Opening Arguments Begin in Federal Government’s Lawsuit Against Tobacco Industry

RAY SUAREZ:

Opening arguments kicked off today in the federal government's massive lawsuit against the tobacco industry for fraud and racketeering.

At stake is a potential fine of $280 billion, a sum that could drive some tobacco companies into bankruptcy. The case was first filed five years ago.

It is the second time the tobacco industry has faced such a massive government lawsuit. In 1998, the industry settled numerous state lawsuits at a total cost of $246 billion.

For more about the case and why tobacco was brought back to trial, I'm joined by Myron Levin, a Los Angeles Times reporter who's been covering the case from its genesis under President Clinton. Why is it back, if it was first filed five years ago, and then not pursued?

MYRON LEVIN:

It was pursued. These things take a long time to get to trial. And when it was originally filed, the centerpiece of the case were medical cost recovery claims similar to the ones the states filed.

Those were dismissed fairly early on, and what was left in the case was racketeering claims, which were sort of on the back burner. That is now what the case is. It's taken years of legal discovery, some 300 depositions have been taken of various perspective witnesses. So it always takes a long time to bring a case like this.

RAY SUAREZ:

So they're using RICO law –

MYRON LEVIN:

Yes.

RAY SUAREZ:

— a law originally formed to go after organized crime operations. What is the Justice Department saying the tobacco companies did?

MYRON LEVIN:

Well, they're basically portraying them as kind of an outlaw enterprise that built this huge market of smokers based on deceptions and lies dating back to the 1950's; this is what their claim is, and that when the first serious studies linking smoking and lung cancer began to become publicized with sort of electrifying effect on smokers in the 1950s, that the industry sort of huddled up and figured out how to deal with this terrible public relations problem and since then has distorted or lied about the risks of smoking, the addictiveness of smoking, denied falsely that they've targeted kids to replace smokers who quit or died and so on. That's what the government's claims are all about.

RAY SUAREZ:

What does the government have to do to make a charge of fraud and racketeering rather than just sharp or reprehensible business practices stick?

MYRON LEVIN:

Well, the judge and the appeals courts will be ultimately decide that, but basically, they have logged thousands of exhibits, including many internal documents, some of which have surfaced in other cases in which tobacco scientists and executives are bluntly affirming things they're denying to the public about the risks of smoking.

I mean, they have documents… in the opening statements today, the government spent five hours and they used a lot of documents about, for instance, addiction, where people in the industry are talking about how smoking is an addictive habit and nicotine is addictive back in 1960, '61.

RAY SUAREZ:

So they said things they knew not to be true. That's the fraud part of the case?

MYRON LEVIN:

That's the fraud part of the case, and once they had people smoking, for example, they introduced filters and light or very low-tar cigarettes to try to reassure people with the way those were marketed that this was a reasonable alternative to quitting. People were addicted, therefore, they did not want to quit if they could rationalize keeping on. This is the government's claim.

RAY SUAREZ:

Now a lot of these things sound familiar from previous big tobacco trials, information about marketing to kids, information about manipulating the level of nicotine inside the product. Is this really just a rerun of a lot of things that we've learned over the years in tobacco trials?

MYRON LEVIN:

Well, it is sort of a kitchen sink of the alleged sins of the tobacco industry. It's broader actually than in any other case that's come before because the Justice Department isn't tethered to an individual, for example, who has lung cancer and therefore can only produce evidence that is relevant to what happened to that person.

They can go after everything that the companies ever did. So, for example, they're putting in it looks like a lot of evidence about second-hand smoke and representations that were made about hazards or lack the lack of hazards of that. We haven't really seen much of that before.

So there will be new documents and new allegations in the case. But much of this is familiar, I think.

RAY SUAREZ:

For its part, what are these major tobacco companies, household names really, R.J. Reynolds, Lorillard, Philip Morris — what are they saying in their defense? Are they denying they did these things that are alleged in the complaint?

MYRON LEVIN:

They're saying basically that, well, nobody would argue that the tobacco industry didn't make mistakes or should have owned up to things earlier than it did perhaps, but that you can't really call what they did a fraudulent conspiracy, that some of the things they said and did over the years, dating back to the '50s were reasonable or defendable based on what was going on at the time.

And furthermore, it's a two-pronged argument. They say, even if you don't agree, Your Honor, that this was a conspiracy, the only way that you can use the RICO law to make us disgorge this gargantuan sum of $280 billion is if you find that this is money that will be used to commit fraud in the future.

The government, the Justice Department does not agree with this. This is the linchpin, according to the industry, and so that even if the judge would say, yes, you lied, cheated and stole, we still don't forfeit this money unless it would be used to commit fraud in the future, since we've signed this agreement with the states in 1998 settling that litigation.

We have a new level of candor; we have restrained our marketing practices, therefore there is no serious risk of future fraud, therefore, there is no need for a federal court to intervene and put us under control.

RAY SUAREZ:

So RICO, the Racketeering Influence Corrupt Organization Act requires that in effect the corrupt organization still exists. The cigarette companies, if I understand this, are saying we're not those kinds of players anymore, so even if we did these things in the past, we don't do that anymore?

MYRON LEVIN:

They're saying that, but that's their definition of what the law says and what the law means. Today was the government's turn, they gave five hours of opening statements, and they conclude by saying, hey, if you obtain money must be by fraudulent means, you have to give it back. You have to surrender it.

We don't have to prove anything more than that you did all these bad things, but we're going to, because they're obviously worried that the industry's interpretation of the law might be correct and that unless they can hook the behavior in the past to ongoing and likely future misconduct, that they won't prevail.

RAY SUAREZ:

We're just about at the end of our time, but you referred to tens of thousands of documents and articles of evidence. How long is this trial going to take?

MYRON LEVIN:

Well, it's going to take supposedly each side has three months to present their testimony, but even that is… there is a streamlined procedure going on here where testimony is pre-filed in a transcript form, and then we move right into cross-examination of witnesses. So it's going to be a marathon despite this step to bring some economy to it.

RAY SUAREZ:

Myron Levin, thanks for being with us.

MYRON LEVIN:

Well, thanks for inviting me.