Judge Rules Government Can Seek Tobacco Industry Profits

A federal judge ruled Monday that the government can seek $280 billion in tobacco industry profits as part of a case against cigarette manufacturers, clearing the way for the biggest civil racketeering suit in history. Judge Gladys Kessler said the tobacco companies could be ordered to hand over the money if Justice Department lawyers can prove that it was earned through fraud, and also that the billions surrendered would prevent future wrongdoing.

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A federal judge ruled Monday that the government can seek $280 billion in tobacco industry profits as part of its case against cigarette manufacturers, clearing the way for the biggest civil racketeering suit in history. The tobacco industry had argued in a motion that the government should not be allowed to seek the $280 billion that Justice Department lawyers allege was earned by the tobacco companies through fraud. Judge Gladys Kessler said the companies could be ordered to hand over the money if government lawyers prove their case and also prove that the billions surrendered would prevent future wrongdoing. “This ruling shows this case has the potential to bring about fundamental change in the tobacco industry,” said Bill Corr, executive director of the Campaign for Tobacco-Free Kids. “It will allow the government to put on the strongest possible case and to seek the strongest possible remedies.” Tobacco stocks fell sharply on the news. Shares of Altria Group Inc., parent of Philip Morris USA, fell $2.80, or nearly 6 percent, to $46.52 on the New York Stock Exchange, where RJ Reynolds Tobacco Holdings fell $2.61, or 5 percent, to $54.65. Loews Corp. shares fell $1.04, to $57.27 on the NYSE. The Justice Department alleges in the suit that the companies deceived the public about the dangers of tobacco and the addictive nature of nicotine. The government also claims the companies targeted children through advertising and then lied about it. Government lawyers are pursuing the civil case under the Racketeer Influenced and Corrupt Organizations Act, known as RICO. The 1970 law was created to prosecute mobsters. Six years ago, 46 states settled their suit against the industry for $206 billion, payable over 25 years. Four states settled separately for a total of $40 billion. The states recovered costs for treating sick smokers. Kessler rejected a bid by the federal government to similarly recoup the costs of treating sick smokers, but she did allow the racketeering case to proceed. It is the largest amount ever sought under the racketeering statute. In addition to seeking the money, the government wants the judge to impose new restrictions on the industry, including banning vending machines, forbidding certain marketing terms and limiting in-store promotions. The defendants are Philip Morris USA Inc. and its parent, Altria Group Inc.; R.J. Reynolds Tobacco Co.; Brown & Williamson Tobacco Co.; British American Tobacco Ltd.; Lorillard Tobacco Co.; Liggett Group Inc.; Counsel for Tobacco Research-U.S.A.; and The Tobacco Institute. The trial is scheduled to begin Sept. 13 in the U.S. District Court for the District of Columbia. Copyright 2004 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.

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