Feds, Cigarette Makers Meet in Court

After five years of legal wrangling, the nation's largest cigarette-makers are meeting federal lawyers in court for the trial phase of the government's record $280 billion civil racketeering suit against the tobacco industry.

The government alleges the industry conspired to deceive the public about the dangers of smoking and the addictive nature of nicotine, and illegally targeted children through marketing campaigns.

Government lawyers were to begin presenting their case in U.S. District Court on Tuesday.

Industry lawyers acknowledge tobacco executives may have expressed doubts about public health concerns in the past, but say that doesn't amount to fraud.

"Fraud is, 'I have a specific intention to mislead you or take money from you by deceiving you,'" said Philip Morris USA attorney William Ohlemeyer. "Fraud is a very high bar."

William Schultz, a former Justice Department lawyer who headed the case during the Clinton administration, said the government would use as evidence internal industry documents that have surfaced in other cases and show tobacco executives knew some of their public statements about health risks related to smoking were untrue.

"It's not just that they said things that were false, but the documents show they knew they were false," Schultz said.

In addition to disagreeing about whether fraud occurred in the past, cigarette makers and Justice lawyers also disagree on what the government must demonstrate about the future to win the case.

The industry says companies have significantly changed the way they sell and market cigarettes. They say that makes it impossible for the government to prove fraud is likely to occur in the future, something the government must show to win its case.

Justice lawyers argue that evidence of past fraud is enough to conclude that future wrongdoing is likely to occur.

The industry settled lawsuits with the states over smoking-related health costs for $246 billion. Those agreements, reached in the late 1990s, led to limits on advertising and marketing and shuttered industry lobbying and research organizations.

David Bernick, attorney for Brown & Williamson Tobacco Corp., says the government's case ignores those reforms.

"It blinks away the reality of the profound changes that have taken place both within the tobacco industry and in how tobacco is perceived by people outside the industry," Bernick said.

Like the states, the government initially sued to recover the costs of treating sick smokers. U.S. District Judge Gladys Kessler ruled the government couldn't do that but did allow the Justice Department to sue under the Racketeer Influenced and Corrupt Organizations Act (search).

The government is relying on RICO, originally crafted to go after mobsters, because that law is designed to achieve remedies where there has been a group effort to violate fraud statutes, Schultz said.

The government is seeking $280 billion in "ill-gotten gains" earned by the industry. Justice lawyers also want new restrictions on the industry, which might include limiting in-store promotions or banning product descriptions such as "low tar" or light."

The judge has said the government can go after the companies' old earnings, but the industry appealed that ruling. A higher court is considering the issue even as the trial gets under way.

Justice lawyers have been unwilling to speak publicly about the case, but their advocates say it's only fair for the government to take away money earned wrongfully.

"If you steal something, or you take something by fraud that doesn't belong to you, you should not profit from that," said Robert Kline, a senior attorney at the Tobacco Control Resource Center, a think tank at Northeastern University in Boston.

The government's first witness, expected to take the stand Thursday, is David Kessler, former commissioner of the Food and Drug Administration (search). He tried to assert jurisdiction over the tobacco industry in 1996, but the Supreme Court ruled the FDA overstepped its authority.

In a written filing with the court Monday, tobacco industry lawyer Robert Northrip testified about a case in Australia involving British American Tobacco in which the presiding judge said industry documents were deliberately destroyed, hurting the plaintiff's case.

In response to questions from Justice lawyers, Northrip said the judge was correct, that documents had been destroyed.

The defendants are Philip Morris USA Inc. and its parent, Altria Group Inc. (MO); R.J. Reynolds Tobacco Co.(RJR); Brown & Williamson Tobacco Co.; British American Tobacco Ltd.(BTI); Lorillard Tobacco Co.; Liggett Group Inc.; Counsel for Tobacco Research-U.S.A.; and the Tobacco Institute.