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Three years ago, the Liggett Group publicly denounced the dangers of smoking, turned over thousands of incriminating industry documents, and struck settlement deals with the states. The Miami-based tobacco company also cooperated with a Justice Department criminal investigation of Big Tobacco. But that apparently wasn’t enough to appease the government. The company is a defendant in the largest civil action ever brought by the United States — a massive suit against the tobacco industry pending in a D.C. federal court — lumped in with the pariah companies from which it had tried to distance itself. Liggett is now arguing that it has mended its ways and should be dropped from the suit. Its legal argument is a long shot, but Liggett’s effort to redeem itself has sparked some sympathy from an unusual source — a leading anti-tobacco activist. Matthew Myers, who has dedicated his life to protecting children from tobacco products as executive director of the Campaign for Tobacco-Free Kids, sat in on negotiations when Liggett settled with 46 state attorneys general in 1998. He came away believing that Liggett’s efforts to change its ways were sincere. “I was skeptical of Liggett’s motives, but I got to see them straight up,” Myers says. “The bottom line is that they did change. Liggett broke with the rest of the industry when it was a monolith. It was one of the most critical parts in the litigation against the tobacco companies.” The Justice Department filed its lawsuit, modeled on similar state actions, in U.S. District Court for the District of Columbia last year. The suit has two components: it seeks billions in reimbursement for the cost of treating smoking-relating illnesses and claims that Liggett and the four largest tobacco companies are engaged in a racketeering conspiracy. The government wants them to forfeit billions of dollars in profits. The suit accuses Liggett of being an active part of a tobacco cartel that Liggett says it split from three years ago. As such, the company argues in its motion to dismiss, it shouldn’t have to face drastic sanctions alongside the other companies. “The government insists that this court pretend Liggett’s clear and conspicuous public record actions never occurred,” the company complained in its brief. A ruling on the dismissal motion could come sometime in August. U.S. District Court Judge Gladys Kessler will hold a status conference Aug. 2. CLEAR THE AIR Liggett, once the producer of signature brands like Chesterfield, doesn’t deny that it worked for decades with other companies like the Philip Morris Cos. and R.J. Reynolds Tobacco Co. to deceive Americans about the risks of smoking. But in 1997, the CEO of the company that owned Liggett, corporate raider Bennett LeBow, turned whistleblower. He settled many of the civil suits against the company and handed over millions of pages of industry documents. The company also agreed to list the ingredients in cigarettes on its packages and subject itself to the authority of the Food and Drug Administration — things other tobacco companies have continually resisted. Liggett also agreed to cooperate with the Justice Department’s now-defunct criminal investigation of the tobacco industry. Such an agreement — even if Liggett was promised immunity from prosecution — would have no bearing on a civil action. Critics said Liggett made its moves out of necessity. “Liggett is profit-maximizing like everyone else,” says David Adelman, a tobacco analyst at Morgan Stanley Dean Witter. “Their mechanism to maximize profitability is to distinguish themselves from other manufacturers.” And, adds Adelman, “They’re still in the cigarette business.” Even after its acts of contrition, Liggett didn’t completely stop selling cigarettes. But it has a puny 1.3 percent share of the domestic market, mainly as a seller of generic brands. For a while, it remained a player overseas, particularly in Russia, where it built a new factory on the outskirts of Moscow in 1999. (Last month, the company that owns Liggett sold the Russian subsidiary for $400 million.) Liggett’s D.C. lawyer, Fred Reinke of Clifford Chance Rogers & Wells, says the government’s decision to include Liggett in its suit sends the wrong signal to whistleblowers in other industries. “When you break ranks, it’s a serious step,” Reinke says. “The government needs to recognize and reward that behavior.” THE COMPANY THEY KEPT Justice Department officials overseeing the tobacco suit declined to comment on their reasons for including Liggett. But in court proceedings in June, government lawyers hinted — without naming Liggett — that they had information that the tobacco defendants were still involved in alleged conspiratorial acts, such as marketing to youths, even after they had signed a 1998 agreement with 46 state attorneys general not to do so. At the hearing, Reinke dismissed the idea that Liggett has remained in league with the industry. “The likelihood of Liggett participating in a racketeering conspiracy with the other defendants and participating in strategy meetings with them is about as likely as Fidel Castro being invited to Miami as an honorary citizen,” he said. Still, government lawyers want the opportunity to find that out for themselves. In court records, they argue that it would be a mistake to let Liggett loose before discovery begins. Such a process, however, will likely take years and cost Liggett millions in legal fees. Meanwhile, Liggett must also fend off its tobacco brethren. After LeBow, in effect, turned state’s evidence, Liggett was buried in lawsuits by rival companies, most of which sought to prevent him from releasing sensitive information. As recently as January, the other companies intervened against Liggett in a suit Liggett filed against its former lawyers, Los Angeles-based Latham & Watkins, which demanded that the firm return 2,600 boxes of Liggett documents. That suit, filed in the Eastern District of New York, was settled. Even jurors in Miami recognized Liggett’s about-face earlier this month, when, after hammering the industry with a $145 billion punitive damages award, it reduced Liggett’s share by $1 billion, to $790 million. LeBow testified on behalf of the plaintiffs. Anti-smoking activist John Banzhaf, the George Washington University professor who heads Action on Smoking and Health, says Liggett deserves no mercy. “For 25 years, they had as black a heart as anyone else,” Banzhaf says. “If sometime before Judgment Day you repent, you shouldn’t escape punishment.” Banzhaf also says that many in the anti-smoking effort believe more incriminating documents have yet to be released. He says the Justice Department may be leaning on Liggett to obtain them. “You pick the weakest link, you pick them off,” Banzhaf says, “and use them to go after the big guy.”

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