MONTANA LATEST TO SUE TOBACCO INDUSTRY [05/08]
JOSEPH P. MAZUREK
Attorney General
CHRIS TWEETEN
Chief Deputy Attorney General
State of Montana
215 North Sanders
P.O. Box 201401
Helena, MT 59620-1401
(406) 444-2026
COUNSEL FOR PLAINTIFFS
MONTANA FIRST JUDICIAL COURT, LEWIS AND CLARK
COUNTY
STATE OF MONTANA ex rel.
JOSEPH P. MAZUREK,
Plaintiff,
v.
PHILIP MORRIS, INCORPORATED; R.J. REYNOLDS, TOBACCO CO.;
AMERICAN TOBACCO CORP.; BROWN & WILLIAMSON TOBACCO CORP.;
LIGGETT &
MYERS, INC.; LORILLARD TOBACCO CO., INC.; UNITED STATES TOBACCO
COMPANY;
B.A.T. INDUSTRIES, P.L.C.; BRITISH AMERICAN TOBACCO COMPANY, LTD; RJR
NABISCO
HOLDINGS CORP.; RJR NABISCO, INC.; HILL & KNOWLTON, INC.; THE
COUNCIL
FOR TOBACCO RESEARCH - U.S.A., INC., and TOBACCO INSTITUTE, INC.,
Defendants.
NO.
Jury Demand
COMPLAINT FOR INJUNCTIVE RELIEF, DAMAGES,
RESTITUTION, PENALTIES AND OTHER RELIEF
I. INTRODUCTION
1. The State of Montana, through Attorney General Joseph
Mazurek, brings this action for monetary damages, civil penalties, declaratory
and injunctive relief, restitution, and disgorgement of profits.
2. This case challenges a massive unlawful course of conduct
and conspiracy perpetrated by the defendants. The defendants' unlawful
conduct includes a host of unfair, deceptive, anticompetitive and illegal
acts, including without limitation the following:
Publicly undertaking a supposedly "paramount"
special duty to research and disclose to public health authorities and
the public at large--including the State of Montana--the full extent of
the health risks of cigarette smoking; but then suppressing and distorting
the state of their knowledge of those health risks;
Creating and/or funding fraudulent "front"
organizations--such as the Tobacco Industry Research Committee (later the
Council for Tobacco Research)--which were held out to the public as independent
research organizations, but were in fact secretly controlled by the industry's
lawyers and public relations firms and were used by the defendants as industry
fronts to prevent the public from learning what defendants knew about the
health risks of smoking and to falsely create a controversy about the health
risks of smoking;
Secretly destroying, concealing, and shipping overseas
incriminating evidence of industry testing and research on the health risks
of cigarette smoking and the addictive nature of nicotine, shutting down
laboratories overnight and making personal threats against scientists who
tried to publish research revealing what the industry knew, and asserting
improper claims of attorney-client privilege and work product to suppress
the results of adverse scientific research;
Conspiring in violation of state antitrust law to eliminate
and restrain competition based on the health effects of smoking and by
agreeing not to market "safer" cigarettes;
Conspiring to and concealing the addictive nature of
tobacco products and the tobacco companies' deliberate manipulation of
the nicotine levels in tobacco products; and
Engaging in unfair and deceptive trade practices by
undertaking a course of conduct designed to promote illegal sales of cigarettes
to minors.
As a direct, foreseeable result of these and other actions,
the State of Montana has suffered substantial damages, and minors continue
to be lured into illegal use of tobacco products. The Attorney General
seeks to recover those damages and enjoin the continuing deceptive and
unlawful practices described below.
A. The Defendants' Unlawful Conduct. The Defendants'
Unlawful Conduct
3. The Tobacco Industry in the United States is a highly
profitable oligopoly dominated by Brooke Group, Ltd., Liggett Group, Inc.
(Liggett and Myers Tobacco Co.), Philip Morris Companies, Inc. (Philip
Morris, Inc.), American Brands, Inc. (the American Tobacco Co.), UST, Inc.
(United States Tobacco), RJR Nabisco Holdings Corp., RJR Nabisco, Inc.,
R.J. Reynolds Tobacco Co., Batus, Inc. (Brown & Williamson Tobacco
Company), British American Tobacco Company (BATCO), and Lowes Corporation
(Lorillard Tobacco Co.) (collectively referred to as the "Tobacco
Companies," "Tobacco Industry" or the "Tobacco
Cartel").
For decades, these Tobacco Companies have sold tobacco products at huge
profit margins to millions of consumers. The Tobacco Companies have built
and sustained the market for their products in large part by concealing
and/or misrepresenting the addictive nature of tobacco products, by creating
confusion concerning the damage to human health caused by tobacco products,
by manipulating the levels of nicotine in tobacco products in order to
maintain and boost addiction, by agreeing not to compete for sale of a
"safer cigarette" and other innovative products, and by focusing
the brunt of their sales efforts on minors.
4. The Tobacco Companies, as well as their public relations
agents, lawyers, and industry "fronts," have known for more than
40 years that their tobacco products contain large amounts of nicotine--a
highly addictive substance--as well as numerous carcinogens and other harmful
elements.
5. Notwithstanding this knowledge, the Tobacco Companies
have repeatedly told the public that nicotine, an element in all tobacco
products, is not addictive. As recently as April 14, 1994, the CEOs of
seven tobacco companies testified under oath that nicotine is "not
addictive." These statements are false.
6. Nicotine is addictive. The Tobacco Industry is aware
of the addictive nature of nicotine as evidenced by just one of the many
internal industry documents addressing this subject:
Moreover, nicotine is addictive. We are, then in the business
of selling nicotine, an addictive drug . . . .
7. Tobacco products are not only addictive, they are abnormally
dangerous and unfit for human use. Tobacco products kill, maim and injure
virtually all who use them. The Tobacco Companies know this, but continue
to deny the existence of adverse health effects in their public statements.
8. The Tobacco Industry's unlawful conduct does not stop
with misrepresentations concerning the addictive nature of nicotine and
the adverse health effects of tobacco use. The industry has secretly gone
a step further by manipulating the level of nicotine in tobacco products
in order to increase addiction and sell more product. For example, manufacturers
of smokeless tobacco seek to "graduate" new users from milder
products to those with more "kick" in order to addict users.
Their campaign to addict new users has achieved great success, particularly
with the young.
9. To continue in its hugely profitable business, in 1953
the Tobacco Industry entered into a multifaceted unlawful conspiracy which
continues to this day. One essential element of the conspiracy was an agreement
to suppress harmful information concerning tobacco products which was
accomplished
as follows. First, the tobacco conspirators agreed to falsely represent
that there is no proof that smoking or tobacco use is harmful. Second,
they agreed to falsely represent that nicotine and tobacco use is not addictive.
And finally, the tobacco conspirators represented to the public and governmental
regulators that they would undertake a "special duty" and
"responsibility"
to determine and report the scientific truth about the health effects of
tobacco, both by conducting internal research and by funding
"independent"
external research.
10. Those representations were and continue to be false.
Despite the Tobacco Companies denials, there is no question that the Tobacco
Industry knew its products were addictive and harmful. Further, the industry's
publicly proclaimed special undertaking to pursue and report the truth
about smoking was false. The industrys purported undertaking was part
of a conspiracy to refute, undermine and neutralize information coming
from the objective scientific and medical community and, at the same time,
to confuse and mislead the public in an effort to avoid state or federal
regulation, to encourage existing smokers to continue smoking and to induce
new persons to start smoking.
11. An additional important element of the conspiracy
was an agreement by the Tobacco Companies to restrain competition for sales
of an innovative "safer" cigarette. The purpose and effect of
this aspect of the conspiracy was to suppress and restrain competition
based on claims of health because such competition would have exposed the
ill effects and addictive nature of smoking, thereby substantially increasing
the defendants liability exposure for the inevitable harm caused by cigarettes
and tobacco products, and thereby threatening their shares of the tobacco
market.
12. The conspiracy described above originated in response
to medical and scientific studies publicizing the adverse health impact
of smoking in the early 1950s. In response to what the industry internally
called the "health scare," in late 1953 and early 1954, the Tobacco
Companies and their public relations agent, Hill & Knowlton, jointly
created a purportedly independent entity initially known as the Tobacco
Industry Research Committee (the "TIRC"). As part of their unlawful
conspiracy, the Tobacco Companies publicly represented that the TIRC would
undertake, on behalf of the public and those responsible for the public
health, including the State of Montana, to objectively research and gather
data concerning the relationship between cigarette smoking and health and
truthfully publicize the results of this "independent" research.
>From 1954 forward the industry has been using the TIRC and its successor,
the CTR, to publish false reports regarding the relationship between smoking
and health.
