WASHINGTON – The tobacco industry urged a federal appeals court Wednesday to throw out a decision allowing the Justice Department (search) to seek $280 billion from cigarette-makers for allegedly misleading the public about the dangers of smoking.
The government brought the case, now being heard in U.S. District Court, under a 1970 civil racketeering statute originally designed to prosecute mobsters.
Industry lawyer Michael Carvin told a three-judge panel of the U.S. Court of Appeals (search) for the District of Columbia Circuit Wednesday that the civil RICO statute (search) doesn't allow the government to recover money in the ongoing lower court case.
Carvin argued that the government should have filed its case under criminal RICO laws, which would allow the government to go after money and would require a higher burden of proof.
Deputy Solicitor General Michael Dreeben argued that the law does give judges the power to impose monetary remedies in civil RICO cases and that the government therefore has the right to go after earnings the companies made through fraud.
Dreeben said that taking the money away would eliminate a "pool of capital" that could be used for illegal acts in the future.
But Carvin said that going after money earned years earlier would not "prevent and restrain" future violations, something the law requires of remedies imposed. "It is not a carrot or a stick for future compliance," Carvin said.
U.S. District Judge Gladys Kessler previously agreed with the government but said the industry could appeal her ruling even as the case proceeds in lower court. That trial has been under way since September and is expected to last several more months.
The government has described the $280 billion as an estimate of money the companies earned illegally through fraudulent activities such as marketing to children and denying doing so.
The industry, meanwhile, says the government failed to distinguish between money earned legally and illegally.
Kessler has said she would like to sort that out in trial.
If the appeals court rules that the government cannot go after the industry's earnings, Kessler could still impose restrictions on the tobacco companies such as limiting marketing or requiring the industry to fund public health campaigns or smoking cessation programs.
There is some expectation, however, that both sides might seek a settlement if the appeals court rules the government can't go after money.
The federal case comes six years after the states reached legal settlements with the industry worth $246 billion and aimed at recouping health care costs. Those settlements also imposed restrictions on the industry, such as banning ads on billboards and public transportation.