Commentary: The Tobacco Suit That's Going Up In Smoke

How the government blew $135 million in six years

After months of obscurity, the U.S. Justice Dept.'s lawsuit against Big Tobacco has bloomed into an all-out controversy -- but for all the wrong reasons. Critics charge that Bush appointees within the agency may have pressured the Justice trial team to go light on the final penalties sought in court. But that unproven charge, even if true, is far from the most shocking thing about this case. The real affront is that this ill-conceived legal campaign was not halted years ago.

The tobacco lawsuit is the most expensive case in the Justice Dept.'s history. Filed back in 1999 by the Clinton Administration, it has cost the government more than $135 million. Some 250 witnesses have testified and 16,000 documents have been admitted into evidence, resulting in 45,000 pages of trial transcript. The cigarette companies have not disclosed how much all this is costing them, but William S. Ohlemeyer, associate general counsel of the biggest defendant, Altria Group Inc. (MO ), says a "substantial portion" of the $268 million that the company spent on litigation last year went to this case.

And what has been the payoff? Precious little. The Justice Dept. took a mountain of evidence, much of it uncovered by other investigators, applied speculative legal theories, and then proceeded to seek ridiculously overinflated damages. Now most of its original case has been thrown out by the courts, and the agency is scrambling to devise a remedy that will justify all the effort. "This began as a 900-pound gorilla and is beginning to now look like a rhesus monkey," says Jonathan Turley, a law professor at George Washington University who has criticized the case in testimony before the Senate and the House of Representatives. Turley thinks it likely that this suit will now settle before any verdict.

This is not to say that the tobacco industry is above reproach -- far from it. It's just that this suit has been a case of unproductive piling on from the start. Former Attorney General Janet Reno's original complaint was filed at a time when Big Tobacco was far more disingenuous about the dangers of smoking, and the courts were willing to entertain creative lawsuits intended to bring cigarette execs to heel. The case borrowed heavily from the controversial litigation that a coalition of state attorneys general brought against cigarette companies in the mid-1990s. It argued that Big Tobacco should reimburse the federal government for money spent on behalf of injured smokers. This key part of the suit was dismissed by U.S. District Judge Gladys Kessler in 2000. She held, among other things, that government lawyers had failed to identify the victims on whose behalf the government had allegedly spent federal funds.

That ruling left the Justice Dept. with just one controversial legal claim: that the companies had violated the Racketeer Influenced & Corrupt Organizations (RICO) Act. Using the civil version of a criminal law originally intended to target the mob, federal lawyers accused the industry of participating in a decades-long coordinated conspiracy to hide the health consequences of smoking and to market cigarettes to children. As punishment, Justice sought the breathtaking sum of $280 billion -- or all the profits of the top six manufacturers from sales to smokers addicted at youth from 1971 to 2000, plus interest.

New Game Plan

Had justice won the damages it wanted, the money might have been put toward programs that would have helped Americans cut back on smoking. That certainly would have been a logistical nightmare. The companies would have been driven into bankruptcy, and the government might well have found itself functionally in charge of the cigarette business. Of course, that's not what happened. In February a federal appeals court dealt the government another blow, ruling that Justice could not seek allegedly ill-gotten past profits under RICO. (The government has not yet said whether it will appeal that ruling to the U.S. Supreme Court.)

So halfway through the trial, Justice had to rewrite its game plan. Unable to impose a significant financial penalty, it is focusing instead on a wide variety of so-called conduct remedies, including checks on cigarette marketing. But some of these new limits, including the funding of campaigns specifically designed for the youth market, have proven far less effective than measures such as indoor smoking bans and hikes in tobacco taxes. Neither of those are on the government's wish list.

To make sure the industry behaves, the government has devised another proposal: establishing an industry monitor with broad rights, including the power to fire tobacco executives. But this type of highly detailed regulatory oversight requires a big bureaucracy -- it's not the type of job that's appropriate for the judiciary. During the government's closing arguments, Judge Kessler repeatedly asked how any fines against the industry would be spent. The court, she noted, could not supervise that spending -- which must be prudently and cautiously invested.

After all the time and money devoted to this case, the Justice Dept. now appears to be vacillating and uncertain. On Mar. 17, Dr. Michael C. Fiore, a professor of medicine at the University of Wisconsin and a government witness, told Kessler that the government would need $130 billion to fund a massive 25-year national smoking- cessation program. The program would need to include a national tobacco quit line, universal access to counseling and medication, money for research, and an extensive media campaign to encourage Americans to stop using tobacco.

But then on June 7, the government appeared to reverse course, asking for only $10 billion to set up a five-year cessation program. Now the Justice Dept. is scrambling to explain its apparent flip-flop as only the request for the first year of the program and that more requests could follow. Even some of the case's tried-and-true supporters are confused. Gregory N. Connolly, longtime director of the Massachusetts Tobacco Control Program and a professor at the Harvard School of Public Health, says that without multiyear commitments, setting up 800 numbers for addicted smokers or getting hospitals to launch programs will be impossible. "You can't do it for $10 billion," he says. "At $10 billion, why bother?"

Why indeed? Like so many attempts to bring tobacco to heel, this case has fallen far short of its early promise. The Master Settlement Agreement won by the states, universally lauded at its signing, has itself become a political hot potato as states have siphoned off funds meant for education and medical care and put them instead into the general government coffers. Today only three states are meeting the Centers for Disease Control & Prevention minimum funding guidelines for these programs.

Now Washington is embroiled in political infighting as Rep. Henry A. Waxman (D-Calif.) and other Dems call on the inspector general to investigate whether the drop to $10 billion was the result of pressure from advisers close to the Bush Administration. If they indeed are trying to get rid of a Clinton-era case they have never embraced ideologically, as Waxman suggests, the weakness of the case itself only made that all too easy to do.

By Nanette Byrnes

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