13. Indeed, the Tobacco Companies, their lawyers, and
Hill & Knowlton controlled the TIRC and manipulated its affairs so
as to "[s]uppress any data demonstrating the addictive nature of cigarette
smoking or that cigarette smoking caused human disease" and to publicize
information, regardless of its merit, tending to obscure any relationship
between cigarette smoking and disease. This course of conduct was designed
to create the notion that there was a legitimate and good faith medical/scientific
controversy over whether smoking or tobacco is harmful to human health
or that nicotine is addictive. The tobacco cartel accomplished this hoax,
in part, by assigning all information indicating that cigarette smoking
or tobacco use is harmful to human health or that nicotine is addictive
to a so-called "Special Projects" division of the TIRC, where
the information was secreted from the public and concealed from discovery
in litigation against the Tobacco Companies by the improper assertion of
the attorney-client privilege.
14. In the words of U.S. District Court Judge H. Lee Sarokin,
a "jury could reasonably conclude that the creation of . . . [the
TIRC] was nothing but a hoax created for public relations purposes with
no intention of seeking the truth or publishing it."
15. Also in the 1950s, the Tobacco Companies began, and
continued thereafter, to tailor their cigarette advertisements, promotional
activities, and public statements to conceal and/or misrepresent the addictive
nature and the adverse health impact of cigarette smoking and tobacco use,
while at the same time presenting cigarette smoking in a glamorous, youthful,
exciting, relaxing posture by associating it with professional and economic
success, intelligence, athletic ability, and sexual attraction. This course
of conduct accomplished the purpose of suppressing or misstating the addictive
nature and the adverse health impact of smoking, so that new smokers, mainly
young teenagers, could be "hooked" and existing smokers would
continue smoking.
B. The Damages Caused by Defendants Unlawful
Conduct. The Damages Caused by Defendants Unlawful Conduct
16. The intended and foreseeable effects of the conspiracy
are several and far-reaching, including but not limited to increased medical
costs to the State of Montana and its agencies, the use of tobacco products
by minors in violation of state law and the failure of the industry to
develop and market "safer" innovative products.
1. Health care costs1. Health care costs.
One of the foreseeable and intended consequences of defendants' conduct
has been to unjustly enrich the defendants at the expense of Montana's
health care system, and ultimately, all Montana residents and taxpayers.
(a) Approximately 50 million residents of the United States
smoke cigarettes, and another six million use smokeless tobacco products.
Nationwide, tobacco-related deaths are a national tragedy: More than 400,000
deaths per year in the United States are tobacco related.
(b) In Montana, thousands of adults are smokers. Thousands
of Montana adults use smokeless tobacco.
(c) Health care costs in the United States are hundreds
of billions of dollars each year. Tobacco-related health care costs are
estimated to be more than seven percent of total health care costs, and
for 1993, tobacco-related health care costs were $50 billion.
(d) The defendants conduct has wrongfully shifted these
increased costs to the State of Montana in the form of charges directly
attributable to tobacco usage and exposure that should have been borne
by the defendants, including but not limited to, increased Medicaid payments
and increased health care insurance for public employees.
(e) Montana's excess health-care costs alone caused by
defendants' conduct is in the tens of millions of dollars. The State would
have avoided these costs if defendants had not engaged in the course of
conduct described in this Complaint, and those costs are among those the
State seeks as damages in this case.
2. Targeting minors in violation of state law.
A further effect of defendants' course of unlawful conduct and conspiracy
is the targeting and eventual addiction of minors and young people. Recognizing
the pernicious addictive nature of their products, the Tobacco Industry
seeks new customers among the youth of the nation. Because of the deaths
of so many of the industry's adult customers, the defendants must constantly
add new customers in order to maintain their profits.
(a) According to a 1994 U.S. Surgeon General's Report,
every day another 3,000 children become regular smokers. Eighty-two percent
of adults who have ever smoked had their first cigarette before age 18
and more than half of them had already become regular smokers by that age.
Reports published by the U.S. Center for Disease Control and Prevention
indicate that anyone who does not begin smoking in childhood is unlikely
to begin. For those 3,000 children who do become regular users of tobacco
products every day, projections of current trends indicate that 1,000 will
die prematurely as a result of their tobacco use.
(b) It is against the law of Montana for minors to use
tobacco and efforts to encourage them to do so contravene public policy.
Nonetheless, to lure minors into smoking, the Tobacco Companies have unfairly
and deceptively designed special marketing campaigns particularly appealing
to minors and young people. This targeting of minors is accomplished by
promotional materials designed to create the impression that smoking is
glamorous, sexy, fun and the "in" thing to do. An integral part
of this campaign is the use of images particularly appealing to minors
and the placement of promotional materials in locations likely to be accessed
primarily by minors.
(c) Further, knowing that products, such as smokeless
tobacco, with too much nicotine can be harsh and thus deter new users from
becoming new addicts, the Tobacco Companies seek to graduate new users,
often minors, from "milder" products to those with more
"kick"
in order to attract and addict more customers.
(d) As a result of defendants' unlawful acts, each day
minors use tobacco products in violation of state law. The Attorney General
seeks to halt this practice.
C. The Objectives of This Action. The Objectives
of This Action
17. In this action, the Attorney General seeks (i) to
secure for the people of the State of Montana a fair and open market, free
from unfair or deceptive acts or practices and illegal restraints in trade;
(ii) to return to the State the increased costs of health care caused by
defendants' wrongful conduct; (iii) to require fair and full disclosure
by defendants of the nature and effects of their products; (iv) to unequivocally
halt the marketing of tobacco products to minors; and (v) to disgorge
defendants'
profits from their sales of tobacco products accomplished through violations
of state law.
II. JURISDICTION AND VENUEII. JURISDICTION AND VENUE
18. This Complaint is filed and these proceedings are
instituted under Mont. Code Ann. § 2-15-501(1) and (6) and the common
law of the State of Montana.
19. Authority for the Attorney General to commence this
action for injunctions, mandatory injunctions, damages, restitution,
disgorgement,
civil penalties, attorneys' fees and such other relief as the Court deems
proper, is conferred by, inter alia, Mont. Code Ann. §§
2-15-501 et seq., 30-14-121 and 30-14-122.
20. The violations alleged herein have been and are being
committed in whole or in part, and affect commerce in, and defendants do
business in, Lewis and Clark County and elsewhere throughout the State
of Montana. The basis for jurisdiction over defendants is further set forth
in this Complaint.
III. THE PARTIESIII. THE PARTIES
PLAINTIFF
21. This action is brought for and on behalf of the State
of Montana through Joseph P. Mazurek, Attorney General of Montana.
DEFENDANTS
22. Defendant American Tobacco Company, Inc. ("American
Tobacco") is a Delaware corporation whose principal place of business
is Six Stamford Forum, Stamford, Connecticut 06904. American Tobacco,
sometimes
hereinafter referred to as "ATC," manufactured, advertised and
sold Lucky Strike, Pall Mall, Tareyton, American, Malibu, Montclair, Newport,
Misty, Iceberg, Silk Cut, Silva Thins, Sobrania, Bull Durham, and Carlton
cigarettes and other tobacco products throughout the United States. In
1994, American Tobacco was sold to British-American Tobacco Co., parent
of defendant Brown & Williamson.
23. Defendant Brown & Williamson Tobacco Corporation
("Brown & Williamson") is a Delaware corporation whose
principal
place of business is 1500 Brown & Williamson Tower, Louisville, Kentucky
40202. Brown & Williamson manufactures, advertises and sells Kool,
Raleigh, Barclay, BelAir, Capri, Richland, Laredo, Eli Cutter and Viceroy
cigarettes and other tobacco products throughout the United States.
24. Defendant Liggett & Meyers, Inc. ("Liggett")
is a Delaware corporation whose principal place of business is Main and
uller, Durham, North Carolina. Liggett manufactures, advertises and sells
Chesterfield, Decade, L&M, Pyramid, Dorado, Eve, Stride, Generic and
Lark cigarettes and other tobacco products throughout the United States.
25. Defendant Lorillard Tobacco Company, Inc. ("Lorillard"),
is a Delaware corporation whose principal place of business is 1 Park Avenue,
New York, New York 10016. Lorillard manufactures, advertises and sells
Old Gold, Kent, Triumph, Satin, Max, Spring, Newport and True cigarettes
and other tobacco products throughout the United States.
26. Defendant Philip Morris Inc. ("Philip Morris"),
is a Virginia corporation whose principal place of business is 120 Park
Avenue, New York, New York 10017. Philip Morris manufactures, advertises
and sells Philip Morris, Merit, Cambridge, Marlboro, Benson & Hedges,
Virginia Slims, Alpine, Dunhill, English Ovals, Galaxy, Players, Saratoga
and Parliament cigarettes and other tobacco products throughout the United
States.
