Gov't Accepts Reduced Quit Smoking Program From Big Tobacco

Federal prosecutors, wrapping up a drawn-out lawsuit against the tobacco industry, are demanding only a fraction of the $130 billion that the government initially envisioned cigarette makers would have to spend on smoking cessation programs.

The new stand by the Justice Department (search), announced as lawyers were summarizing arguments Tuesday in the racketeering trial, caught attorneys by surprise. Federal prosecutors said they were willing, instead, to accept a penalty of only about $10 billion, for a five-year program to help people kick the habit.

The defendants in the lawsuit are Altria Group Inc. (MO) and its Philip Morris USA (search) unit; Loews Corp.'s (LTR) Lorillard Tobacco unit, which has a tracking stock, Carolina Group (CG); Vector Group Ltd.'s (VGR) Liggett Group; Reynolds American Inc.'s (RAI) R.J. Reynolds Tobacco unit and British American Tobacco Plc unit British American Tobacco Investments Ltd.

The $130 billion, for a 25-year smoking cessation program, was initially proposed in court by Michael C. Fiore, a medical professor at the University of Wisconsin and government witness. But Justice Department lawyers on Tuesday called the $10 billion sum an "initial requirement" that could be extended.

Cigarette makers, who were getting their chance to state their last arguments Wednesday, saw the department's change of heart as a positive sign.

"Somewhere $120 billion has suddenly disappeared," said Philip Morris lawyer Ted Wells.

At the heart of the suit is the government's allegation that cigarette companies conspired for decades to deceive the public about the dangers of smoking. The companies deny the charges and argue that the civil racketeering statute under which the case was filed in 1999 severely limits any sanctions that U.S. District Judge Gladys Kessler can impose if she finds against them.

"The United States introduced voluminous evidence that the tobacco industry defendants engaged in an over-50-year scheme to mislead the American public," Associate Attorney General Robert McCallum said in a statement.

In February, however, an appeals court had stripped the government of its biggest stick against the defendants, when it denied prosecutors' request to seek $280 billion in allegedly ill-gotten gains.

Among the other penalties the government suggested Tuesday were long-term educational campaigns designed to counter tobacco marketing, quantifiable reductions in youth smoking rates and restrictions on practices such as price discounts and in-store displays.

Government lawyer Stephen Brody suggested Kessler issue injunctions governing the companies' public statements about the risks of smoking and requiring the release of certain documents.

In addition, he suggested requiring the companies to pay for court-appointed monitors to ensure compliance. If monitors find misconduct, they could recommend changes, including the removal of senior management, Brody said.

Kessler asked the government to look for legal precedents to back its request.

"Here you are essentially asking for judicial oversight of private corporations. These are very weighty issues, I'll leave it at that," she said.

Throughout the government's closing arguments on Tuesday, Kessler resisted proposals that would require her persistent supervision.

"I think you are suggesting that I would be the one overseeing and supervising the whole effort," she said about the proposed education campaign.