Big Tobacco Trial

GWEN IFILL:

Now, big tobacco on trial. The latest prosecution of the tobacco industry for conspiracy to mislead the public is nearing an end after an eight-month trial. But yesterday, government attorneys announced a surprise. Instead of the $130 billion penalty recommended by their own expert, they are asking for only $10 billion. The current lawsuit, initiated by the Clinton administration and continued under President Bush, followed a separate $246 billion settlement reached in 1998. That case reimbursed states for smoking-related medical costs.

Here to discuss the latest twist in the legal wrangle over tobacco are: Matthew Myers, president of the Campaign for Tobacco-Free Kids; and Mary Aronson, she heads a Washington research firm that analyzes tobacco policy and litigation for institutional investors. For the record, we extended invitations to tobacco companies and to the Justice Department, but they declined to appear.

Welcome to you both.

MATTHEW MYERS:

Thank you.

GWEN IFILL:

Mary Aronson, first explain the difference between the trial that we're watching now, which a lot of people didn't realize was still going on, and what that settlement was in 1998 that we heard so much about.

MARY ARONSON:

The 1998 settlement dealt with the cases that were brought by the states against the tobacco industry, and four of the cases had been settled — or four of the states' cases had been settled prior to 1998 and the rest were settled in bulk in 1998. The result of that settlement was a master settlement agreement that addressed a variety of issues, allowed payments to the states, and basically that was the end of that.

The case that we're dealing with now initially started as one that included two RICO claims, racketeering claims, as well as counts to recapture money under two federal medical programs, Medicare and Medicaid, which is the state and federal program.

GWEN IFILL:

And there was a $280 billion price tag on that, but that went away because, Mr. Myers?

MATTHEW MYERS:

The court of appeals found that the federal law, the RICO law, didn't permit disgorgement rulings but left in place the ability of the court to require –

GWEN IFILL:

Disgorgement?

MATTHEW MYERS:

Disgorgement means payment of ill-gotten or wrongful profits. But what it left with the court was the ability to require fundamental reform if it found ongoing, wrongful behavior of the tobacco industry. And that's much of the evidence that the Department of Justice has focused on.

It spent literally hundreds of days presenting evidence of continued wrongdoing to demonstrate that the master settlement agreement really didn't end the problem, that we continue to see tobacco marketing targeting the kids, that they've even introduced candy flavored cigarettes, if you can believe that, all of which heavily impact kids. They continue, according to the Department of Justice — and I think the evidence is persuasive.

GWEN IFILL:

So the Department of Justice had said, at least one of their experts had said earlier in this trial that the price tag for this kind of behavior, if there were to be one, should be about $130 billion. Yesterday they changed their minds. Do you have any idea what brought that on?

MARY ARONSON:

Well, there are all sorts of stories as to what brought it on. For one thing, the numbers that we began with were somewhat weak. The size of the population that would be treated and the cost of the program I think were somewhat weak as far as the federal government's witness.

GWEN IFILL:

There was no explanation about why they came up with that number?

MARY ARONSON:

Well, it really wasn't all that useful. There was a question as to what a marketing campaign to market the cessation program would cost. There were also questions as to the number that they were using to extrapolate to the general population.

Anyway, those numbers were questionable. There have also been stories that there may have been some pressure put on internally within the Justice Department, you know, to get a backing away from that number to something lower.

GWEN IFILL:

And, in fact Judge Kessler kind of hinted around at that today. What was your sense about why that number —

MATTHEW MYERS:

It's interesting, the witness who testified in support of a 25-year, $130 billion cessation program is this nation's foremost expert on cessation. He was the expert that the Department of Health & Human Services turned to, to head a task force to find out what was necessary. What he testified to was the summation of a consensus of the leading experts in the nation. When the tobacco industry challenged his testimony, they didn't punch a single hole in the elements of the program, only the question of how many people would be served.

What he said was that his proposal was based on the assumption that a well-run program with a good public education campaign needs to serve as many of the people in the American public who would request such a program. You could disagree whether the estimate would be $130 or $110 billion dollars. What is clear — because I testified after he did in that case, and at that time, the Department of Justice lawyers said clearly to me, they believe that his testimony withstood scrutiny. There's only one explanation, and it's an unfortunate one: Having spent this much money, political pressure has finally been put on the trial team to require them to do the opposite of what they think is necessary.

GWEN IFILL:

It should be said that none of us is inside the trial team so we don't know.

