco use, fueled by widespread addiction to nicotine,
is the root cause of the 20th Century epidemic of lung cancer,
emphysema and numerous other fatal illnesses.  Until this
century, lung cancer was so rare that when Dr. Alton Ochsner,
a well-known researcher of the health effects of tobacco use,
was in medical school in 1919, his entire class was summoned
one day to observe an autopsy.  The dead subject had been
felled by lung cancer, such a rare disease that the chief surgeon
believed that his students would never have an opportunity to
observe another case.  By the 1930s, Dr. Ochsner, then a
practicing surgeon, began to witness a growing stream of lung
cancer cases.  The cause was cigarette smoking.

       Since that time, and particularly since the chief
executives of the nation's major tobacco companies published
their infamous advertisement, "A Frank Statement to Cigarette
Smokers,þ in 1954 in more than 400 newspapers across the
United States, the tobacco industryþs most important strategic
decisions and actions have been conducted in a covert manner. 
Unbeknownst to the government or the public, a product that
was represented by its manufacturers to be a benign luxury was
deliberately manipulated to addict its users.  Cigarette makers
engaged in such conduct knowing that the product would
consequently kill a large percentage of those who became
addicted to it.  Indeed, the industryþs long-term pattern of
fraud and conspiracy provides the basis for the broad, ongoing
criminal investigation of the tobacco industry by the Fraud
Section of the Justice Departmentþs Criminal Division.

       
       B.  Statutory Right of Action

              The Federal Medical Care Recovery Act

                 a.   Background

       The tobacco companiesþ history of misconduct supports
several statutory rights of action by the United States to seek
reimbursement of medical costs incurred by federal government
agencies.  The government can assert such claims independent
of the common law claims described below (see Section II(C)
of this analysis, infra), thus providing an insurance policy
against the unlikely possibility that the governmentþs common
law claims encounter difficulty.  See New Jersey Carpenters
Health Fund v. Philip Morris, Inc., __F.Supp.2d__, 1998 WL
547126 (D.N.J. Aug., 1998).

       Perhaps the most obvious statutory vehicle is the
Medical Care Recovery Act (þthe Recovery Actþ), 42 U.S.C.
 2651.  The Recovery Act empowers the United States to seek
reimbursement of medical costs that have been incurred by
federal government agencies.  A close analysis of the Recovery
Act strongly supports the argument that the federal government
can seek recovery of medical costs attributable to the use of
tobacco products.  The government could likely avail itself of
the provisions of the Recovery Act to seek to recover from the
tobacco industry hundreds of billions of dollars spent caring for
millions of consumers who were duped by the conduct of the
tobacco companies into a physically debilitating addiction to
tobacco.þ

       The Recovery Act was enacted in 1962 in response to
the Supreme Courtþs decision in United States v. Standard Oil,
332 U.S. 301, 67 S.Ct. 1604 (1947), which found that the
federal government did not have an independent cause of action
at common law.  The statute was enacted following a report by
the Comptroller General that described the substantial funds
expended by the federal government for medical care to
individuals injured by the acts of others - funds that the
government could not recover under the Standard Oil decision.
       
       In Standard Oil, the Supreme Court denied a claim
brought by the United States for recovery of the value of
medical care furnished to a serviceman injured in an
automobile accident by the negligence of a third party.  The
Court found that the governmentþs claim was for þtortious
interference by a third person with the relation between the
Government and the soldier.þ  Declaring that tortious
interference was not a recognized tort (which was true in 1947,
though it is a recognized tort today), the Court held that the
federal government could not recover its money by creating a
new tort for which the driver would be liable.  Rather,
Congress would first have to create the new liability as a
matter of fiscal policy.  The court also rejected the
governmentþs attempt to claim a subrogation right of action,
finding that the claim was a claim þfor an independent
liabilityþ that did not depend on the rights of the injured
individual.  Id., 332 U.S. at 304, n. 5.  See United States v.
Merrigan, 389 F.2d 21, 22-23 (3d Cir. 1968).  At the same
time, the Court was careful to clarify that it was not necessary
for Congress to create statutory remedies involving tortious
conduct that was recognized under the common law.  The
government already had the power to seek redress in such
circumstances.  United States v. Standard Oil, 332 U.S. at 316,
n. 22.

       Concerns have been raised, certain to be echoed by the
tobacco industry, that the holding in Standard Oil continues to
bar the federal government, half a century later, from bringing
a direct recovery action against the tobacco industry.  Such a
strained reading of the law ignores the fact that the holding in
Standard Oil no longer has application to the power of the
United States to prosecute such an action.  It also ignores a
fundamental difference between the facts considered in
Standard Oil and those involved here:  While the tortious act
alleged by the plaintiff in Standard Oil was caused by the
negligence of a third party, the extraordinary fiscal injury
suffered by the government in this instance was caused by the
intentional, and possibly criminal, conduct of the U.S. tobacco
industry.

       Congress made clear with the enactment of the Medical
Care Recovery Act, which it subsequently amended twice, that
tortfeasors can be held liable for the medical costs incurred by
the federal government due to the industryþs malfeasance.   The
Recovery Act states in relevant part:

       2651. Recovery by United States

       (a)  Conditions; exceptions; persons liable; amount of
recovery; subrogation; assignment

              In any case in which the United States is
       authorized or required by law to furnish or pay for
       hospital, medical, surgical, or dental care and treatment
       (including prostheses and medical appliances) to a
       person who is injured or suffers a disease, after the
       effective date of this Act, under circumstances creating a
       tort liability upon some third person ... to pay damages
       therefor, the United States shall have a right to recover
       (independent of the rights of the injured or diseased
       person) from said third person, or that personþs insurer,
       the reasonable value of the care and treatment so
       furnished ...

       . . .

       (d)  Enforcement procedure; intervention; joinder of
       parties; State or Federal court proceedings

              The United States may, to enforce a right ... (1)
       intervene or join in any action or proceeding brought by
       the injured or diseased person, his guardian, personal
       representative, estate, dependents, or survivors, against
       the third person who is liable for the injury or disease ...
       or; (2) if such action or proceeding is not commenced
       within six months after the first day in which care and
       treatment is furnished or paid for by the United States in
       connection with the injury or disease involved, institute
       and prosecute legal proceedings against the third
       person who is liable for the injury or disease ... in a
       State or Federal court, either alone (in its own name or
       in the name of the injured person, his guardian, personal
       representative, estate, dependents, or survivors) or in
       conjunction with the injured or diseased person, his
       guardian, personal representative, estate, dependents, or
       survivors.

(Emphasis added.)

       The statuteþs explicit reference to the governmentþs right
to recover þindependent of the rights of the injured or diseased
personþ was added by amendment in 1996.  No court has had
occasion to interpret its meaning since its adoption.  There is,
moreover, no meaningful legislative history, as the provision
was added among various technical amendments to an
appropriations measure passed by Congress that year. 
Therefore, under traditional rules of statutory interpretation, the
plain meaning of the language speaks for itself.  The
correctness of this construction is underscored in the following
discussion by the Third Circuit Court of Appeals concerning
the process of statutory construction in a case that did not
involve the Medical Care Recovery Act:

              þIn determining whether Congress has directly
       spoken to the issue, the court may consider not only the
       plain meaning of the statute, but also any pertinent
       legislative history.þ  Doyle v. Shalala, 62 F.3d 740, 745
       (5th Cir. 1995) (citing Chevron, 467 U.S. at 845, 104
       S.Ct. at 2783).  The Supreme Court has made clear that
       the judiciary retains its right þto say þwhat the law is,þ
       that is, to interpret statutes.þ Mississippi Poultry, 31
       F.3d at 299 (quoting Chevron, 467 U.S. at 843 n. 9, 104
       S.Ct. at 2781 n. 9).

              Accordingly, our first task is to determine
       whether the statute is ambiguous.  If we determine that
       Congress has spoken to the issue, then our job is done;
       we will þgive effect to the unambiguously expressed
       intent of Congress.þ  Chevron, 467 U.S. at 843, 104
       S.Ct. at 2781.  If, however, we find that Congress has
       not clearly spoken to the issue and the statute is
       ambiguous on its face, we then will look to legislative
       history to clarify the purpose.  If legislative history is
       ambiguous, we will defer to the agencyþs interpretation
       if it is þbased on a permissible construction of the
       statute.þ  Id. At 843, 104 S.Ct. at 2782.

United Services Automobile Assþn v. Perry, 102 F.3d 144, 149
(3d Cir. 1996) (emphasis added).  Thus, even if the clear
parenthetical, þindependent of the rights of the injured or
diseased person,þ were judged to be ambiguous and without
clear legislative history, a court could be expected to defer to
the federal governmentþs reasonable interpretation of the statute.

