Philip Morris CEO Testifies That Company Has Changed

From Reuters

The chief executive of cigarette maker Philip Morris USA told a federal judge Thursday that the company had changed in recent years and was now open with the public about the dangers of smoking.

Appearing as a defense witness in the government’s racketeering case against the tobacco industry, Philip Morris CEO Michael Szymanczyk said the company made a business decision during the late 1990s to ensure it was dealing with the public “responsibly, openly and honestly.”

“We have determined that having society view us as a responsible company is the best way to build value in the business,” Szymanczyk told U.S. District Judge Gladys Kessler.


Szymanczyk also testified that the company spent generously on a program to prevent youth smoking.

But Szymanczyk faced tough questioning by a government lawyer, who argued that the changes made by the company were really a “public relations stunt” designed to blunt public anger and help defend it against sick-smoker lawsuits.

The government suit, launched in 1999, targets Altria Group Inc. and its Philip Morris unit; Loews Corp.'s Lorillard Tobacco unit, which has a tracking stock, Carolina Group; Vector Group Ltd.'s Liggett Group; Reynolds American Inc.'s R.J. Reynolds Tobacco unit and British American Tobacco unit British American Tobacco Investments Ltd.

The government charges that cigarette makers conspired to lie about the dangers of smoking for decades.

The tobacco companies deny any conspiracy and say they changed their marketing practices as part of a 1998 settlement with state attorneys general.

At the center of Szymanczyk’s testimony were a series of moves made by Philip Morris’ parent company between 1997 and 1999 in response to mounting public pressure.

The company decided to drop a long-held stance questioning whether smoking is addictive and whether its links to disease had been fully proven. It has since deferred to public health authorities on the health effects of smoking.

Philip Morris also undertook to communicate with the public more directly about the dangers of smoking through its website and TV ads, and instituted a new set of corporate “missions” and “values” to reflect its new positions, Szymanczyk said.

He said that the changes were more than just cosmetic. They were designed to make sure Philip Morris was seen as “a company worth respecting.”

Justice Department lawyer Sharon Eubanks cast the changes in a more cynical light.

Eubanks referred to a 1999 memo written by a Philip Morris executive that attached comments from Wall Street analysts, who praised the new strategy because it would help change the company’s image with the public and soothe juries weighing sick-smoker cases.

“It’s fair to say that this analyst was looking at the website as a public relations stunt, right?” Eubanks asked Szymanczyk, referring to one of the analyst’s comments.

“I don’t know. It sounds like it,” Szymanczyk conceded.

Eubanks also questioned the effectiveness of Philip Morris’ initiative to prevent youth smoking, which featured advertisements starting in 1998 that urged children not to smoke.

Szymanczyk denied that the ads were ineffective. But he said Philip Morris later pulled them off the air, concluding that it was better to direct the ads at parents, not directly at kids.