27. Defendant R.J. Reynolds Tobacco Company ("Reynolds")
is a New Jersey corporation whose principal place of business is Fourth
& Main Street, Winston-Salem, North Carolina 27102. Reynolds
manufactures,
advertises and sells Camel, Vantage, Now, Doral, Winston, Sterling, Magna,
More, Century, Bright Rite and Salem cigarettes and other tobacco products
throughout the United States.
28. Defendant United States Tobacco Company ("U.S.
Tobacco"), is a Delaware corporation whose principal place of business
is 100 West Putnam Avenue, Greenwich, Connecticut. U.S. Tobacco
manufactures,
advertises and sells Sano cigarettes. U.S. Tobacco also manufactures, advertises
and sells approximately 88 percent of the smokeless tobacco (snuff and
chewing tobacco) sold in the United States, under various brand names including
Happy Days, Skoll and Copenhagen.
29. Each of the cigarette and tobacco manufacturers advertised,
sold and promoted their tobacco products in the State of Montana.
30. B.A.T. Industries P.L.C. ("B.A.T. Industries"
or "BAT II") is a British corporation whose principal place of
business is Windsor House, 50 Victoria St., London. Through a succession
of intermediary corporations and holding companies, B.A.T. Industries is
the sole shareholder of Brown & Williamson. Through Brown &
Williamson,
B.A.T. Industries has placed cigarettes into the stream of commerce with
the expectation that substantial sales of cigarettes would be made in the
United States and in the State of Montana. B.A.T. Industries has also conducted,
or through its agents, subsidiaries, associated companies and/or
co-conspirators,
significant research for Brown & Williamson on the topics of smoking,
disease and addiction. On information and belief, Brown & Williamson
also sent to England, research conducted in the United States on the topics
of smoking, disease and addiction, in order to remove sensitive and inculpatory
documents from United States jurisdiction, and such documents were subject
to B.A.T. Industries' control. B.A.T. Industries is a participant in the
conspiracy described herein and has caused harm and affected commerce in
the State of Montana.
31. British American Tobacco Company, Ltd. ("BATCO")
is a British Corporation whose registered office is Millbank, Knowle Green,
Staines, Middlesex, England TW18 1DY. British American Tobacco Company,
Ltd., is or was a related corporation of defendant Brown & Williamson
Tobacco Corporation. Both are owned by BAT Industries, PLC. BATCO also
advertises, promotes and sells its own tobacco products such as "555
Express" cigarettes throughout the State of Montana. At times pertinent
to the Complaint, BATCO, individually or through its affiliate, alter ego,
subsidiary and/or division, defendant Brown & Williamson Tobacco
Corporation,
designed, tested, manufactured, marketed and sold cigarettes for use in
the State of Montana. BATCO has also conducted, or through its associated
companies, agents, or subsidiaries, significant research for Brown &
Williamson on the topics of smoking, disease, and addiction. On information
and belief, Brown & Williamson also sent to England research conducted
in the United States on the topics of smoking, disease, and addiction,
in order to remove sensitive and inculpatory documents from United States
jurisdiction. BATCO is a participant in the conspiracy described herein
and has caused harm and affected commerce in the State of Montana.
32. Defendant RJR Nabisco Holdings Corp. ("RJR Nabisco
Holdings") is a Delaware Corporation whose principal place of business
is 1301 Avenue of the Americas, New York, New York. RJR Nabisco Holdings
is the parent company of wholly-owned subsidiary RJR Nabisco, Inc., which
in turn is the parent company of R.J. Reynolds Tobacco Company. According
to RJR Nabisco Holdings, its "worldwide tobacco operations are managed
in the United States by R.J. Reynolds Tobacco Co." Through R.J. Reynolds
Tobacco Company, RJR Nabisco Holdings manufactures, advertises and sells
Camel, Vantage, Now, Doral, Winston, Sterling, Magna, More, Century, Bright
Rite and Salem cigarettes and other tobacco products throughout the United
States. Through R.J. Reynolds Tobacco Company, RJR Nabisco Holdings
advertises,
promotes and sells its tobacco products throughout the State of Montana.
33. Defendant RJR Nabisco, Inc. ("RJR Nabisco")
is a Delaware Corporation whose principal place of business is 1301 Avenue
of the Americas, New York, New York. RJR Nabisco is the parent company
of wholly-owned subsidiary R.J. Reynolds Tobacco Company. According to
RJR Nabisco Holdings, its "worldwide tobacco operations are managed
in the United States by R.J. Reynolds Tobacco Co." Through R.J. Reynolds
Tobacco Company, RJR Nabisco manufactures, advertises, and sells Camel,
Vantage, Now, Doral, Winston, Sterling, Magna, More, Century, Bright Rite
and Salem cigarettes and other tobacco products throughout the United States.
Through R.J. Reynolds Tobacco Company, RJR Nabisco advertises, promotes
and sells its tobacco products throughout the State of Montana.
34. Defendant Hill & Knowlton, Inc. is an international
public relations firm with offices located in major United States cities
and whose principal place of business is 420 Lexington Avenue, New York,
New York. Defendant Hill & Knowlton played an active and knowing role
in the conspiracy complained of, aiding the circulation and/or publication
of many of the false statements of the tobacco industry attributable to
the TIRC and the Council for Tobacco Research (the "CTR"). Hill
& Knowlton has been the primary advertising agency responsible for
dissemination of the false and misleading information in question, in its
capacity as the advertising and public relations agency for The Tobacco
Institute, the CTR and several members of the tobacco industry, including
Liggett Group, Inc., Philip Morris, U.S.A., R.J. Reynolds Tobacco Co.,
the American Tobacco Company and Lorillard Tobacco Co. In the course of
such representation Hill & Knowlton aided these defendants in creating
and issuing false information and covering up the truth concerning the
tobacco industry, the link between smoking and cancer or other health hazards,
the addictive nature of smoking and the true nature of the activities of
the TIRC/CTR and its relationship to the industry. Hill & Knowlton
has been involved in the wrongful conduct and conspiracy since its creation.
The TIRC was actually formed at the recommendation and with the substantial
assistance of Hill & Knowlton in 1954, 11 days after Hill & Knowlton,
in December 1953, sent members of the tobacco industry "preliminary
recommendations" for dealing with "a serious problem with public
relations," suggesting the tobacco industry form the Tobacco Industry
Research Committee. Moreover, Hill & Knowlton shared office space with
the TIRC and provided staffing for it. Hill & Knowlton also played
a major role in the creation, development and dissemination of "selection
criteria" for a publication entitled, "Tobacco & Health
Research,"
which was used as a vehicle for the dissemination of the false and misleading
information generated by the tobacco industry. Hill & Knowlton knew
that the CTR and the tobacco industry were engaged in the fraudulent conspiracy
complained of, but failed to disclose the truth because the tobacco industry
and its agents had promised Hill & Knowlton enormous fees to help
publicize
and circulate the false information necessary to conceal the truth and
to continue the tobacco industry's fraud of issuing misleading statements
regarding the health risks of tobacco products.
35. The Council for Tobacco Research--U.S.A., Inc. (the
"CTR"), successor in interest to the Tobacco Industry Research
Committee (the "TIRC"), is a New York nonprofit corporation with
its principal place of business at 900 3rd Avenue, New York, New York 10022.
At all relevant times, the CTR and the TIRC operated as public relations
and lobbying arms of the Tobacco Companies and as agents and employees
of the Tobacco Companies. They also acted as facilitating agencies in
furtherance
of defendants' combination and conspiracy as described in this Complaint.
In doing the things alleged, the CTR and the TIRC acted within the course
and scope of their agency and employment, and acted with the consent,
permission,
and authorization of each of the Tobacco Companies. All actions of the
CTR and the TIRC alleged were ratified and approved by the officers or
managing agents of the Tobacco Companies. The CTR and the TIRC have been
involved continuously in the conspiracy described and the actions of the
CTR and the TIRC have affected commerce and caused harm in Montana.
36. Defendant Tobacco Institute, Inc. ("Tobacco Institute")
is a New York nonprofit corporation with its principal place of business
at 1875 I Street Northwest, Suite 800, Washington, D.C. 20006. At all relevant
times, Tobacco Institute operated as a public relations and lobbying arm
of the Tobacco Companies and was an agent and employee of the Tobacco
Companies.
It also acted as a facilitating agency in furtherance of the combination
and conspiracy of the defendants described in this Complaint. In doing
the things alleged, Tobacco Institute acted within the course and scope
of its agency and employment, and acted with the consent, permission and
authorization of each of the Tobacco Companies. All actions of the Tobacco
Institute alleged were ratified and approved by the officers or managing
agents of the Tobacco Companies. Tobacco Institute has been involved in
the conspiracy described in this Complaint and the actions of Tobacco Institute
have affected commerce and caused harm in Montana.
37. The above named defendants are sometimes herein collectively
referred to as "Defendants," "Tobacco Industry,"
"Tobacco
Companies" or "Tobacco Cartel."
