Tobacco Industry Target of Taxpayer Suits

The tobacco industry encountered major new legal problems Thursday as two massive lawsuits seeking the recovery of billions of dollars spent treating sick smokers by the federal Medicaid, Medicare and veterans programs were filed in federal court in Wichita, Kan.

The suits were filed by individuals, acting on behalf of federal taxpayers.

The cases are analogous to those filed by 41 state attorneys general seeking recompense for expenditures the states made treating sick smokers. The suits allege that the cigarette companies have engaged in a conspiracy spanning more than four decades to deceive the public about the dangers of their products, hook teenagers on an addictive product and keep them addicted by manipulating nicotine levels.

Consequently, the suits allege the U.S. government has incurred more than $100 billion in expenses treating smokers under various federal benefit programs.

Under terms of the proposed national tobacco settlement that would resolve the state cases and 17 major class actions, only state governments were to receive a portion of the $368.5-billion settlement fund, even though about half of the money spent on smoking-related illnesses by the states was provided to them by the federal government, said Mark D. Hutton, a Wichita attorney who represents the plaintiffs in the cases lodged Thursday.

Since federal officials have not carried out “their obligations to the taxpayers” to seek recovery of money to compensate the federal government for expenses incurred treating smoking-related diseases, “our clients are doing it for them,” said Hutton’s co-counsel, Gary L. Richardson of Tulsa, who was the U.S. attorney in Oklahoma in the early 1980s.

Because the tobacco settlement must be approved by Congress, there has been no determination of how the funds would be allocated if the deal is enacted into law. In theory, the federal government would be entitled to a healthy chunk--in some cases up to 80%--of any recovery a state got, depending on how much of state Medicaid money came from the U.S. Treasury.

However, the attorneys general have been attempting to persuade lawmakers in Washington to permit them to keep all of the money so long as they allocate it for health care for uninsured children or a similar purpose.

Since the national settlement was announced on June 20, several lawmakers, led by Sen. Edward M. Kennedy (D-Mass.), have said that there has to be reimbursement to federal taxpayers for any settlement to pass muster.

Just two days ago, the Department of Defense announced that the agency felt it was entitled to a substantial recovery if the settlement becomes law because the department spends $584 million a year to treat service personnel with illnesses caused by smoking.

Mississippi Atty. Gen. Mike Moore, who filed the first of the state cases against the $50-billion-a-year tobacco industry, told senators this summer that some time ago he had formally asked the Justice Department to sue the cigarette companies, utilizing the same legal theories that the states had used. He said Justice Department officials never responded.

Justice officials had no immediate response Thursday to the new suits. Spokesmen for Philip Morris Inc. and R.J. Reynolds Tobacco Corp., the nation’s two largest cigarette makers, said they had not been served with the suits and thus could not comment.

In theory, the Justice Department could jump into the cases and even take them over on behalf of the nation’s taxpayers, Hutton said. “I hope this motivates them,” said Hutton, a veteran of many major mass tort cases including litigation against the manufacturers of breast implants, diet drugs and pharmaceutical devices.

Hutton stressed that his clients would not get any direct financial benefit if the suits were successful. “They don’t want a penny.”