Tapes & Transcripts

FRONTLINE 1616
Inside the Tobacco Deal

Lowell Bergman, Correspondent
Written by Lowell Bergman and Neil Docherty
Produced and directed by Neil Docherty

CORRESPONDENT: The playing fields of Ole Miss have witnessed many battles, from football to the struggle for Civil Rights. High in the stands at this game are two "Ole Miss" alumni who've been calling the plays in another epic battle, lawyer Dick Scruggs and Mike Moore, the attorney general of Mississippi.

RICHARD SCRUGGS, Pascagoula Attorney: The Battle of Waterloo was won on the fields of Eton, and perhaps the tobacco war was won at the Old Miss law school.

CORRESPONDENT: Until big tobacco met the boys from Ole Miss, they were undefeated in hundreds of lawsuits, and without shame before the public or before Congress.

Rep. HENRY WAXMAN: [Congressional hearing] Do you swear that the testimony you are about to give is the truth, the whole truth and nothing but the truth?

1st TOBACCO EXECUTIVE: I believe nicotine is not addictive.

2nd TOBACCO EXECUTIVE: I believe nicotine is not addictive.

3rd TOBACCO EXECUTIVE: I believe that nicotine is not addictive.

4th TOBACCO EXECUTIVE: I believe that nicotine is not addictive.

MIKE MOORE, Mississippi Attorney General: I believe they're the most corrupt and evil corporate animal that has ever been created in this country's history.

RICHARD SCRUGGS: This was an industry that had never been beaten, that had literally defied the judicial system and the regulatory system for decades, and yet was killing millions of people. You know, it was just a challenge that cried out for somebody to do it.

CORRESPONDENT: And this is the story of how they did it, and how in June last year, big tobacco made historic concessions from which there will be no turning back.

STEVEN PARRISH, Senior V.P., Philip Morris: [June 20th, 1997, press conference] The proposal is a bitter pill because our companies have made concessions that were extremely difficult.

MIKE MOORE: [June 20th, 1997, press conference] We wanted this industry to have to change the way they do business, and we have done that.

1st WOMAN AT PICNIC: I'm proud of what you're doing.

2nd WOMAN AT PICNIC: Yeah, I am, too.

CORRESPONDENT: Tonight on FRONTLINE, the inside story of how two hometown boys from Pascagoula, Mississippi, took an industrial Goliath to the edge of bankruptcy and criminal prosecution, and forced Washington to finally deal with tobacco.

The tobacco battle lines were re-drawn in 1994 in the most unlikely of places: the Mississippi delta town of Clarksdale. It's a town famous for a deal, but not the tobacco deal. Legend has it that the great guitarist Robert Johnson made a deal with the devil here so that he could sing the blues.

And the blues sit comfortably in Clarksdale, a poor town in the nation's poorest state that has one other local hero. In the corner of the El Ranchero restaurant, they still honor the gridiron great, Charlie Conerly, number 42 of the New York Giants, who went on to become a cultural icon, the first Marlboro Man.

MIKE LEWIS, Clarksdale Attorney: Charlie Conerly, the Marlboro man, was born here in Clarksdale, and it's my belief that Joe Camel died here.

CORRESPONDENT: Clarksdale lawyer Mike Lewis had a secretary, Alice Craven. It was a death in her family that would give birth to the idea that would bring down tobacco. In the last 30 years, 10 million Americans have died from smoking. Alice and her daughter light a candle for two of them.

ALICE CRAVEN: My parents always smoked. It was just part of our life. You know, there were just always cigarette butts everywhere.

CORRESPONDENT: Alice's father died at 44. She then watched her mother suffer four heart attacks. Of the 400,000 smokers who would die in 1994, Alice's mother was one of them, Jackie Thompson.

ALICE CRAVEN: And it took her about two hours. She just kind of lay there quietly breathing, you know? I unstrapped her, and just lay there and held her until- excuse me. I just laid my head on her chest until I felt her last breath.

MIKE LEWIS: She was 51. And the last 5 years of her life were spent as an invalid and spent in poverty because of this disease.

CORRESPONDENT: Mike Lewis and his wife, Pauline, also a lawyer, wanted to sue the industry on behalf of Jackie Thompson, and soon discovered that every lawsuit in the last 40 years had failed because jurors believed smokers like Jackie knew the risks they were taking.

But illness rendered Jackie bankrupt and her treatment would cost the state about a million dollars. On his final visit to see Jackie in the hospital, the idea came to Mike Lewis: The taxpayer had not decided to smoke, but was paying for the consequences.

MIKE LEWIS: When I was on that elevator thinking about this, I was not thinking as an intellectual lawyer or anything of that nature. I was mad. Just out of the blue, it hit me that a way to get at this industry, a way to get a measure of justice, if not individually, at least as a society, would be to sue this industry on behalf the state of Mississippi.

CORRESPONDENT: And then the Ole Miss connection was played. Mike Lewis is a graduate, and he turned for help to his old classmate, Mike Moore, now the attorney general of Mississippi.

MIKE LEWIS: If I hadn't known him personally, I probably never would have had the courage to call him or anybody else with it.

MIKE MOORE, Mississippi Attorney General: He wondered, because she had sold everything she had, and now she was on Medicaid and the state was actually spending dollars- wondered if there was cause of action that the state could bring against the industry. And we just explored that a little bit on the phone, and I hung up the phone and I go "I don't know about that."

CORRESPONDENT: To check out the idea, Mike Moore turned to another Ole Miss classmate, Dickie Scruggs.

RICHARD SCRUGGS, Pascagoula Attorney: He said, "Mike Lewis has just called me about an idea to sue the tobacco industry over the cost of treating his secretary's mother." The state paid the expenditures for that. And I told Lewis that Mike said that before he takes on something like that, he ought to get with some lawyers who have done this on a big scale before. He knew that we had enough money to fund it, and that we ought to get together on it.