IV. CONSPIRACY ALLEGATIONSIV. CONSPIRACY ALLEGATIONS
38. In committing the wrongful acts alleged, all of the
defendants and the other entities and persons identified, with the assistance
and knowledge of their counsel, have pursued a common course of conduct,
acted in concert with, aided and abetted and conspired with one another
and other conspirators not yet named or known, in furtherance of their
common plan and scheme outlined herein.
V. ADDITIONAL JURISDICTIONAL ALLEGATIONS
REGARDING BAT INDUSTRIES, P.L.C.V. ADDITIONAL JURISDICTIONAL
ALLEGATIONS
REGARDING BAT INDUSTRIES, P.L.C.
39. B.A.T. Industries p.l.c., or "BAT-II," describes
itself as "one of the U.K.'s leading business enterprises with interests
principally in tobacco and financial services." "[B.A.T. Industries]
is the world's most international cigarette manufacturer," with an
unrivaled range of both international and domestic brands. In 1995, the
"B.A.T. Industries Group" [ The defendant, B.A.T. Industries
p.l.c. (or "BAT - II") repeatedly refers to itself and its subsidiaries
as the "B.A.T. Industries Group," or "the BAT Group,"
"the Group" or simply "BAT" in publicly required filings
and promotional material. BAT - II and subsidiary annual reports are replete
with references to BAT - II as being in the business of selling cigarettes.
Of course, this is a clear indication of the close cooperation of the affiliated
BAT - II companies worldwide. The term "BAT - II" as used herein,
refers to the corporate defendant, B.A.T. Industries p.l.c.; the term "BAT
- I" refers to British American Tobacco Corporation Limited, an English
corporation that, from 1902 until 1976, was the ultimate parent company
for the BAT commercial enterprise. After 1976, BAT - I has functioned largely
as only one of many of the BAT Group's tobacco operating companies, and
since 1976 the defendant has typically referred to BAT - I simply as
"BATCo,"
a usage which is similarly adopted for the post-1976 period. The terms
"BAT," the "BAT Group," and "BAT Industries
Group"
shall be used to refer to BAT - II and its subsidiaries, a usage adopted
by BAT - II in its own documentation.] sold "more than 670 billion
cigarettes . . . achieving a 12.4% share of the world market [and] B.A.T.
Industries has the leading cigarette brand in over 30 markets." In
1995, BAT-II's total revenue amounted to about $38.8 billion, and pre-tax
profit reached a record $4.6 billion. (Id.)
40. For the past 20 years, BAT-II has played a significant
role in the BAT Group process that leads to the sale of tens of millions
of packs of cigarettes in Montana annually. The BAT-II board and senior
officers established and enforced coordinated cigarette research, tobacco
growing and other development policies for the BAT Group. BAT-II also
established
and enforced policies and guidelines for the design and manufacture of
addictive cigarettes in the United States. BAT-II also established, and
enforced, coordinated marketing and public relations policies for the BAT
Group in the United States. In sum, BAT-II is the ultimate decision maker
on all significant issues-- whether it be research, tobacco agriculture,
design, manufacture, marketing or administration--that affect the BAT Group's
sale of cigarettes in Montana.
41. BAT-II acted in complicity not only with the corporate
members of the BAT Group itself, but with the American tobacco industry
as a whole, in connection with the wrongdoing alleged in this case. The
promulgation and enforcement of deceptive smoking and health policies,
or of the manipulative nicotine design of cigarettes to addict smokers,
did not remain within the walls of BAT-II's Windsor House headquarters
-- they spread throughout the BAT Group and into BAT-II's American tobacco
business. And, by combining with the wider tobacco industry in the United
States, these policies were implemented on an industry-wide basis.
42. BAT-II has purposely availed itself of the American
economy, including the Montana cigarette and financial markets. BAT Group
tobacco reaps substantial revenues in Montana--sales ultimately directed
and controlled by BAT-II. Over time, BAT-II has reaped millions of dollars
of profits from Montana consumers, upstreaming those profits to diversify
its global commercial enterprise and pay dividends. Furthermore, BAT-II
has succeeded in its aggressive United States corporate acquisition plan,
a plan that has had significant effects upon the Montana economy. For example,
in 1994 BAT-II purchased the American Tobacco Company, then the fifth-largest
tobacco operation in the country, for approximately $1 billion.
43. Furthermore, BAT-II has directly and substantially
engaged in key decision making for the research, development, design,
manufacture
and marketing of millions of dollars worth of cigarettes sold in Montana.
Through secret programs such as "Project GHOST" or "Project
BATTALION" and through formal "delegation" of authority,
BAT-II directly participated in fundamental, strategic and implementive
decisions leading to the sale of cigarettes in the United States by the
BAT Group, and more particularly, its wholly owned subsidiary, Brown &
Williamson. The participation was detailed, and covered many important
aspects of the research, development, manufacture, design and marketing
of cigarettes, along with the political relations to accompany the business
generally, and the administrative infrastructure to carry on that work.
BAT-II's actions were intentional, and they were directed at the sale of
cigarettes in Montana (as well as other states). BAT-II is the hub of the
BAT Group industrial enterprise, which sells millions of dollars worth
of cigarettes in Montana. In short, BAT-II regularly does or solicits business
in Montana.
44. BAT-II is also subject to personal jurisdiction for
causing tortious injury by an act or omission in Montana. BAT-II has participated
in a fraud against Montana and the public; has assured that substantial
scientific and other knowledge not be disclosed to Montana and its citizens;
has directed the research and design of cigarettes sent into Montana for
sale and consumption, and has assured the complicity of B&W and the
other BAT-II operating companies in the United States tobacco industry
conspiracy alleged in the Complaint. As a result, BAT-II has directly,
or by an agent, caused tortious injury by an act or omission in this State.
45. BAT-II also has minimum contacts with Montana under
a stream-of-commerce analysis. In this case, BAT-II has played the
most significant and important role in the research, development, design,
and marketing of cigarettes for the BAT Group, including B&W. BAT-II
established and enforced the coordinated research and development policies
of the BAT Group for 20 years. BAT-II established and enforced policies
and programs for the design and manufacture of addictive cigarettes in
the United States for many years, such as Project AIRBUS, Project GREENDOT,
Project WHEAT and "Y-1" tobacco. BAT-II established and enforced
coordinated marketing and public relations policies of the BAT Group in
the United States and elsewhere for over 20 years. BAT-II has, quite simply,
been the ultimate decision maker for the BAT Group on the issues which
go to the heart of this case, including decisions on the research, design,
manufacture, distribution, marketing and public relations of cigarettes
in the United States for 20 years. It is, therefore, subject to personal
jurisdiction in Montana.
46. When it suits BAT-II's own purposes, BAT-II does not
hesitate to subject itself to jurisdiction in the United States. For example,
when it sought to consummate its $5.2 billion purchase of the Farmer's
Group, BAT-II subjected itself to jurisdiction in various states in undertaking
the insurance approval process for that transaction; when it sought to
purchase American Tobacco Company for $1 billion, it submitted to the
jurisdiction
of the Federal Trade Commission, and judicially admitted that it was involved
in "commerce" between the various states; when it sought to raise
hundreds of millions of dollars on the American financial markets through
the sale of promissory notes through a BAT-II United States subsidiary,
BAT-II submitted to the jurisdiction of New York courts and unconditionally
guaranteed payment on the notes.
47. The United States, including Montana, has been central
to BAT-II's global tobacco and financial businesses. There is nothing unfair,
indeed it is only just, to require BAT-II to defend this action in Montana.
VI. FACTUAL ALLEGATIONSVI. FACTUAL ALLEGATIONS
A. Background.
48. Today, 50 million Americans smoke and, according to
current trends, 22 percent of adult Americans will still be smokers in
the year 2000. In the latter half of the 20th century, some 10 million
Americans have been killed by cigarette disease. This year (and every year
into the foreseeable future), nearly half a million Americans will die
prematurely due to disease caused by cigarette smoking. Based upon current
smoking trends, of the American children alive today, more than 5 million
will be killed by cigarette disease during the 21st century.
49. Cigarette and smokeless tobacco diseases share a common
root cause: a highly addictive product that has been fraudulently and falsely
promoted by the corporations comprising the Tobacco Cartel. Smoking causes
lung cancer. It is also virtually the only cause of throat cancer and emphysema.
Smoking-caused heart disease actually results in more deaths than lung
cancer. Smoking is responsible for approximately one-fourth of all cancer
deaths as well as one-third of all heart disease deaths.
