Cigarette makers face US Government in conspiracy trial

By PETER KAPLAN

WASHINGTON - Cigarette makers lied and tried to confuse the public about the dangers of smoking for 50 years, the US government said on Tuesday as its US$280 billion case against the industry went to trial.

In opening arguments in the biggest and most ambitious racketeering case in history, the government said a 1953 meeting of tobacco industry executives at New York's Plaza Hotel was the starting point for a conspiracy designed to cast doubt on links between cancer and cigarettes.

"This case is about a 50-year pattern of misrepresentation, half-truths and lies by the defendants that continues to this day," US Justice Department attorney Frank Marine told a federal court.

The 1999 lawsuit launched under President Bill Clinton targets Altria Group Inc. and its Philip Morris USA unit; Loews Corp's Lorillard Tobacco unit, which has a tracking stock, Carolina Group; Vector Group Ltd's Liggett Group; Reynolds American Inc's R.J. Reynolds Tobacco unit and British American Tobacco Plc unit British American Tobacco Investments Ltd.

The companies have denied the government's allegations and say they have drastically changed their marketing practices since 1998, when they signed a landmark settlement with state attorneys general that severely restricts marketing and subjects cigarette makers to oversight.

Tobacco companies say the past misconduct alleged by the government does not mean that they are likely to commit fraud in the future, a showing they say is necessary to justify the US$280 billion financial penalty sought by the government.

"Cigarettes are not sold the way they were sold in the past," Philip Morris attorney William Ohlemeyer said outside the courthouse after the government made its presentation. "The best way to predict the future is to look at how cigarettes are sold today."

As the trial's first day continued, stocks of tobacco companies were mostly lower, including Altria, down 1.9 per cent to US$46.19 a share on the New York Stock Exchange and Reynolds American Inc., down 2.4 per cent at US$68.24 a share.

The trial is expected to last about six months and feature more than 100 witnesses.

In its opening arguments, the government said it would prove that the industry constructed a huge public relations operation designed to sow confusion about the health affects of smoking.

Justice Department attorney Sharon Eubanks cited a 1964 memo from a Philip Morris executive that said the industry had to provide "a psychological crutch and a self rationale to continue smoking."

In January, 1964 the US Surgeon General issued a landmark report outlining the risks of smoking that briefly cut into tobacco sales.

Citing dozens of similar internal industry documents, government attorneys charged that the cigarette makers misled the American public about whether tobacco was addictive, and whether it caused cancer and other diseases.

They also said they would show that the industry manipulated nicotine levels and marketed cigarettes to teenagers, even as they publicly denied both practices, and that the companies suppressed and destroyed potentially incriminating documents and research.

Justice Department officials want the industry to give up US$280 billion worth of past profits and seek tougher rules on marketing, advertising and warnings on tobacco products.

Cigarette makers say a US$280 billion penalty would put them out of business and have challenged the government's demand.

An appeals court is scheduled to hear oral arguments in November on the penalty issue and some industry analysts think settlement talks could follow if the government loses.

Marine, of the Justice Department, told Kessler that the figure represents only a third of what the government could have sought.

"If it's money obtained by fraud, it's not their money," Marine said.

Lawyers for the cigarette makers are scheduled to respond with their opening statement after the government's presentation.

"We're prepared to offer a very detailed response to what you saw today," Ohlemeyer said outside the courthouse.

Later in the week, the government is scheduled to call former Food and Drug Administration Commissioner David Kessler as its first witness.

In testimony already filed with the court, Kessler has described how the FDA found that tobacco companies were manipulating levels of nicotine in cigarettes.

The former FDA commissioner is not related to the judge.

Some anti-smoking groups fear the administration of President Bush may want to settle the case, but Attorney General John Ashcroft said in a statement that the Justice Department looked forward to recapturing industry profits and preventing the marketing of cigarettes to young people.

- REUTERS