CORRESPONDENT: Dick Scruggs had millions. He had made them suing the asbestos industry over the last 10 years. This lifestyle was new to Scruggs. He was born poor, and when he first set up business in 1980, he couldn't afford a word processor. Now it would be his net worth - over $9 million - that would float the Mississippi lawsuit.

RICHARD SCRUGGS: It would not have been fiscally possible for state governments to risk the taxpayers' money in 1994 or 1995 on litigation like this. Attorneys general who asked their legislatures to appropriate money for this would have been laughed out of the hearing room.

CORRESPONDENT: Based on the promise that he would be paid only if they won, and then at a rate set by the court, without a written contract, on the strength of a handshake, these two friends from Pascagoula declared war on tobacco, an industry that had vanquished every plaintiff and politician who had ever tried to bring it to account.

MIKE MOORE: My parents thought I was nuts, filing a lawsuit against the tobacco industry. My best friends told me that this would be the last political thing that I'd ever do in my life.

LOWELL BERGMAN, FRONTLINE Correspondent: So this was Mississippi madness?

MIKE MOORE: You know, you could say it was madness, but it was more "Damn the torpedoes, full speed ahead."

CORRESPONDENT: Dick Scruggs would bring more than money to the attorney general's arsenal. He had connections- personal connections. His wife, Diane, has a sister who is married to a political heavyweight. Chester Trent Lott, the Senate majority leader, is another boy from Pascagoula and another Ole Miss grad. He is also Dick Scruggs's brother-in-law. And Trent Lott, in turn, would give Scruggs a critical introduction to his adviser and political pollster, Dick Morris.

DICK MORRIS, Pollster/Political Strategist: Trent had a weird relationship with Scruggs. He would always refer to Scruggs as "My no-good, scum-suckin' brother-in-law." But he kind of saw Scruggs as sort of this crazy liberal who he was related to by marriage, who he liked a great deal. He had a very real affection for him.

CORRESPONDENT: Dick Scruggs's partner in the asbestos litigation was South Carolina lawyer Ron Motley, one of the most successful trial lawyers in the country. He had personal reasons to join up again. Motley's mother died of emphysema after decades of smoking.

RON MOTLEY, South Carolina Attorney: When you hear the denials of the cigarette companies that they had never caused the illness or death of a single American citizen, having sat there and watched my mother suffocate, and having the doctors tell me and describe for me exactly what caused it, how it caused it and what it was doing to her, it makes you very angry. At least, it made me very angry. And when I get angry, I try to get even.

CORRESPONDENT: The chance to get even came on May 23, 1994.

REPORTER: The state of Mississippi filed suit today against 13 tobacco companies-

CORRESPONDENT: After a year of preparation, Attorney General Moore's suit wound up in the Pascagoula court of Judge William Myers- coincidentally, another graduate of Ole Miss.

LOWELL BERGMAN: Your five friends who went to the University of Mississippi, the judge in the case, Trent Lott- it's like a Mississippi Mafia.

MIKE MOORE: You know, we planned this case to be in Pascagoula, Mississippi, our home town. We would know if the tobacco companies did anything untoward down there. We were sure that they would, so we tried to get every advantage we could get, yeah.

LOWELL BERGMAN: Home cooking?

MIKE MOORE: Well-

RICHARD SCRUGGS: We home cooked.

MIKE MOORE: We hoped that the frying pan was going to be very, very hot for them.

CORRESPONDENT: And they would keep the heat up by providing a safe haven for the two most important whistle-blowers in the history of the tobacco wars, a corporate vice president and a lowly clerk who would liberate the most damaging documents to ever emerge from inside the industry.

Merrell Williams was a paralegal for Brown & Williamson Tobacco's lawyers. Outraged by what he read in their secret files, Williams covertly copied thousands of documents. And then he stole them.

MERRELL WILLIAMS: I took information from 1988. Starting late in '88, I became very bold. And then Christmas, I had a whole suitcase I just took out.

CORRESPONDENT: The documents contained admissions by the makers of Viceroys and Kools that nicotine is addictive, that tobacco is linked to diseases, and that tobacco lawyers kept secret information that was vital to the public health.

For several years, Williams tried to get his documents out, but no one he contacted in the anti-tobacco movement was willing to touch them for fear of retribution. So he turned to Ralph Nader's organization and Nader's lead counsel, Alan Morrison.

ALAN MORRISON: Everybody would be running substantial risks, perhaps even us, because we knew that these had been taken from lawyers' files.
CORRESPONDENT: And so no lawyer would volunteer to represent Williams in his effort to get out his 4,000 pages of documents.

MERRELL WILLIAMS: Alan Morrison could not find a pro bono attorney in the entire area of his expertise, and he knew people in corporate law who did this kind of thing. Why? Because it was tobacco.

ALAN MORRISON: And in addition, of course - or perhaps I should say paramount - Merrell Williams, of course, had no money to pay any of these lawyers, so that was- we were asking somebody to take on a difficult, high- risk task for no money.

CORRESPONDENT: Isolated, unemployed, the subject of a lawsuit by Brown & Williamson and its lawyers, gagged by a Kentucky court, Williams was desperate. Then he met Dick Scruggs.

RICHARD SCRUGGS: He looked like warmed-over death when we met him. He looked unkempt, not quite like he'd been sleeping under a bridge, but close to it.

CORRESPONDENT: Merrell Williams's poverty and isolation ended in Mississippi. Dick Scruggs arranged housing, a car and a boat and, of course, Williams handed over the precious stolen documents.