50. Several factors account for the persistence of cigarette
smoking and other tobacco use. First, largely as a result of the Tobacco
Industry's false and fraudulent advertising, smoking and other tobacco
use became socially acceptable before it was proven to be a cause of lung
cancer and other diseases. Second, the long latency period between the
initiation of tobacco use and disease contraction masked the causal relationship
for decades. Third, cigarettes and other tobacco products contain large
amounts of nicotine, an extraordinarily addictive substance, which makes
it difficult for a person to stop smoking. Fourth, the Tobacco Industry
has conspired not to compete on the basis of relative health risk, to restrict
output in safer and alternate products, and to create confusion as to whether
smoking or other tobacco use is really harmful and to make it appear that
there is a legitimate good faith scientific dispute over the health impact
of smoking and other tobacco use, while presenting cigarette smoking in
an attractive, youthful and positive way -- concealing all the while that
tobacco products are, in fact, highly addictive and unquestionably dangerous.
51a Despite their knowledge that nicotine is extremely
addictive, the Tobacco Companies to this day, pursuant to their conspiracy,
deny that smoking is the cause of disease or that nicotine is addictive.
Recently, and in furtherance of the conspiracy, each of the CEOs of the
defendant Tobacco Companies testified under oath before Congress that
smoking
was not addictive.
B. The Cartel's Pre-Conspiracy Advertising
and Promotional Activities: False Claims of Health and Safety.
52a The promotional activities and conduct of the Tobacco
Industry, after the conspiracy was agreed to and implemented (which is
described below), can only be understood in the context of the fraudulent
and false claims that they had engaged in pre-conspiracy regarding cigarette
smoking and health. Until the mid-1950s, explicit or implied health claims
and/or medical endorsement for smoking were major advertising campaign
themes for many cigarette brands and in the public statements issued by
the Tobacco Industry.
53a Cigarette smoking increased dramatically in the first
half of the 20th century. With the increase of cigarette smoking
came an increase in lung cancer. Dr. Alton Ochsner, a New Orleans surgeon
and regional medical director of the American Cancer Society, told an audience
at Duke University on October 23, 1945, that "there is a distinct
parallelism between the incidence of cancer of the lung and the sale of
cigarettes . . . . [T]he increase is due to the increased incidence of
smoking and . . . smoking is a factor because of the chronic irritation
it produces."
54a In 1946, Tobacco Company chemists themselves reported
concern for the health of smokers. A 1946 letter from a Lorillard chemist
to its manufacturing committee states that "[c]ertain scientists and
medical authorities have claimed for many years that the use of tobacco
contributes to cancer development in susceptible people. Just enough evidence
has been presented to justify the possibility of such a presumption."
55a Despite evidence showing their cigarettes caused lung
disease and cancer, the Tobacco Companies chose sales over public health
and safety. Starting in the 1930s and continuing until the mid-1950s, the
Tobacco Companies made express claims and warranties as to the healthiness
of their products with reckless disregard to the falsity of their claims
and the consequential adverse impact on consumers. Examples of these health
warranties include the following: Old Gold--"Not a cough in a
Carload";
Camel-- "Not a single case of throat irritation due to smoking
Camels";
Philip Morris-- "The Throat-tested cigarette."
56a One of the key themes used to promote cigarette smoking
during this period was a promise that individual cigarette brands were
either "less irritating" or that "harmful irritants"
had been removed. At one point or another during this period every major
cigarette brand made a false claim regarding health and/or irritation.
These pre-1954 advertisements and representations demonstrate defendants
understanding that consumers wanted safer products, and as a result, the
Tobacco Companies engaged in vigorous competition on the basis of claims
of health and safety as detailed above and elsewhere in this Complaint.
C. The 1953 "Big Scare" and Beginning of
the Industry Conspiracy to Suppress the Truth and Curtail Competition.
57a The defendants and their co-conspirators knew that
published information about health risks would (1) increase consumer demand
for safer tobacco products; (2) induce some competitors to promote their
own brands or denigrate competing brands on the basis of relative health
risk; (3) materially reduce their profits and market shares; and (4) increase
the likelihood of government regulation and decrease the likelihood that
they could shift to the public and public agencies the health costs caused
by use of tobacco products. Armed with this knowledge, and as set forth
below, defendants ultimately agreed to not compete in the market based
on health claims or in the market for "safer" or alternative
products and agreed to suppress adverse information concerning health risks
and addiction.
58a In the early 1950s, scientists published two significant
scientific studies warning of the health hazards of cigarettes. The first
was published in 1952 by Dr. Richard Doll, a British researcher, who found
that lung cancer was more common among people who smoked and that the risk
of lung cancer was directly proportional to the number of cigarettes smoked.
A second study was published in December 1953 by Dr. Ernest Wynder and
others of the Sloan-Kettering Institute, whose experiments with mice confirmed
the cancer-causing properties of cigarettes. The widespread reporting of
these studies caused what cigarette company officials called the "Big
Scare."
59a The cigarette industry responded quickly to the Big
Scare, that by late 1953 had caused a decrease in consumption of tobacco
products and in the stock prices of many tobacco companies. Thus, on
December
14, 1953, in the direct aftermath of the Wynder study and the public concern
over it, B&W President, Timothy V. Hartnett, circulated a memorandum
to his counterparts at other tobacco companies and set out his proposals
on how the industry should collectively deal with the "health
issue."
60a Hartnett proposed a two-prong collective response
to his competitors "to get the industry out of this hole": (a)
"unstinted assistance to scientific research," with the most
difficult part of this effort being the group deciding "how to handle
significantly negative research results if, as, and when they develop";
and (b) "the best obtainable" public relations counsel since
none "has ever been handed so real and yet so delicate a multimillion
dollar problem."
61a Hartnett's proposal was an invitation to his competitors
to agree to restrain independent economic best interest in favor of collusion.
62a The next day, December 15, 1953, accepting Hartnett's
offer to conspire, the presidents of the leading tobacco companies met
at an extraordinary gathering in the Plaza Hotel in New York City. Present
were the presidents of American Tobacco, Benson & Hedges, B&W,
Lorillard, Philip Morris, R.J. Reynolds and U.S. Tobacco. This gathering
was unprecedented: It was the first time the Tobacco Companies had met
together outside occasional dinners. Also in attendance was Hill &
Knowlton, who coordinated the meeting and was to play a major role in
formulating
and executing the industry's response.
63a According to a Hill & Knowlton memorandum summarizing
the meeting, the companies exchanged proprietary information and
"voluntarily
admitted" that "their own advertising and [past] competitive
practices have been a principal factor in creating a health problem,"
and acknowledged that they had "informally talked over the problem
and will try and do something about it." Emphasis added. The defendants
realized that the subject of doing something collectively about competitive
advertising practices "is one of the important public relations activities
that might very clearly fall within the purview of the antitrust act."
In order to conceal their intentions to collectively restrain competition,
they concluded, "it is doubtful that we will be able to make any
formal recommendation with regard to the advertising or selling practices
and claims." Emphasis added.
64a At the Plaza Hotel meeting, the defendants entered
into a contract, combination and conspiracy to cease to compete on the
basis of relative health risks, an agreement that violates Montana's prohibition
on unreasonable restraints of trade.
65a At the time of the December 15, 1953 meeting, the
cigarette industry did not have a trade association, and cigarette manufacturers
had never before met in a formal business meeting or discussed business,
because, according to the Hill & Knowlton memo, the Tobacco Companies
were prevented by a 1911 dissolution decree and criminal convictions for
price fixing in 1939 from carrying on many group activities.
66a Despite the dangers, the competitors met because they
viewed the current problem "as being extremely serious and worthy
of drastic action." An indication of the seriousness of the problem
was "that salesmen in the industry are frantically alarmed and that
the decline in tobacco stocks on the stock exchange market has caused grave
concern."
67a The agreement reached at the Plaza Hotel to conceal
adverse information and not compete on the basis of health, was to be a
permanent fixture of defendants' future relationship. According to the
Hill & Knowlton memorandum, "[e]ach of the company presidents
attending emphasized the fact that they consider the program to be a long-term
one," and the meeting participants were "emphatic in saying
that the entire activity is a long-term, continuing program,
since they feel the problem is one of promoting cigarettes and protecting
them from these and other attacks that may be expected in the future."
Emphasis added.
68a Thus, at the December 15, 1953 meeting the course
of conduct agreed to include, but was not limited to:
a. "The chief executive officers of all the leading
companies -- R.J. Reynolds, Philip Morris, Benson & Hedges, U.S. Tobacco
Company, Brown & Williamson--have agreed to go along with a public
relations program on the health issue."
b. "Because of the antitrust background, the companies
do not favor the incorporation of a formal association. Instead, they prefer
strongly the organization of an informal committee which will be specifically
charged with the public relations function and readily identified as such."
c. Hill & Knowlton, a public relations firm, was to
play a central role in the industry association. "The current plans
are for Hill & Knowlton to serve as the operating agency of the companies,
hiring all the staff and disbursing all funds."
d. All of the leading manufacturers, except Liggett, agreed
to join in the public relations strategy. Liggett decided not to participate
at that time "because that company feels that the proper procedure
is to ignore the whole controversy."
