Law Suits: Rico Part Two

By Jonathan On Jul 5, 2017

RICO PART TWO

Read the Newest Articles at:? RICO Part Three

RICO Witness. Health Info Has Little Effect On Smoking.

Tobacco Asks Judge To Strike Key DOJ Fraud Remedies
July 20, 2005? Two days after the Justice Department asked the Supreme Court to reinstate disgorgement of $280 billion in past cigarette profits as a possible fraud penalty, tobacco lawyers on Wednesday countered by urging a federal judge to throw out the “centerpiece” of the government’s remaining remedies.
http://money.iwon.com

Justice Seeks to Pursue Tobacco Profits
Department Appeal to High Court Under Racketeering Law Says Industry Misled Public
By Dan Eggen.? Washington Post Staff Writer
July 19, 2005? The Justice Department appealed to the Supreme Court yesterday in its landmark lawsuit against the tobacco industry, arguing that the government should be able to pursue as much as $280 billion in past profits from cigarette makers for allegedly misleading the public about the dangers of smoking.
http://www.washingtonpost.com/

Justice Department Finally Does The Right Thing On Tobacco Settlement
July 18, 2005
?? You’ll recall that we bashed around the Alberto Gonzales Justice Department several weeks ago for selling out to Big Tobacco and undercutting their own litigators by slashing their proposed racketeering penalty against Big Tobacco from an expected $130 billion to only $10 billion, after the personal involvement of an Associate Attorney General who used to be an attorney for a tobacco company. At the time, the Justice Department said it had no choice because an appeals court decision in February restricted what the government could seek. As we noted at the time, if so then the proper course of action would be to appeal the appeals court decision to the Supreme Court, since it now turns out that one of the judges who wrote the pro-tobacco company decision was none other than Jesse Helms’ prot?g? and Big Tobacco supporter David Sentelle, who was responsible for issuing adverse, political rulings against Clinton.
?? The Justice Department just did what it should have done months ago: appeal the appeals court decision to the Supreme Court, especially since we now find out that the full DC Court of Appeals actually deadlocked 3-3 on whether the decision written by Sentelle should have stood in the first place.
?? This would sure make Gonzales look good at any subsequent Supreme Court nomination hearing.
http://www.theleftcoaster.com/archives/004918.php
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Read The Rest of the Story, Michael Seigel’s blog.
http://tobaccoanalysis.blogspot.com/
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DOJ Tobacco Disgorgement Appeal Deadline Set For July 18
July 11, 2005.? WASHINGTON -(Dow Jones)- The Justice Department has until July 18 to ask for Supreme Court review of an appeals court ruling rejecting disgorgement of past tobacco industry profits as part of the government’s racketeering suit against the industry.
http://money.iwon.com

To Really Stop Smoking
July 6, 2005.? By John E. Calfee.? But the critics have got it all wrong. The DOJ should never have brought this case, which was based on the absurd premise that during the previous four or five decades the Surgeon General was fooled by the tobacco companies into thinking smoking wasn’t really very dangerous.
http://www.techcentralstation.com/070605D.html

IN MY VIEW: Fashioning an Effective and Appropriate Remedy to Restrain RICO Violations
June 30, 2005 By Michael Siegel.? If public health groups really want to help the D.C. District Court fashion effect and appropriate remedies in the tobacco case, then I think their focus should be not on monetary remedies, which have no chance of being upheld, but rather on the non-monetary remedies, which is where I think the action is.
http://tobaccoanalysis.blogspot.com/2005/06/in-my-view-fashioning-effective-and.html

Health Groups File Motion To Join DOJ Tobacco Suit
June 29, 2005? By Brian Blackstone.? In the strongest signal yet of antismoking advocates’ anger at the government’s handling of the cigarette racketeering case, a group of health advocates on Wednesday filed a motion in federal court to become parties to the lawsuit.
http://money.excite.com

DOJ Asks For 5-Year, $12 Billion Quit-Smoking Plan In Fraud Case
June 28, 2005.? WASHINGTON -(Dow Jones)- Barely meeting a court-imposed deadline, the Justice Department late Monday asked a federal judge to force tobacco companies to spend a total of $12 billion over five years on smoking cessation programs starting early next year.
http://money.iwon.com

The Motion to Intervene
and a Memorandum in Support of Motion to Intervene can be found at:
http://tobaccofreeaction.org/files/Motion_to_Intervene.pdf.