RICHARD SCRUGGS: I helped Merrell Williams. I didn't buy him these things. These were, in essence, loans that I made to him and he has- at the time, agreed to repay me one day for that, and I hope he will. I trust that he will. I can understand how it might look like it was some sort of a payoff, but it wasn't.

LOWELL BERGMAN: I guess the question is, with Merrell Williams, you knew that he did not come by these documents through a legal process.

RICHARD SCRUGGS: I disagree with that.

LOWELL BERGMAN: Well, it made a whole bunch of other people real nervous. I mean, people who are dedicated anti-tobacco activists wouldn't even go near him.

RICHARD SCRUGGS: When you catch someone in the process of committing a crime or a fraud on the public health and you don't make that public, I think that is the crime.

Rep. HENRY WAXMAN: [Congressional hearing] Can you raise your right hand? Do you swear that the testimony you are about to give is the truth, the whole truth and nothing but the truth?

TOBACCO EXECUTIVES: I do.

MIKE MOORE: I saw with my own two eyes seven tobacco executives

raise their right hand and swear.

1st TOBACCO EXECUTIVE: I believe nicotine is not addictive.

2nd TOBACCO EXECUTIVE: I believe nicotine is not addictive.

3rd TOBACCO EXECUTIVE: I believe that nicotine is not addictive.

4th TOBACCO EXECUTIVE: I believe that nicotine is not addictive.

MIKE MOORE: And then the very next couple of weeks, I had in my hand a memo that proved that they were lying. When Merrell Williams showed me that first document from Addison Yeaman, the famous 1963 memo, I was astonished. I mean, I was amazed. I knew that what I had in my hand right there was enough, I thought, to put some chief executive officers of the tobacco industry behind bars. [www.pbs.org: Read the original memo]

CORRESPONDENT: Armed with boxes of documents, Moore and Scruggs headed straight for the Capitol and the offices of Congressman Henry Waxman, who had chaired those memorable hearings.

LOWELL BERGMAN: You told him that they were basically stolen documents?

RICHARD SCRUGGS: Yes. I think that we didn't tell him so much that they were stolen documents, but that we had received them through a whistle blower. I think it was implied that they were stolen documents.

LOWELL BERGMAN: He didn't dive into the box.

RICHARD SCRUGGS: No, he didn't. It was almost as if they were radioactive. I mean, he wanted to embrace them, but at the same time, he was afraid of them. It was, like, almost a physical reaction. But he- after some initial discussion, he then asked us to meet with his staff, and his staff then proceeded to go through them like a hungry lion. They were just- they were just amazed at the documents.

CORRESPONDENT: Within days the documents would leak out of Congress. First excerpts appeared in "The New York Times." Then someone from Mississippi, calling himself "Mr. Butts," sent them to the University of California Medical Center in San Francisco and into the hands of long-time anti-tobacco activist Professor Stan Glantz.

Prof. STANTON GLANTZ, University of California, San Francisco: The lawyers who come into this case have done the public a great service because they've come in and had the courage and the wherewithal to take the industry on on its own terms. And I think that the activities of these lawyers really points to the really inadequate job that the public health community's done on this issue for the last 40 years.

CORRESPONDENT: The university scanned the documents onto the Internet. Once-secret papers were now public and were now admissible in court.

LOWELL BERGMAN: And somehow, through your delivering them to Washington, they wind up on the Internet.

RICHARD SCRUGGS: That's right. That's right.

LOWELL BERGMAN: And eventually they do become admissible.

RICHARD SCRUGGS: Well, we were not sorry to see that happen.

CORRESPONDENT: Then the Food and Drug Administration got its hands on them. A few months before, the FDA administrator had launched an investigation into tobacco and nicotine and what the industry knew about its health effects.

Dr. DAVID KESSLER, Former FDA Commissioner: In our wildest dreams, we never thought we would find documents that would say, "We're in the business of selling nicotine, an addictive drug." And it was then, and it was only then, that I realized that we were really crossing a bridge and that we couldn't go back.

CORRESPONDENT: The FDA would be further helped by Scruggs's other whistle blower, Dr. Jeffrey Wigand, a former vice president of Brown & Williamson, the highest-level defector ever to ever emerge from inside big tobacco. On November 29, 1995, at Dick Scruggs's home in Pascagoula, Jeffrey Wigand faced a critical decision. That day he was scheduled to give evidence in a Mississippi courtroom, while back home in Kentucky he faced jail if he revealed what he knew about his former employer.

Wigand's life was already coming apart. Shadowed by bodyguards because of death threats, he was being sued by Brown & Williamson for speaking out. Like Merrell Williams, no one would come forward to defend him except Dick Scruggs. In Pascagoula, Jeff Wigand spent the night in Dick Scruggs's home protected by armed guards.

LOWELL BERGMAN: You were really scared?

RICHARD SCRUGGS: No, I wasn't scared physically. I was scared of the consequences of what might happen to Jeff.

JEFFREY WIGAND: I came down here, yeah, I was going to go ahead and do it. I mean, the guards that night, sweeping the house for bugs- I mean, I'm just getting the stark realization of what could happen. I mean, the concept of going to jail really scared me.

CORRESPONDENT: And Dick Scruggs understood the risk Wigand was taking.

RICHARD SCRUGGS: I told Jeff that there was a good possibility that when he got back to Kentucky that night or the next day, that if he testified in Mississippi, that the judge in Kentucky would put him in jail for contempt of court, and that they would plague him to the gates of hell for giving this deposition, and that if he wanted to back out and not do it, it was not too late to back out.

JEFFREY WIGAND: Dickie then said, "You know, you can be off the hook, if you want. There's nothing lost. You can- we understand and we'll understand. It'll change nothing." I guess I came out here and Dickie was at the door, and I said, "Fuck it. Let's do it!"

CORRESPONDENT: Waiting inside the courtroom was Ron Motley.