       If the intent of Congress in enacting and amending the
Recovery Act ultimately is perceived as ambiguous, the courts
have the freedom either to take into account traditional
common law remedies or to craft new remedies designed to
satisfy the intent manifested by Congress, which is to make the
government fiscally whole.  See United States v. Haynes, 445
F.2d 907, 908 (5th Cir. 1971) (þReduced to fundamentals, the
basic purpose of the ... Recovery Act is to allow the federal
government to recover from third party wrongdoers the value
of medical care which is provided to injured persons.þ)

       That said, Congress appears, in fact, to have made clear
its desire to compensate the federal government when third
parties have engaged in tortious behavior resulting in otherwise
avoidable health care costs that must be borne by the
government.  Cf. Bush v. Lucas, 462 U.S. 367, 378-80, 103
S.Ct. 2404 (1987) (noting that Courtþs power to grant relief not
expressly authorized by statute should be exercised in the light
of relevant policy determination made by Congress).  At the
outset, Congress enacted the Recovery Act to ensure that the
holding in Standard Oil could not be applied to block future
government efforts to seek redress.  Later, Congress amended
the statute to give the government a direct claim not based on
subrogation, which was retained merely as a remedial remedy
of which the government could avail itself.  Congress amended
it yet again to ensure that the United States would not be
impeded by state no-fault laws and other such obstacles to
recovery.  In response, as discussed more fully below, the cases
have consistently interpreted  2651 liberally, ruling repeatedly
in favor of the governmentþs recovery.  See, e.g., United States
v. Theriaque, 674 F.Supp. 395, 400 (D. Mass. 1987); United
States v. Merrigan, 389 F.2d 21, 23-24 (3d Cir. 1968);
Holbrook v. Andersen Corp., 996 F.2d 1339, 1341 (1st Cir.
1993), United States v. Housing Authority of Bremerton, 415
F.2d 239, 241 (9th Cir. 1969); Commercial Union Ins. Co. v.
United States, 999 F.2d 581, 587 (D.C. Cir. 1993); Hedgebeth
v. Medford, 74 N.J. 360, 378 A.2d 226, 228 (1977); and Texas
v. The American Tobacco Co., __F.Supp.2d__, No. 5:96CV91,
slip-op. 5 (E.D.Tex. Sept. 8, 1997).


                     The Medical Care Recovery Act Does Not
                        Limit the United States to a
                           Subrogation Remedy

       The tobacco industry is likely to argue that the language
of the Recovery Act affords only a subrogation remedy to the
federal government, thus limiting the governmentþs claims to
those that could be made by each individual smoker, one at a
time.  It would also subject the government to any affirmative
defenses that could be raised against an injured individual, such
as assumption of risk or comparative or contributory
negligence, that the tobacco companies would inevitably raise
as they have done in every products liability suit brought
against them by individuals.  Thus, if this theory were correct,
the government -- a third-party victim -- would be denied the
ability to recoup such funds under the Recovery Act because,
by being forced into the shoes of individual smokers, it would
have to prove the tobacco companiesþ liability in the case of
each injured person, an impractical task.

       In addition, if a court determined that the government
was entitled to pursue an action on an aggregate, or statistical,
basis (see, infra, Section II(B)(1)(d)), the effect of such a ruling
obviously would be nullified if the court also were to find that
the tobacco industry was entitled to assert affirmative defenses.

       The industryþs predictable interpretation of the Recovery
Act is misplaced.  Congress did a poor technical job of
amending the statute when it imbedded the language providing
for the governmentþs independent right in the same sentence
that refers to the subrogation of the government to the
individualþs right against the tortfeasor.  Nonetheless, neither
the plain language of the Recovery Act nor the consistent
interpretations of the courts limit the federal government to
subrogation, and the case law makes clear that Congress
intended by its amendment to give the government an
independent right of recovery.
       
       One oft-cited opinion supporting this position is that of
United States v. Theriaque, 674 F.Supp. 395, 400 (D. Mass.
1987).  There the court found that þit may not be doubted that
the [Recovery Act] created in the government a federal
substantive right to recover medical expenditures where a tort-
feasor is found to have caused the injuries requiring the
treatmentþ (citing earlier federal appeals court cases).  The
court denied the defendantþs use of affirmative defenses, holing
that the governmentþs independent right of action entitled it to
full recovery even where the injured individual would be
limited by his comparative negligence.  The court added that,
þunder Massachusetts law, one partyþs contributory negligence
is not imputed to another if the noncontributorily negligent
partyþs claim is independent.þ  Id.

       The holding in Theriaque has since been cited as
authoritative by various federal appellate and district courts. 
For example, in Holbrook v. Andersen Corp., a case decided by
the First Circuit Court of Appeals, the court, quoting an earlier
decision rendered by the Ninth Circuit Court of Appeals, found
that þ[a]ll courts which have considered the question have
agreed that [the Medical Care Recovery Act] gives the United
States an independent right of recovery against the tortfeasor.þ 
Holbrook v. Andersen Corp., 996 F.2d 1339, 1341 (1st Cir.
1993), quoting United States v. Housing Authority of
Bremerton, 415 F.2d 239, 241 (9th Cir. 1969) (emphasis
added); see also Commercial Union Ins. Co. v. United States,
999 F.2d 581, 587 (D.C. Cir. 1993) (government right to sue
not limited by judgment or settlement obtained by tort victim, a
Secret Service employee).

       One such case is United States v. Merrigan, 389 F.2d
21, 23-24 (3d Cir. 1968), in which the court held, in a case
involving a military veteran, that þSubsection (a) of the
Medical Care Recovery Act unmistakably confers on the
government what the congressional reports describe as an
þindependent right of recoveryþ from the tortfeasor of the
reasonable value of the care and treatment it furnishes to the
injured person.þ  The court continued:

       What is involved here is the construction of the Actþs
       remedial or procedural provisions.  These are not to be
       construed strictly against the government, but rather in
       aid of the substantive right which the statute has created. 
       Congress did not intend to limit the primary right of
       recovery in specifying the right of subrogation in aid of
       it ... The [Act] was amended to confer on the
       government an independent right of action and to free
       its right of subrogation from the vagaries of state law. 
       This was accomplished by adding immediately before
       the provision regarding subrogation in subsection (a) a
       new provision that the United States þshall have a right
       to recover from said third person the reasonable value of
       the care and treatment so furnished.þ The right of
       recovery was thus conferred on the government and
       subrogation was made one of the remedial consequences
       of the governmentþs right, a subsidiary equitable remedy,
       which did not limit the primary right.

Id. at 23-24 (footnotes omitted).  The court asserted further, in
response to the question of whether subsection (b), written in
permissive terms, defeats the governmentþs independent right of
action set forth in subsection (a), that þ[t]he purpose cannot
have been to destroy entirely the governmentþs right to bring an
independent suit ... the statute literally declares that [where the
injured person fails to sue the tortfeasor] the government may
bring its action þaloneþ, if it so chooses.þ  Id. at 24.  The courtþs
decision is further instructive in that the governmentþs action
was not brought until after the individual victimþs own
litigation had gone to final judgment.

       State courts, moreover, have referred to the Recovery
Act in support of the proposition that state governments are not
limited to a subrogation remedy.  The Supreme Court of New
Jersey, in a ruling on the effect of state Medicaid law in
Hedgebeth v. Medford, 74 N.J. 360, 378 A.2d 226, 228 (1977),
stated:

              As we interpret the [State] act, the State has two
       avenues by which it may seek reimbursement for
       Medicaid payments:  it may either institute an action
       directly against the tortfeasor who is liable for the
       medical expenses or seek recovery by way of the
       Medicaid recipient through a right of subrogation.  This
       conclusion is in harmony with the rights accorded the
       federal government under the parallel federal provision. 
       Id. At 365 (emphasis added).

The New Jersey courtþs ruling is also notable in that the court
considered the federal Medical Care Recovery Act sufficiently
clear in its grant of a direct right of recovery that it held the
same in Hedgebeth, even though þthe state statute contained no
provision expressly referring to an independent right of
recovery.þ  Id. at 366.  Since the state was required by federal
law to seek reimbursement from the tortfeasor and the federal
government had an independent right of recovery under the
Medical Care Recovery Act, the court found that the state had
the same right.  The stateþs right of subrogation, like the
parallel right of the federal government, was merely a
þprecautionary measureþ enacted to ensure that two
complementary methods of recovery would be available.  Id. at
366.

       Significantly, Hedgebethþs analysis of the state Medicaid
statute and the federal Medical Care Recovery Act was adopted
last year by a Texas court in denying defendantsþ motion to
dismiss the Texas attorney generalþs reimbursement action
against the tobacco industry.  Relying on the Recovery Act, the
court ruled that the state could pursue a direct and independent
action against the tobacco industry that was not limited to
subrogation.  Texas v. The American Tobacco Co.,
__F.Supp.2d__, No. 5:96CV91, slip-op. 5 (E.D.Tex. Sept. 8,
1997).  The Texas litigation was settled prior to trial for
þthe largest judgment in the history of the nation,þ as tobacco
defendants described it.

       Confirming the independent nature of the governmentþs

right of action under the Recovery Act, courts have rejected
attempts by defendants to assert against the United States
affirmative defenses that might have been applicable to the
injured party.  In Theriaque, discussed above, the court found
that since þ[t]he governmentþs right of action under the
[Recovery Act] in this case is independent of Theriaqueþs claim
... the Court concludes that the defendants may not raise the
defense of comparative negligence in this case.þ  674 F.Supp.
at 400.
       