MATTHEW MYERS:

That's exactly right.

MARY ARONSON:

I was in the court, and he had a number, for example — he said the program would have to consist of a significant marketing campaign, and he suggests that it would cost $1 billion a year. But when asked where that number came from, he really didn't support, or didn't come up with any good basis for that. He also, as Matt suggested, used a healthcare program and the referral rates that people within this healthcare program who were smokers, what their referral rates, what their usage rates for smoking cessation were, and then he extrapolated that to the general public, and I think a lot of people had problems with that.

But one more issue that is also perhaps somewhat problematic with this smoking cessation program is whether or not, under RICO, it is forward-looking. The remedies need to be forward-looking. They need to prevent future wrongdoing, and the industry would argue — and I'm not here on behalf of them — but the industry would argue that a smoking cessation program is simply getting at past wrongdoing, not future wrongdoing.

MATTHEW MYERS:

It's interesting, the cessation proposal in this case is one that has been supported by the Department of Justice all through the litigation. It was supported by them, even after Dr. Fiori, the expert, testified. He is this nation's foremost expert on this. If we're serious about actually using this case to address a fundamental problem going forward, then his recommendation is the only recommendation that was put forward.

What's really interesting here is that the Department of Justice stood behind Dr. Fiori — and they should have — all the way through until yesterday afternoon. I testified after he did, after he had been cross-examined. They felt confident at that time that he was presenting the best evidence that this nation had ever received. And then there's a sudden change and we look behind the scenes and there is evidence that there was political pressure put on the lawyers in the case to change — and the change wasn't small; it took a program that recognized this problem took a long time to be created. It would take a long time to solve.

GWEN IFILL:

But there were other problems, also, it seemed with this case. And we heard the judge saying — questioning the Justice Department lawyers yesterday, saying who's supposed to enforce all these sanctions? Is it supposed to be me? Was that also a problem?

MARY ARONSON:

I think it's got to be a problem. I mean, when I was in law school they talked about programs that the court would have to enforce through, you know, court-appointed agents, as being the kind of situation courts don't necessarily want to get into. There's a lot of administrative activities that have to be going on. There's also a lot of cost, which in this case, I think they would try to pass on to the industry. But, you know, I still think it's got to take up a good amount of the judge's time.

GWEN IFILL:

Well, I also wonder, this came close to being derailed once before, when the administration shifted, and I think the former attorney general attempted or considered pulling this case, and instead, that did not happen. So do you think this is fallout, perhaps, from the earlier effort?

MATTHEW MYERS:

Well, you know, I think it's a new effort, but it's the same kind of effort. All we think needs to happen in this case is that the judge needs to be permitted to decide it on its merits. What our concern is that the judgments that are being made now are because of political influences, because of heavy political contributions, because of the tobacco industry, not being based on the merits of what was presented.

Mary and I can go back and forth on some of the specific issues, but the Justice Department in its closing said that it presented the most compelling, comprehensive case of continuing tobacco industry wrongdoing that has ever been presented in any court in the United States, and I think that's true. It deserves a serious response on the merits. Our concern is only that the sudden, unexplained, unexplainable change in the Department of Justice's position is in likelihood caused by a political decision, not a decision on the merits. And I think that the plaintiffs and the citizens of this country deserve better than that.

GWEN IFILL:

On the merits, watching this eight-month trial unfold, did the government make its case?

MARY ARONSON:

I think, well, the government started with what it called "seven pillars of fraud," and I think some of those pillars may still be standing —

GWEN IFILL:

For example?

MARY ARONSON:

— whereas others might have fallen. Well, one of the issues was causation, whether or not the industry had indeed admitted that smoking causes cancer. It's true that — and Matt may disagree with me – but it's true that on many of the Web sites there are different levels of association of smoking and lung cancer.

However, one of the tobacco industry's — who was then soon-to-be retired — CEO's got up in front of the a court and when asked point-blank by the Department of Justice, whether or not there was a link between — whether smoking caused cancer; he wouldn't answer the question, which I thought was rather shocking. There are other issues, other perhaps diseases that have a weak link to smoking or where the scientific link is not yet established and perhaps could be in the future. So perhaps in an area like that, the court might want to, you know, keep some hold over the industry.

GWEN IFILL:

Mary Aronson, Matt Myers, thank you both very much.

MATTHEW MYERS:

Thank you.

MARY ARONSON:

Thank you.