RON MOTLEY: There was a lot of jostling for position, a lot of shouting by the media. "Bedlam" best describes what was going on inside.

CORRESPONDENT: This is the videotape of Jeffrey Wigand's deposition, the first time it's ever been broadcast. The voices are those of 30 tobacco lawyers trying to plug the leak.

1st ATTORNEY: [at deposition, November 29, 1995] The order doesn't say that.

2nd ATTORNEY: Well, the order doesn't not say it, either. Rules say you can.

1st ATTORNEY: Order doesn't say it. This is a sealed deposition. The order does not say it.

2nd ATTORNEY: Doesn't make any difference.

1st ATTORNEY: Well, show me where it says that, Joe.

2nd ATTORNEY: Well, show me where it doesn't say it.

RON MOTLEY: At one point in time, I actually told them why didn't they just go on ahead outside and I'd finish the deposition by myself with Dr. Wigand.

[at deposition] Sir, if you continue to disrupt this, I am just going to walk up there close and let him state his answer for the record. And whether you hear or not, I care not. Now, will you please tell me so I can hear what your answer is?

ATTORNEY: Brown and Williamson reserves all of the- [crosstalk]

JEFFREY WIGAND: Would you repeat the question?

RON MOTLEY: Yeah. Did they change the minutes?

JEFFREY WIGAND: Yes, they did.

RON MOTLEY: Did they eliminate 12 pages of the minutes?

JEFFREY WIGAND: Roughly 12 pages of the minutes.

[to Bergman] I had never seen anybody take control like that before. Normally, in those situations, the industry always controlled and overpowered.

RON MOTLEY: [deposition] Sir, are you familiar with a term called "document management"?

CORRESPONDENT: The former vice president of research would describe how his company altered and hid scientific documents, and explain how they boosted nicotine's impact on the brain. He would go on to accuse his former boss, Thomas Sandefur, of lying before Congress.

RON MOTLEY: [at deposition] Do you see what he said, sir?
JEFFREY WIGAND: Yes, I do.

RON MOTLEY: He says, "I do not believe that nicotine is addictive." Do you see that?

JEFFREY WIGAND: Yes, I do.

RON MOTLEY: Is that the opposite, contrary to what he has expressed to you numerous times?

JEFFREY WIGAND: That is correct.

CORRESPONDENT: And then Jeffrey Wigand would reveal how Brown & Williamson tobacco genetically engineered tobacco plants and then illegally shipped the seeds to Brazil.

JEFFREY WIGAND: [deposition] Seeds were harvested and sent into New Jersey - they were taken out, knowingly, when it was illegal to take them out - and bring them to Souza Cruz to be grown.

CORRESPONDENT: Listening in the courtroom was a Justice Department prosecutor. Wigand's testimony would now give substance to a separate federal criminal investigation of the industry.

JEFFREY WIGAND: They spent $20 million on it, in terms of what the- their total legal action against me. They probably could have- probably could have paid me off for a hell of a lot less, and never created the monster they created.

CORRESPONDENT: Wigand now had some protection because he was a federal witness. And for months Wigand had been secretly helping another government agency. He had agreed to help the Food and Drug Administration in their investigation, on condition that he be known only by his code name, "Research."

DAVID KESSLER: I was sitting there in my conference room, and I was talking to one of the most important people we would talk to during our investigation, and I knew him only by his code name. I knew him as "Research." And I was sitting there one day and I'm looking at documents and I'm saying, "Who's this person? Who's that person?" Then I go, "Who's Jeffrey Wigand?" And he looks at me and he says, "I'm Jeffrey Wigand."

CORRESPONDENT: Jeffrey Wigand would help the FDA sort through thousands of industry documents. But David Kessler knew that in order for the FDA to regulate nicotine, he would need more than just scientific evidence. He would need political muscle.

DAVID KESSLER: It's one thing when a regulator goes out and says nicotine is a drug. It's another thing when a regulator and a president of the United States makes that statement.

CORRESPONDENT: And that is where Dick Scruggs would play a surprising back-room role. His connection was his adviser in the tobacco war, Trent Lott's friend, Dick Morris, who was now engineering the president's re-election.

DICK MORRIS: I knew from my polling in Mississippi how strongly people in what's, after all, the most conservative state in the country, felt about that issue. So I told the president that I thought this could be a really good issue for us to focus on.

LOWELL BERGMAN: But did he bring up the fact that, "Hey, Dick, tobacco? They're the Darth Vader of politics"?

DICK MORRIS: Well, he was scared to death of losing Kentucky and losing Tennessee. But I kept telling him that even in those states, there was a- probably a strong majority in favor of banning tobacco companies' efforts aimed at kids. And the contribution that I guess I perhaps had the most to do with was to say that voters felt one way about kids and teenagers and another way about adults smoking.

CORRESPONDENT: The Mississippi boys' back channel to the White House reported that the president needed persuading if he was going to back the FDA.

RICHARD SCRUGGS: Dick asked me if I would pay for a poll to see just what the public attitudes in the tobacco states were toward youth smoking and presidential intervention in that area. And I said, "Of course. If that's what's needed, do what you need to do. Go ahead and run a poll, and I'll be more than happy to pay for it."

DICK MORRIS: So I did a survey in five states. And we found that in every single one of these states he gained by taking this position, as long as it was aimed at kids, at teenagers. And he was shocked by that. He was absolutely blown away by that.

Pres. BILL CLINTON: [press conference] Today I am announcing broad executive action to protect the young people of the United States from the awful dangers of tobacco.

CORRESPONDENT: Bill Clinton would be the first president to challenge big tobacco. Emboldened by this growing tide of political support, the Mississippi boys set out aboard Scruggs's private jet to forge new alliances and persuade more states to sue.