       A final note on  2651(c)(2)(C):  This subsection states
that þthe United States shall be subrogated to any right or claim
that the injured or diseased member or the member's guardian,
personal representative, estate, dependents, or survivors have
under a policy, contract, agreement, or arrangement referred to
in paragraph (1) þþ  Paragraph (1) concerns situations where
state law provides for a system of compensation or
reimbursement for health care costs specifically for members of
the uniformed services whose health is impaired by the tortious
conduct of a third party.  In light of this language, it is possible
that a court could interpret  2651(c)(2)(C) as carving out an
exception to the federal governmentþs otherwise clear
independent right of action in cases involving individual
members of the uniformed services.  The practical effect of
such an interpretation would be limited for two reasons.  First,
in the context of a federal cost recovery action that aggregates
the cases of potentially millions of injured individuals in a
single case against the tobacco industry,  2651(c)(2)(C) may be
held not to apply.  Second, since members of the uniformed
services make up only a small fraction of the total population
covered by federal health care programs, their exclusion from
consideration in an aggregated action would have a minor
effect on the total costs claimed.


                     The Recovery Act Does Not Restrict the
                        United Statesþ Right of Action to Only
                        Certain Recipients of Federal
                        Government-Funded Health Care

       The tobacco industry may also argue that, if it is found
that the United States can bring a direct action against the
industry under the Recovery Act, it can do so only with regard
to a limited number of recipients of federal government-funded
health care.  The broad language of  2651(a) establishes
otherwise, however, by providing for direct action by the
government in þany case in which the United States is
authorized or required by law to furnish or pay for hospital,
medical, surgical, or dental care and treatment (including
prostheses and medical appliances) to a person who is injured
or suffers a diseaseþ (emphasis added).  The language of the
statute gives no hint that its application should be limited to
only certain federal programs.  In addition, since  2651(b), a
special provision, specifically addresses only members of the
þuniformed services,þ it strains reason to argue that subsection
(a), which expresses no such limitation, should be read as
limiting the governmentþs right of action.

       The view that the United States can bring a direct action
under the Recovery Act in any case in which the government
was legally obligated to pay for health care is supported by
McCotter v. Smithfield Packing Co., 868 F.Supp. 160 (E.D.Va.
1994), where the court found that þthe [Medical Care Recovery
Act] itself does not limit its application to military personnel,
but includes all who receive medical benefits from the federal
government as a legal requirement.þ  It notes further that þ[t]he
only exception in the Act is for the Veterans Administration. 
The Act is meant to prohibit victims from taking a double
recovery:  once from the United States, which funds the
victimþs medical care, and once from the tortfeasor.þ  Id. at
162.  See also Zinman v. Shalala, 835 F.Supp. 1163, 1171
(N.D.Cal. 1993) (applying  2651 in context of Medicare,
stating that, þ[s]imilarly ... the government may bring an action
against any entity which is responsible to pay primaryþ).


                     The Medical Care Recovery Act Does Not
                        Bar Recovery by the United States on
                        an Aggregate Basis 

       It is clear that the federal government has the power to
seek reimbursement from the tobacco industry for the costs of
treating an individual smoker made ill by tobacco use. 
Attempting to litigate every individual case of this kind would
be absurd, however, and so it would be necessary for the
government to pursue an action on an aggregate basis to recoup
moneys expended for the treatment of tobacco-caused illnesses. 
The Recovery Act does not expressly address the question of
whether the federal government can recover funds expended on
medical care on an aggregate basis.  There also is no case law
addressing the governmentþs pursuit of a case brought on an
aggregate basis.
       
       The absence of such statutory language or court rulings
should not bar such the government from pursuing a cost
recovery action against the tobacco industry on an aggregate
basis.  Again, as discussed above,  2651(d) gives the
government explicit authority to bring an independent action
against a tortfeasor without joining or suing on behalf of the
injured individual.  There is no obvious procedural obstacle to
the governmentþs proceeding in the aggregate.  Indeed,
aggregation through the use of modern econometric methods
was allowed in the Medicaid reimbursement actions brought by
state attorneys general against the tobacco industry in
Mississippi, Florida, Texas, and Minnesota þ whose settlements
with the tobacco industry totaled a combined $40 billion over
25 years.
       
       More recently, the remaining 46 states settled for a total
of more than $200 billion to be paid over 25 years, again based
on aggregation of costs.  Of the original four settling states,
only Florida had a special statute that authorized the state to
avail itself of the use of statistical proof.  The courts hearing
the cases in the other three states permitted the introduction of
such statistical information based on ordinary rules of evidence. 
Minnesota, without a special statute, brought its case to trial
and, just prior to verdict, settled with the industry defendants
for an unprecedented payout and unprecedented advertising and
marketing concessions.
       
                           i)  Damages Can be Ascertained
                           on a Statistical Basis

       If the Justice Department pursues a cost recover action
against the tobacco industry and succeeds in sustaining an
aggregated action, it will then have to prove causation and
damages by the use of statistical methods.  As noted by
Massey in a discussion of the reimbursement action brought by
the state of Florida against the tobacco industry, þ[i]t is
especially reasonable to use statistical evidence in the tobacco
context, where the Stateþs injury is itself an aggregate one.þ 
He continues:

              Indeed, focusing on the population effects of
       smoking in the aggregate is a more sensible system that
       will prove fairer to defendants overall.  Suppose, for
       example, that it is 75% likely that each victim of a
       particular disease contracted her illness from smoking
       and that there are one hundred such victims.  If the
       State proceeds on an aggregate basis by statistical
       evidence, it will be able to recover the Medicaid costs
       of 75% of the cases involving that disease, or 75 out of
       each 100 hypothetical cases.  But, if the State were to
       proceed on an individual-by-individual basis, it might
       well be able to meet the more-probable-than-not
       standard in every case (since 75% is greater than 50%),
       and the State would recover the Medicaid costs of all
       100 individuals.  Tobacco companies would be required
       to pay a greater sum of money to the state treasury. 

Id. at 605-6 (footnote omitted).  While there appears to be no
one þbestþ way, various econometric methods have been
employed in determining the health care expenditures
associated with large population groups.

       Two of the available statistical methods for ascertaining
smoking-attributable expenditures provide useful examples. 
Each was employed in connection with the state attorney
general actions against the tobacco industry.  They are the
þMortality Ratio Approachþ and the þSAMMECþ approach. 
SAMMEC is an acronym for Smoking-Attributable Mortality,
Morbidity, and Economic Cost, which is a database software
package whose use by the states is overseen by the U.S.
Centers for Disease Control and Prevention (CDC).  Both
are applied to data on smoking prevalence for all 50 states,
which are obtained from the Behavioral Risk Factor
Surveillance System, a sophisticated telephone survey that is
conducted annually by the states in cooperation with the CDC.

       The Mortality Ratio Approach uses the ratio of deaths
attributable to smoking by disease category and applies that
ratio to expenditures for that category.  This method of analysis
is based on the reasonable assumption that the proportion of
costs attributable to smoking for a particular disease is the
same as the proportion of deaths attributable to smoking for
that disease. The Mortality Ratio Approach has been applied to
the United States for more than 20 years.  It was also
applied in Florida.

       The SAMMEC system calculates the so-called smoking-
attributable fraction of expenditures based on smoking
prevalence and the relative risk of the use of health care
services for smokers and former smokers as compared to those
who have never smoked.  SAMMEC incorporates two
measures of relative risk: 1) the relative risk of death from
tobacco-caused diseases, which is taken from the rates reported
in the 1989 Surgeon Generalþs report; and the relative risk of
medical expenditures, which is derived from an analysis of the
National Health Interview Survey comparing the number of
hospital days and number of physician visits for smokers and
former smokers versus those of never smokers.  SAMMEC has
been used widely to develop estimates of tobacco-related health
care costs for the states.

       It is also understood that both the Mortality Ratio
Approach and the SAMMEC approach result in conservative
estimates of the actual costs to government of tobacco-related
health care.  Neither approach takes into account, for example,
the impact of environmental tobacco smoke exposure to
medical expenditures, and SAMMEC does not take into
account the costs of health care involving complications of
pregnancy caused by the use of tobacco.



                           ii)  The Liability of Each
                           Defendant Can be Determined
                           Based on Its Market Share

       In addition to using statistics to prove damages, the
Justice Department will need to allocate or apportion liability
among the defendants.  It bodes well for the government that
the use of statistical modeling based upon published population
surveys has been upheld by courts as an appropriate means for
ascertaining liability by market share.  See, inter alia, David H.
Kaye and David A. Freedman, þReference Guide on Statistics,þ
in Federal Judicial Center 1994, Reference Manual on Scientific
Evidence, pp. 332-415.  One example is found in the context of
the DES litigation, which involved large numbers of people
injured as a result of the ingestion of DES by their mothers.