Snuff out this silly suit
June 23, 2005
By Michael I. Krauss
Attorney General Gonzales, please kill this suit.
http://washingtontimes.com/commentary/20050622-090459-8461r.htm

UPDATE: DOJ Gets 2 Extra Days To Specify Tobacco Remedies
Tuesday June 21, 2:37 PM EDT
http://money.iwon.com

Commentary: The Tobacco Suit That’s Going Up In Smoke?
How the government blew $135 million in six years?
BusinessWeek
JUNE 27, 2005 edition
http://www.businessweek.com/magazine/content/05_26/b3939102.htm

Behind the Justice Department’s Shift on Tobacco
June 15, 2005
By Frank J. Marine.? I am a senior member of the Justice Department section involved with enforcement of racketeering laws. In 1998 the office of Attorney General Janet Reno asked whether it would be appropriate to bring civil racketeering claims against the tobacco industry for defrauding the public. I recommended that such a lawsuit be brought, and I have been a member of the case’s trial team ever since.
http://www.washingtonpost.com/

The Federal Government’s Reversal In Its Suit Against the Tobacco Industry:
Why There May Actually Be a Good Reason For The Justice Department’s Last-Minute About-Face
By ANTHONY J. SEBOK
anthony.sebok@brooklaw.edu
June 13, 2005
http://writ.news.findlaw.com/sebok/20050613.html

Judge Is Boxed In in Tobacco Lawsuit
By Myron Levin
Times Staff Writer
June 11, 2005
WASHINGTON – The massive civil racketeering case against big tobacco companies that wrapped up this week in federal court has been so battered by adverse rulings and government fumbling that a verdict may mean little even if the industry loses, observers say.
http://www.latimes.com/

Government Defends Downsized Penalty In Tobacco Trial
June 10, 2005
Tobacco industry lawyers seized on federal prosecutors’ downsized penalty in a racketeering trial against major cigarette makers, calling it proof the case is in shambles.
“The plaintiff’s case is disappearing, and this is a desperate effort to stop the fall,” Brown & Williamson lawyer David Bernick said Thursday.
http://www1whdh.com/news/articles/national/DBB1422/

Shift in Tobacco Suit Is Assailed
Some Democratic lawmakers demand a probe into possible political meddling.
By Myron Levin and Richard Simon
Times Staff Writers
June 9, 2005
WASHINGTON – With the government’s giant racketeering case against cigarette makers nearing a close Wednesday, rancor spread beyond the courtroom as lawmakers demanded an investigation of possible political interference in the government’s case.
http://www.latimes.com/

Tobacco witnesses were told to ease up
Justice Department sought softened sanctions
By Carol D. Leonnig
The Washington Post
Updated: 12:35 a.m. ET June 9, 2005
Government lawyers asked two of their own witnesses to soften recommendations about sanctions that should be imposed on the tobacco industry if it lost a landmark civil racketeering case, one of the witnesses and sources familiar with the case said yesterday.
http://www.msnbc.msn.com/id/8149706/

IG Asked to Investigate DOJ Tobacco Reversal
June 8, 2005
CONTACT: Rep. Henry A. Waxman
Reps. Waxman and Meehan asked the Justice Department Inspector General to investigate whether improper political interference contributed to the Department’s surprise decision to slash its request for relief by over 90% in the RICO litigation against the tobacco industry. They also asked the IG to investigate the role played by Associate Attorney General Robert McCallum, a former tobacco industry lawyer, in the decision. The text of the letter to the IG follows:
http://www.commondreams.org/news2005/0608-27.htm

Tobacco Escapes Huge Penalty
U.S. Seeks $10 Billion Instead of $130 Billion
June 8, 2005
By Carol D. Leonnig
After eight months of courtroom argument, Justice Department lawyers abruptly upset a landmark civil racketeering case against the tobacco industry yesterday by asking for less than 8 percent of the expected penalty.
http://www.washingtonpost.com

