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Judge Finds Big Tobacco Guilty of Racketeering, Conspiracy

August 18, 2006 at 6:10 PM EDT

JEFFREY BROWN: It was a stinging indictment. The ruling came seven years after the government began its case against major tobacco companies, seeking billions of dollars in fines.

U.S. District Judge Gladys Kessler put it bluntly: “Over the course of more than 50 years, defendants lied, misrepresented and deceived the American public, including smokers and the young people they avidly sought as replacement smokers, about the devastating health effects of smoking.”

The judge found that the companies had violated civil racketeering laws and ordered them to stop describing their products with the labels “low tar,” “light,” and “mild.” She also ordered the companies to begin a media campaign to correct years of misrepresentation. But Judge Kessler said she could not impose the huge penalties the Justice Department had sought because of a prior ruling by a higher court.

So where does that leave things? We discuss that now with former FDA commissioner Dr. David Kessler. He’s now dean of the School of Medicine at the University of California, San Francisco. For the record, he was the government’s lead witness in this case and we note is not related to the judge.

Also with us is Mary Aronson, an independent tobacco litigation analyst who attended the trial. Tobacco companies declined our request for an interview.

Dr. Kessler, let me start with you. You’ve been a leading player in this fight for a long time. Are you pleased with the ruling?

DAVID KESSLER, Former FDA Commissioner: I think it is an historic ruling. It ends once and for all any debates about what the companies knew and what they did.

They knew that cigarettes caused cancer, and they lied about it. They knew that nicotine was addictive, and they lied about that, too. They manipulated the levels of nicotine in cigarettes to sustain a smoker’s addiction. And they denied that, knowing that that was incorrect. They lied about marketing to youth.

It is an historic decision. And what was very important about the judge’s ruling was that she said that the conduct continues even until this day.

Deception in the public record

David Kessler
Univ. of California at San Francisco
You have this industry now being label as racketeers, and yet the judge did acknowledge that there were limits to what she could impose. So you have this imbalance.

JEFFREY BROWN: Mary Aronson, an historic ruling? What do you see as the main outcome here?

MARY ARONSON, Independent Tobacco Litigation Analyst: Well, I think it's an historic ruling in that the federal government has finally after, you know, several years of coming to this trial declared that, indeed, what we've been hearing for so many years is the case, and that is that for decades the industry has deceived the public, has lied about the health issues, and a lot of the other things that David mentioned.

But unfortunately, I suppose for the health community in particular, I don't see that there's a big impact that is going to result. There are corrective statements that need to be made and the like, but what would hurt the industry was getting them in their -- would be to get them in their pocketbooks. And that I don't see happening as a result of this case.

JEFFREY BROWN: Well, that is the issue, Dr. Kessler, I guess, looking forward here. What impact on the reputation of the companies, on the standing, and most important on the business of these companies? What do you see?

DAVID KESSLER: I think Mary is right. The fact is, there is this imbalance. You have this industry now being label as racketeers, and yet the judge did acknowledge that there were limits to what she could impose. So you have this imbalance.

There's a reason why this opinion goes 1,650 pages. The judge was very, very smart here. She knew she had certain limits, but what she has done is set out a road map, first to the court of appeals, and then to legislatures around this country and to the United States Congress.

She is saying, "Look, for 50 years this is an industry that engaged in one of the greatest conspiracies to affect the public health." She documented that in exhaustive, exhaustive detail. That is now and forever part of the public record. And she turned to the court of appeals and said, "Now it's your job to do something about this."

Limits to the ruling

Mary Aronson
Tobacco Litigation Analyst
I don't see how now labeling all of that bad behavior racketeering is going to be all that much more than what was already in the public domain before.

JEFFREY BROWN: But, Mary Aronson, you were at the trial often. Explain to our audience why she felt constrained by a prior ruling.

MARY ARONSON: Well, under the Rico statute, the racketeering statute, which was the basis for this case, the appeals court, the federal appeals court ruled that any remedy has to be forward-looking.

So despite the fact that, as David said, there have been more than 50 years of deceit and wrongdoing and the like on the part of the industry to the public, unless the remedy, the final remedy is one that addresses the prevention of forward behavior of this type, you can't really apply a significant remedy that, as I said, I think would hurt the industry the most, and that is a financial one.