       In a leading case, Hymowitz v. Eli Lilly and Co., 73
N.Y.2d 487, 539 N.E.2d 1069, 541 N.Y.S.2d 941 (NY 1989),
cert. denied 110 S.Ct. 350 (1989), the New York Court of
Appeals, the stateþs highest court, established causation on a
market-share basis where plaintiffs could not specifically
identify the manufacturer who caused the damage to each
individual.  The court noted that, although þextant common-law
doctrines, unmodified, provide no relief for the DES plaintiff
unable to identify the manufacturer of the drug that injured her
... the present circumstances call for recognition of a realistic
avenue of relief for plaintiffs injured by DES ... in order þto
achieve the ends of justice in a more modern context.þþ Id. 73
N.Y.2d at 507, 539 N.E.2d at 1075, 541 N.Y.S.2d at 947
(citations omitted).  While, in contrast, the use of aggregation
has been questioned in some class action litigation, where some
courts have determined that individual affirmative defenses
would be available, this should not pose a problem here since
any cost recovery action brought by the United States would be
a direct, not a class action.

       Nor should the caution expressed in Hymowitz -- þthat
the DES situation is a singular case, with manufacturers acting
in a parallel manner to produce an identical, generically
marketed product, which causes injury many years later, and
which has evoked a legislative response reviving previously
barred actionþ -- pose an obstacle in the context of the tobacco
industry.  Id.  Cigarettes are not only singular in their own
right but, in terms of their addictiveness and effects on health,
essentially indistinguishable, an argument the industry cannot
refute in light of its continued refusal to admit that cigarettes
cause any health problems at all.  And in the context of an
aggregate action, it would be inappropriate to require the
United States to identify the precise manufacturers of the
cigarettes smoked by the millions of individuals receiving
government-funded health care - not to mention impossible for
the government to do so.

       This point was underscored by Frolich in a discussion of
Floridaþs enactment of the Medical Third-Party Liability Act,
which was enacted in 1994 to explicitly permit the state to
bring a direct action against tobacco industry defendants.  The
statute prohibits the assertion of affirmative defenses by
defendants and permits aggregation of claims.  According to
Frolich:

       The statuteþs elimination of the due diligence
       requirement is not contrary to the Florida Supreme
       Courtþs intent of þprovid[ing] a remedy where there is
       an inherent inability to identify the manufacturer of the
       product that caused the injury.þ  In a case where the
       state brings suit on behalf of many injured people, the
       state will always be a nonconsuming plaintiff with no
       first-hand knowledge of what particular product caused
       a Medicaid recipientþs harm.  In fact, Florida faces an
       inability to identify the actual product that caused its
       harm much as a daughter faces an inability to identify
       the particular brand of DES her mother ingested; in both
       cases, the party actually harmed was not the party who
       used, and who could possibly identify, the harmful
       product.  The state could rationally have determined that
       the potentially enormous number of treated Medicaid
       recipients, as well as the stateþs position as a
       þnonconsuming plaintiff,þ render the state þinherently
       unableþ to identify the exact degree to which each of
       many manufacturers caused its harm.

Frolich, supra, at 457.

       Making reference to the Medicaid reimbursement action
undertaken by the state of Florida, another commentator
explains that þmarket share liability is especially appropriate þ
in light of the aggregate nature of the Stateþs injury:  because
the harm to the State is independent of the individual identities
of Medicaid smokers, it is unnecessary -- even if it were
feasible -- to determine which brand of cigarettes was smoked
by each Medicaid patient.  The critical issue is each
manufacturerþs contribution to the total damage done to the
State.þ  He also observes that Florida courts had already upheld
the use of the common law theory of market share liability
before the state legislature had passed the special Florida
Medical Third-Party Liability Act in 1994.  The only
difference between the common law theory and the provisions
of Floridaþs special statute is that the latter does not include the
þdue diligenceþ requirement of the common law.  See Frolich,
supra, at 457.
       
       It may be argued by the tobacco industry that neither
the language of the Recovery Act nor the legislative history
suggest that Congress considered the possibility that an
aggregate claim might be brought under the statute.  Of course,
just as previously secret documents and revelations detailing
decades of tobacco industry duplicity, conspiracy, and
manipulation of nicotine did not become known to the
government or the public until quite recently, so too was
Congress deceived until recently by the industryþs
misrepresentations.  (Indeed, as noted earlier, the industryþs
chief executives continued, in testimony before Congress in
1998, to deny that cigarette smoking causes death or a physical
addiction to nicotine.)  Arguably, therefore, until very recently
Congress could not have contemplated the use of the Recovery
Act to seek recompense from the tobacco industry on an
aggregate basis.  Congress clearly gave the statute a broad and
liberal application, however, which should enable the
government to now bring such an action.

              The Sherman Act

                 Background

       The cigarette companies make up one of the most
concentrated oligopolies in the United States.  Philip Morris,
R.J. Reynolds, Brown and Williamson (B&W), Lorillard and
the Liggett Group control virtually the entire American
cigarette market.  In 1994, another major cigarette
manufacturer, the American Tobacco Company, was bought by
Brown and Williamsonþs parent company, B.A.T, and merged
with B&W.  As of March 1998, the respective shares of the
major cigarette companies in the United States were as follows:
       
       Philip Morris þ 48 percent
       R.J. Reynolds þ 25 percent
       Brown and Williamson þ 17 percent
       Lorillard þ 8 percent
       Liggett Group þ 2 percent

In addition, the U.S. Tobacco Company manufactures nearly 90
percent of the þsmokelessþ tobacco products sold in this
country.

       Substantial barriers prevent entry into the tobacco
market.  The substantial capital needed for entry, the long-
established and entrenched companies with stable market
shares, the substantial economies of scale, production and
regulatory barriers, and the existence of patents, among other
factors, present essentially insurmountable barriers to the entry
of newcomers.  Moreover, the major tobacco companiesþ
history of extraordinary profit margins provides further
evidence of the impenetrability of the industry.  Indeed, due
partly to its concentration, and due partly to the fact that over
90 percent of its customers are physically addicted to its
products, the tobacco companiesþ profit margins exceed 30, and
sometimes 40, percent.

       This tight-knit cartel of tobacco producers has a long
history of collusion.  As discussed elsewhere in this analysis,
the industryþs concentration and the insurmountable barriers to
market entry have enabled the major U.S. tobacco companies
and their trade and scientific associations to carry out a
decades-long conspiracy not to compete in research,
development, production and marketing of less-hazardous
products.  Moreover, because of their unique nature as superior
vehicles for the delivery of nicotine that are not subject to
government regulation for health and safety, tobacco products
are not reasonably interchangeable with other consumer
products or characterized by cross-elasticity of price with other
consumer products.  See, infra, Section III(B).


                 The Application of the Statute

       The Justice Department is in an excellent position to
argue that, since the early 1950þs, the major U.S. tobacco
manufacturers have violated the Sherman Act, 15 U.S.C.  1, by
entering into, adhering to and continuing to observe the terms
of a conspiracy to engage in the unreasonable restraint of trade
and commerce in the market for nicotine-containing cigarettes
and other tobacco products.  The government should be able to
prove that the industryþs illegal conduct effectively eliminated
commercial competition that would have existed in the absence
of the conspiracy.
       
       The effects of the industryþs anti-competitive activities
on the health of millions of tobacco users in the United States,
including those covered by federal government health care
programs, have been direct, long-term and measurable by, inter
alia, the statistical methods described earlier.  Under the
provisions of 15 U.S.C.  15, the federal government may be
entitled to three times the actual damages that it has sustained
in the form of tobacco-related health care expenditures.  Such
damages would not be duplicative of damages that are or could
be asserted by other parties.  Furthermore, the government may
be entitled to injunctive relief pursuant to 15 U.S.C.  26.  Such
relief could include an order requiring the tobacco companies
to cease and desist from conspiring to suppress the research,
development and marketing of safer cigarettes, and directing
the companies to take any additional steps that the court
deemed necessary to reverse the anti-competitive effects of the
conspiracy.
       
       Specifically, the Justice Department could assert that the
members of the tobacco cartel successfully conspired to:

       suppress innovation and competition in product quality
          by agreeing not to participate in the research,
          development, manufacture and marketing of less-
          hazardous tobacco products;

       suppress output in the marketplace by agreeing not to
          produce and sell on a mass-marketed basis less-
          hazardous tobacco products; and

       suppress competition by agreeing not to compete for
          each othersþ business by making claims regarding the
          relative safety of particular brands, whether or not
          such claims would have been truthful.

In short, in the absence of the tobacco industryþs conspiracy,
competition in the tobacco product marketplace would have
been far more vigorous.  

       Such conduct may be shown to be unreasonable per se
under Section 1 of the Sherman Act.  The industry cannot
credibly relate its concerted actions to lawful business
transactions, the promotion of efficiency, the advancement of
the interests of consumers or the promotion of brand
competition.  One or more of the tobacco manufacturers almost
certainly would have developed, sold and advertised
commercially successful, less-hazardous tobacco products,
and such products would have been likely to garner substantial
market share among health-concerned American consumers. 
Those consumers, including millions of beneficiaries of federal
government health care insurance, would have experienced a
greatly reduced burden of tobacco-caused disease.  And the
U.S. government would have incurred substantially lower
health care expenditures resulting from the use of tobacco.
       