DOJ Tobacco Shift Spurs Judge,Congress Queries
By Brian Blackstone
A confident tobacco defense team on Wednesday said the Justice Department has failed to prove its fraud case against the industry and ridiculed DOJ’s decision to reduce by $120 billion its proposed smoking- cessation remedy.
http://www.nasdaq.com/

2nd UPDATE: Judge Presses DOJ On Remedies In Tobacco Case
By Brian Blackstone
District Court Judge Gladys Kessler, meanwhile, pressed government lawyers on whether there is legal precedent for remedies such as industry monitors and corrective advertising and suggested the government is asking her to take on too large a role in overseeing the tobacco industry.
http://www.nasdaq.com/

DOJ Scales Back Smoking-Cessation Remedy In Fraud Case
June 7, 2005
“Somewhere $120 billion has suddenly disappeared,” said Philip Morris USA lawyer Ted Wells.
http://money.iwon.com/

US judge questions remedies sought in tobacco case
June 7, 2005
By Peter Kaplan
The judge presiding over the racketeering trial of cigarette makers on Tuesday expressed serious doubts about some of the sanctions the government is seeking to impose on the tobacco industry.
http://news.yahoo.com/

US seeks $10 billion for quit-smoking program
June 7, 2005
WASHINGTON (Reuters) – A lawyer for the U.S. government told a federal judge on Tuesday that cigarette makers should be forced to pay $10 billion over five years to fund a program to help smokers quit, far less than suggested by a government witness a month ago.

Justice Department attorney Stephen Brody made the request as the government summed up its case in the landmark racketeering trial against major tobacco companies that began in September last year.

Smoking cessation expert Michael Fiore had testified for the government on May 17 that cigarette makers should be forced to fund a $130 billion program over 25 years to help smokers quit.
http://www.reuters.com

US tobacco trial near end, sanctions in doubt
06 Jun 2005 22:23:23 GMT
Source: Reuters
By Peter Kaplan
WASHINGTON, June 6 (Reuters) – The U.S. racketeering trial of cigarette makers that began with great fanfare eight months ago draws to a close this week amid doubts it will lead to any major sanctions against the tobacco industry.
http://www.alertnet.org/thenews/newsdesk/N06378226.htm

Altria Lawyer Promises ‘Blistering’ Attack On DOJ Case
June 6, 2005
WASHINGTON -(Dow Jones)- Tobacco lawyers will mount a “blistering and well- deserved” attack on the government’s civil racketeering case against the industry in closing arguments this week, a top lawyer at Altria Group (MO) said Monday.
http://money.excite.com

Court Nixes U.S. Request in Tobacco Trial

04.20.2005

An appeals court won’t reconsider its decision barring the Justice Department from seeking $280 billion in a lawsuit against cigarette companies.

In a vote Wednesday, the U.S. Court of Appeals for the District of Columbia Circuit divided 3-3 on whether to reconsider the case, according to a Justice Department spokesman.

Officials said the government has not decided whether to appeal the decision to the Supreme Court.

“In the wake of the tied vote … the United States will carefully review its options and make a determination in the near future as to what course of action it will pursue,” said Associate Attorney General Robert D. McCallum Jr.

In the case, filed in 1999 under a federal racketeering statute, the government is alleging cigarette makers conspired for decades to deceive the public about the dangers of smoking. A trial began in U.S. District Court in September, and is ongoing.

The Justice Department last month asked the full court to reconsider a panel’s 2-1 decision that the government could not seek the huge penalty. The panel decided the government was limited to “forward looking” remedies, and that “disgorgement” – or the seeking of money allegedly earned through fraudulent means – was not one.

U.S. District Judge Gladys 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.

But Jonathan Turley, a law professor at George Washington University, said the decision puts the government in a “rather untenable decision.”

“It lost the majority of its expected damages out of this case,” he said. “On the other hand, it can’t simply pick up its marbles and go home.”

The Justice Department has already spent more than $135 million on the case filed under the Clinton administration.

