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U.S.' Years-Long Battle With Tobacco Firms Nears an End

Billions of dollars are at stake in a lawsuit as closing remarks start. A ruling may take months.

June 07, 2005|Myron Levin | Times Staff Writer

WASHINGTON — More than eight months after it started, the Justice Department's marathon civil case against the tobacco industry enters its final lap today with closing arguments on whether the leading cigarette makers are guilty of fraud and racketeering.

The immense case, which already has cost the two sides hundreds of millions of dollars, has been described as the largest civil suit ever brought under the federal anti-racketeering statute known as RICO.

A federal appeals court in February wiped out what was, for the industry, the most worrisome part of the suit: a government demand that the companies be required to forfeit $280 billion in allegedly ill-gotten profits.

But the stakes remain high. Despite the industry's dismal reputation, it is eager to avoid the stigma of a racketeering verdict -- which would be the first such judicial finding against a major industry.

A loss also could force the companies to spend billions of dollars on remedial measures sought by the Justice Department. These include a massive smoking cessation program that would cost the companies as much as $130 billion over 25 years.

A lot is riding on the verdict for the Justice Department as well, where lawyers are eager to vindicate their longtime pursuit of the industry.

For the industry, avoiding a costly verdict would put a major challenge out of the way -- though its legal problems won't be over: Philip Morris is appealing a $10.1-billion verdict in an Illinois class-action suit involving deceptive marketing of low-tar cigarettes. And in Florida, plaintiffs in a class action are seeking to reinstate a $144.8-billion punitive damages award that was reversed by a state appeals court.

In the largest series of tobacco suits resolved to date, the industry agreed in 1998 to pay $246 billion to settle claims by the states. The tobacco industry has won and lost smaller cases brought by individual smokers.

With Justice Department and industry lawyers allotted 6 1/2 hours apiece, summations in the racketeering case are expected to last into Thursday. Then U.S. District Judge Gladys Kessler, who has heard the case without a jury, will consider 45,000 pages of testimony by more than 240 witnesses, along with about 15,000 exhibits.

Government lawyers have painted the companies as outlaws that engaged in a 50-year conspiracy to addict and mislead the public about the risks of smoking and secondhand smoke, at a cost to society of millions of premature deaths.

The cigarette makers have accused the government of exaggerating past wrongdoing, ignoring its own longtime support for the industry and failing to acknowledge significant changes in the companies' conduct since their settlement with the states.

Defendants include Philip Morris USA, a unit of Altria Group Inc.; R.J. Reynolds Tobacco Co. and Brown & Williamson, which have merged to form Reynolds American Inc.; British American Tobacco; the Lorillard Tobacco unit of Loew's Corp.; and Vector Group Ltd.'s Liggett Group Inc.

In addition to the smoking-cessation program, the government may seek to impose a system of stiff fines if teen smoking fails to decline by targeted amounts. And it also may seek monitors appointed to watch over senior industry executives and remove them if warranted.

But some of these remedies, too, seem in jeopardy from the sweeping appeals court ruling barring forfeiture of profits.

By a 2-1 vote, a panel of the U.S. Court of Appeals for the District of Columbia reversed Kessler and ruled that the civil provisions of RICO do not permit sanctions to undo past harm but only to prevent future acts of fraud. The Justice Department sought a rehearing by the full appeals court, but the request was rejected April 20. The government's 90-day window for appeal to the U.S. Supreme Court expires July 20. Justice Department officials have not said whether they will appeal.

Kessler is almost universally regarded as sympathetic to the government's case. But because the remedies sought could be deemed, like forfeiture of profits, to be improperly focused on misconduct in the past, experts say the judge may have little room to exercise her will.

Kessler described the appeals court decision, which reversed her ruling, as a "body blow" to the government's case. Shortly after the ruling, she also voiced frustration that Justice Department attorneys were proceeding as if the appellate decision had never been written.

"She's going to find them liable because they are liable, and I think the evidence is such that they go down," said G. Robert Blakey, a Notre Dame law professor and a former Senate subcommittee counsel who drafted the RICO statute.

"The only question is the remedy" available to Kessler, said Blakey, who added that he considered the appeals court's narrow ruling to be "dead wrong."

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