One state that wasn't going along with them was Minnesota, where Attorney General Hubert Humphrey had launched his own assault on tobacco.

HUBERT HUMPHREY: [press conference] This morning we filed a historic lawsuit charging the tobacco cartel with conspiracy, consumer fraud and anti-trust violations.

CORRESPONDENT: Under the leadership of fiercely independent trial lawyer Mike Ciresi, using their own documents, Minnesota made its own case, separate from Mississippi.

LOWELL BERGMAN: How important has their case been to you?

MIKE CIRESI: Not at all. It hasn't been important to us at all. I mean, it's a different case. I think it's been important to the entire litigation, just as our case has been important to the entire litigation. But has it been important here in Minnesota? No.

LOWELL BERGMAN: Would you give any credit to Mike Moore, for instance, for advancing the anti-tobacco cause?

MIKE CIRESI: Oh, absolutely. I think that Mike Moore's a promoter, and that's what he did. He went around the country promoting the lawsuit. He got a lot of other attorneys general to get involved down the road. And you know, in a situation like this, you sort of need a barker, and he was the carnival barker. He was out there promoting the case.

LOWELL BERGMAN: And Dick Scruggs?

MIKE CIRESI: He's his lawyer.

CORRESPONDENT: The barker and his lawyer gathered some allies. By the spring of 1996, they were joined by West Virginia, then Florida, then Massachusetts and finally Louisiana.

MIKE MOORE: I tried to twist arms, if I could, tell them how much proof we had, because I knew the political pressure involved in this. I mean, suing the tobacco industry is not a smart political move, especially back then. And-

LOWELL BERGMAN: Because?

MIKE MOORE: Because they come after you. And they did. They sent former attorneys general, hired as lobbyists, to every attorney general in this country. They sent business representatives, industry representatives, not just tobacco, but whatever state it was in. In Louisiana, they sent a chemical industry and oil industry to the state attorney general, said "You better not do this or we are coming after you." You know, "It's bad for business." I mean, in my own state, my governor sued me.

TELEVISION REPORTER: Governor Kirk Fordice shoots his own smoking gun at Attorney General Mike Moore's smoking lawsuit.

Gov. KIRK FORDICE: [press conference] This is not an attempt to take the side of the tobacco companies. Instead, it is simply an attempt to stop an improper action by the state's attorney general.

MIKE MOORE: He ought to be put on the billboard as the new Marlboro Man.

[to Bergman] He filed a lawsuit directly in the supreme court on one day. Tobacco companies filed the same lawsuit against me the very next day. So I had this huge industry and the governor of my state fighting me in my supreme court with nine judges, and my case hanging in the balance. If they had dismissed my case, I was history.

CORRESPONDENT: But Scruggs and Moore were about to make a breakthrough. They flew around the country to a series of clandestine meetings with the CEO of a tobacco company. He was an outsider in the world of big tobacco who had taken control of the Liggett Group, Wall Street operator Bennett LeBow.

BENNETT LeBOW, CEO, Brooke Group Ltd.: I mean, you have to recognize that Liggett is the smallest of all the tobacco companies. I also, from a financial point of view, said to myself, "We can't afford to lose even one lawsuit, one Medicaid case. We go immediately bankrupt."

CORRESPONDENT: In addition, LeBow could cut a good deal for his company by getting in first. So he dropped a bombshell on Wall Street.

NPR ANNOUNCER: For the first time, a cigarette company is breaking ranks with the rest of the tobacco industry and agreeing to settle a smoking-related lawsuit.

BENNETT LeBOW: Wall Street says, "What did you do? This is insane." Et cetera, et cetera. And the truth, Lowell, is I didn't believe the strategy these tobacco companies were following.

LOWELL BERGMAN: So did you notify your allies in the tobacco industry that you were about to defect after 30 or 40 years of a united front?

BENNETT LeBOW: Absolutely not. They all read about it in "The Wall Street Journal" on, you know, that day when it was announced.

STEVEN PARRISH, Senior V.P., Philip Morris: It was a major event. I would say it was a major event in the process that led us to June 20, 1997, that- I think, as I said earlier, there were a number of things that came together. And certainly, the Liggett settlement was a part of that.

RICHARD SCRUGGS: And I think when Liggett actually settled, agreed to pay money, it was earthshaking because it validated the lawsuits. I mean, it showed that they did have merit, and I think that's what- that encouraged other attorneys general to get into the fight. And it started the walls crumbling.

CORRESPONDENT: And the Liggett settlement would also bolster the federal criminal investigation. A few steps from the White House, dozens of FBI agents and 12 prosecutors had been assigned to a special task force based in this building.

BENNETT LeBOW: We're cooperating completely with the Justice Department.

LOWELL BERGMAN: So when you say you're, in a sense, turning over evidence to the attorneys general, you're also turning over evidence to the attorney general of the United States.

BENNETT LeBOW: Oh, yes. Absolutely.

CORRESPONDENT: The heat from the Justice Department was causing tobacco executives like Thomas Osdene, Philip Morris's long-time research director to fear for their future.

ATTORNEY: [at deposition] Did you become director of research?

THOMAS OSDENE: On advice of counsel, I respectfully decline to answer, based on my 5th Amendment privilege against self-incrimination.

CORRESPONDENT: Back in Mississippi, those suits by the governor and the tobacco industry against attorney general Mike Moore had been dismissed by the state supreme court.

MIKE MOORE: It took a year of effort to beat that lawsuit. But when they lost that, they were history. I mean, when the supreme court of my state said "This trial will go forward," they were through, and they knew it.

STEVEN PARRISH: Well, that was certainly a setback.

CORRESPONDENT: A setback that within a week knocked $9 billion off Philip Morris's stock. And Ron Motley had another surprise in store for the industry. He persuaded judges in upcoming trials in Florida and Texas that he could sue not just for Medicaid recovery, but charge them with racketeering.

