Cooperate all you like: The government’s still going to get you. This is the lesson at the heart of the civil racketeering lawsuit currently pending against major American tobacco companies.
But wait, wasn’t the crusade against the tobacco companies wrapped up a few years ago? Well, to a certain degree, yes.
In November 1998 the tobacco industry signed the Master Settlement Agreement (MSA), effectively ending lawsuits pending against the industry by the states in exchange for a payout of more than $200 billion spread over 25 years and an agreement to fundamentally change the way it advertised its products.
The agreement bars cartoon characters in cigarette ads (sorry Joe), bans brand name tobacco sponsorship of major athletic events, outlaws nearly all billboards, and prohibits cigarette manufacturers from seeking “product placement” deals in movies, television, or “other performances or video games intended for the general public.” The companies were also compelled to put up $50 million to fund enforcement of the deal. Fines run into the millions of dollars.
Over the past six years, tobacco has held up its end of the bargain, paying dearly for the crime of selling a legal product. Unsurprisingly, state governments have failed to live up to the spirit of the agreement.
A significant portion of the settlement monies were dedicated to funding programs to “prevent youth smoking and promote public health” through advertising campaigns and education programs. In essence, the settlement required tobacco companies to pay for hysterical condemnations of their own products, all to let the public in on what every non-vegetative state citizen already knows: Smoking is bad for you.
According to a recent study by the National Conference of State Legislators, however, only a paltry 5 percent of these payouts have been spent on such indoctrination, er, education programs.
Details, details. Still, with a settlement of hundreds of billions of dollars and a major shift in the way this newly contrite industry does business, one might expect that tobacco’s hour of attrition has passed. Cue vicious laughter.
UNTIL THE MSA WAS signed, the federal government held that the litigation against tobacco companies was not a federal matter. In fact, in 1997 then-Attorney General Janet Reno readily admitted that the feds do “not have an independent cause of action” against tobacco producers.
Nevertheless, just three short months after the agreement was signed, President Clinton announced during his 1999 State of the Union address that he was directing the Department of Justice to go after tobacco manufactures, settlement or no.
The tobacco industry, to a certain extent, brought this on itself. After all, such a monumental capitulation, both in principle and principal, was sure to be perceived as a sign of weakness. Put that sort of green blood in the water and the feds can be more vicious than Lenten sharks.
The case the government contrived was twofold. First, it sought to recover federal money used to treat people with smoking-related illnesses. The second was a somewhat baffling civil claim pursued under the RICO Act, passed in 1970 to crackdown on the mob. Justice Department lawyers argue that up to $280 billion of past cigarette profits were “ill gotten gains” being used to perpetuate “pervasive fraud.”
Apparently the American public, poor saps that we are, cannot tell the difference between cigarettes and salad. This mega-settlement would be dispersed to the victims of big tobacco’s “racket,” namely “youth addicted smokers,” who are defined as anyone who smoked five cigarettes a day by the time they were 21. That it is legal to smoke at 18 somehow escapes them.
JUDGE GLADYS KESSLER dismissed the first claim in September of 2000, but has allowed the RICO action to move forward. In order to successfully argue a civil RICO claim, the government cannot merely seek redress for past damages, but also prove the defendant will use these “ill gotten gains” to fund future violations of the law.
This is a fairly high bar for the government to clear, especially considering that the two tobacco research organizations accused of disseminating fraudulent research, the Tobacco Institute and the Council for Tobacco Research, were dissolved under the MSA. The government’s case is almost entirely dependent on the demonizing cigarette manufacturers as terrible, greedy corporations which cannot be reformed. You know, kind of like the federal government, but shorter.
Few expect the tobacco companies will have to pony up the $280 billion, but the threat of “injunctive relief” by the court could arguably be deadly. The restrictions the tobacco companies have already submitted to with the MSA do not go far enough for the feds.
The Justice Department wants a court-imposed ban on cigarette vending machines. It wants marketing terms that give smokers “false impressions” about the dangers of smoking (e.g., “low tar,” “light”) eliminated. It wants more funds available to help people quit smoking, over and above the millions the tobacco industry has already committed.
And there will likely be more. The government isn’t willing to specify when enough will finally be enough. “It’s hard to talk rationally about a case I don’t think was given a lot of rational thought,” Philip Morris lawyer William Ohlemeyer sighed during a recent briefing on developments in the case, which goes to trial this September.