U.S. Accuses Company of High-Nicotine Plot

The U.S. Justice Department, in the first criminal case resulting from its long investigation of the tobacco industry, accused an Oakland-based biotechnology company on Wednesday of conspiring with Brown & Williamson, the nation’s third-largest cigarette maker, to create a tobacco plant with unusually high levels of nicotine.

Department officials charged DNA Plant Technology, or DNAP, with cooperating with a U.S. tobacco company “to develop a reliable source of supply of high-nicotine tobaccos that the company could then use to control and manipulate the nicotine levels in its cigarettes.”

Allegations of nicotine manipulation to hook smokers are a critical element of legal actions against the industry around the country, including suits filed by state attorneys general in Texas and Minnesota that are scheduled to go to trial later this month.

The Justice Department filed what is known as a criminal information against DNAP. Such a filing virtually always means that the defendant will plead guilty. Indeed, department sources said that DNAP would plead guilty to one misdemeanor count of conspiring to illegally export tobacco seeds--a charge that carries a fine of $200,000 or twice the profit that DNAP made on the nicotine project.

Brown & Williamson was not named in the criminal information, which simply refers to an unnamed U.S. tobacco company as an unindicted “co-conspirator.” However, congressional hearings in 1994 revealed that DNAP had a contract with B&W; to develop high-nicotine tobacco.

Legal observers said that Wednesday’s action is the strongest sign yet that the Justice Department’s extensive criminal probe of the $50-billion-a-year industry is likely to yield further charges and indictments.

Some lawmakers and public health leaders said that indictments could complicate the industry’s efforts to obtain special legal protections in the $368.5-billion tobacco settlement pending in Congress. The settlement bars class-action suits and punitive damages against the industry in the future, but it provides no protection from criminal charges.

“This is just the opening salvo for the Justice Department,” said Clifford Douglas, an Ann Arbor, Mich., attorney who has been assisting department officials with the criminal probe.

Rep. Martin T. Meehan (D-Mass.), who urged Atty. Gen. Janet Reno to launch a criminal probe of the industry in late 1994, said he was pleased that the government had moved aggressively. “I anticipate that this is just the tip of the iceberg,” he added.

Meehan predicted that the case could have “a major impact on Congress’ effort to pass tobacco legislation this year. Members of Congress will likely have reservations about providing sweeping [legal] protections to tobacco companies that have either been indicted or pleaded guilty to criminal charges.”

Grant of Immunity Signaled Seriousness

The first public sign that the Justice Department was seriously pursuing a case against DNAP came in July when The Times reported that the government had granted immunity to a New Jersey scientist who had worked on the project in return for her cooperation.

The criminal information filed Wednesday charged that, under a contract DNAP signed in 1983, the company was to grow and improve high-nicotine lines of tobacco, including a variety called Y-1, which had a nicotine content of twice the normal level in flue-cured tobacco.

The information further charges that DNAP conspired with the tobacco company and its Brazilian affiliate to violate a law that prohibited the export of tobacco seeds from the U.S. without a permit.

Moreover, the information charges that employees of DNAP and the tobacco company, on numerous occasions between 1984 and 1991, conspired to illegally export Y-1 seed and other tobacco seeds to Brazil and a number of other countries, including Nicaragua, Honduras, Chile, Nigeria, Costa Rica, Argentina, Zimbabwe and Canada. Company employees smuggled the seeds “by concealing the seeds in their luggage or on their persons,” according to the Justice Department papers.

The Justice Department further charged that DNAP knowingly concealed from the FDA information about the contract and the illegal export of tobacco seeds.

DNAP issued a brief formal statement saying that it had agreed to cooperate with the Justice Department’s probe of the tobacco industry. It also said that the Y-1 contract had been terminated in 1994.

B&W; issued a formal statement Wednesday saying it would not comment directly on the Justice Department announcement. However, the company stressed that the seed export law that DNAP allegedly violated had been repealed in 1991 because “it impeded international commerce and was hurting American agricultural interests.”

