Industry Avoids Huge Penalties but Is Ordered to
Correct False Advertising
Friday, August 18,
2006; A01
A federal judge ruled
yesterday that tobacco companies have violated civil racketeering laws,
concluding that cigarette makers conspired for decades to deceive the public
about the dangers of their product and ordering the companies to make
landmark changes in the way cigarettes are marketed.
But U.S. District
Judge Gladys Kessler said that under a 2005 appellate court ruling, she
could not impose billions of dollars in penalties that had been sought by
the Justice Department in its civil racketeering suit against the eight
defendant tobacco companies.
All she could do, she
said, was try to deter future illegal acts by the companies, and to that
end, she ordered them to stop using terms such as "low tar,"
"light" and "mild" and to undertake a massive media
campaign in an effort to correct years of misrepresentations.
It is a penalty that
will cost the industry millions of dollars -- a fraction of the cost of
sanctions the companies faced at the outset of the case, when the Justice
Department sought $280 billion from the industry.
In the opinion, which
runs 1,742 pages and was more than a year in the drafting, Kessler wrote
that there is "overwhelming evidence" of most of the charges
leveled at the industry -- that it conspired to violate, and indeed
violated, federal racketeering laws.
"In short,"
she wrote, "defendants have marketed and sold their lethal product
with zeal, with deception, with a single-minded focus on their financial
success, and without regard for the human tragedy or social costs that
success exacted."
Tobacco company
officials indicated that they will appeal at least parts of the decision.
David Howard, a spokesman for R.J. Reynolds Tobacco Co., said the judge
was wrong. "We are disappointed and disagree with the judge's
ruling," he said.
At the same time,
Howard said, the firm is "gratified that the court did not award any
unjustified and extraordinarily expensive monetary penalties that had
been sought by the government."
Long-awaited, the
ruling was a significant, if incomplete, victory for the government and
for anti-smoking advocates.
"It's an historic
decision of major importance," said David A. Kessler of the
University of California at San Francisco, who as commissioner of the Food
and Drug Administration during the Clinton administration led an
unprecedented effort to regulate tobacco in the same way that agency
places controls on some drugs.
"It ends any
debate about what the industry knew and what they did for decades,"
said Kessler, who is not related to the judge. "This was the
greatest conspiracy to put the public's health at risk, and this decision
makes that exceptionally clear."
In a statement, the
Justice Department said officials were "pleased" with the
decision to find the industry liable, but "disappointed that the
Court did not impose all of the remedies sought by the government.
Nevertheless, we are hopeful that the remedies that were imposed by the
Court can have a significant, positive impact on the health of the
American public."
Eight years ago, the
industry agreed to pay states $246 billion in compensation for the public
money spent on treating the health effects of smoking. A year later, the
Justice Department filed its racketeering suit in federal court.
Anti-tobacco activists predicted that government and private litigation
would ultimately cripple the industry.
But after yesterday's
decision, and last month's Florida Supreme Court decision overturning a
$145 million judgment against tobacco makers, some said the industry may
not be as threatened as it once appeared to be.
"This was the
last big, really major case against the industry. Individual smokers will
continue to sue, but that's going to amount to static. I don't think
there's going to be another big case like this," said Mary Aronson, a
tobacco litigation analyst in Washington.
But other experts
said the industry is not yet out of the woods. If the decision is
appealed by either side, and the appeals court
limits on the penalties are overturned, Kessler's decision could provide
the groundwork for imposing staggering fines.
"If it's
appealed, and the government wins its remedies, then this will hit the
industry," said G. Robert Blakey of Notre
Dame Law School.
William B. Schultz,
who as a deputy assistant attorney general in the Clinton administration
oversaw the early stages of the case, said Kessler's ruling was
nevertheless an unquestioned blow to the industry.
"It's the first
time that a court has granted broad injunctive relief against the tobacco
industry," he said.
The Justice
Department lawsuit originally sought $280 billion in what the government
argued were the tobacco industry's ill-gotten gains from the marketing of
a harmful, addictive product.
But the U.S. Court of
Appeals for the District of Columbia Circuit ruled that, under federal
civil racketeering law, a company could not be forced to turn over past
profits as a way of preventing future misconduct.
The Justice
Department subsequently proposed a $130 billion penalty to pay for
anti-smoking programs, but as the nine-month trial came to a close last
summer, it scaled that back to a total of $14 billion -- $10 billion to
help people quit smoking and $4 billion to educate the public about the
risks of smoking.
Critics inside and
outside the department saw the huge cut in the proposed remedy as part of
a political effort to insulate the companies from a larger penalty.
In the end, Kessler
said, the government proved that the tobacco companies engaged in a
massive scheme to defraud the public.
"Put more
colloquially and less legalistically, over the course of more than 50
years, defendants lied, misrepresented and deceived the American public,
including smokers and the young people they avidly sought as 'replacement
smokers,' about the devastating health effects of smoking and
environmental tobacco smoke," she wrote.
Kessler added that
the companies "suppressed research, they destroyed documents, they
manipulated the use of nicotine so as to increase and perpetuate
addiction . . . and they abused the legal system in order to achieve
their goal -- to make money with little if any regard for individual
illness and suffering, soaring health costs, or the integrity of the
legal system."
Kessler said she
intends to keep a careful watch on an industry whose product, she said,
leads to "a staggering number of deaths per year, an immeasurable
amount of human suffering and economic loss, and a profound burden on our
national health care system."
Not only will the
companies have to abandon misleading terms such as "low tar"
and publicly correct their previous misinformation, but they will have to
provide the court with detailed marketing data for the next 10 years.
Kessler ordered them to put "corrective statements" in advertisements
in newspapers and on prime-time television, on their Web sites and on
cigarette packs themselves.
The judge saved a few
pointed comments for the lawyers who have represented the tobacco
industry over the past 50 years.
"At every stage,
lawyers played an absolutely central role in the creation and perpetuation
of the Enterprise and the implementation of its fraudulent schemes,"
she wrote. They "hid the relationship between . . . witnesses and the
industry; and they devised and carried out document destruction policies
and took shelter behind baseless assertions of the attorney client
privilege," the judge wrote.
"What a sad and
disquieting chapter in the history of an honorable and often courageous
profession."
By Henri E. Cauvin and Rob Stein
Washington Post Staff Writers
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