William V. Corr, executive director of the Campaign for Tobacco-Free Kids, urged the government to appeal the disgorgement decision, and said the ruling “has a significant impact on the government’s ability to use the RICO law against major corporate wrongdoing in all industries.”

Failing to appeal could also leave “major questions about the remedies that are available to Judge Kessler,” Corr said.

Representatives of the cigarette companies did not return phone calls or had no immediate comment on the effect of the decision.

The appeals court decision could also weaken the government’s hand in any potential settlement talks with cigarette makers, Turley said.

“Disgorgement was the 800-pound gorilla in the closet. I think that 800-pound gorilla is now a midsize chimpanzee,” he said.

The defendants in the lawsuit are: Philip Morris USA Inc. and its parent, Altria Group Inc.; R.J. Reynolds Tobacco Co.; Brown & Williamson Tobacco Co.; British American Tobacco Ltd.; Lorillard Tobacco Co.; Liggett Group Inc.; Counsel for Tobacco Research-U.S.A.; and the Tobacco Institute.
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http://www.forbes.com/
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Appeals Court Won’t Rehear Tobacco Ruling?

April 20, 2005

WASHINGTON – A federal appeals court on Wednesday refused to reconsider a recent ruling that barred the government from seeking $280 billion in past profits from cigarette makers as part of its civil racketeering case against the industry.

The U.S. Court of Appeals for the D.C. Circuit dealt another setback to the racketeering case against the industry, rejecting the government’s request that the full court review a ruling by a three-judge panel in February that concluded it cannot pursue past industry profits.

In a tied, 3-3 vote, the appeals court judges left standing a Feb. 4 ruling that stripped the government of its strongest penalty in the racketeering case, which charges tobacco companies lied for decades about the dangers of smoking.

The decision leaves reversed a previous ruling by U.S. District Judge Gladys Kessler, the judge presiding over the case that went to trial in September.

In a legal brief seeking a rehearing, the Justice Department said the appeals court had left Kessler “virtually powerless” to impose remedies and contradicted past decisions from other appeals courts and the U.S. Supreme Court.

Targeted in the lawsuit, filed in 1999, 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 tobacco companies deny they illegally conspired to promote smoking and say the government has no grounds to pursue them after they drastically overhauled marketing practices as part of a 1998 settlement with state attorneys general.
http://www.foxnews.com/

Appeals court keeps decision for tobacco firms in US racketeering suit

April 20, 2005

WASHINGTON (AFP) – A federal appeals court declined to rehear a decision that barred the government from seizing 280 billion dollars in allegedly ill-gotten gains from tobacco companies.

The US government, which had been thwarted by a February 4 ruling by the US Court of Appeals in its bid to recover billions from the industry, had asked for a review by all 12 appellate judges, a so-called “en banc” review.

There was no immediate comment from the Justice Department.

But Altria, whose Philip Morris USA unit is among the defendants, said the decision upholds the original ruling that the so-called “disgorgement” of ill-gotten gains or any other penalty can only be applied if there is proof “that the defendants have engaged in fraudulent behavior in the past and that they are likely to do so in the future.”

The suit was initially filed in 1999 by the US Department of Justice against the major tobacco companies, claiming they engaged in a fraudulent pattern of covering up the dangers of tobacco use and marketing to minors.

The three-judge panel said the racketeering law cannot be used in this case, but the Justice Department said it would argue that there is a “long-established line of precedent” to punish unlawful conduct under the statute.

Joel Spivak of the Campaign for Tobacco-Free Kids urged the government to appeal the case to the US Supreme Court.

“A final legal resolution to this issue is critical not only to holding the tobacco industry accountable for decades of deceptive and harmful practices, but also to effective application of the civil (racketeering) law to other wrongdoing, including organized crime and corporate fraud,” Spivak said.

“Even if disgorgement is not allowed, the Justice Department has argued persuasively that the trial judge can impose other remedies that would fundamentally reform the tobacco industry’s harmful practices and require the industry to pay billions of dollars — possibly tens or hundreds of billions — to fund programs to prevent kids from smoking and help smokers quit.”