       Finally, antitrust law protects competition over
innovation and product quality, just as it does price
competition.  The tobacco companies could reasonably have
foreseen that their anti-competitive activities would both harm
consumers and cause those responsible for coverage of
smokersþ health care to incur increased costs for such services. 
Thus, in asserting antitrust claims under the Sherman Act, the
Justice Department can argue that the direct and proximate
harm to the federal treasury is precisely the type of harm that a
conspiracy to suppress competition related to product safety
would be likely to cause.  And it is precisely the type of harm
for which the tobacco industry should now be held accountable
under law.


              The Racketeer Influenced and Corrupt
                 Organizations Act

                 a.  Background

       The Federal Racketeer Influenced and Corrupt
Organizations Act (RICO), 18 U.S.C.  1962 et seq., was
enacted in 1970 to facilitate legal action against organized
crime.  Over the years, the statute has been applied broadly
against defendants who would not be considered to fit the
traditional notion of organized criminals.  To take one stark
example, health care clinics filed suit against antiabortion
groups alleging, among other things, that the defendants were
members of a conspiracy to shut down abortion clinics through
a pattern of racketeering activity in violation of RICO.  In a
unanimous opinion written by Chief Justice William Rehnquist,
the Court ruled that the private plaintiffs had standing to bring
a civil RICO claim even though there was no showing that the
defendants had been motivated by an economic purpose. 
National Organization for Women, Inc. v. Scheidler, 510 U.S.
249 (1994).

       The Justice Department should be able to present a
stronger RICO case against the tobacco industry than the
National Organization for Women did against anti-abortion
activists. In the event of a successful civil RICO action by the
Attorney General, Section 1964(c) prescribes treble damages
and costs, including reasonable attorneyþs fees.  In addition, in
light of the þgeneral public importanceþ of the case, the
government probably would succeed in expediting the action. 
Section 1966 states:

        1966.  Expedition of actions

       In any civil action instituted under this chapter by the
United States in any district court
       of the United States, the Attorney General may file with
the clerk of such court of such
       court a certificate stating that in his opinion the case is
       of general public importance.  A copy of that certificate
       shall be furnished immediately by such clerk to the
       chief judge in his absence to the presiding district judge
       of the district in which such action is pending.  Upon
       receipt of such copy, such judge shall designate
       immediately a judge of that district to hear and
       determine action.

(Emphasis added.)  Thus, there should be significant
advantages in pursuing RICO claims against the tobacco
industry in connection with a federal government cost recovery
action against the tobacco industry.

                     b.  The Statute

       The Justice Department can bring action against the
tobacco industry under 18 U.S.C.  1962(c) and (d), which
provide as follows:
       
       (c) It shall be unlawful for any person employed by or
associated with any enterprise
        engaged in, or the activities of which affect, interstate
or foreign commerce, to conduct 
        or participate, directly or indirectly, in the conduct of
such enterpriseþs affairs through a
        pattern of racketeering activity þ
       
       (d) It shall be unlawful for any person to conspire to
violate any of the provisions of
       subsection ... (c) of this section.

The tobacco companies and their affiliated trade and scientific
organizations are þpersonsþ within the meaning of Section
1961(3), since each of them are þcapable of holding a legal or
beneficial interest in property.þ

       Under Section 1961(4), the trade and scientific
organizations, including the Tobacco Institute and the Council
for Tobacco Research, are þenterprisesþ that together have
served since the 1950þs as a combined enterprise formed to
further the tobacco industryþs public relations activities.  The
enterprise was formed by the major tobacco manufacturers in
order to orchestrate a public relations campaign to protect their
market from the perceived threat posed by negative reports on
the disease-causing properties of their products.  From its
inception, the enterprise has been funded, directed and managed
by the major tobacco companies in apparent violation of
Section 1962(c).  The primary purpose of the enterprise was,
and still is, to maximize the tobacco industryþs profits, which it
has done, among other things, by misleading federal
government agencies and the public regarding the health
hazards of tobacco products and by suppressing the truth about
the addictiveness of nicotine and the tobacco companiesþ
manipulation of the drug.  (See Section III(B) of this analysis,
infra.)

       The facts that have been adduced from the disclosure of
millions of documents, including internal documents prepared
by tobacco industry lawyers that have been found to contain
evidence of crime or fraud, demonstrate that the tobacco
companies have committed multiple predicate acts of
racketeering, including mail and wire fraud in violation of  18
U.S.C.   1341 and 1343.  The companies also have engaged in
interstate commerce in aid of their racketeering activities in
violation of 18 U.S.C.  1952.

       In addition, there is evidence that at least one major
tobacco company, Brown and Williamson, committed the
predicate act of obstruction of justice in violation of 18 U.S.C. 
  1512 and 1513 in actions that it either took or orchestrated
against Jeffrey Wigand, the companyþs former director of
research and development.  Section 1512 prohibits, among
other things, the use of intimidation or threats with the intent to
þinfluence, delay, or prevent the testimony of any person in an
official proceeding,þ and prohibits the use of intentional
harassment to hinder, delay, prevent or dissuade any person
from testifying in an official proceeding.
       
       The predicate acts noted above, among others, form a
þpatternþ of racketeering activity.  They have been related in
their common objectives of increasing profits, suppressing the
truth and misleading the public, the federal government and
others about the health hazards of tobacco use, soliciting
minors as well as adults to purchase tobacco products through
false and misleading advertising, manipulating nicotine delivery
with the intent to addict consumers, etc.  See 18 U.S.C.
 1961(1) and (5).
       
       The ultimate outcome as it relates to a government cost
recovery is that the tobacco industryþs violations of 18 U.S.C.
 1962(c) and (d) proximately caused direct injury to the
business and property of the federal government, which
incurred significant, concrete financial costs attributable to the
provision of health care for tobacco-caused illness.  This injury
is not a derivative injury of the harm caused to individual
smokers themselves, but is a separate economic injury.
       
       Finally, no other party has standing to bring an action
for the recovery of damages for this injury caused by the
actions of the tobacco industry.


       C.  Precedent for Action Under the Common Law

       In addition tot he statutory rights of action discussed
above, the tobacco companiesþ malfeasance also supports a
common law action by the United States to seek reimbursement
of medical costs incurred by federal government agencies.  The
fundamental right of the government to take such legal action
has been described succinctly, as follows:

              The United States has power to sue. The
       governmentþs right to maintain an action is inherent in
       its sovereignty and it is not restricted to maintaining
       actions through the instrumentality of an agent
       authorized to act for it.  Its right to resort to the courts
       is not restricted to any particular form of action and, in
       addition to its right to bring law actions, it may sue in
       equity ... It may bring a suit for injunction.

91 C.J.S.  175 (footnotes omitted).

       The United Statesþ power to bring actions under the
common law also was made clear by the Third Circuit Court of
Appeals in United States v. Silliman, 167 F.2d 607, 610 (3d
Cir. 1948), a case often cited as authoritative by other federal
appeals courts.  In language that suggests strong precedent for
a federal government cost recovery action against the tobacco
industry, the court stated:

       The United States can sue those who commit tortious
       acts which result in pecuniary loss to the United States. 
       Thus action may be brought for a trespass on
       Government owned land or an injury to chattels owned
       by the United States.  We think this line of authorities
       clearly demonstrates the standing of the United States as
       plaintiff to recover pecuniary loss sustained through a
       tort recognized at common law. [Footnotes omitted.]
       
       There appear to be no cases denying the federal
government standing to prosecute an established common law
tort claim in the absence of a congressional directive expressly
preempting the right of the government to do so.  Cf. Bush v.
Lucas, 462 U.S. 367, 378, 103 S.Ct. 2404 (1987) (þIn the
absence of such a congressional directive, the federal courts
must make the kind of remedial determination that is
appropriate for a common-law tribunal, paying particular heed,
however, to any special factors counselling hesitation before
authorizing a new kind of federal litigation.þ)  It is important to
note, moreover, that the Supreme Court, in the case of United
States v. Standard Oil, 332 U.S. 301, 67 S.Ct. 1604 (1947), in
rejecting the federal governmentþs claim of tortious interference
in the contractual relationship between the government and an
injured serviceman whose medical care the government was
obligated to pay for, did not rule that the federal government
could not maintain a common law action.  As discussed more
fully below, the Court ruled that it could not sanction a claim
based on a new tort, which tortious interference would have
been in 1947.

       In light of the intentionally deceptive conduct of the
tobacco industry toward consumers and the government alike,
the United States should be able to maintain a cost recovery
action against the industry based on traditional notions of tort
liability.  Theories that have been applied in the lawsuits
brought by individual plaintiffs, state attorneys general, health
insurers, unions and other plaintiffs would apply equally as
strongly in the context of a federal cost recovery action.  These
include, among others, fraudulent misrepresentation, breach of
special duty, breach of express and implied warranty,
conspiracy and negligence þ all of which can be shown to have
been committed by the major tobacco companies on a
continuing and widespread basis dating at least as far back as
1954.
       
