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     CIV

     WEDNESDAY, SEPTEMBER 22, 1999

     (202) 616-2777

     WWW.USDOJ.GOV

     TDD (202) 514-1888
 

                             UNITED STATES SUES CIGARETTE COMPANIES
                              TO RECOVER FEDERAL HEALTH CARE COSTS
 

     WASHINGTON, D.C. -- The Department of Justice today filed a civil lawsuit against the
     largest cigarette companies to recover the billions of dollars the federal government
     spends each year on smoking-related health care costs.

     "Each year, American taxpayers spend billions of dollars due to the actions of the
     cigarette companies. Today's suit seeks to recover those expenses," said Attorney
     General Janet Reno. "Smoking is the nation's largest preventable cause of death and
     disease, and American taxpayers should not have to bear the responsibility for the
     staggering costs."

     The complaint, filed today in U.S. District Court in Washington, D.C., alleges that
     the cigarette companies have conspired since the 1950's to defraud and mislead the
     American public and to conceal information about the effects of smoking.

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

     "For more than 45 years, the cigarette companies conducted their business without
     regard to the truth, the law, or the health of the American people," added Reno.
     Today's suit relies on three statutes, including the Medical Care Recovery Act, the
     Medicare Secondary Payer Act, and the civil provisions of the Racketeer Influenced
     and Corrupt Organizations (RICO) statute. It focuses on the concerted efforts of the
     defendants to defraud the public, and alleges, among other things, that the
     defendants:

          made false and misleading statements to create a false controversy about whether
          smoking causes disease, even though they knew that smoking did cause disease;

          made false promises that they would undertake or sponsor research to determine
          whether smoking causes disease;

          sponsored research that was designed not to answer the question of whether
          smoking caused disease, promoted biased research that would assist in defending
          lawsuits brought by injured smokers, and suppressed research that suggested that
          smoking causes disease;

          denied that nicotine was addictive, despite the fact that they knew nicotine was
          addictive;

          failed to warn consumers about the effects of smoking, including that cigarettes
          are addictive;

          refrained from developing, testing, and marketing potentially less hazardous
          products; and,

          denied that they marketed and/or targeted products to children, although they
          actively sought to capture the youth market.

     "Based on internal documents that have been revealed in the last few years, we allege
     that the cigarette companies knew exactly what they were doing at all times -- that
     their false and misleading statements would keep people smoking," said David W.
     Ogden, Acting Assistant Attorney General for the Civil Division. "As we allege in our
     complaint, even when the truth began coming out, the cigarette companies responded
     with more fraud and deception."

     Today's lawsuit is similar to those filed, and settled, by the states for more than
     $200 billion. While the state suits recovered funds paid out under the Medicaid
     program -- a joint state and federal program -- it did not recover funds paid out
     under solely federal programs such as Medicare. The federal government spends more
     than $20 billion per year to treat smoking-related diseases.

     Two of the three statutes cited in the complaint give the U.S. a right to recover
     costs borne by the federal government from those third parties responsible for the
     costs in the first place.

     Under the Medical Care Recovery Act, the United States has an "independent" right to
     recover medical costs "[i]n 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 . . . to a person who is injured or suffers a disease, . . . under
     circumstances creating a tort liability upon some third person."

     Under the Medicare Secondary Payer Act, the United States has an independent right to
     recover Medicare payments from third parties who are required or responsible to pay,
     including insurers and those who self-insure.

     The federal complaint also employs the special authority of the Attorney General to
     bring civil actions under the RICO statute, to obtain equitable relief, including
     disgorgement of ill-gotten gains, and to prevent and restrain certain unlawful
     conduct. The complaint includes more than 100 allegations of mail and wire fraud,
     including making false and misleading statements to the public and using the mails
     and wire transmissions to further the defendants' scheme to defraud.

     "This lawsuit seeks to remedy the ongoing effects of this conduct and to recover the
     billions of dollars in health care costs that the federal government has paid because
     of the unlawful conduct," said Ogden.

     The factual and legal basis for the lawsuit filed today was developed by the Justice
     Department's Tobacco Litigation Team, currently consisting of 16 career Justice
     Department attorneys. The Litigation Team has been working since early 1999 to
     develop a plan to recover federal health care costs. The Attorney General determined
     in December 1998 that the U.S. had viable grounds to pursue recovery from the
     cigarette companies for health care costs caused by smoking.

     There are no pending Criminal Division investigations of the tobacco industry.

                                              # # #

     99-428

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