The suit is separate from a settlement struck in 1998 between the tobacco industry and US states that provided more than 250 billion dollars to state governments.
http://story.news.yahoo.com

Remedies Emerging as Issue in Federal Tobacco Case

By MICHAEL JANOFSKY
April 2, 2005

WASHINGTON, April 1 – Already one of the most costly civil cases ever prosecuted by the Justice Department, the racketeering trial against the tobacco industry, now in its seventh month, is being heard in two courts and could reach a third, raising questions about what the government might gain with a victory.

Testimony continues in the Federal District Court here in a nonjury trial to determine whether the companies hid the adverse health effects of cigarettes for 50 years, as the government contends. Meanwhile, an appeal is already under way to determine the extent of liability if the trial judge rules against the companies.

Barring a settlement, the efforts – along with appeals almost certain to reach the Supreme Court – are expected to drag out for months, driving up litigation costs to hundreds of millions of dollars for each side.

“This is a very expensive, very time-consuming process,” said William S. Ohlemeyer, vice president and associate general counsel for Altria, the parent of Philip Morris, one of the five defendant companies. “It’s particularly difficult with such a large number of people working for such a long period of time.”

Looming over the daily parade of witnesses who have come before Judge Gladys Kessler is how the tobacco companies might be held accountable if she decides for the government.

Early in the case, Judge Kessler ruled that the government could seek $280 billion from the companies as a remedy for any past fraudulent acts. To speed things along, she encouraged the companies to appeal that decision while testimony proceeded. Last month, a three-judge panel of the United States Court of Appeals for the District of Columbia Circuit overruled her, asserting that financial remedies would be contrary to civil racketeering law, which requires remedies to prevent and restrain future illegal acts.

The panel’s ruling prompted the government to ask the full appellate court to rehear the arguments. It also prompted Judge Kessler to reorganize the trial, ordering both sides to call witnesses to address remedies after the liability phase of the case. In effect, she made the remedy phase a trial within a trial, to help her assess how to hold the companies accountable if financial remedies remain unavailable.

The appellate decision, meanwhile, has cast doubt on other remedies the government might seek and whether they would accomplish the lawsuit’s goals any better than, say, the latest tobacco bill in Congress, which seeks to confer regulatory authority over tobacco products to the Food and Drug Administration.

Government lawyers say that even without a financial remedy, Judge Kessler has at her disposal a broad pallet of methods that could discourage future illegal acts.

One proposal is creating a nationwide stop-smoking program the companies would sponsor at a cost of $5.2 billion a year for 25 years, a total commitment of $130 billion. Another is a campaign to reduce youth smoking that would set estimates of the population of young smokers, then penalize the companies $2,400 for every young smoker exceeding an annual target number. Judge Kessler could also impose restrictions on cigarette marketing, like limiting print advertisements to black-and-white pictures.

The companies contend that most of the remedies Judge Kessler could order were addressed in 1998 with the Master Settlement Agreement between states and the tobacco industry, which ended an enormous lawsuit concerning the states’ health-care costs incurred from smoking-related illnesses.

“There are a lot of things the court can do that the F.D.A. bill cannot do,” said William V. Corr, executive director of the Campaign for Tobacco-Free Kids, a nonprofit group that supports tighter controls on the industry.

But Mr. Corr acknowledged that current legislation could achieve many goals that a court decision could not, like forcing the companies to list all the ingredients in their products.

The costly racketeering trial being prosecuted by the Justice Department against the tobacco industry is raising questions about what the government might gain with a victory.

The legislation would also cover all tobacco companies, not just the lawsuit’s defendants; increase the size of warning labels; prohibit flavored cigarettes; and end the use of terms like “light,” “low” and “mild” that suggest some cigarettes pose lower health risks than others.

Lawmakers have tried since 1997 to pass measures giving the F.D.A. authority over tobacco. Recent efforts have fared better in the Senate than in the House, and that may be the case again, with measures introduced two weeks ago that revise efforts of last year.

