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| SMOKING GUN
MARCH 20, 1997TRANSCRIPT |
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Smoking cigarettes is additive and can cause cancer admits the Liggett Group, the smallest of the five major U.S. tobacco companies. In an historic settlement with 22 state Attorneys General, Liggett will include a warning on its cigarette products, pay $25 million in penalities up front, allocate an additional 25% of its pre-tax profits for 25 years as an additional penalty, and turn over documents that indicate cigarettes were specifically marketed to minors. A background report is followed by interviews with Christine Gregoire, Washington State Attorney General, and Paul Raeburn, Business Week correspondent.
CHARLAYNE HUNTER-GAULT: For the first time ever a cigarette maker has admitted that smoking is hazardous to your health. Today the smallest of the big five cigarette companies, the Liggett Group, agreed to a landmark settlement with 22 states.
NEWHOUR LINKS:
A RealAudio version of this NewsHour segment is available.
March 20, 1997:
Paul Raeburn, Business Week correspondent analyzes the Liggett Group settlement.
February 10, 1997:
FDA Commissioner David Kessler discusses his contentious term as commissioner of the Food and Drug Administration.
August 23, 1996:
Brennan Dawson, of the Tobacco Institute, and FDA Commissioner David Kessler debate new restrictions on tobacco sales.
July 5, 1996:
Political Analysts Mark Shields and Kate O'Beirne explore Sen. Bob Dole's comments that tobacco may not be addictive and his exchange with "Today Show" anchor Katie Couric.
April 1:
Congressman Henry Waxman participates in an Online NewsHour forum on the tobacco industry.
March 13, 1996:
The Liggett Group settles out of court a class-action lawsuit brought by smokers. Does it mark the end of the powerful tobacco lobby?
Browse the Online NewsHour's coverage of health issues.
The remaining tobacco companies have not agreed to any settlements with the states. They are Philip Morris, R.J. Reynolds, Brown & Williamson, and Lorillard. The settlement stems from a series of lawsuits brought by states beginning in 1994. The states demanded that the tobacco industry foot the bill for costs incurred for treating patients with smoke-related illnesses.
According to the government about 46 million people smoke and smoking kills almost 400,000 people a year. Today's settlement is not Liggett's first. Last March, the company reached an agreement on a class action suit, agreeing to donate 5 percent of its pre-tax income for 25 years to study nicotine addiction and fund smoking cessation programs. That same month Liggett agreed to give five state Medicaid programs a total of $5 million plus 2 to 7 percent of his pre-tax income for 24 years. In both instances Liggett did not admit to any wrongdoing.
But in today's settlement Liggett acknowledges that cigarettes are addictive, cause lung cancer, and
are marketed specifically to minors. The company will put warnings that smoking is addictive on its cigarette packages. They will also pay $25 million up front and then pay to the states 25 percent of their pre-tax income for 25 years. Liggett also promises to turn over thousands of potentially incriminating documents to the states and help them prosecute other tobacco companies.
Further, Liggett is dropping all confidentiality agreements so that its employees can testify against other tobacco makers. Today, however, attorneys for the four remaining tobacco companies still facing lawsuits want a temporary restraining order that blocks Liggett from turning over confidential documents. The four companies released a joint statement saying the only ones who potentially benefit from Liggett's latest shenanigans are plaintiffs' lawyers and some seed money for their illegitimate assault on the remainder of the tobacco industry.
CHARLAYNE HUNTER-GAULT: We're joined now by attorneys general who settled with Liggett today. She is Christine Gregoire of Washington State. Thank you for joining us. I want to get some of the details in a moment, but what exactly do you think is the significance of this settlement?
CHRISTINE GREGOIRE, Washington State Attorney General: Well, we've had a history in this country of
the tobacco industry--you may recall the image of all of the CEO's standing before Congress, swearing to tell the truth, and then proceeding to say that there were no health side effects and that the product wasn't addictive. Today for the first time in the history of this industry we have a CEO of one of the five largest tobacco companies in our country admitting that it predicted, admitting that it causes the kinds of health care problems we have thought all the way along, and admitting that they're targeting minors in their advertising.
CHARLAYNE HUNTER-GAULT: What do you think you've achieved with this?
CHRISTINE GREGOIRE: Well, I think some of that's yet to be seen. The documents that we expect to have turned over come in two parts: one where Liggett clearly has the right to waive any privilege, and those we have begun to look at today after the agreement was signed. And they've got some fairly powerful information in there that I think any court and any jury is going to want to see.
CHARLAYNE HUNTER-GAULT: Like maybe what, for example?