To make the case, Motley hired Prof. Robert Blakey, a former federal prosecutor and the author of RICO, the federal racketeering law. These charts that he prepared for trial would cast the tobacco industry in the same light as the Mafia.

ROBERT BLAKEY, University of Notre Dame: In the 1930s, the 22 families put together a national organization. What they did is, they had nine families in the center, as a commission that would be like a cartel for organized crime, organizing all of the family business, settling all the disputes, running organized crime through this central organization. That's the organization of organized crime.

This is the organization of the tobacco industry. The manufacturers are around here competing in the sale of cigarettes, but colluding in a scheme to defraud, orchestrated by the lawyers in the center, a bogus group doing research and then a P.R. group putting the message out. The Committee of Counsel is the mechanism that organized the scheme to defraud. [www.pbs.org: More of Blakey's interview]

CORRESPONDENT: The Committee of Counsel included a lawyer representing each company. Steve Parrish of Philip Morris was at one time chairman.

LOWELL BERGMAN: We interviewed G. Robert Blakey. He describes the Committee of Counsel to us as almost like a conspiracy of Consigliori from a Mafia family, getting together to make policy, policy designed to deceive the American people.

STEVEN PARRISH: Could not disagree with that more. Don't know what else to say.

LOWELL BERGMAN: Did you in these meetings attempt to steer research in certain directions that would help the industry and obfuscate the scientific debate?

STEVEN PARRISH: In the limited time that I attended those meetings, we got together to discuss common legal issues to the industry.

LOWELL BERGMAN: Did it have anything to do with scientific research projects?

STEVEN PARRISH: I'm sure there were discussions of scientific research. One of the key-

LOWELL BERGMAN: Special projects.

STEVEN PARRISH: One of the key things that is a part of the smoking and health litigation is the science that people use to claim that cigarette smoking makes people sick. So I'm sure there was discussion about that.

CORRESPONDENT: This document states that, "Research programs have not been selected against specific scientific goals, but rather for various purposes such as public relations, political relations, and position for litigation."

ROBERT BLAKEY: The lawyers, not the scientists, designed the research. The lawyers decided what was to be disclosed publicly about the research. They orchestrated a fraud and a crime.

RON MOTLEY: They were facing bankruptcy, some of them, in the Texas case, because the damages for Texas were so great. And we were going on the RICO. They faced punitive damages, too.

LOWELL BERGMAN: Isn't there the threat that you may lose one, two, three of these multi-billion-dollar judgments and have to go into bankruptcy?

STEVEN PARRISH: Sure. That would be a terrible thing.

LOWELL BERGMAN: The stock you own in the company would be worthless.

STEVEN PARRISH: It would not be worth much.

RICHARD SCRUGGS: If these tobacco companies go bankrupt, new tobacco companies will spring up from the ashes. So what would happen in the event of a bankruptcy is far worse than bringing this industry under control and making them comply, because then, following a bankruptcy, the new tobacco companies would be totally free of any of the liabilities for the misdeeds of this industry. Totally free.

CORRESPONDENT: In the spring of 1997, Scruggs was on the course towards a face-off in court. He knew he had the advantage. He had 40 states on his team. His opponents were floundering, but he couldn't afford to kill them. For a contingency lawyer, the obvious tactic was to settle.

The opportunity came from an unexpected place. Bill Clinton had assigned his close adviser, Bruce Lindsey, to tobacco. He was listening to the industry's overtures.

MIKE MOORE: I got a call from Bruce Lindsey, and Bruce said that the president wanted us to at least meet with the tobacco industry. At that point, we weren't wanting to meet with them. You know, we were trying to hold off meeting with them because we just didn't believe- we didn't trust them. But when, you know, the president of the United States, through Bruce Lindsey, tells me he wants me to meet with the industry, I mean, who am I to say, "No, I'm not going to"? So I called Scruggs and I said, "Scruggs, we got to change the plan here. We need to meet with them."

CORRESPONDENT: On the 3rd of April, 1997, Moore and Scruggs would come face to face with the Marlboro man's boss, Geoffrey Bible, CEO of Philip Morris, and his counterpart at RJR - makers of Ritz crackers and Winston cigarettes - Steven Goldstone.

MIKE MOORE: These are some folks who've done some bad things and, you know, I'm walking in the room, shaking hands with them and, you know, the usual nice things, gestures that you do, and "Glad to meet you," et cetera. And I don't know if I was glad to meet them or not, but I was glad that they were there.

STEVEN PARRISH: We didn't know how people were going to react to us, what the emotional state of everybody in the room was going to be. So I think there was a fair amount of tension, a fair amount of apprehension.

CORRESPONDENT: What the industry was looking for was immunity from future lawsuits.

MIKE MOORE: They wanted the kind of limitations on liability that we just weren't going to give them. They wanted total immunity from civil liability for individual cases, for class actions, punitive damages, everything. So it was a huge, frustrating, fighting battle.

CORRESPONDENT: The industry was prepared to make a surprising offer up front. They would agree to give up their right to advertise their product. It was a concession the attorneys general knew they would never get in court because big tobacco had for decades successfully defended its 1st Amendment right to free expression.

STEVEN PARRISH: When we early on indicated a willingness to give up billboards all across the country, that they realized that we were there in good faith and that we were serious and we really wanted to try to work something out.

CORRESPONDENT: The industry was also prepared to offer an astounding amount of money, hundreds of billions of dollars. Not only would they retire Joe Camel, but vending machines would go. And in a contentious "look back" provision, the industry would face fines if youth smoking did not decline.