The current Senate bill, sponsored by Senator Mike DeWine, Republican of Ohio, and Senator Edward M. Kennedy, Democrat of Massachusetts, has nine other Republican supporters and full backing among Democrats, giving it a reasonable chance to pass. Prospects for a parallel bill in the House are less certain.

Philip Morris, the nation’s largest tobacco company, with about half the domestic market, supports the legislation as a way to standardize the industry and reduce corporate liability in tobacco lawsuits. But the other defendants oppose legislation, arguing that more regulation would make it harder for smaller companies to build market share at Philip Morris’s expense.

“We believe the F.D.A. legislation is anticompetitive because it locks in market share,” said John Singleton, a spokesman for Reynolds American, the company formed last year from R.J. Reynolds Tobacco’s acquisition of the Brown & Williamson division of British American Tobacco. Reynolds is the second-largest company, with about a third of the domestic market. “If you’re Philip Morris, with half the market, that’s not a bad place to be,” Mr. Singleton said.

Legislative success might ultimately depend on the White House, which has at least tacitly supported the lawsuit but has expressed no opinion on F.D.A. regulation of tobacco. At his Senate confirmation hearing last month, President Bush’s nominee to become the new commissioner of food and drugs, Lester M. Crawford, said nothing about tobacco products.

While Mr. Bush “talks constantly” about the need for Americans to quit smoking, said Trent Duffy, a White House spokesman, “it’s rare that the administration takes a position on legislation until it reaches the floor of the House or Senate.”

“If it does,” Mr. Duffy added, “the administration will obviously look at it.”

http://www.nytimes.com

U.S., Cigarette Makers Try Mediator in Fraud Case
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March 22, 2005
Wall Street Journal Staff Reporters John R. Wilke and Vanessa O’Connell contributed to this story.

WASHINGTON — The Justice Department and the nation’s largest cigarette makers have met secretly with a court-appointed mediator in an effort to settle the government’s sprawling civil fraud and racketeering case against the companies, according to Tuesday’s Wall Street Journal.

The settlement talks mark a striking turn in the suit, now in its sixth month of trial here, and they emerge as both sides are feeling new pressure to resolve the case.

U.S. District Judge Gladys Kessler privately urged both sides to forge a settlement after a federal appeals court last month dealt a serious setback to the government, people close to the case said. The appeals-court ruling, if it is upheld, narrows the remedies available to the government in the case and robs it of its most potent weapon: Forcing the cigarette makers to disgorge $280 billion in profit allegedly earned from smokers who took up the habit before age 21.

The two sides have met at least once, since the appeals-court ruling, with the mediator, Eric Green, a Boston University professor who brokered the settlement in the Microsoft Corp. (MSFT) antitrust case three years ago, the people close to the case said. It couldn’t be determined whether progress was made, but the parties are expected to meet again, these people said.

The government’s civil fraud and racketeering case against the cigarette makers was announced in 1999 by President Bill Clinton. It sought in part reimbursement of Medicaid spending for tobacco-related ailments, but a judge threw out that claim. That left the government with the civil fraud and racketeering claims. The federal suit is separate from the $206 billion settlement struck in 1998 between the tobacco industry and 46 states (the four other states earlier settled for a total of about $40 million) and Washington, D.C.

http://money.excite.com/

Live Defense Witness Filings

The defendants began presenting their case-in-chief on March 7, 2005.
The live witness testimonies are posted to this section and updated as the submissions are filed publicly with the Court.
http://www.altria.com/

DOJ’s losing case against Big Tobacco
March 21, 2005
By Joel Mowbray
When the defense started presenting its case recently in the civil RICO case against Big Tobacco, it was the federal government that was on the defensive.? The Department of Justice has taken so long to lose so much that it has but one goal left: saving face.
http://www.townhall.com/

Cigarette, Civil Racketeering Articles
http://search.yahoo.com/

DOJ Asks Court To Allow Witness On Tobacco Exec Removal

March 21, 2005
By Brian Blackstone; Dow Jones Newswires; 202-828-3397; brian.blackstone@ dowjones.com

WASHINGTON (Dow Jones)–The Justice Department on Monday said the judge hearing its racketeering case against tobacco should consider testimony on industry management changes as a potential remedy.

