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Judge: Tobacco industry violated RICO

Last Oct. 17, the Supreme Court refused to hear the federal government’s appeal seeking to regain the opportunty to force the tobacco industry to surrender $280 billion in profits — one of the remedies the Justice Department had sought in its massive anti-racketeering lawsuit against the industry. The D.C. Circuit Court had barred that type of remedy. The Supreme Court’s denial of review in U.S. v. Philip Morris USA, Inc., et al. (docket 05-92) thus took that “disgorgement” remedy off the table. At that time, the industry had not yet been found to have violated RICO. The post below discusses the ruling Thursday finding RICO violations, and imposing other remedies.

A U.S. District judge in Washington, D.C., ruled on Thursday that the tobacco industry engaged in an illegal, decades-long campaign to deceive smokers about the health hazards of smoking, in violation of the 1970 federal anti-racketeering law (RICO). The tobacco companies, the judge wrote, “have marketed and sold their lethal product with zeal, with deception, with a single-minded focus on their financial success, and without regard for the human tragedy or social costs that success exacted.”

The ruling by U.S. District Judge Gladys Kessler, in a case that has been before her for nearly seven years, is 1742 pages long. It thus is too long to upload to this blog. A link to it can be found at the top of the website of the U.S. District Court for the District of Columbia, here, along with a link to an 18-page final judgment and remedial order. (The case is U.S. v. Philip Morris USA Inc., et al., docket 99-2496).

The conclusions of law begin on page 1498, but that page becomes 1528 in the electronic text because of the 29-page table of contents at the beginning. (The actual opinion numbers 1653 pages; the remainder of the pages are in the appendices — including a recitation of 148 “alleged racketeering acts.”)

Kessler found both a conspiracy to violate RICO, and actual violation of that law. Discussing what “this case is really about,” the judge said it was “about an industry, and in particular these defendants, that survives, and profits, from selling a highly addictive product which causes diseases that lead to a staggering number of deaths per year, an immeasurable amount of human suffering and economic loss, and a profound burden on our national health care system. Defendants have known many of these facts for at least 50 years or more. Despite that knowledge, they have consistently, and repeatedly, and with enormous skill and sophistication, denied these facts to the public, to the Government, and to the public health community.”

She also offered some biting criticism of the role of lawyers in that history, saying they played “an absolutlely central role” at every stage in creating and keeping the racketeering “enterprise” going, and in implementing its “fraudulent schemes.” “What a sad and disquieting chapter in the history of an honorable and often courageous profession.”

The judge’s order imposng remedies consists mainly of bans on using deceptive promotion of cigarettes to suggest they are not as harmful, and a broad mandate to widely publicize corrective statements about the hazards of smoking and nioctine.

The Justice Department issued a brief statement, saying it was pleased with the finding of liability, but disappointed at the limitation on remedies. “Nevertheless, we are hopeful,” the statement said, “that the remedies that were imposed by the Court can have a significant, positive impact on the health of the American public.”

In the introduction to her ruling, the judge commented: “Unfortunately, a number of significant remedies proposed by the Government could not be considered by the Court because of a ruling by the Court of Appeals…In that opinion, the Court held that, because the RICO statute allows only forward-looking remedies to prevent and restrain violations of the Act, and does not allow backward-looking remedies, disgorgement (i.e., forfeiture of ill-gotten gains from past conduct) is not a permissible remedy.”

Kessler said she was obliged to apply that same standard to other remedies, meaning that she was “precluded from considering other remedies proposed by the Government, such as a comprehensive smoker cessation program to help those addicted to nicotine fight their habit, a counter marketing program run by an independent entity to combat defendants’ seductive appeals to the youth market; and a schedule of monetary penalties for failing to meet pre-set goals for reducing the incidence of youth smoking.” (The Justice Department had sought a $10 billion program for smoking cessation, running over five years, and a $4 billion program, over 10 years, for public education and counter marketing.)

Here is the judge’s summary, in her introduction, of the remedies she did order:
“…The Court is enjoining defendants from further use of deceptive brand descriptors which implicitly or explicitly convey to the smoker and potential smoker that they are less hazardous to health than full flavor cigarettes, including the popular descriptors ‘low tar,’ ‘light,’ ‘ultra light,’ ‘mild,’ and ‘natural.’
“The Court is also ordering defendants to issue corrective statements in major newspapers, on the three leading television networks, on cigarette ‘onserts,’ and in retail displays, regarding (1) the adverse health effects of smoking, (2) the addictiveness of smoking and nicotine; (3) the lack of any significant health benefit from smoking ‘low tar,’ ‘light,’ ‘ultra light,’ ‘mild,’ and ‘natural’ cigarettes; (4) defendants’ manipulation of cigarette design and composition to ensure optimum nioctine delivery; and (5) the adverse health effects of exposure to secondhand smoke.
“Finally, the Court is ordering defendants to disclose their disaggregated marketing data to the Government in the same form and on the same schedule which they now follow in disclosing this material to the Federal Trade Commission. All such data shall be deemed ‘confidential’ and ‘highly sensitive trade secret information’ subject to the protective orders which have long been in place in this litigation.”