       In the State of Minnesotaþs cost recovery action against
the cigarette industry, which the industry settled in May 1998
for a payment of $6.1 billion over 25 years and a ban on
industry marketing tactics that appeal to children, Judge
Kenneth Fitzpatrick found that tobacco companies for decades
had used their lawyers to conceal research into the health
effects of tobacco, then engaged in þabuse and disregard for the
judicial process.þ  Following the review by a special master of
thousands of internal industry documents for which company
lawyers had claimed privilege in an attempt to keep them
secret, the court ordered the companies to disclose 834
documents, finding that þ[t]he courtþs own review of the
documents reveals a conspiracy of silence and suppression of
scientific research.þ  Later, following a more extensive
investigation by the special master, the court ordered the
cigarette companies to turn over an additional 39,000
confidential documents, a decision that ultimately was allowed
to stand by the U.S. Supreme Court.  The court found that the
papers showed evidence of crime or fraud, confirming that the
industry had engaged in a long-term and systematic effort to
keep the public ignorant of the truth.

       The cigarette companies also conspired to falsely
represent to the public and the government that the industryþs
scientific research arm, the Council for Tobacco Research
(originally formed in 1954 as the Tobacco Industry Research
Committee), would seek the truth about the health effects of
tobacco use, and that such information would be disclosed to
the public.  The industry exploited the publicþs and the
governmentþs reliance on such misrepresentations by continuing
to manufacture and market unreasonably dangerous products
containing manipulated deliveries of nicotine.   The major
companies also secretly agreed not to conduct health-related
research in the United States so that they could hide adverse
results from federal health officials and the public.

       Examples of the industryþs intentional misrepresentation
are legion.  For years, the major cigarette makers engaged in
advertising campaigns to persuade the public that cigarette
smoking actually benefited oneþs health.  The companies made
express claims and warranties regarding the safety of their
products, acting with reckless disregard as to the falsity of such
claims and the debilitating effects on their customers.  Brown
and Williamson claimed that Kool cigarettes would protect
smokers against colds.  R.J. Reynolds enlisted doctors to
support such claims as, þNot one single case of throat irritation
due to smoking Camel.þ  As recently as January 1998, the
tobacco companiesþ chief executives gave misleading testimony
before Congress.  While stating that they did not personally
believe that nicotine was addictive, they stated that under
colloquial definitions it could be considered addictive.  They
did not admit that nicotine was a pharmacologically addictive
drug.
       
       In more recent times, tobacco manufacturers have made
highly misleading implied health claims in advertisements for
so-called low tar/low nicotine cigarettes.  They have done so at
the same time that they have known from their own secret
internal research that many smokers get just as much of the
addictive drug and the poisonous tar from smoking þlow-yieldþ
cigarettes as they do from smoking brands with higher tar and
nicotine ratings.  Indeed, government health officials have only
recently come to understand that cigarette makers could have
made simple cigarette design changes that would have done
away with this problem, but failed to do so out of fear that
they might lose customers.  As of today, the major cigarette
companies still have failed to make such design changes.
       
       The industryþs grand strategy was documented 26 years
ago by a senior Tobacco Institute official in a confidential
memorandum to the instituteþs president:

              þFor nearly twenty years, this industry has
       employed a single strategy to defend itself on three
       major fronts -- litigation, politics, and public opinion.

              While the strategy was brilliantly conceived and
       executed over the years helping us win important
       battles, it is only fair to say that it is not - nor was it
       intended to be - a vehicle for victory.  On the contrary,
       it has always been a holding strategy, consisting of

                     -- creating doubt about the health charge
without actually denying it

                     -- advocating the publicþs right to smoke,
without actually urging them to take up the practice

                     -- encouraging objective scientific
research as the only way to resolve the question of health hazardþ

It was this strategy that resulted in the industryþs successful
withholding of critical information from the government and
public until the dam burst in 1994.

       Finally, some observers have suggested that the
government should also argue that it has been victimized not
only by the tobacco industry, but by the combined intentional
acts of the industry and the consumer.  This argument is based
on the theory that consumers are at least partly responsible for
their tobacco-related injuries.  Of course, most tobacco users
were enticed by the industryþs marketing ploys to begin
smoking when they were children.  They then became addicted,
while still children, by the industryþs successful efforts to
thwart smokersþ freedom of choice by manipulating nicotine. 
These facts make troubling any argument that consumers
should be cited as responsible for the financial harm suffered
by the government.  The government could nonetheless call the
industryþs bluff by making this argument, observing that it
merely echoes the one that the tobacco companies themselves
make in every products liability case brought against them by
individual smokers, which is that it was the consumerþs own
choice, freely made, to use tobacco.  Ironically, the government
could in this way borrow from the tobacco industryþs own
playbook and assert that it is indeed the ultimate victim of the
combined intentional acts of the industry and the consumer.


III.   The Tobacco Industryþs Preemptive Strike Against
Federal Action

       The tobacco industry recognizes that, even with the
defeat of the McCain bill and the settlement with the state
attorneys general now behind it, it remains vulnerable to legal
action by the federal government.  The industryþs sense of
insecurity may explain why it has embarked on a preemptive
campaign to dissuade the Justice Department from bringing a
cost recovery action against the major tobacco companies. 
Tobacco industry spokespersons and sympathetic members of
Congress have recently defended the industry against charges
that it has engaged in decades of misconduct and claimed that
the government cannot sue because it has so-called unclean
hands.  For example, one tobacco industry consultant said:
þFederal officials have known the health effects of cigarette
consumption and have required warning labels for many years. 
For them to come in now and say they want to recover
damages, after that long involvement, would be a very difficult
case to make.þ


       A.  The þJonesþ Defense of the Tobacco Industry
              
       Perhaps the most detailed example of the tobacco
industryþs preemptive strategy is found in an article published
by Congressman Walter Jones, Jr. in the Capitol Hill
newspaper Roll Call, seeking to make the case against federal
legal action.  The congressmanþs arguments mirror those
customarily employed by tobacco interests in response to
efforts to regulate or otherwise hold the industry accountable. 
They are, in summary, as follows:

       a.     The Justice Department has never before filed
              such a lawsuit because the federal government
              has no authority to þrecover costs spent on
              patients who happen to smoke.þ  Therefore, it
              should not do so now.
       
       b.     þAdults make the choice to use tobacco products
              knowing the potential health effects.þ

       c.     Such an action would skirt Congressþs authority
              þto create effective tobacco policy.þ

       d.     A government suit would place the livelihood of
              tobacco farmers at risk, þresult[ing] in
              devastating social and economic impacts on the
              state of North Carolina.þ

       e.     The government cannot sue industries þfor
              making legal products,þ and þtobacco is a legal
              crop.þ

       f.     Tobacco companies are philanthropists who help
              people.  They þhave helped fund libraries,
              schools, churches, art exhibits and medical
              centers ...þ

       g.     A government action would create a slippery
              slope leading to þa host of similar actions against
              other industries,þ including alcohol producers,
              auto makers and the food industry.  This would
              create a þdangerous precedent that could be used
              to take massive funds away from any American
              industry,þ and would cast þa dark cloud over our
              entire business community.þ

       h.     Finally, everyone has known about þthe risks
              associated with the use of tobacco productsþ for
              þdecades.þ  The federal government itself
              mandated the first warning label in 1966.  Thus,
              the government cannot þclaim that it was
              deceived by the tobacco industry about these
              risks.þ

       While some of the arguments articulated in the article
by Rep. Jones have at times been persuasive with juries hearing
the cases of individual smokers, where the industry invariably
attacks the victim and endeavors to cast doubt on the cause of
their disease, they have little or no relevance to the cost
recovery action proposed here.  Not all of Rep. Jonesþs
arguments require comment (e.g., those addressing the potential
impact on tobacco farmers and the philanthropic activities of
the cigarette companies), but a few merit a response.

       First, the claim that the Justice Department has never
before filed such a lawsuit because the federal government
lacks authority to do so is, for the reasons identified throughout
this analysis, without basis.  Possibly one actual reason why the
government did not seek recovery in previous years is that it
lacked sufficient evidence of the industryþs malfeasance, which
it now has, to justify such an action.  As detailed in the
following section, since 1994:
       

       The Food and Drug Administration and investigative
          journalists uncovered previously secret information
          about the tobacco industryþs use and manipulation of
          nicotine as a drug and cigarettes as drug delivery
          devices;
       
       Ten months of historic congressional hearings resulted
          in the discovery of additional previously secret
          information regarding industry knowledge,
          malfeasance and criminal conduct;

       Tens of millions of  pages of (again) previously secret
          internal tobacco company documents, including
          thousands of purportedly privileged  documents that
          were found to contain evidence of crime or fraud,
          were discovered in lawsuits filed by state attorneys
          general, classes of addicted and injured smokers and
          individual plaintiffs.

       Second, the references made to þpatients who happen to
smokeþ and adults who þmake the choice to use tobacco
productsþ demonstrate nothing more than the fact that the
writer is in sympathy with the tobacco industryþs position that
nicotine is not an addictive drug, an argument that stems from
political expedience, not medical fact.  Indeed, the industryþs
secret long-time knowledge of the addictive effects of its
products and its manipulation of cigarette design to ensure such
addiction provide strong evidentiary support for federal
government legal action.  (This is addressed more fully below.)

       Third, concern that a federal recovery action would skirt
Congressþs authority to create effective tobacco policy is
negated by the fact that Congress has already manifested its
strong desire to make the government whole whenever it is
forced to cover medical costs caused by the tortious conduct of
a third party.  Regardless, a cost recovery action is not intended
to set policy.  It is intended to get the governmentþs money
back.  (This, too, is addressed more fully below.)

