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Their bribees in Congress and White House too preoccupied with Iraq and 
next election to pay back the bribers.


The New York Times
------------------------------------------------------------------------


         September 20, 2004


   Tobacco Firms Face U.S. in High-Stakes Trial

*By MICHAEL JANOFSKY*

WASHINGTON, Sept. 19 - In 1953, the chief executives of the country's 
leading cigarette companies and officials from a major public relations 
firm gathered at the Plaza Hotel in Midtown Manhattan.

What they discussed that day and what happened over the next 50 years as 
a result go to the heart of the biggest legal challenge the tobacco 
industry has ever faced.

In a nonjury trial scheduled to start here on Tuesday in Federal 
District Court, the government is seeking to strip the companies - 
disgorgement, in legal terms - of $280 billion that Justice Department 
lawyers say was earned through fraud. As the largest civil case ever 
prosecuted under the federal Racketeer Influenced and Corruption 
Organizations Act, it has the potential to put the companies out of 
business.

Five years in preparation, at a cost to the government of $135 million, 
the trial is scheduled to last at least six months, with 100 witnesses 
expected to testify in person and 200 others through depositions or 
testimony in other trials.

Company lawyers say the hotel meeting produced only a research 
organization, now defunct, to study smoking and health. The government's 
lawyers say the meeting led to a widespread conspiracy of deception that 
remains in effect, reflecting a carefully built strategy to misrepresent 
the addictive nature of cigarettes, lie about the health risks of 
secondhand smoke and direct marketing efforts at young people to sustain 
a large population of smokers.

"The government has provided extensive evidence to support our case," 
Peter D. Keisler Jr., assistant attorney general for the civil division 
of the Justice Department, said in a statement. "We look forward to 
presenting it in court."

The defendant companies - Philip Morris USA; its parent, the Altria 
Group; the R.J. Reynolds Tobacco Company; the Brown & Williamson Tobacco 
Corporation, which merged over the summer with Reynolds; the Lorillard 
Tobacco Company, a subsidiary of the Loews Corporation; British American 
Tobacco; and the Liggett Group - say that the government's case is 
groundless.

They deny engaging in a conspiracy and accuse the government of 
distorting history to drive them into bankruptcy. They also say that 
under the terms of a 1998 settlement with 46 states that sued to recover 
nearly $250 billion for the health care costs of smoking, the companies 
have already complied with orders that the government is seeking in the 
lawsuit, like public disclosure of company research relating to smoking 
and bans on marketing to children.

William S. Ohlemeyer, vice president and associate general counsel for 
Altria, said the judge, Gladys Kessler, could decide for the government 
only if it could show that a pattern of fraud in the past was evidence 
of fraud in the present and future.

Mr. Ohlemeyer said that past behavior was debatable. He said positions 
the companies once held - that smoking does not cause disease, for 
example - "can be wrong without being evidence of committing fraud."

As for the present and future, he said, the 1998 settlement created so 
much government oversight that continuing fraud would be impossible. 
"The court is required to review the totality of circumstances," Mr. 
Ohlemeyer said in a conference call with reporters last week. "It's 
difficult for the government to argue that the past is a reasonable 
predictor of the future. It ignores a detailed list of how cigarettes 
are sold today versus the past."

Filed in 1999, the case originally included charges to recover federal 
health care costs due to smoking. Judge Kessler dismissed them, leaving 
two counts under the racketeering act. The Justice Department has 
aggressively pursued those charges despite several efforts by Congress 
to block financing for the case.

"With President Bush's election, the tobacco industry thought they were 
going to have a friend who would get the lawsuit dismissed," said 
William V. Corr, executive director of the Campaign for Tobacco-Free 
Kids. "Fortunately none of those efforts succeeded, and when terrorism 
became such a prominent issue for our government and the public, it 
appears that the effort to undermine the lawsuit diminished."

Full victory for the government after appeals would have major financial 
consequences for the companies. Martin Feldman, an analyst for Merrill 
Lynch who tracks the tobacco industry, estimated that the combined net 
worth of the companies, which account for 85 percent of the domestic 
cigarette market, was less than $200 billion, at least $80 billion less 
than what the government is seeking.

But whether the government has the right to seek disgorgement under its 
theory of the case is now before the United States Court of Appeals for 
the District of Columbia Circuit. That court has agreed to hear an 
appeal of Judge Kessler's decision in May dismissing the companies' 
request that the disgorgement claim be thrown out. Oral arguments are 
scheduled for Nov. 17.

If Judge Kessler's ruling is overturned, Mr. Feldman said, "this case 
ceases to be newsworthy."

Justice Department officials, who discussed the case in a background 
briefing with reporters under the promise that their names not be used, 
said the government would try to show a conspiracy to sell cigarettes 
through intentional misstatements about smoking and health, the 
addictive nature of cigarettes, the manipulation of nicotine as the 
addictive ingredient, the marketing of low-tar cigarettes as safer and 
the suppression of evidence that would adversely affect sales.

The companies' chief strategy is to direct the judge's attention to 
industry reforms since 1998. "The focus of this case should be on recent 
history, the activities of the defendants today, and an actual threat of 
a specific ongoing or future violation," the companies said in court 
documents.

"We intend to rebut the charges that fraud was committed in the past," 
Mr. Ohlemeyer said. "And we're going to make it very clear to the judge 
that no evidence currently exists of an intent to commit fraud in the 
future."

To speed the case along, Judge Kessler has instructed each side to 
conduct direct examinations of witnesses outside court before their 
appearances. That means that when David A. Kessler, a former 
commissioner of the Food and Drug Administration who is not related to 
the judge, takes the stand on Thursday as the first witness, company 
lawyers will immediately cross-examine him about testimony that was 
filed last week.

In that testimony, Dr. Kessler recounted efforts by the agency during 
his tenure, 1990 to 1997, to regulate nicotine as a drug in the belief 
that the cigarette companies manipulated the level of nicotine to 
sustain addiction.

Citing company documents, he told the court that the companies had known 
for decades that nicotine was a drug but that the agency's effort at 
regulation had been challenged by a lawsuit from the industry that 
reached the Supreme Court.

In 2000, the court ruled 5 to 4 for the industry, saying that Congress 
did not intend the agency to regulate cigarettes. But when Dr. Kessler 
was asked if any justice took issue with the agency's findings, he said, 
"No."


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