Judge Says U.S. May Go After Long-Ago Tobacco Profits

The Justice Department may seek to force Altria Group’s Philip Morris USA, R.J. Reynolds Tobacco Holdings Inc. and other cigarette makers to give up profits earned before 1970, a federal judge ruled Wednesday.

Attorneys for the cigarette makers argued that the government shouldn’t be able to use a 1970 racketeering statute to recover industry profits earned before the law was on the books.

U.S. District Judge Gladys Kessler said that “disgorgement of illegal proceeds is not ‘punishment,’ ” allowing the government to seek remedies for the pre-1970 activity as long as it does not add new punishments.

The Justice Department sued in 1999 during the Clinton administration, seeking more than $200 billion in damages. The lawsuit claimed that the tobacco companies engaged in a 30-year pattern of racketeering to mislead the public and Congress about the risks of smoking. A trial is set for September.

The Justice Department suit also names as defendants Loews Corp.’s Lorillard Tobacco Co., Brown & Williamson Tobacco Corp. and Vector Group Ltd.’s Liggett Group Inc. Two tobacco industry trade groups, the Tobacco Institute and the Council for Tobacco Research, also were sued.

Kessler also said she would later address two other claims by the tobacco industry. The cigarette makers allege that the disgorgement is so “disproportionate” that it should be considered constitutionally excessive and that any disgorgement should be limited to ill-gotten gains that “are being used to fund or promote” any illegal conduct.