69a In furtherance of the conspiracy, nine days later,
Hill & Knowlton presented a detailed recommendation to the tobacco
companies and their co-conspirators. The recommendation recognized the
importance of gaining public trust, and avoiding the appearance of bias,
if the industry's "pro-cigarette" public relations strategy was
to succeed. According to the memorandum:
a. "[T]he grave nature of a number of recently highly
publicized research reports on the effects of cigarette smoking . . . have
confronted the industry with a serious problem of public relations."
b. "It is important that the industry do nothing
to appear in the light of being callous to considerations of health or
of belittling medical research which goes against cigarettes."
c. "The situation is one of extreme delicacy. There
is much at stake and the industry group, in moving into the field of public
relations, needs to exercise great care not to add fuel to the flames."
70a John Hill suggested that the word "research"
be included in the name of the Committee. The suggestion was apparently
taken, and thus, an organization designed to pursue a very delicate "public
relations function" was given the intentionally misleading name of
the "Tobacco Industry Research Committee" (the "TIRC").
71a Five of the Big Six cigarette manufacturers were original
members of the TIRC. Liggett did not join until 1964. In 1964, the TIRC
changed its name to the Council for Tobacco Research (the "CTR").
The industry formed equivalent organizations in other countries, as well,
including the Tobacco Advisory Committee, formerly Tobacco Research Council
in the United Kingdom, and Verbrand der Cigarettenindustrie in Germany.
The U.S. companies, either directly or through affiliates, are members
of the other organizations.
72a The agreement that the industry would not compete
based on claims of health was documented and communicated in a number of
ways. One example is a June 21, 1954 Hill & Knowlton memorandum:
Early in the life of the Tobacco Industry Research Committee,
it was accepted as a basic principle that every effort should be made
to avoid stimulating more adverse publicity and controversy on the subject
of tobacco and health.
The principle has been and will continue to be carefully
adhered to in the work carried on for the committee.
Emphasis added.
73a The "every effort" referred to the agreement
not to compete on the basis of health claims for fear of stirring up any
controversy regarding health and safety.
74a A July 31, 1954 Hill & Knowlton "Confidential
Memorandum" acknowledges that the formation of the TIRC was the result
of a decision that "joint action" was imperative.
75a The defendants were keenly aware that the agreement
creating the TIRC was a restraint on competition: "On the Continent
individual companies and monopolies have agreed to pool research on the
health question, thereby reducing it as a basis for competition."
Emphasis added.
76a British research conducted by the Tobacco Manufacturers'
Standing Committee [TMSC], an equivalent organization to the TIRC (and
including companies, such as British American Tobacco [BAT] who were
affiliated
with U.S. companies) had known competitive impacts. BAT's Chairman, Sir
Charles Ellis said, "The Board has decided that if this Company [BAT]
makes any significant scientific discovery clearly relevant to health it
will share its knowledge with its co-members of TMSC and not seek to
obtain competitive commercial advantage." Emphasis added.
77a In compliance with the conspiracy not to compete,
at least one of the companies, American Tobacco, did nothing on its own
to evaluate the risks of use of its products: "The Council for Tobacco
Research was the source of expertise on that."
78a To further the existing conspiracy, a second trade
group, the Tobacco Institute, was formed by cigarette manufacturers in
1958. It performs a variety of functions and provided opportunities for
the conspirators to exchange information, to police the agreement, and
otherwise to coordinate activities.
D. Representations and Special Undertakings
by the Industry.
79a The cigarette industry announced the formation of
the TIRC on January 4, 1954, with newspaper advertisements placed in virtually
every city with a population of 50,000 or more, reaching a circulation
of more than 43 million Americans. The advertisement was captioned "A
Frank Statement to Cigarette Smokers" and was run under the auspices
of the TIRC with, inter alia, five of the Big Six manufacturers
listed by name. The advertisement stated as follows:
"A Frank Statement to Cigarette Smokers"
RECENT REPORTS on experiments with mice have given wide
publicity to a theory that cigarette smoking is in some way linked with
lung cancer in human beings.
Although conducted by doctors of professional standing,
these experiments are not regarded as conclusive in the field of cancer
research. However, we do not believe that any serious medical research,
even though its results are inconclusive should be disregarded or lightly
dismissed.
At the same time, we feel it is in the public interest
to call attention to the fact that eminent doctors and research scientists
have publicly questioned the claimed significance of these experiments.
Distinguished authorities point out:
1. That medical research of recent years indicates many
possible causes of lung cancer.
2. That there is no agreement among the authorities regarding
what the cause is.
3. That there is no proof that cigarette smoking is one
of the causes.
4. That statistics purporting to link cigarette smoking
with the disease could apply with equal force to any one of many other
aspects of modern life. Indeed the validity of the statistics themselves
is questioned by numerous scientists.
We accept an interest in people's health as a basic
responsibility, paramount to every other consideration in our business.
We believe the products we make are not injurious to health.
We always have and always will cooperate closely
with those whose task it is to safeguard the public health.
For more than 300 years tobacco has given solace, relaxation
and enjoyment to mankind. At one time or another during these years critics
have held it responsible for practically every disease of the human body.
One by one of these charges have been abandoned for lack of evidence.
Regardless of the record of the past, the fact that cigarette
smoking today should even be suspected as a cause of a serious disease
is a matter of deep concern to us.
Many people have asked us what we are doing to meet the
public's concern aroused by the recent reports. Here is the answer:
1. We are pledging aid and assistance to the research
effort into all phases of tobacco use and health. This joint financial
aid will of course be in addition to what is already being contributed
by individual companies.
2. For this purpose we are establishing a joint industry
group consisting initially of the undersigned. This group will be known
as TOBACCO INDUSTRY RESEARCH COMMITTEE.
3. In charge of the research activities of the Committee
will be a scientist of unimpeachable integrity and national repute. In
addition there will be an Advisory Board of scientists disinterested
in the cigarette industry. A group of distinguished men from medicine,
science, and education will be invited to serve on this Board. These scientists
will advise the Committee on its research activities.
This statement is being issued because we believe the
people are entitled to know where we stand on this matter and what we intend
to do about it.
Emphasis added.
Listed as sponsors of this announcement were, inter
alia, the American Tobacco Company, Brown & Williamson Tobacco
Corporation, P. Lorillard Company, Philip Morris Co. Ltd., Inc., R.J. Reynolds
Tobacco Company, United States Tobacco Company.
80a By issuing this publication and others that followed,
the industry undertook a special and continuing duty to protect the public
health by representing that it would conduct and disclose unbiased and
authenticated research on the health risks of cigarette smoking. When they
made this representation, defendants intended that the public and government
regulators believe and rely upon it, and knew or should have known that
consumers would consider the representation material to their decisions
to purchase and smoke cigarettes and that government regulators would
consider
the representation material to their decisions to regulate cigarettes.
At that time, and continuing to the present, defendants intended and/or
knew or should have known that their failure to fulfill the duty they undertook
would directly increase the health care costs to the State of Montana.
The issuance of this statement and others that have followed was also intended
by defendants to assure public health officials that the industry would
respond to health issues in an honest manner so that no government regulation
was necessary. The issuance of this publication was an integral step in
the conspiracy to suppress and conceal information that might reduce the
cartel's sale of tobacco products.
E. Repeated False Promises to the Public
81a Despite increasing internal knowledge of the dangers
of cigarette smoking which they did not disclose, the defendants continued,
renewed and repeated the representations and undertakings of the 1954
"Frank
Statement to Cigarette Smokers." The cigarette industry continued
to pursue its two-prong strategy of falsely representing the objectivity
of industry research to the public in order to gain credence, and then
misrepresenting, distorting, and suppressing information in order to support
its pro-cigarette position.
82a Other public statements issued by the tobacco industry
through the TIRC/CTR or the TI, repeated several themes: (1) that the industry
was working to report the full and complete truth concerning tobacco and
health; (2) that these working on reporting the truth were
"independent"
scientists; and (3) that the results of this independent research cast
grave doubt on any study linking tobacco use with health problems. These
statements include, but are not limited to the following:
a On June 4, 1955, the TIRC issued a release entitled
"Anti-smoking Theories Not Based on Scientific Knowledge." The
release represented that according to the TIRC's associate scientific director,
"little is established scientifically about tobacco effects on the
heart"; tobacco has "even been reported as killing various harmful
bacteria." The release represented that the TIRC "is supporting
scientific investigation into many phases of tobacco use and human health
in order to get the facts." Emphasis added.
b On December 16, 1957, the TIRC issued a release representing
that "extensive scientific research now underway into tobacco use
does not substantiate generalized charges against smoking as a cause of
cancer." Reporting on the findings of Dr. Clarence Cook Little,
"Scientific
Director" of the TIRC, the release represented that "no substance
has been found in tobacco smoke known to cause cancer." According
to Dr. Little, the research program was designed "solely to obtain
new information and to advance human knowledge in every possible phase
of the tobacco and health relationship." Emphasis added.
c On or about December 27, 1958, the TIRC issued a release
representing that "during the past year many scientists of high professional
standing have produced additional evidence and opinions that challenge
the validity of broad charges made against tobacco use." According
to the TIRC, its research had developed several "essential facts,"
including the fact that "the cause or causes of lung cancer remain
undetermined" and that "compelling doubts have been raised about
statistics and their interpretations involving smoking and health."
