Government Lawsuit Seeks Billions From Tobacco Industry

WASHINGTON—By imposing taxes on tobacco products and mandating health warnings on cigarette pack-ages, did the federal government, in effect, collaborate with the tobacco industry in causing smoking-related diseases in millions of Americans?

That legal theme will likely play out in the coming months and in any trial that results from the civil lawsuit filed by the US Justice Department against major cigarette makers. The federal government seeks to reclaim some portion of the money, now about $20 billion a year, that it has paid out over four decades to treat tobacco-associated illnesses.

The lawsuit, filed in US District Court, Washington, DC, accuses the defendants of conspiring since the 1950s to defraud and mislead the American public and to conceal information about the ill effects of cigarette smoking.

“For more than 45 years, the cigarette companies conducted their business without regard to the truth, the law, or the health of the American people,” Attorney General Janet Reno said in announcing the lawsuit. “Smoking is the nation’s largest preventable cause of death and disease, and the American taxpayers should not have to bear the responsibility for the staggering cost.”

The companies named in the suit vowed to vigorously defend themselves against the federal action and not to settle it. Philip Morris called the Justice Department filing “politically motivated” and suggested that the federal mandate for health warnings showed the government was well aware of the health risks of cigarettes.

The new challenge to cigarette makers is similar to the lawsuits filed by the attorneys general of 46 states against the tobacco industry and settled for $246 billion. However, that settlement covered only reimbursement of funds spent for treating Medicaid recipients with smoking-related illnesses. The new action aims to recover money paid out through strictly federal programs, such as Medicare.

“This suit represents the most serious legal threat the tobacco industry has ever faced, a threat that dwarfs those posed by the state cases,” said Bill Novelli, president of the Campaign for Tobacco-Free Kids.

The Justice Department alleges in its suit that the defendants:

Made untrue and misleading statements to create a false controversy about whether smoking causes disease, even though they knew that it did.
 

Falsely promised to undertake or sponsor research to determine whether smoking causes disease.
 

Sponsored research designed not to resolve the issue of smoking and disease; promoted biased research that would aid them in defending lawsuits brought by smokers; and suppressed research that suggested that smoking causes disease.

Knowingly and falsely denied that nicotine is addictive.

Failed to warn consumers about the ill effects of smoking, including the addictive nature of cigarettes.

Purposely refrained from developing, testing, and marketing less hazardous products.

Denied marketing to and targeting children, while activly seeking to capture the youth market.

Fraud and More Fraud

The Justice Department said it based its allegations on internal tobacco company documents that have become public in recent years as the result of lawsuits, particularly those filed by various states.

“We allege that the cigarette companies knew exactly what they were doing at all times—that their false and misleading statements would keep people smoking,” said David W. Ogden, acting assistant attorney general for the Civil Division. “Even when the truth began coming out, the cigarette companies responded with more fraud and deception.”

The government based its legal claims on three federal laws, the Medical Care Recovery Act, the Medicare Secondary Payer Act, and the Racketeer Influenced and Corrupt Organizations statue, known as RICO.

The RICO law allows the government to recover ill-gotten gains. The government alleges that the defendants engaged in more than 100 instances of mail and wire fraud, including making false and misleading statements to the public using the mails and wire transmissions to further their fraudulent scheme.

The Justice Department said that a special team, which began working in early 1999 on a plan to recover federal health-care costs, developed the federal lawsuit. The department said it had no criminal investigations of the tobacco industry pending.