Earlier this month, DOJ added Harvard Business School Professor Max Bazerman as a remedies witness to testify on “court-ordered structural changes” to the industry, “including but not limited to the removal of senior management and changes in oversight and reporting arrangements.”

In a court brief last week, tobacco lawyers asked District Court Judge Gladys Kessler to strike Bazerman as a witness, calling the executive-firing remedy ” inexcusable.”

“The government’s late addition of this new and extreme remedy to its requests makes a mockery of this court’s discovery and case management orders and threatens manifest injustice to defendants,” tobacco lawyers wrote.

In its reply brief Monday, DOJ it doesn’t seek court-ordered firing of executives, but rather court appointment of monitors who could in turn recommend removal if violations continue. “The remedies which Dr. Bazerman’s testimony will support are not ‘new,'” DOJ lawyers wrote.

Last month, Kessler – who’s hearing the nonjury trial – granted DOJ’s request to postpone the remedies phase of its case until after the industry’s defense to liability. Tobacco lawyers began their defense two weeks ago after five months of testimony from government witnesses.

DOJ requested the delay in the wake of a D.C. appeals court panel’s 2-1 rejection in February of the government’s attempt to disgorge $280 billion in industry profits and proceeds. The panel ruled that disgorgement was aimed at past violations and thus doesn’t prevent future fraud. Kessler called the decision a “body blow” to the government’s case.

DOJ filed Bazerman’s expert report Monday with the court. Bazerman billed the government $800 an hour for his work on the case.

Bazerman stated that, assuming the industry is guilty of past and ongoing misconduct “as long as incentives primarily reward profit and sales, managers and executives will be incapable of making unbiased judgments.”

DOJ also released a report from MIT Economics Professor Jonathan Gruber that advocates target declines for youth smoking, with a $2,400 penalty for each youth smoker by which the target is missed. Under his calculations, if no reduction in youth smoking were achieved, tobacco companies would have to pay more than $1.5 billion in 2013.

Another witness, University of Wisconsin Medical School Professor Michael Fiore, recommends national smoking cessation programs at an annual cost of $3.2 billion a year and another $1 billion a year in antismoking ads.

Defendants include Altria Group Inc.’s (MO) Philip Morris USA; R.J. Reynolds Tobacco Holdings Inc. and Brown & Williamson, which have merged to form Reynolds American Inc. (RAI); British American Tobacco PLC (BTI); Vector Group Ltd.’s ( VGR) Liggett Group Inc.; and Loews Corp.’s (LTR) Lorillard Inc

http://money.iwon.com/

This Bad Bargain Must Go Up in Smoke

March 14, 2005
by Steve Forbes, Editor-In-Chief

?Recently a federal appeals court finally brought some sanity to the
?issue of the U.S. government’s being able to sue tobacco companies
for? allegedly burying the truth about cigarettes being harmful. Forgotten
?in all of this, of course, is the fact that cigarette packs have
?carried health-warning labels on them for 40 years. The judges ruled
?that the federal government cannot force the tobacco companies to
hand? over $280 billion of profits they earned while allegedly misleading
us? about their products’ impact on people’s health. The suit was born of
?Washington’s envy over the $206 billion settlement 46 states had
wrung? out of the big tobacco companies several years ago. Uncle Sam wanted
?some tobacco loot, too.

?While the courts are at it, they should take a similar knife to the
?original settlement in the case of the states versus the tobacco
?companies. It is unconstitutional; it makes a travesty of the
?government’s needing to win legislative approval before being able to
?exact a tax.

?That settlement is one of the most monopolistic, anti-property-rights,
?anticompetitive acts of modern times. Most state legislatures–not to
?mention the U.S. Congress–were not willing to raise cigarette taxes
?substantially and directly. But they wanted big money from the
tobacco? industry, so they cooked up an extraconstitutional scheme to get it.
?To settle various state lawsuits, the big tobacco companies agreed to
?cough up $206 billion over 25 years. To get the dough, the tobacco
?companies raised cigarette prices substantially. Thus, the taxes that
?legislators were afraid to levy directly were exacted in the form of
?more expensive smokes. In return, the states, in effect, were
?protecting the big tobacco companies from competition.