The release concluded with the following promise:
At its formation in January 1954, the Tobacco Industry
Research Committee stated its fundamental position: 'We believe the products
we make are not injurious to health. We are providing aid and assistance
to research efforts into all phases of tobacco use and health.'
That statement and pledge are reaffirmed today by members
of the Tobacco Industry Research Committee.
d On March 28, 1960, the TIRC issued a release challenging
any link between smoking and lung cancer. In the release the TIRC repeated
that "we have frankly accepted a responsibility for financing independent
research into health problems, including lung cancer, in an effort to get
needed facts and evidence." Emphasis added.
e George Allen, President of the Tobacco Institute, issued
a report pledging that the TI, for the benefit of the "public interest"
would "encourage the kind of research that will provide the necessary
facts." Further, Allen promised that this type of research "is
what the industry has tried to do in the past" and "is what we
shall do in the future, until enough facts are known to provide solutions
to the health questions involved." Emphasis added.
f In 1962, the TIRC issued a release announcing it was
in its ninth year of supporting research by independent scientists relevant
to questions about tobacco and health. The release represented that "the
tobacco industry continues its support of the search for truth and
knowledge."
Emphasis added.
g On May 28, 1962, the TIRC, in a release, confirmed that
its purpose was to "make the facts known to the public."
h In 1964, the TIRC issued a "year end statement"
representing that its research "will intensify," that $7.25 million
had been apportioned to date involving 125 grants and that the TIRC "is
dedicated to support its program of research by independent scientists
until all the answers are known."
i In 1979, the TI issued a document entitled "Tobacco
Industry Research on Smoking and Health." In it, the TI represented
that "[t]here are still eminent scientists who question whether a
causal relationship has been proven between cigarette smoking and human
disease." The report went on to claim the industry had a great desire
to "learn the truth":
[A] major portion of this scientific inquiry has been
financed by the people who knew the most about cigarettes and have a great
desire to learn the truth--the tobacco industry.
The industry has committed itself to this task in the
most objective and scientific way possible.
The report describes how the industry spent $82 million
in research "into all phases of tobacco use and health." Further
the report proclaimed that "the findings are not secret" and
reaffirmed the commitment to the tobacco industry:
>From the beginning the tobacco industry has believed the
American people deserve objective, scientific answers.
With this credo in mind, the tobacco industry stands ready
today to make new commitments for additional valid scientific research
that may shed light on the question of smoking and health.
83a Additional representations were made by the tobacco
companies themselves repeating the promise that they would investigate
and report all facts relating to smoking and health. For example:
a On February 28, 1956, the President of American Tobacco
Company ("ATC") issued a release indicating that "many highly
respected medical scientists challenge the anti-tobacco claims."
b On November 14, 1957, ATC issued a release representing
that its own research produced "evidence directly contradicting the
theory that smoking causes lung cancer or heart disease."
c On April 9, 1962, ATC issued a release indicating that
research contradicting any statistical association between cigarettes and
higher death rates was "very difficult to refute."
d On June 4, 1963, ATC issued a release, quoting Dr. Robert
Heiman, Assistant to the President and prime author of studies refuting
any link between smoking and health. In the release, Heiman claimed that
workers for the company smoked twice as much as the average while having
a mortality rate of 29 percent below average.
e On October 3, 1963, ATC again issued a release, this
time citing Heiman for proof that the statistical association between smoking
and lung cancer is "fallacious" and leads to " absurd
consequences."
f In 1967, ATC issued a release describing a 46-page booklet
prepared by the tobacco industry which "refutes anticigarette
charges."
ATC called the evidence on smoking and health "an open one,"
refuted the studies linking smoking with cancer in mice, and claimed that
"no one does more" about smoking and health than "The
Tobacco
People":
No one does more. The tobacco industry supports more scientific
research into the problems than any other source.
The release went on to claim that: "The tobacco industry
continues to endure unfair and unjustified harassment from government and
private sources." ATC also claimed that "the cold hard fact remains
that no clinical or biological evidence has been produced which demonstrates
how cigarettes relate to cancer or any other disease in human beings."
84a Additional representations were made in 1970 when
the cigarette industry, through its lobbying group, the Tobacco Institute,
placed a number of announcements similar to the 1954 "Frank
Statement."
These announcements stated in part:
a "After millions of dollars and over 20 years of
research: The question about smoking and health is still a question."
b "[N]o particular ingredient, as it occurs in cigarette
smoke, has been demonstrated as the cause of any particular disease."
c "[A] major portion of this scientific inquiry has
been financed by the people who know the most about cigarettes and have
a great desire to learn the truth . . . the tobacco industry. And the industry
has committed itself to this task in the most objective and scientific
way possible."
d " A $35,000,000 program."
e "In the interest of absolute objectivity, the tobacco
industry has supported totally independent research efforts with completely
non-restrictive funding."
f "In 1954, the Industry established what is now
known as CTR, the Council for Tobacco Research--U.S.A., to provide financial
support for research by independent scientists into all phases of tobacco
use and health. Completely autonomous, CTR's research activity is directed
by a board of ten scientists and physicians who retain their affiliations
with their respective universities and institutions. This board has full
authority and responsibility for policy, development and direction of the
research effort."
g "The findings are not secret."
h "From the beginning, the tobacco industry has believed
that the American people deserve objective, scientific answers."
i "The tobacco industry stands ready today to make
new commitments for additional valid scientific research that offers to
shed light on new facets of smoking and health."
85a On March 24, 1965, the TI issued a release in which
it represented that regulations on advertising should not be implemented,
in part because the "industry is profoundly conscious of the questions
concerning smoking and health" and the industry is conducting scientific
research through the CTR. In the release, Bowman Gray of RJ, represented
that "it has not been established that smoking causes lung cancer
or any other disease."
86a Another industry publication in 1970 stated that the
industry believed the American public is "entitled to complete,
authenticated
information about cigarette smoking and health. The tobacco industry recognizes
and accepts a responsibility to promote the progress of independent scientific
research in the field of tobacco and health."
87a Yet another announcement co-sponsored by the TIRC
and the Tobacco Industry, called "A Statement about Tobacco and
Health,"
stated:
We recognize that we have a special responsibility
to the public, to help scientists determine the
facts about tobacco and health, and about certain diseases that have been
associated with tobacco use.
We accepted this responsibility in 1954 by establishing
the Tobacco Industry Research Committee, which
provides research grants to independent scientists. We pledge continued
support of this program of research until the facts are known.
. . . .
Scientific advisors inform us that until much more is
known about such diseases as lung cancer, medical science probably will
not be able to determine whether tobacco or any other single factor plays
a causative role, or whether such a role might be direct or indirect, incidental
or important.
We shall continue all possible efforts to bring the facts
to light. In that spirit we are cooperating with the Public Health Service
in its plan to have a special study group review all presently available
research. (Emphasis added.)
88a In 1972, Tobacco Institute President Horace Kornegay
testified before Congress:
Let me state at the outset that the cigarette industry
is as vitally concerned or more so than any other group in determining
whether cigarette smoking causes human disease, whether there is some
ingredient
as found in cigarette smoke that is shown to be responsible and if so what
it is.
That is why the entire tobacco industry . . . since 1954
has committed a total of $40 million for smoking and health research through
grants to independent scientists and institutions.
89a The industry repeated these statements to members
of the public, including citizens of the State of Montana.
90a RJR chairman Bowman Gray told Congress in 1964: "If
it is proven that cigarettes are harmful, we want to do something about
it regardless of what somebody else tells us to do. And we would do our
level best. It's only human."
91a In 1984, RJR placed an editorial style announcement
in the New York Times stating:
Studies which conclude that smoking causes disease have
regularly ignored significant evidence to the contrary. These scientific
findings come from research completely independent of the tobacco industry.
92a Each of the representations to the public that defendant
tobacco companies were sponsoring independent objective research, that
they were endeavoring to bring the truth to light, and that the public
could therefore rely upon the statements made, were false and deceptive.
These misrepresentations were designed to gain the trust of the public
and public health authorities in order to better distort and suppress substantive
information about smoking and health.
F. The True Nature of the TIRC: A Front for
the Tobacco Cartel.
