U.S. Seeks $289 Billion in Cigarette Makers' Profits
The New York Times
March 17, 2003
By ERIC LICHTBLAU
WASHINGTON, March 17 -- The Justice Department is demanding that the
nation's biggest cigarette makers be ordered to forfeit $289 billion in
profits derived from a half-century of "fraudulent" and dangerous marketing
Citing new evidence, the Justice Department asserts in more than 1,400
pages of court documents that the major cigarette companies are running
what amounts to a criminal enterprise by manipulating nicotine levels,
lying to their customers about the dangers of tobacco and directing their
multibillion-dollar advertising campaigns at children.
Those practices continue even today, despite the industry's repeated
pledges to change its ways, the Justice Department said in filings in
federal court in Washington as part of a federal lawsuit first filed by the
Clinton administration in 1999.
The Justice Department's aggressive attack on the industry surprised many
legal analysts because Attorney General John Ashcroft has voiced public
skepticism in the past about the strength of the federal lawsuit.
This is the first time the federal government has given a dollar figure for
what it believes the tobacco industry should have to forfeit in "ill-gotten
gains." The $289 billion figure is based partly on proceeds the government
says the industry made from selling cigarettes to an estimated 30 million
people who started smoking regularly before the age of 18 beginning in
1954, when the industry allegedly began its illegal collusion.
That figure, if endorsed by Judge Gladys Kessler of Federal District Court
when United States v. Philip Morris et al. goes to trial next year, would
eclipse the $206 billion that the industry agreed to pay 46 states in a
landmark 1998 settlement in a separate lawsuit brought by the states. If
the Justice Department were to win out in its demands in the federal case,
the judgment could threaten to bankrupt the American tobacco industry,
lawyers and analysts said.
The five principal defendants in the lawsuit are: Philip Morris; R. J.
Reynolds; the Loews Corporation's Lorillard Tobacco; British American
Tobacco's Brown & Williamson, and the Vector Group's Liggett Group.
A financial analyst who covers the tobacco industry said that if the
Justice Department were to win anything approaching the $289 billion
figure, cigarette makers would, at the very least, have to consider raising
their prices by about 50 cents a pack.
Even then, the analyst said, "their survival would be problematic."
The new filings lay out the details of the government's case for the first
time and rely on potentially incriminating new documents from within the
tobacco industry. The Justice Department filed seven volumes of material on
Jan. 29, along with additional filings earlier this month.
The tobacco industry said the charges were without merit, asserting in new
filings of its own that its public pronouncements about cigarettes were
free speech protected by the First Amendment.
Moreover, the tobacco industry, which has been a major political
contributor to the Bush administration, said it was wrong for the Justice
Department to charge cigarette makers with engaging in a conspiracy when
the federal government has been an active partner for years, subsidizing
cigarettes for military personnel and reaping billions in taxes and fees.
Tobacco lawyers also accused the government of withholding federal health
documents helpful to the industry's case.
The lawsuit, one of the biggest in federal history, was initiated in 1999
by President Bill Clinton and Attorney General Janet Reno. Mr. Ashcroft,
who opposed the lawsuit when he was in the Senate, has demonstrated
occasional resistance to it since becoming attorney general in 2001. Months
after he took office, he moved to curtail financing for the legal team
working on the case, and he said he wanted to try to reach a settlement
because he was concerned the case was too weak for trial.
But with the Justice Department's senior officials preoccupied with
terrorism for the last 18 months, Mr. Ashcroft let it go forward and the
lawyers working on the case have quietly sifted through reams of documents
to move toward a trial date of September 2004.
Antismoking groups said that given Mr. Ashcroft's past positions on the
lawsuit, the scope and volume of the department's latest accusations
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