Amid great speculation and controversy as to its underlying motivations, the Justice Department has filed its formal damage request motion in its civil racketeering case against the tobacco industry. The $10 billion for a five-year stop-smoking program and a ten-year $4 billion for an anti-smoking education program is all that is being asked of an industry that stands accused of a decades-long conspiracy of fraud on the public and government agencies. In terms of absolute dollars, it is like asking someone who just burned down an entire neighborhood to pay a $500 fine and another $100 to fund an anti-arson program.   

As previously reported, the manner in which the trial came to an end has raised questions as to just what motivated the dramatic and unexpected last-minute shift in the government’s position with respect to the amount of damages it was seeking in its six-year-old civil racketeering case against the tobacco industry for engaging in a 50-year conspiracy to defraud and addict smokers by intentionally concealing information regarding the dangers associated with smoking.   

For years, the government has pursued the tobacco industry for “a decades-long pattern of material misrepresentations, half-truths, deceptions and lies that continue to this day.” (Excerpt from summation of Associate Attorney General Sharon Eubanks.)
The monetary damages the government had always been expected to demand from the industry was based on the extensive testimony of expert witnesses and was anticipated to be a $130-billion, 25-year smoking cessation program along with other penalties and injunctive relief prohibiting tobacco companies from targeting young smokers in their marketing campaigns.

Anti-smoking advocates were all in favor of such a substantial award which they believed would act as a deterrent to future improper conduct as well as provide funding for badly needed cessation programs.  

The tobacco industry and its attorneys fully expected that demand and were concerned about how much of that claim and penalties U.S. District Court Judge Gladys Kessler would impose.

Much of the evidence presented by the government was comprised of highly incriminating internal documents that included written memos from tobacco executives and scientists which described plans to encourage young people to smoke and to keep the public ignorant of the potentially dangerous and addictive nature of cigarette smoke.

This was essentially the same evidence introduced in prior litigation brought by states to recover their costs for the medical treatment of smokers. The industry settled that case for $246 billion.

Thus, it came as a complete shock to everyone in the courtroom when the Justice Department lawyers inexplicable scaled back their demand to what amounts to little more than petty cash to the defendants which include Phillip Morris USA; RJ. Reynolds Tobacco Co. and Brown & Williamson (now Reynolds American Inc.); British American Tobacco; the Lorillard Tobacco unit of Loew’s Corp.;  and Vector Group Ltd.’s Ligget Group Inc.

Anti-smoking advocates like William V. Corr, director of the Campaign for Tobacco Free Kids, immediately assailed the government’s unexpected move as “a political decision to take into consideration the tobacco companies’ financial interest rather than health interests of 45 million addicted smokers.” Tobacco analysts and many lawmakers immediately speculated that politics played a role in the decision.

At the request of Rep. Henry A. Waxman and seven other lawmakers, the Justice Department’s Office of Professional Responsibility has opened an investigation into allegations of political interference in the case.

Even the trial judge, herself, questioned the reduction in the demand as suggesting “that there are some additional influences being brought to bear on the government’s position in this case.”

At first, the Justice Department offered had no real explanation for the reduced figure and the members of its trial team declined comment. As more facts surrounding this “mystery” came to light, however, it began to appear that the decision was more the product of politics and favoritism than sound legal analysis.

Less than a month before summations, the Justice Department had filed an extensive legal brief with the trial judge which argued that the $130 billion smoking-cessation program was an appropriate and legally permissible sanction that was unaffected by the recent federal appeals court ruling that determined the government could not seek to force the tobacco industry to pay $280 billion in ill-gotten gains.

Representative Waxman has expressed great concern that a position the Justice Department had confidence in so close to the end of the trial was abandoned to benefit the tobacco industry at the expense of the health of the American people. A group of 50 lawmakers has sent a letter to Attorney General Alberto R. Gonzalez requesting that he not enter into any agreement with the tobacco industry “based on the unreasonably weak demands made by the government last week.”

While the Justice department attempted to justify the decision as a response to the appellate ruling which eliminated a large element of the damages being sought, the May 12 brief had already addressed that point and came to the conclusion that the earlier ruling by the Court of Appeals did not preclude the $130 billion demand.

An additional red flag was also raised by an apparent flurry of internal activity at the Justice Department just prior to the end of the trial. The New York Times reported that senior Department officials flatly overruled the objections of the career lawyers in charge of the case and ordered them to reduce the demand by $120 billion despite the fact that the trial team argued the move was legally unjustifiable and would be viewed as politically motivated.

Robert D. McCallum, the Associate Attorney General who overruled the top two lawyers on the trial team (Sharon Y. Eubanks and Stephen D. Brody) and other political appointees appear to have engaged in efforts to undermine the case.

Significantly, McCallum is a close friend of President Bush from college as well as a former partner in the Atlanta law firm of Alston & Bird, which has done legal work for R.J. Reynolds Tobacco, part of Reynolds American, a defendant in the case.

The New York Times quoted an anonymous source in the Justice Department as stating: “Everyone is asking, ‘Why now?’ Why would you throw the case down the toilet at the very last hour, after five years?” Some lawyers on the trial team reportedly threatened to quit after McCallum’s actions.

As a result of the internal dissention, a lower-level attorney in the Department, who agrees with the lower demand, was reportedly put in charge of preparing the final briefs and the proposed order on penalties.

Other allegations adding to the suspicion that the decision to reduce the demand by $120 billion was anything but justified include what the New York Times calls “the handling of some government witnesses who were asked to alter their written testimony to reflect the department’s concerns.”

One of those witnesses who refused to eliminate part of his testimony was Matthew Meyers, president of the Campaign for Tobacco-Free Kids, stated in an interview that: “To have the lawyers work on a case this long, and then just have the department basically throw it out seems despicable to me.”  
Obviously emboldened and encouraged by the collapse of the Justice Department’s previously aggressive stance with respect to damages and penalties, the attorneys for the tobacco industry defendants have now indicated that they will ask Judge Kessler to throw out the entire case claming the government isn’t entitled to any of the remedies it now seeks to have imposed.

Although Judge Kessler has encouraged the two sides to settle the case, all previous attempts to do so failed. This latest turn of events would seem to guarantee the matter will have to be resolved by the District Court and then the Court of Appeals for the Second Circuit.

This entry was posted in Legal News. Bookmark the permalink.

© 2005-2020 Parker Waichman LLP ®. All Rights Reserved.