Judge rules against Big Tobacco
Sides with government in multibillion-dollar racketeering case, but companies don't have to pay for cessation campaigns.

WASHINGTON (CNN) -- U.S. District Judge Gladys Kessler ruled Thursday that the tobacco industry engaged in a decades-long racketeering enterprise that conspired to hide the dangers of smoking.

But, citing constraints imposed by a February 2005 appeals court ruling that disallowed penalties for past conduct, Kessler did not order the companies to pay for smoking-cessation programs that the Justice Department had sought.

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In a 1,653-page ruling, Kessler ordered tobacco makers to buy newspaper ads detailing smoking's health effects and to stop using such descriptions as "low tar," "light," ultra light," "mild" or "natural" that might imply that they are less dangerous than other cigarettes.

"Over the course of more than 50 years, defendants lied, misrepresented, and deceived the American public, including smokers and the young people they avidly sought as 'replacement smokers,' about the devastating health effects of smoking and environmental tobacco smoke, they suppressed research, they destroyed documents, they manipulated the use of nicotine so as to increase and perpetuate addiction, they distorted the truth about low-tar and light cigarettes so as to discourage smokers from quitting, and they abused the legal system in order to achieve their goal -- to make money with little, if any, regard for individual suffering, soaring health costs, or the integrity of the legal system," Kessler wrote.

"We are pleased with the court's finding of liability on the part of the defendants, but disappointed that the court did not impose all of the remedies sought by the government," the Justice Department said in a written statement. "Nevertheless, we are hopeful that the remedies that were imposed by the court can have a significant, positive impact on the health of the American public."

A statement from Philip Morris USA said it will appeal the decision.

"Philip Morris USA and (parent company) Altria Group, Inc. believe much of today's decision and order are not supported by the law or the evidence presented at trial, and appear to be constitutionally impermissible or infringe on Congress' sole right to provide for the regulation of tobacco products," said William S. Ohlemeyer, Altria Group vice president and associate general counsel, in the statement.

It has not been decided, he said, whether the companies will appeal to the trial court or the U.S. Circuit Court of Appeals for the District of Columbia.

Anti-smoking group pleased

Ed Sweda, of the Tobacco Products Liability Project, an anti-tobacco group based at Northeastern University School of Law in Boston, said he was particularly pleased about the ruling on "light" cigarettes.

"That's critically important, since roughly 80 percent of U.S. smokers smoke cigarettes in that category," he said.

He predicted that the Justice Department would now appeal the appeals court ruling, based on past conduct.

Kessler said the conspiracy dates back to 1953, when a group of tobacco companies met together at the Plaza Hotel in New York City and devised a public relations plan to counter health concerns associated with smoking.

Kessler said that, even after the 1964 U.S. Surgeon General's report linking smoking to lung cancer, tobacco companies continued "to falsely deny and distort the serious health effects of smoking."

As late as last year, she wrote, the defendants still did "not admit the serious effects of smoking which they recognized internally decades ago."

Citing internal industry documents, Kessler said the industry knew that nicotine is addictive, but publicly denied it "and continue(s) to do so."

Addiction

In addition, she said, the defendants "concealed and suppressed research data and other evidence that nicotine is addictive."

She added that the companies "have falsely denied that they can and do control the level of nicotine delivered in order to create and sustain addiction" and worked on ensuing that "all cigarettes delivered doses of nicotine adequate to create and sustain addiction."

They do so, she wrote, by altering the chemical form of nicotine delivered in smoke and by changing cigarette filters' design and paper porosity and composition.

Kessler faulted the industry for marketing to youth, concluding that "independent studies have found that marketing is a substantial contributing factor to youth smoking initiation."

Though the industry has said that it does not want children to smoke, Kessler said the companies tracked youth behavior and preferences, thereby ensuring that "marketing and promotion reaches youth."

In addition, she said, the companies still use marketing themes intended to resonate among youths, advertise in youth-oriented publications and continue price promotions that lure young people to their products.

She described the companies' youth smoking prevention programs as "not designed to effectively prevent youth smoking."

Kessler also faulted the industry for denying publicly that second-hand smoke is dangerous when its own internal documents acknowledge that to be true.

Case began in 1999

The case dates back to 1999, when the Justice Department, under the Clinton administration, accused the tobacco industry of racketeering as part of a coordinated plan to deceive the public about the negative health effects of smoking.

The Bush administration continued to press the charges in the lawsuit, but rolled back the proposed remedies and punishment for the alleged activity.

The industry is on record as denying wrongdoing, and asserting their marketing has changed to preclude any chance of wrongdoing.

In the statement issued after the ruling, Altria Group's Ohlemeyer said as much: "The conclusion that PM USA and Altria are reasonably likely to engage in future wrongdoing is flawed in light of the profound and permanent changes in the way cigarettes are marketed today, including requirements imposed by agreements with the state attorneys general and other voluntary -- and irrevocable -- changes made by our companies."

But Kessler disagreed.

"In short, defendants 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," her ruling said.

Kessler reserved special criticism for lawyers, saying they "played an absolutely central role in the creation and perpetuation of the enterprise and the implementation of its fraudulent schemes."

The defendants were: 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, which no longer exists.

Liggett was excluded from Kessler's ruling.

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.