STEVEN PARRISH: The look-back provision of the June 20th agreement is one of the most, I believe, unfair parts of the agreement because it penalizes us if youth smoking doesn't decline, even though we may not be the ones at fault. And I think if there's one thing we could all agree on, it is that despite what people think of the tobacco industry, that the tobacco industry is not the only player in this- in the decision as to whether a kid's going to light up a cigarette.

CORRESPONDENT: But in return, the companies would be protected from punitive damages for past behavior and from all class actions suits. There would also be a cap on any future damages. By June 20th, 1997, Mike Moore and the other attorneys general had a deal. For settling their suits, the industry that had never paid out a dime would hand over $368 billion. It had taken four years.

MIKE MOORE: [press conference] It's been a long, hard struggle. I won't tell you that this is the end. This is really the beginning of the end for the way the tobacco industry has treated the American public and probably the people of this world.

CORRESPONDENT: That day, Scruggs and Moore drove to the White House with their deal. For it to take effect, it needed legislation and presidential approval. But they were about to discover some bumps on that road.

MIKE MOORE: The first disappointment we had, though, was that we were told that within 10 days- actually, we were told that on that day, a positive statement would be forthcoming from the White House. It didn't work out like that. Two weeks went by, four weeks went by, eight weeks went by.

CORRESPONDENT: Even though the White House had had daily briefings throughout the settlement talks, there were those backstage who now argued for a tougher deal.

Pres. BILL CLINTON: [press conference] Today I want to challenge Congress to build on this historic opportunity by passing sweeping tobacco legislation that-

CORRESPONDENT: Mike Moore would now be pushed onto the defensive.

DICK MORRIS: Scruggs and Moore were so used to fighting the tobacco companies that they were unused to fighting a two-front war - the tobacco companies in front of them and the public health community in the rear - because the public health community basically said, "Thanks for the gains. Now get lost. We want to kill these guys. We don't want to make a deal with them."

DAVID KESSLER: Why a settlement?

LOWELL BERGMAN: Well, the-

DAVID KESSLER: Why do you want a settlement? Why not legislation? Why not enact comprehensive legislation that's aimed at reducing the number of young people who smoke? Why do you need a settlement? Why do you need to give the industry immunity?

Prof. STANTON GLANTZ, University of California, San Francisco: I thought it was horrible. I thought it was premature. I thought it was a sellout. I thought that this was the beginning of the divergence of the public interests and the interests of these lawyers, and that it was a mistake.

MIKE MOORE: We could kill the industry. And we could kill them. I mean, I don't have any question in my mind that we could have killed them. We could have put them out of business, and we still can. If this settlement doesn't go forward, the industry will be killed. There's no question in my mind. The states' lawsuits will put the industry in bankruptcy. There will be no money whatsoever, and there may not be this particular tobacco industry. But guess what? Out of the ashes will rise ABC tobacco industry, with no past misconduct and no liability whatsoever. Therefore they won't have to pay a penny.

Or we could call a peace, if you will, make them change the way they do business, make them quit hurting our kids and make them pay for the sins of the past. And that's what we chose to do.

Prof. STANTON GLANTZ: I think the way to beat the tobacco industry is to beat the tobacco industry. You know, it's not easy, but it's possible. And you do it is one step at a time.

CORRESPONDENT: This is what Stan Glantz wants: the tobacco companies dragged into court, state after state. Minnesota didn't sign on to the June 2Oth deal, and so Mike Ciresi has taken the first state case to trial.

LOWELL BERGMAN: If you prevail in Minnesota, what will you want?

MIKE CIRESI: We want actions of the industry to stop. We want remedial actions to take place. We want to prevent, to the greatest degree possible, the opportunity for youth to start smoking.

LOWELL BERGMAN: You sound just like Mike Moore. I mean, he-

MIKE CIRESI: I don't think I do.

LOWELL BERGMAN: Well, he says "We've got- we don't just have money"-

MIKE CIRESI: Well, then, what is he doing out, being a paid lobbyist for the industry, promoting this June 20th settlement? I'm not promoting the June 20th settlement. He is. So please don't tell me I sound like Mike Moore in terms of what I want to take place in this litigation, because I don't. We're a sea apart.

LOWELL BERGMAN: What people say today that you've become, in a sense, their life preserver, that the settlement is their way to survive and profit, and you're now their lobbyist, it's true, then.

MIKE MOORE: No, I promise you, the only people that I lobby for are the people, men and women of this state, and the children of this country. Just think from whence we came and where we are now. Where we were is, we had an industry who wouldn't tell the truth, refused to admit their products caused disease and marketed specifically to our children, right? Now we got an industry who by law has to tell the truth, and will be made to tell the truth, can't market to our children, and is paying for the health care costs for the damage that they do.

CORRESPONDENT: On Dick Scruggs's desk is a deposit slip, the first installment of Mississippi's settlement with the tobacco companies. It's for $170 million dollars. While Congress tries to come up with a national deal, three states have settled: Mississippi for $3.4 billion, Florida for $11.3 billion and Texas for $14.5 billion.

Scruggs and Moore have forced Washington to deal with tobacco. Each week they fly into the capital to push for a national deal, and the going can get pretty rough.

CONGRESSMAN: [at hearing] The subject of our hearing this afternoon is what role, if any, Congress should play in determining the amount of attorneys' fees top be-

CORRESPONDENT: And there is no shortage of skeptics and critics.

RICHARD SCRUGGS: [Congressional hearing] We know the contingency fee is controversial. And human nature being what it is, no one really objected. There weren't hearings like this when these contracts were entered. Everybody thought this was so risky that these lawyers must be nuts if they would take this industry on a contingency fee. There were no objections to it of any consequence. It's only- and that's human nature. It's only when the rats are out of town, the people decide that the Pied Piper didn't earn his money.

CORRESPONDENT: Because he and Motley represent the majority of the states, Scruggs could make hundreds of millions of dollars.