CHRISTINE GREGOIRE: Very clear admissions not just by Liggett but by the--what we alleged in our case the conspiracy of these five companies to keep the truth from the American consumer; that they could produce a safe cigarette; that they, in fact, are targeting "youth." And youth specifically is described as those under the age of 18 and over 14 in this country, in other words, our teen-agers. Now, the second set of documents are the ones that I think they're trying to keep us from getting and why they ran into court, and those we have been told by Liggett--obviously we have not seen them--that they can come within the crime fraud exception. So--
CHARLAYNE HUNTER-GAULT: What does that mean exactly?
CHRISTINE GREGOIRE: We may find in those documents--a court may find upon review of them that criminal acts have been committed; that there's been fraud perpetrated upon the American consumer in which case if they do, those documents have to be made public.
CHARLAYNE HUNTER-GAULT: So what do you think--all things being equal--what do you think overall impacts of just the Liggett settlements, for example, will be on the public at large?
CHRISTINE GREGOIRE: Well, I think there's been some skepticism. People who are long-term smokers haven't wanted to accept that, in fact, a company would lie to them. We haven't wanted to accept as an American people that, in fact, they would advertise to our kids with the intent to bring about the addiction.
These admissions today I think put that to rest. In fact, it says that they have liked the American public and that they are, in fact, targeting our children and with good reason. They know full well that children are more susceptible to addiction between the ages of 14 and 18 than they are afterwards. And that's the future of the industry.
CHRISTINE GREGOIRE: We've speculated as attorneys general why would the company want to do that, and everybody I think has their own theory. But in the end we concluded we didn't much care the why behind it. My personal theory is they saw the writing on the wall, and they knew that beginning in June in Mississippi, attorneys general around this country are going to start winning these lawsuits. And so if they want to get on with business--and we're saying they can--we're not saying that they can't continue to run their business in a lawful way--that they can put this behind them and get on with business in a lawful manner.
CHARLAYNE HUNTER-GAULT: Today several of the remaining--there were four remaining companies and Philip Morris was among those who issued a statement saying that this--this was a merit-less case, merit-less settlement, and that it means absolutely nothing. They're going to defend against it, and it's not going to make any difference. They're going to keep doing what they do.
CHRISTINE GREGOIRE: Well, I'm disappointed that they're going to say they're going to continue what
they do because I think this agreement shows that they're lying to the public. But, you know, I find it interesting that they immediately ran into North Carolina and asked for a restraining order against the Liggett company. If they have nothing to hide from the American people, why is it they immediately ran in before a document was even signed to restrain Liggett from turning over documents to the American people? If they have nothing to hide, then come forward. Let the American people see those, and let them decide for themselves whether these companies have been honest and fair with the American consumer.
CHARLAYNE HUNTER-GAULT: They also say that they're going to defend vigorously against this, but I noticed in the press conference today one of the--one of your colleagues, one of the attorneys generals said they were going to bring these other four companies to their knees. How are you going to do that?
CHRISTINE GREGOIRE: Well, again, assuming the documents are as incriminating as what we've been told they are, they may very well kind of put the death knell to these lawsuits. And I don't think it'll take very many of these lawsuits to result in a decision in favor of the states, and they're going to have to see the writing on the wall as well. I remember when I filed my case in June of 1996. I said, as I do in any case, I'm open to settlement. They immediately sent a team out to do a press conference in my state in which they pounded on the table and said they'd never settle.
You've seen it yourself over the last few months. One by one every one of the major companies is saying, well, they might consider settlement. I think they too are beginning to see the writing on the wall, but we as attorneys general will settle for nothing less in any settlement than they stop praying on kids; they have got to be regulated by the FDA regs and others; they have got to tell the American consumers the truth; and they've got to pay and reimburse consumers for the Medicaid costs incurred because of the health-care related issues that they've created.
CHRISTINE GREGOIRE: Well, the first thing we want to do is get at the documents that are privileged. And those will be in each of our respective states. We will ask our judges that have been assigned to our cases to review the documents in private. I will not see them. I will not have access to them under my ethics rules, but to review those documents. And if they conclude a crime has been committed or fraud has been committed, then open up those documents to the American people. That's first on our agenda. The first case to go to trial is in Mississippi in June. That will be a real test for the tobacco companies. We think that they are going to be running to Congress for some kind of resolution, but we're going to hold strong what we want out of these cases
CHRISTINE GREGOIRE: Thank you.
ELIZABETH FARNSWORTH: We invited representatives tonight from the four major tobacco companies who did not join today's settlement. They either refused our request to be on the show or did not return our calls.
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