Big Tobacco Is Guilty of Conspiracy

A federal judge on Thursday found the major cigarette makers guilty of civil fraud and racketeering, saying the government had proved their participation in a decades-long conspiracy to deceive the public about the risks of smoking in order to sustain their profits.

But the historic ruling in Washington by U.S. District Judge Gladys E. Kessler appeared to be a largely moral victory for the Justice Department, which brought the suit seven years ago, and for anti-smoking groups that hoped the case would strike a major blow against the industry.

In sharp contrast to her withering remarks in the 1,653-page ruling, Kessler imposed only minor sanctions against the companies and no hard hits on their wallets. Kessler lamented that a federal appeals court ruling had tied her hands.

Nevertheless, the fact that a federal court found that cigarette makers are racketeers could weaken the industry’s defense in dozens of other tobacco suits around the country.

Industry leader Philip Morris USA and its parent Altria Group Inc. announced late Thursday that they would appeal the ruling, which they said was “not supported by the law or the evidence presented at trial.”

Kessler enjoined the companies from committing any future acts of fraud, and ordered them to issue a series of “corrective statements” through advertisements in major newspapers and TV networks, and on their websites. She said the statements must disclose the hazards and addictiveness of smoking, the lack of significant health benefits from smoking low-tar cigarettes, the companies’ use of cigarette design to achieve optimum nicotine delivery, and the adverse effects of secondhand smoke.

The judge also barred cigarette makers from using terms such as “mild,” “light” and “ultralight” in promoting their brands, ruling that these words were meant to falsely imply that the cigarettes were less harmful. She also ordered the defendants to pay the government’s legal costs, which could run into the hundreds of millions of dollars.

Kessler said she “unfortunately” could not order the multibillion-dollar remedies sought by the Justice Department and tobacco control groups, including industry-funded programs to help addicted smokers quit, counter-advertising campaigns, and fines if youth smoking doesn’t drop by targeted amounts. She said a sweeping ruling in mid-trial by the U.S. Court of Appeals for the District of Columbia had precluded these options.

Kessler found the government had failed to prove that the companies deliberately chose not to market less hazardous cigarettes, but said there was “overwhelming evidence” to support most of the allegations.

She said that over the course of more than 50 years, the defendants “lied, misrepresented, and deceived the American public

Moreover, “they suppressed research, they destroyed documents, they manipulated the use of nicotine so as to increase and perpetuate addiction, they distorted the truth about low-tar and light cigarettes so as to discourage smokers from quitting.”

Found liable along with Philip Morris were R.J. Reynolds Tobacco Co. and Brown & Williamson Tobacco Co., which have merged into Reynolds American; Lorillard Tobacco Co.; and British American Tobacco (Investments) Ltd. Kessler found Liggett Group Inc., the smallest of the defendants, not liable.

The Justice Department said in a brief statement that it was “pleased with the court’s finding of liability ... but disappointed that the court did not impose all of the remedies sought by the government.”

William V. Corr, executive director of the Campaign for Tobacco-Free Kids, called it “a very important decision because Judge Kessler has found that we’ve got a rogue industry in this country.”

But he admitted being “deeply disappointed” that the judge felt constrained “by misguided appellate court rulings.”

Filed in September 1999, the lawsuit was the largest civil racketeering suit in history and culminated in a nine-month trial that ended in June 2005.

But well before Thursday’s ruling, the industry’s financial exposure had been sharply reduced.

Early on, Kessler dismissed government claims for recovery of billions of dollars in smoking-related healthcare costs. The government then focused on proving that the industry had committed mail and wire fraud and violated civil provisions of the federal Racketeer Influenced and Corrupt Organizations Act, better known as RICO.

In February 2005, midway through the trial, a federal appeals panel handed the industry a huge win, ruling that the government could not pursue a claim for $280 billion in profits under the RICO law. In fact, the court ruled, civil RICO could not be used to punish past wrongdoing, but only to stop present or future acts of fraud.

Cigarette makers had argued that their conduct, while sometimes questionable, had never been fraudulent, and that prosecutors had ignored significant improvements in their behavior.

Retooling its case after the appeals ruling, government lawyers instead sought to require the industry to underwrite a nationwide smoking cessation program costing $130 billion over 25 years.

Then, in a radical and controversial shift at the close of the trial, government lawyers, under orders from political appointees at the Justice Department, slashed their demands to $14.5 billion, including a $10-billion stop-smoking program.

Kessler allowed a coalition of tobacco-control groups to submit a counterproposal for up to $108 billion in spending on anti-smoking programs over 20 years. But in the end, she ruled that these measures were not permitted under the appeals court decree that remedies only address the risk of future acts of fraud.

Even so, in her exhaustive review of the record, Kessler was unsparing in her assessment of the industry’s behavior.

The case “is about an industry ... that survives, and profits, from selling a highly addictive product which causes diseases that lead to a staggering number of deaths per year, an immeasurable amount of human suffering and economic loss, and a profound burden on our national healthcare system.”

Kessler also had harsh words for the role of industry lawyers, who, she said, “played an absolutely central role in the creation and perpetuation of the Enterprise and the implementation of its fraudulent schemes....”

“What a sad and disquieting chapter in the history of an honorable and often courageous profession.”