RICHARD SCRUGGS: [Congressional hearing] I can't speak for all our colleagues, but we are willing to go to the arbitration system, to have an independent panel of three arbiters decide how much money we make. And we intend to urge that on our colleagues, our co-counsel in other states.

CORRESPONDENT: On the other side of the Hill, his critics have paid frequent visits to the Senator who is now in charge of trying to pass legislation, John McCain.

Sen. JOHN McCAIN, (R), Arizona: I've been working very closely with Dr. Kessler, with these organizations that advocate a tobacco-free environment for kids because, look, whether I happen to like it or not, these people are the referees. And if we come up with a proposal that they attack - maybe not all of them, but the majority of them attack - then we're not going to get any legislative result here.

CORRESPONDENT: Last month, Senator McCain's Commerce Committee approved a bill that eliminated almost all of the immunity that Scruggs and Moore had negotiated, and jacked up the industry's total bill to $515 billion. the response from the industry was immediate and unambiguous.

STEVEN GOLDSTONE, CEO, RJR Nabisco: [National Press Club speech] The extraordinary settlement reached on June 20th last year, that could have set the nation on a dramatically new and constructive direction, is dead.

CORRESPONDENT: Steven Goldstone of RJR was signaling that the public health community had pushed a step too far. Big tobacco wasn't going to pay half a trillion dollars and get virtually nothing in return.

But down the street at a federal courthouse, events were unfolding that the industry could not walk away from. While the news crews waited to stake out the witnesses in the Monica Lewinsky scandal, no one recognized the man arriving to testify before another grand jury: Nick Brookes, CEO of Brown & Williamson tobacco.

LOWELL BERGMAN: Have you been questioned by the Department of Justice?

STEVEN PARRISH, Senior V.P. Philip Morris: No, I have not.
LOWELL BERGMAN: Have people from Philip Morris been subpoenaed before the grand jury?

STEVEN PARRISH: We have been cooperating with the Justice Department's investigation. We've said that publicly, and that's all we're prepared to say.

LOWELL BERGMAN: You're not aware that certain CEOs and executives at other companies have been subpoenaed before the grand jury?

STEVEN PARRISH: As I said before, we are cooperating with the Justice Department in its investigation, and we're not prepared to say anything further.

CORRESPONDENT: FRONTLINE has learned that Brown & Williamson has been notified that it is a target of the grand jury and can expect to be indicted. The charges are based in part on information that was provided by Jeffrey Wigand in that Pascagoula deposition back in 1995. As of June 20th, 1997, tobacco industry spokesmen have changed their tune on at least one key issue. [www.pbs.org: More on the criminal probe]

LOWELL BERGMAN: Do you believe that nicotine is addictive?

STEVEN PARRISH: Do I personally? Under the definition that people apply today, I certainly do believe it is addictive.

DICK MORRIS, Pollster/Political Strategist: Tobacco enjoyed a charmed life in American politics, and the assumption was that you could never take them on. Remember the old stuff about Jim Brown? "You don't spit on Superman's cape- you know, walk on Superman's cape. You don't spit into the wind. You don't mess with the Lone Ranger and you don't fool around with Jim." Well, that's how people, I think, felt about the tobacco companies. And the irony of it was that it took a pygmy to take them on because the giants were too scared.

CORRESPONDENT: Moore and Scruggs are still selling their agreement, convinced that all the sides are posturing. Last week, Minnesota settled its case, and now Scruggs believes that for everyone else, the stakes are so high that no one can afford to walk away from a deal.

RICHARD SCRUGGS: It's not often in life that you have a chance to make a mark on humanity. And we all got caught up in the opportunity that this presented to us not only to make a lot of money for our clients and perhaps for ourselves, but to really make a difference in the world.

[In response to our report that they are "a target of the grand jury," a spokesman for Brown & Williamson said, "Brown & Williamson does not comment on the grand jury investigation, and has not. Brown & Williamson is outraged that any citizen is unfairly threatened with possible criminal charges by purposeful and illegal leaks. Unfortunately, this is typical of the kind of politically motivated tactics we are seeing from many in Washington today."]

ANNOUNCER: For more of this report, check out FRONTLINE online. Take a closer look at the criminal case and what damaging internal tobacco documents show, the depositions, never before seen excerpts from the intensive questioning of the CEOs, a special report on who loses if big tobacco goes bankrupt, a challenging quiz on tobacco ads and marketing on FRONTLINE on line at www.pbs.org.

Next time on FRONTLINE-

NEWS ANCHOR: -special Watergate prosecutor Archibald Cox-

ANNOUNCER: Once they were heroes. Now they're not.

KENNETH STARR: I'm not going to comment on any-
-I'm not going to comment-

-I can't comment-

ANNOUNCER: For the first time, the inside story.

DONALD SMALTZ: It's absolutely outrageous.
-a bald-faced lie.

ANNOUNCER: An independent counsel speaks out.

DONALD SMALTZ: It's shocking if the president has chosen to trivialize and ridicule an independent counsel, and it's unfair.

ANNOUNCER: FRONTLINE reveals "The Secrets of an Independent Counsel."

INSIDE THE TOBACCO DEAL


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Our program, "The High Price of Health," elicited a response from Dr. Malik Hasan, who was profiled in the program as head of one of the largest HMOs in the country. In a letter to FRONTLINE, Dr. Hasan disputed an assertion made in the program by journalist George Anders that Dr. Hasan had been challenged by federal authorities for ordering too many tests as a practicing neurologist.
He writes, "At no time did the federal government ask questions of me as to why I was ordering up so many tests, as Anders asserts." In response to Dr. Hasan, George Anders explained that he had meant that Dr. Hasan had been queried only in the normal course of Medicare peer review, which many active physicians routinely undergo.

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