       Fourth, the oft-cited þlegalityþ of the tobacco industryþs
products is limited to sales to adults.  The industryþs targeted
marketing to the illegal youth market underlies the industryþs
successful perpetuation of its business and, thus, the epidemic
of tobacco-related illness and health care expenditures that
justifies a government recovery action.  The industry also has
engaged in what appears to have been widespread fraud and
conspiracy, as discussed earlier in this analysis, making
irrelevant the question of the þlegalityþ of its products.

       Fifth, will a cost recovery action against the tobacco
industry lead to a slippery slope that will envelope other
industries?  No.  The tobacco industry is unique.  Cigarette
companies produce and mass-market the only legal consumer
product þ legal for adults, that is -- that kills many of its users
when used precisely as intended by the manufacturer.  As
noted earlier, cigarette companies have been found to have
engaged in a unique þconspiracy of silence and suppression of
scientific research.þ  Finally, every slippery slope argument
made by the tobacco industry has, without exception, turned
out to be a red herring.  There is no basis for believing that this
situation will be any different.

       Finally, the claim that everyone has known for
þdecadesþ about þthe risks associated with the use of tobacco
productsþ does not stand up in light of the huge body of
evidence that has emerged since 1994, which marked the
beginning of an unprecedented cascade of revelations about the
industryþs long-hidden knowledge and misconduct.  That is not
to say, in any event, that knowledge of þrisksþ is tantamount to
knowledge that cigarette smoking causes numerous fatal
diseases and makes most users physically dependent on
nicotine - which, in spite of its own superior knowledge, the
tobacco industry for decades has publicly denied to the
government and the American public.

       For purposes of a government cost recovery action,
ultimately it is not whether the government itself was deceived
by the tobacco industry -- though clearly it was -- but rather
whether consumers were deceived by the actions of the tobacco
industry.  The industry denied the harmfulness of its products
and, by bringing to bear its unparalleled influence with key
elected officials, ensured that health warning labels (cited by
Rep. Jones as another industry defense) were initially
nonexistent and, once implemented, weak and insufficiently
informative regarding what the industry already knew about the
health effects of tobacco use.  An excerpt from testimony
delivered before Congress on May 17, 1994 by Joseph A.
Califano, Jr., the former U.S. Secretary of Health, Education,
and Welfare, is instructive:

              The evasions, lies, and transfer of documents
       overseas by the tobacco industry to prevent any
       Government agency or cigarette-injured patient from
       finding them has distorted U.S. Government policy for
       30 years.
       þ
              In 1965 I was working on the White House staff
       of President Lyndon Johnson.  The administration was
       pressing to put warning labels on cigarettes.  The
       tobacco industry wanted no labeling or labeling as weak
       as possible.  The law which Congress passed in 1965
       provided only that packages of cigarettes carry labels
       saying, þCigarette smoking may be hazardous to your
       health.þ

              That relatively weak admonition was not changed
       until 1970 and again in 1984 as evidence of the dangers
       of smoking accumulated and thanks to the work of this
       subcommittee, I might note.  It was not until 1972 that
       the Federal Trade Commission was able to extend the
       warning to cigarette advertising as well as packaging. 
       Had the administration and the Congress known what
       the tobacco industry knew, the warnings in the public
       health program of the U.S. Government would have
       been much stronger.
       þ
              In discussions this weekend with President
       [Jimmy] Carter and Dr. [Julius] Richmond, we all
       agreed to this.  Had we known what the tobacco
       companies knew and had we been privy to their
       research on the addictive nature of nicotine and their
       ability to manipulate the amount of nicotine in
       cigarettes, the 1979 Surgeon Generalþs report would
       have found cigarettes addictive and we would have
       moved to regulate them.  Unfortunately, the President of
       the United States, the Secretary of Health, Education,
       and Welfare, and the Surgeon General of the United
       States were all victims of the concealment and
       disinformation campaign of the tobacco companies.

              It was not until May 16, 1988, almost 10 years
       later, that Surgeon General C. Everett Koop was able to
       state unequivocally that cigarettes and other forms of
       tobacco þare addictingþ; nicotine is þthe drug in tobacco
       that causes addictionþ and þthe pharmacologic and
       behavioral processes that determine tobacco addiction
       are similar to those that determine addiction to such
       drugs as heroin and cocaine.þ
 
       In this way, the industry deceived and harmed
consumers while helping them rationalize their addiction and
forestall diligent efforts to quit smoking.  Consequently, the
industryþs misconduct also resulted in enormous fiscal harm to
an innocent third party:  The United States government.  Thus,
tobacco manufacturers made countless billions of dollars in
profits, year after year, by acting as an enabler, targeting
children, enhancing nicotine delivery to addict people, and
by intentionally creating doubt about the fatal effects of
cigarette smoking.  


       B.  The Truth Regarding the þEverybody Knewþ
Defense

       As noted earlier in this analysis, the court in the State of
Minnesotaþs cost recovery action against the cigarette industry
found that the tobacco industry and its lawyers had engaged in
þa conspiracy of silence and suppression of scientific
research.þ  Following a detailed review of hundreds of
thousands of pages of internal tobacco industry documents that
industry lawyers fought unsuccessfully to keep from public
view, the court determined that the industry had engaged in a
systematic, decades-long effort to keep the public ignorant of
the truth.

       That the American public and the federal government
were kept thoroughly in the dark by the tobacco industry
regarding even the most basic aspects of cigarette design and
the addictiveness of cigarettes was underscored in February
1994, when the Food and Drug Administration (þFDAþ) and
investigative journalists announced their discovery that U.S.
cigarette manufacturers had been secretly controlling nicotine
levels in their products to dose consumers with fine-tuned
deliveries of the drug.  It was at that time that the FDA
embarking on a historic two-and-a-half-year probe into the
industryþs knowledge of nicotineþs drug effects and its
exploitation of sophisticated technology to foist nicotine
dependency on millions of tobacco consumers.  The FDAþs
investigation was, in turn, augmented by 10 months of historic
congressional hearings before the Subcommittee on Health in
1994.   Representative Henry Waxman later supplemented
his subcommitteeþs findings by reading hundreds of newly
obtained, and previously secret, nicotine-research documents
from Philip Morris into the Congressional Record on the floor
of the House of Representatives in July 1995, not long after a
front-page expose in the New York Times first disclosed their
existence.  Providing additional synergy with the FDA and
congressional investigations were reams of internal tobacco
company documents obtained in lawsuits filed by state
attorneys general, classes of addicted and injured smokers, and
individual plaintiffs.

       The flood of new disclosures proved one thing, above
all:  þEveryoneþ did not know the truth about cigarette
smoking, cigarette design practices, or the decades-long cover-
up engineered by the tobacco industry to keep the facts from
the public and the government.  If  þeveryone knewþ the truth
about cigarette smoking, it is perplexing that, fully 25 years
before the Surgeon General made an official determination that
nicotine is an addictive drug, Addison Yeaman, general
counsel to Brown and Williamson (þB&Wþ), was able to
declare in a memorandum to colleagues, þMoreover, nicotine is
addictive.  We are, then, in the business of selling nicotine, an
addictive drug effective in the release of stress mechanisms.þ 
Addison Yeaman, þImplications of Battelle Hippo I & II and
the Griffith Filter,þ 1963, quoted in John Slade et al., þNicotine
and Addiction:  The Brown and Williamson Documents,þ
J.Am.Med.Assþn, Vol. 274, No. 3, pp. 225-33, July 19, 1995
(emphasis added).  Yeamanþs observation was made shortly
before Brown and Williamson executives, including Yeaman,
decided to illegally withhold their findings on the addictiveness
of nicotine from the Surgeon General, who was then in the
process of preparing the first Surgeon Generalþs report on
smoking and health.

       Another telling observation was made in 1962 by Sir
Charles Ellis, an influential scientific adviser to British
American Tobacco, B&Wþs parent, who wrote in another
confidential memorandum:

       What we need to know above all things is what
       constitutes the hold of smoking, that is, to understand
       addiction ... As a result of these various researches, we
       now possess a knowledge of the effects of nicotine far
       more extensive than exists in published scientific
       literature ... Experiments have so far only been carried
       out with rats ... Subsequent similar measurements will
       be made on human nonsmokers and on addicted
       smokers.

Charles Ellis, þThe Effects of Smoking: Proposal for Further
Research Contracts with Battelle,þ British American Tobacco,
February 13, 1962 (Minn. trial exh. 11988) (emphasis added).

       Similar conclusions were reached by top scientists and
executives at the other cigarette companies.  One of myriad
examples is found in the comments of Claude E. Teague, Jr.,
an assistant director of research at R.J. Reynolds who was later
promoted to an executive position:

       In a sense, the tobacco industry may be thought of as
       being a specialized, highly ritualized and stylized
       segment of the pharmaceutical industry.  Tobacco
       products, uniquely, contain and deliver nicotine, a potent
       drug with a variety of physiological effects ... Thus a
       tobacco product is, in essence, a vehicle for delivery of
       nicotine, designed to deliver the nicotine in a generally
       acceptable and attractive form.  Our industry is then
       based upon design, manufacture and sale of attractive
       dosage forms of nicotine, and our Companyþs position in
       our Industry is determined by our ability to produce
       dosage forms of nicotine which have more overall
       value, tangible or intangible, to the consumer than those
       of our competitors.

