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U.S. Details Demands in Tobacco Case

A 60-page proposal sent to the judge includes fines if youth smoking misses reduction targets.

June 29, 2005|Myron Levin | Times Staff Writer

A new document spelling out government demands in a giant fraud case against tobacco companies asks a federal judge to require a $14-billion anti-smoking campaign and impose fines if youth smoking doesn't fall by targeted amounts.

The measures were detailed in a proposed final judgment advising U.S. District Judge Gladys Kessler what actions to take if she finds the industry violated civil fraud and racketeering laws.

The remedies listed in the 60-page document went well beyond a controversial $10-billion smoking cessation program that has drawn the most attention.

Other steps sought by the government include a ban on discounting the brands most popular with youths, such as Marlboro, Newport and Camel.

The companies also would be required to take out full-page newspaper ads proclaiming in capital letters that "SMOKING KILLS," that secondhand smoke causes lung cancer and heart disease and that nicotine is as addictive as crack cocaine.

Tobacco company lawyers on Tuesday said the proposals -- released late Monday -- were doomed because they conflicted with an appeals court ruling that severely limited the sanctions available in the case. Dan Webb, a lawyer for Philip Morris USA, said the companies soon would ask Kessler to dismiss the case on those grounds.

The nearly nine-month trial ended in turmoil two weeks ago when U.S. prosecutors, in closing arguments, suddenly slashed the main remedy they had sought by more than 90% -- cutting their smoking cessation proposal from $130 billion to $10 billion.

Anti-smoking groups and Democratic lawmakers assailed the move as a cave-in to tobacco interests. Political appointees in the Justice Department, who overruled objections of their trial team, said the appeals court decision dictated the change.

The government has accused tobacco companies of engaging in a 50-year conspiracy to deceive the public about the addictiveness of nicotine and the hazards of smoking and secondhand smoke. The companies, although acknowledging some questionable actions in the past, said their conduct was not fraudulent.

In addition to Philip Morris, a unit of Altria Group Inc., defendants include Reynolds American Inc., Loews Corp.'s Lorillard Tobacco unit and British American Tobacco Investments Ltd.

Under the government proposal, the companies would pay $2.4 billion a year for five years, and an additional $400 million annually for the next five years. Most of that money would be absorbed by two initiatives: the $10-billion cessation program, which would offer telephone help and medication for at least 2.5 million smokers a year, and a $2-billion program to fund anti-smoking ads and education.

The programs, in effect, would tax smokers, who would pay for them through price hikes.

Although not assigned price tags, other measures would reduce industry sales and raise administrative costs.

Each company would be fined if consumption of its brands by people ages 12 to 20 did not decline by 6% a year for seven years. Companies would be fined $3,000 for each youth smoker over those targets. The target rate roughly equals the drop in teen smoking over the last eight years, so "I think it's doable," said Lloyd Johnston, principal investigator for the University of Michigan's Monitoring the Future study, which tracks teenage use of drugs, alcohol and tobacco.

However, because there has already been a substantial drop, "it would take a concerted effort" to continue the trend, Johnston said.

The government also proposed that the companies be forced to post their internal documents on websites until 2030. And it asked Kessler to ban use of terms such as "light" and "mild" on the grounds that they imply certain brands are safe. To oversee those efforts, the government wants the companies ordered to underwrite an independent investigations officer, a court-appointed monitor who would ensure that the industry wasn't targeting youths or committing fraud.

The officer could seek fines or removal of executives who violate Kessler's final order. A separate officer would decide disputes between the investigations officer and tobacco companies.

Despite the wide range of proposed sanctions, the threat to the industry has fallen drastically since the trial began last fall. In February, the U.S. Court of Appeals for the District of Columbia barred the government from seeking forfeiture of $280 billion in allegedly illegal past profit.

The jurist panel also decreed that under the Racketeer Influenced and Corrupt Organizations Act, civil sanctions could not be ordered to cure past harm, but only to prevent future fraud.

Kessler described the ruling as a "body blow" to the lawsuit and repeatedly pressed the government to craft forward-looking remedies that might withstand appeals court scrutiny.

Justice Department lawyers are reviewing a draft petition to the U.S. Supreme Court seeking to overturn the appeals court decision, Reuters reported late Tuesday, citing an unnamed source. Department officials, who face a July 18 deadline to appeal, have declined to discuss their intentions and could not be reached Tuesday evening.

William S. Ohlemeyer, Philip Morris associate general counsel, said Tuesday that the government's latest filing revealed "blatant disregard of the appellate court opinion." Government lawyers "have given her [Kessler] a list of things that are inherently backward looking." Justice Department officials declined to comment.

Matthew Myers, president of the Campaign for Tobacco-Free Kids, said that although some elements of the proposal were disappointing, "there are a substantial number of very positive things ... that could make a real difference" in reducing smoking-related deaths.

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