JEFFREY BROWN: And so, as a result, we saw the stocks of these companies today shoot up.

MARY ARONSON: That's right. And that, if nothing else, should tell you something.

And, you know, David also said that they're now construed as racketeers. That's true. But, you know, a lot of this negative information that came out about the industry and all that they have done wrong came out when Dr. Kessler was the head of FDA.

At that point, we had the FDA trying to regulate the industry. We had the states trying to sue the industry. We had class action suits being filed and a lot of other activity. Nearly a week didn't go by when there wasn't some negative thing on the press about what the industry had done wrong.

So, you know, I don't see how now labeling all of that bad behavior racketeering is going to be all that much more than what was already in the public domain before.

Chipping away at Big Tobacco

David Kessler
Univ. of California at San Francisco
I think there are aspects to this decision that will change the way the industry does business.

JEFFREY BROWN: Well, Dr. Kessler, let me ask you about one part of it. I mentioned it in the introduction the idea of banning the use of low tar or light brands. Do you see that as having a real impact?

DAVID KESSLER: I think it will. I think there are aspects to this decision that will change the way the industry does business, and that is one. She has prohibited the use of those terms.

I mean, you and I know that the industry is already at work thinking about other terms that they could use. But the fact is they are going to be under an injunction from here on forth, with no time limits. So the things that she put into effect are important.

But it's the record. It's what she has said in those 1,650 pages, what she has documented. This is a chipping away; this is not any one act. These are a set of chapters that are written. And this was a very important milestone for not only what she said, but what is going to happen because of what she said.

MARY ARONSON: You know, I think a lot of what is now in her record, which perhaps is the most complete record, has already been out there in the domain. I mean, we had the Minnesota state case which was the only of the various state cases -- as you may recall, the listeners may recall that all 50 states had claims against the industry. And the Minnesota case was the only one that really went to trial and settled the day before a jury was to get the case.

And as a result of that case, a depository was put together. And just about all of the documents that were available and, in fact, any additional documents that come out in this federal trial that just concluded will be in that depository.

So I think a lot of the stuff was already out there. And we'll just have to see whether or not it will have an additional significance on, you know, additional individual trials that will come up in the future.

Changing the trends

Mary Aronson
Tobacco Litigation Analyst
Sticks and stones may break my bones but names will never hurt me, and I think that's in a way the position that they may well be taking right now.

JEFFREY BROWN: Well, that brings to the larger perspective I wanted to ask you about, Dr. Kessler, because recently the tobacco companies have done quite well in court cases, in Florida, last month I believe, and it was in Illinois, I think, just before that. All these years later -- and you were involved a decade ago in this -- how harmed are these companies financially from all the court cases that we've seen?

DAVID KESSLER: You know, if you step back, I think it's not a question about any one court case. It's not even about legislation. What's important is how we as a country view this product and, in some ways, how we view this industry.

What is most important to this industry, the thing that they have followed for decades that they care about, is the social acceptability of smoking. And if you look at the successes we have now, the fact that we can go in many, many places and people are not smoking in this country, that's a real testament to the fact that the social acceptability, how we view this product, has changed and changed forever more.

And what this decision does is it clearly articulates what happened. There can be no doubt any more that what this industry did -- I mean, it was the greatest conspiracy ever on the public health. It's not about lawsuits; it's about how we view this product.

JEFFREY BROWN: But in the meantime, Mary Aronson, this case will be appealed, so there is more to come in this case.

MARY ARONSON: Yes. You know, I agree with David. It shouldn't be about lawsuits. It should be about the way the industry is viewed. But when you're dealing with a company or companies as large as the tobacco industry, again they're going to be hurt if they're taken to court and if something is done to affect their bottom line.

Sticks and stones may break my bones but names will never hurt me, and I think that's in a way the position that, you know, they may well be taking right now. You could call them racketeers or anything else, but their bottom line, I think, is going to be minimally affected.

JEFFREY BROWN: All right. We'll have to leave it there. Mary Aronson and Dr. David Kessler, thank you both very much.

MARY ARONSON: Thank you.