Claude E. Teague, Jr., þThe Nature of the Tobacco Business
and the Crucial Role of Nicotine Therein, Research Planning
Memorandum,þ R.J. Reynolds, April 14, 1972 (Minn. trial exh.
12408).

       Such candid observations were made secretly.  They
were never intended to be seen by the public, government
regulators, the medical community, or the media.  Indeed, the
tobacco industry kept them hidden for decades.

       Furthermore, unbeknownst to those outside of the
tobacco industry until recently, cigarette manufacturers
capitalized on their knowledge of the drug effects of nicotine
by developing an arsenal of methods to manipulate its delivery
with the utmost precision.  As a result of its emergence
since 1994, this information has become a major focus of the
Justice Departmentþs broad criminal investigation of the tobacco
industry.  These methods include the following, among
others:

       adjustment of tobacco blends by using high-nicotine
          tobaccos and higher-nicotine parts of tobacco leaves
          to raise the nicotine concentration in lower-þtarþ
          cigarettes;

       addition and/or re-application of nicotine to fortify
          tobacco stems, scraps, and other waste materials,
          which are processed into þreconstituted tobacco,þ an
          artificial product used in significant quantities in
          most major cigarette brands;

       addition of ammonia compounds, which speed the
          delivery of free nicotine to smokers by raising the
          pH, or alkalinity, of tobacco smoke, causing the
          smoker to freebase the drug into his or her
          bloodstream, much as crack users freebase
          cocaine;

       use of filter and ventilation systems that remove a
          higher percentage of tar than nicotine;

       genetic engineering of tobacco plants to substantially
          boost nicotine content, as Brown and Williamson has
          done by producing and using in mass-marketed
          cigarettes the super-charged þY-1" tobacco, conduct
          which earlier this year led to a federal criminal
          conviction;

       use of nearly-invisible ventilation holes that dilute the
          smoke and thus reduce nicotine delivery in machine
          tests -- leading to lower advertised nicotine levels --
          but which are often covered by the fingers and lips
          of human smokers, who consequently inhale much
          higher levels of the drug, as well as the cancer-
          causing tar; and

       use of chemicals, such as acetaldehyde and pyridine,
          that act synergistically to strengthen nicotineþs
          impact on the brain and central nervous system.

       To those who choose to argue on the tobacco industryþs
behalf that the federal government and the consuming public
have long been aware of the truth about cigarettes and the
tobacco industryþs conduct, the question is thus raised:  When
and where exactly did the tobacco industry inform government
authorities and tens of millions of addicted smokers about the
health effects and cigarette design strategies described above? 
Didnþt the industryþs executives again testify under oath before
Congress -- this year -- that nicotine is not an addictive
drug?  As Dr.  C. Everett Koop -- who was the leading
federal government health official during most of the 1980s,
and the man responsible for the 1988 Surgeon Generalþs report
on nicotine addiction -- told ABC News in February 1994
when told about new revelations that tobacco manufacturers
manipulated nicotine in cigarettes: þWell, as you describe that,
which Iþve heard for the first time, it makes my blood boil,
because what they are now selling is not a natural tobacco
product which happens to have nicotine in it, but they are
selling a nicotine dispenser, and that is quite different.þ

       The intentional failure of the industry over decades to
provide such information to the government was, and remains,
directly responsible for the governmentþs inability to adequately
warn consumers about nicotine addiction and the companiesþ
manipulation of the drug to addict unsuspecting consumers. 
Such information would have given the government the
essential tools with which it could have sought to mitigate the
dire effects of the tobacco epidemic starting at least 35 years
ago - by providing full and adequate warnings to consumers
and by arming the government with the information necessary
to impose sensible regulatory controls on the tobacco industry.

       Instead, impeded both by the industryþs withholding of
material health-related data and the industryþs extraordinary
level of expertise and influence in the game of national þpower
politics,þ federal government health authorities were unable to
take an official position regarding nicotine addiction until 1988. 
To this very day, the tobacco industryþs lobbying machine has
successfully prevented Congress or any federal health agency
from taking the simple and essential step of adding a nicotine
addiction warning label to cigarette packages and
advertisements.

       It has been 14 years since Congress last updated the
health warnings that appear on cigarette packages and
advertisements.  15 U.S.C.  1331 et seq.  In 1984, for the first
time, Congress legislated a series of new rotating warning
labels that mentioned specific illnesses caused by smoking,
such as cancer, heart disease and effects on pregnant women
and their fetuses.  Pub.L. 98-474,  3, Oct. 12, 1984, 98 Stat.
2200, amended Pub.L. 99-92,  13, Aug. 16, 1985, 99 Stat. 404. 
The tobacco companies made certain that the configuration and
placement of the warnings would effectively camouflage them
and render them difficult to read.  Worse, in a þcompromiseþ
reached between the industry and a small coterie of
overmatched health advocates that was facilitated by then-
Congressman Albert Gore, the reference to nicotine addiction
was deleted from the bill.  See Michael Pertschuk, Giant
Killers (New York, NY: W.W. Norton & Co., Inc., 1986), pp.
50-81.

       Why is a thorough understanding of this history
important?  Put simply, without nicotine and nicotine addiction,
there would be no tobacco epidemic.  The industryþs intentional
failure to inform the government and public of this fact, which
the industry thoroughly understood by the early-1960s, should
shatter the industryþs disingenuous arguments that þeveryone
knew the health risksþ and that the government was
contributorily negligent.  The facts presented here offer a mere
glimpse of the whole story.  In the event the Justice
Department brings a medical care cost recovery action against
the tobacco industry, it will be essential that the court be made
fully aware of the depth of the industryþs fraud, conspiracy,
perjury, and extraordinary influence over the political process.


IV.    Conclusion

       This analysis has been prepared to encourage to the
Department of Justice to take legal action against the tobacco
industry at the earliest available opportunity.  As described in
the introduction, the tobacco industry continues to wield
considerable political clout in Washington. Moreover, due
largely to the industryþs aggressive marketing tactics, smoking
by minors rose an unprecedented 73 percent between 1988 and
1996, according to the Centers for Disease Control and
Prevention.  Contrary to the conventional wisdom, it now
appears that the tobacco industry is winning the war for the
hearts, minds and lungs of Americaþs youth.

       Since Dr. Ochsner first linked the increased incidence of
lung cancer to the growing consumption of mass-marketed
cigarettes, smoking has become the leading preventable cause
of death and disability in the United States, causing one of
every three deaths of those under the age of 70 and one of five
deaths overall.  More than 400,000 Americans die annually
from cigarette smoking, more than the combined toll wrought
by illegal drugs, AIDS, automobile accidents, alcohol, murders,
suicides, natural disasters, plane crashes, and fires (most of
which are also caused by cigarettes).  Smoking-related deaths
often are preceded by lengthy periods of illness, imposing an
extraordinary burden on the United States economy in health
care costs and lost productivity.
       
       The public health catastrophe that has befallen this
country since modern cigarette manufacturing and marketing
practices came into widespread use earlier in this century did
not occur by accident.  It is not as though a natural plague
quietly and surreptitiously swept the continent, leaving millions
of dead and injured persons in its wake.  On the contrary, the
plague that is responsible for more than 20 million premature
dead in the United States -- the modern, mass-marketed
cigarette -- was spread deliberately and knowingly by the major
cigarette companies:  Philip Morris, R.J. Reynolds, Brown &
Williamson, Lorillard, and Liggett.
       
       Against this backdrop, it has become an urgent moral
and legal imperative that the United States take all available
action against the manufacturers of the chief preventable cause
of illness and death.  This is all the more so in light of the
settlement by all of the state attorneys general of their lawsuits
against the major tobacco companies, settlements whose long-
term impact in reducing tobacco use and protecting children
from nicotine addiction has been strongly questioned.

       It is encouraging that senior White House officials favor
the bringing of a federal reimbursement action.  Indeed, the
Administration reportedly has been conducting a
comprehensive review of the options for federal lawsuits to
recover Medicare costs, as well as similar suits to recover the
cost of treating smoking-related illnesses under other federal
health insurance programs.

       Some observers believe that a federal government
recovery action against the tobacco industry would help to
mitigate the escalating damage by increasing pressure on the
major tobacco companies to return to the bargaining table with
Congress and the Administration and accept the types of
effective controls that the industry continues to fight,
including regulation of nicotine.  Indeed, certain Wall Street
analysts have gone so far as to suggest that þthis
Administration would [not] bring an action for recovery of
federal moneys associated with tobacco unless there were clear
indications that the industry would embrace such an action as a
settlement vehicle.þ

       While it may be appropriate to seek to entice the
tobacco companies back to the federal bargaining table, this
analysis is premised on the view that the bringing of a federal
government recovery action is warranted based on public
policy and legal grounds alone, irrespective of any related
political goals.

       The Department of Justice should take one or more of
the legal actions recommended above at its earliest opportunity.