?It’s no surprise that the major tobacco companies, thus protected,
?raised prices not only to service the settlement but also to fatten
?their bottom lines. The deal prevented would-be cutthroat competitors
?from stealing market share by selling cheap cigarettes.

?Now this cozy arrangement may come unstuck. A New York State court
?decision in early 2004 allowed a plaintiff to pursue an antitrust
?lawsuit against the settlement (see FORBES GLOBAL, Feb. 28). The
?original settlement inadvertently contained a loophole; it allowed
?cigarette discounters to get refunds of the special fee per pack of
?cigarettes that goes toward financing the settlement from states in
?which they don’t sell their wares. States have been passing laws to
?close this loophole, but in October a federal court said no can do.
?After all, why should a company that didn’t even exist at the time of
?the settlement be forced to pony up money for bad behavior in which
it? had played no part?

?The whole deal is like tax collecting in olden times. Governments
?would put the job of collecting taxes up for bid. Whoever won the
?contract could collect whatever they could from the peasants, as long
?as the so-called tax farmers remitted a certain share of it to the
?crown. That tobacco settlement smacks of tax farming: Companies
?collect the money and remit it to the states.
http://www.forbes.com/

DOJ Files Appeal Of ‘Flawed’ Tobacco Disgorgement Ruling

March 4, 2005

WASHINGTON (Dow Jones)–The Justice Department on Friday filed for a full appeals court rehearing of tobacco disgorgement arguments, calling a panel’s rejection of disgorgement last month “fundamentally flawed.”

In a major victory for tobacco companies, a three-judge panel of the Court of Appeals for the District of Columbia ruled 2-to-1 on Feb. 4 that the government can’t disgorge $280 billion in past industry profits and proceeds as a remedy in this case. The opinion was written by Circuit Court Judge David Sentelle.

“The effects of the majority’s holding are sweeping and threaten to cripple … remedial force” of racketeering laws, the DOJ wrote in its filing with the D.C. Appeals Court.

The DOJ seeks rehearing of the case before the entire court.

The U.S. filed suit against tobacco companies in 1999 under the Racketeer Influenced and Corrupt Organizations Act, or RICO, alleging a five-decade campaign to defraud the public on the dangers of smoking and addiction.

In his ruling last month, Judge Sentelle wrote that disgorgement is “a remedy aimed at past violations” and “does not so prevent or restrain” future fraud.

U.S. District Court Judge Gladys Kessler, who is hearing the nonjury racketeering trial, on Monday called the appellate panel’s disgorgement rejection “a body blow to the government’s case.”

DOJ’s proposed non-disgorgement remedies such as industry funding of cessation programs and public education campaigns on addiction, second-hand smoke and youth smoking are also threatened by the panel’s ruling.

Though Kessler signaled her disagreement with the decision by citing Appeals Court Judge David Tatel’s strong dissent, she said she’s “bound by the existing 2-1 opinion written by Judge Sentelle,” which “as this court reads it, simply does not permit non-disgorgement remedies to prevent and restrain the effects of past violations of RICO.”

Though anti-tobacco advocates have said that the court has powerful non- disgorgement remedies at its disposal, DOJ seemed to concede in its filing that the case hinges on the disgorgement outcome.

“The panel majority’s decision…would leave the district court virtually powerless to prevent these defendants from reaping, for years to come, the benefits from their fraudulent conduct or to remedy the enormous injury from the alleged fraud,” DOJ wrote.

The filing was submitted by Assistant Attorney General Peter Keisler and Deputy Solicitor General Michael Dreeben.

The next step is for the D.C. Appeals Court to ask for the industry’s response to DOJ’s filing. Then it will decide whether to hear the appeal.

The racketeering case itself is in its sixth month. Industry lawyers start their defense Monday.

-By Brian Blackstone, Dow Jones Newswires; 202-828-3397; brian.blackstone@ dowjones.com
http://money.iwon.com

Read the history and ruling at RICO PART ONE