B&W; said “there was nothing secretive about the development of Y-1 tobacco” and maintained that the project’s purpose “was never to manipulate nicotine in order to raise nicotine levels in commercial cigarettes.” The company also said that Y-1 was developed in the hopes of lowering dangerous tar in cigarettes without automatically lowering their nicotine content.

Higher Nicotine Levels Said Flavor-Enhancing

Part of the company statement reiterated, in essence, positions taken in 1994 by now-deceased B&W; Chairman Thomas E. Sandefur. At a June 1994 congressional hearing, he maintained that the company was merely trying to enhance cigarette flavor. However, it emerged during the hearing that B&W; officials had said different things at different times to FDA investigators.

Initially, B&W; officials told the FDA that breeding high-nicotine tobacco was not feasible. After the company heard that FDA investigators had learned a good deal about Y-1, they asked for a meeting. Company officials then told the agency that they had 4 million pounds of Y-1 leaf in storage in the U.S. and had used it in five brands of cigarettes: two varieties of Viceroy, two varieties of Richland and Ralph Lights King Size.

B&W; said at the time that it had stopped using Y-1 in the five brands and canceled the project. However, sources close to the Justice Department said Wednesday that the department is investigating whether B&W; has continued to use Y-1 stored in Macon, Ga.

Wednesday’s action against DNAP was hailed by former Food and Drug Administration Commissioner David A. Kessler, who supervised the agency’s Y-1 investigation in 1994.

“They engaged in a conspiracy to boost nicotine levels in tobacco plants--something industry officials consistently denied that they were doing,” said Kessler, now dean of Yale Medical School. “Our investigation of Y-1 was one of the reasons we decided to classify nicotine as an addictive drug” that warranted federal regulation, Kessler said in a telephone interview.

Among the people whom the Justice Department has interviewed is whistle-blower Jeffrey S. Wigand, a former B&W; vice president who is the industry’s highest-ranking defector. In a November 1995 deposition in a civil case in Mississippi, Wigand said that Philip Fisher, then the head of of B&W;’s leaf-blending group, had secretly transported Y-1 seeds to Brazil “several times,” hiding them in cigarette packs.

B&W; said at the time that there was “nothing improper about its involvement in the shipment of seeds to Brazil.” Fisher has declined comment. B&W; officials lambasted Wigand and sued him for violating a confidentiality agreement. But the suit was dropped as part of the $368.5-billion settlement last June.

On Wednesday, Wigand said “it’s great to see the Justice Department corroborate me and get at the truth. It’s great to see the Justice Department bring light into the darkness.”

Many of the lawsuits filed by state attorneys general against the tobacco industry refer to the Y-1 matter as part of the broader allegations that the industry has manipulated the nicotine content of cigarettes to hook smokers.

On Wednesday, Massachusetts Atty. Gen. Scott Harshbarger, one of the first of 41 state attorneys general to sue the tobacco industry, said the Justice Department’s action supports the nicotine manipulation contentions that attorneys general have made in suits seeking to recover billions from the industry.

Neither Jimmye S. Warren, a senior attorney in the Justice Department’s fraud division who has spearheaded the criminal probe, or Randall D. Eliason, assistant U.S. attorney in Washington, would comment beyond the court papers.

Grand Jury Probes for Three Years

The department has had grand juries investigating the industry in New York and Washington for three years. A special task force of FBI agents has been poring over internal industry documents as part of the probe.

Several prominent industry officials have retained criminal defense lawyers in connection with the probe.

Last May, Thomas S. Osdene, former research director for Philip Morris Cos., invoked the 5th Amendment against self-incrimination in a civil deposition when asked about any contact he had with Justice Department officials. Helmut Wakeham, another former research director for Philip Morris, said in an interview that he had been questioned extensively at a New York grand jury hearing about the relationship between company lawyers and scientists. One of the key allegations in suits against the industry is that tobacco lawyers suppressed information about the health hazards of their products that had been discovered by company scientists.

Times staff writer Ronald J. Ostrow contributed to this story.