93a The TIRC was an agent of the conspirators and operated,
among other things, to facilitate their implementation of the Plaza Hotel
agreement/conspiracy to suppress and/or misrepresent information and to
not compete in the development of a "safer" cigarette. Its acts
were the acts of defendants in furtherance of their covenant not to compete.
94a The TIRC was physically established in the Empire
State Building, one floor below the Hill & Knowlton offices. Internal
documents confirm that Hill & Knowlton, and not independent scientists
as represented, actually ran the TIRC.
95a In 1954, the TIRC's first year of operation, 35 staff
members of Hill & Knowlton worked full- or part-time for the TIRC.
In that year, the TIRC spent $477,955 on payments to Hill & Knowlton,
over 50 percent of the TIRC's entire budget.
96a The sham nature of the TIRC is revealed by a series
of Hill & Knowlton reports to the TIRC. Those reports reveal that the
true nature of the TIRC was to influence media and scientific reports so
as to cloud the issue of smoking and health and to suppress all harmful
information. These reports all reveal that Hill & Knowlton--not the
independent scientists--actually ran the Tobacco Industry Research Committee,
and "provided assistance in selecting" the Scientific Advisory
Board, "proposed" Dr. Little for the Scientific Director, and
"handled liaison, agendas, organizational plans, business affairs,
reports, and materials for meetings of the TIRC [and] the Scientific Advisory
Board, . . . in addition to developing operating procedures for the research
program." (Emphasis added.)
97a By the Spring of 1955, the unlawful strategy recommended
by Hill & Knowlton and implemented by the industry through the
"Frank
Statement" was largely successful. Hill & Knowlton reported to
the TIRC:
a. [P]rogress has been made . . . . The first _big scare_
continues on the wane.
b. The research program of the TIRC has won wide acceptance
in the scientific world as a sincere, valuable and scientific effort.
c. Positive stories are on the ascendancy.
98a In 1970, H. Wakeham, a Vice President of Philip Morris,
observed that the stated objective of the CTR was "to make available
to the public" information on tobacco use and health. He noted this
"broad statement" had been interpreted more narrowly by the CTR.
Wakeham also noted that the public statement of the purpose of CTR is "to
find out about smoking and health." In this regard, rather than be
independent as publicly represented, Wakeham wrote "we are interested
in evidence which we believe denies the allegation that cigaret [sic] smoking
causes disease." Wakeham then posited alternatives for the future
of the CTR, one of which was to use the CTR as a means for expert witnesses
in "legislative halls" and "in litigation." This option
was the true function of the CTR.
99a In 1977, Addison Yeaman, chairman and president of
CTR, stated during a published speech that "[CTR] has no propaganda
function of any kind or any degree." Internal documents demonstrate,
however, that the tobacco companies' joint efforts undertaken through TIRC,
and later, through CTR, were not disinterested or objective. Rather, they
were designed and used to promote favorable research, to suppress negative
research when possible, and to attack negative research where it could
not be suppressed, all in order to convince the public that the "case
against smoking is [not] closed."
100a A 1972 internal document from a Tobacco Institute
official to the group's president, described the importance of using joint
industry research to maintain public doubt about the link between smoking
and disease:
For nearly twenty years, this industry has employed a
single strategy to defend itself on three major fronts--litigation, politics,
and public opinion. While the strategy was brilliantly conceived and executed
over the years helping us win important battles, it is only fair to say
that it is not--nor was it ever intended to be--a vehicle for victory.
On the contrary, it has always been a holding strategy, consisting of
* creating doubt about the health charge without actually
denying it
* advocating the public's right to smoke, without actually
urging them to take up the practice
* encouraging objective scientific research as the only
way to resolve the question of the health hazard.
As an industry, therefore, we are committed to an ill-defined
middle ground which is articulated by variations on the theme that, 'the
case is not proved.'
In the cigarette controversy, the public--especially those
who are present and potential supporters (e.g. tobacco state congressmen
and heavy smoker)--must perceive, understand, and believe in evidence to
sustain their opinions that smoking may not be the causal factor. As things
stand, we supply them with too little in the way of ready-made credible
alternatives.
101a A 1974 report to the CEO of Lorillard from a research
executive described CTR's scientific projects as hav[ing] not been selected
against specific scientific goals, but rather for various purposes such
as public relations, political relations, position for litigation, etc.
Thus, it seems obvious that reviews of such programs for scientific relevance
and merit in the smoking and health field are not likely to produce high
ratings.
102a A 1978 memo addressed to the CTR file from a Philip
Morris official characterized CTR as "an industry 'shield.'"
The memorandum goes on to state: "the 'public relations' value of
CTR must be considered and continued . . . . It is extremely important
that the industry continue to spend their dollars on research to show that
we don't agree that the case against smoking is closed for 'PR' purposes
. . . ."
103a In 1993, a former 24-year employee of CTR confirmed
publicly that the joint industry research efforts were not objective: "When
CTR researchers found out that cigarettes were bad and it was better not
to smoke, we didn't publicize that. The CTR is just a lobbying thing. We
were lobbying for cigarettes."
104a This and other evidence demonstrates that the role
and purpose of TIRC and CTR in the tobacco companies' strategy was to seek
to use the public's trust to propagate "pro-tobacco" propaganda.
An industry official wrote in his personal notes describing a meeting that
included high level officials from various tobacco companies that: "CTR
is the best & cheapest insurance the tobacco industry can buy and without
it the Industry would have to invent CTR or would be dead."
105a Nonetheless, in its annual reports published between
1985 and 1992, CTR stated that its Scientific Advisory Board funded
peer-reviewed
research projects "judging them solely on the basis of scientific
merit and relevance." In 1994, Dr. James F. Glenn, CEO of CTR, submitted
testimony to the Waxman Subcommittee that:
a. The Council . . . sponsors research into questions
of tobacco use and health and makes the results available to the public.
b. [G]rantees are assured complete scientific freedom
in conducting these studies . . . [P]ublication [of research results] is
encouraged in every instance.
106a In fact, CTR-sponsored research projects were directed
away from research that might add to the evidence against the use of tobacco
products. When CTR-sponsored research did produce unfavorable results the
information was distorted or simply suppressed. For example, Dr. Freddy
Homburger, a researcher in Cambridge, Massachusetts, undertook a study
of smoke exposure on hamsters. According to Dr. Homburger, he received
a grant from CTR that was changed half-way through the study to a contract
"so they could control publication--they were quite open about that."
Dr. Homburger has testified that when the study was completed in 1974,
the scientific director of CTR and a CTR lawyer "didn't want us to
call anything cancer" and that they threatened Dr. Homburger with
"never get[ting] a penny more" if his paper was published without
deleting the word cancer.
107a An internal CTR document describes how Dr. Homburger
attempted to call a press conference about the incident and how CTR stopped
it:
He . . . was to tell the press that the tobacco industry
was attempting to suppress important scientific information about the harmful
effects of smoking. He was going to point specifically at CTR . . . . I
arranged later that evening for it to be canceled. Homburger was given
a cordial welcome and nicely hastened out the door. P.S. I doubt if you
or Tom will want to retain this note.
G. Role of the CTR as a "Front" for
Disseminating False Information.
108a In 1964, the year of the first Surgeon General's
report on smoking, the CTR formed a "Special Projects" division
to assist the industry in concealing unfavorable information. A series
of research grants designated as CTR "Special Projects" were
developed by defendants in a manner so as to appear to receive the protection
of the attorney-client or attorney work product privilege. The "Special
Projects" division was under the auspices of the CTR.
109a The true purpose of the "Special Projects"
division was to conduct research regarding the links between smoking and
disease in order to develop a number of expert witnesses for defense purposes
in tort suits against the tobacco industry. Consistent with this purpose,
the tobacco industrys counsel were substantially involved in strategic
and specific decision making within the "Special Projects" division,
to secrete dangerous evidence from the public. For example, the notes of
one CTR meeting, written in 1981, state, "When we started the CTR
Special Projects, the idea was that the scientific director of CTR would
review a project. If he liked it, it was a CTR special project. If he did
not like it, then it became a lawyers' special project." Another memorandum
from 1981 explained, "Difference between CTR and Special Four (lawyers'
projects). Director of CTR reviews special projects--if project was problem
for CTR, use Special Four."
110a The industry has been successful in using the CTR
Special Projects division to conceal harmful information. Research from
the Special Projects division remains shielded from public scrutiny. Individual
companies furthered the conspiracy by shielding company documents with
claims of attorney-client privilege and through tactics such as that undertaken
by Brown & Williamson, which over the years has transferred documents
described as "deadwood" to its British parent company, BAT
Industries,
so that they would not be discovered in legal proceedings in the United
States.
111a Other internal industry documents also shed
light on the true nature of the conspirators' associations, as the following
quotations demonstrate by way of example:
a. "CTR began as an organization called Tobacco Industry
Research Council (TIRC). It was set up as an industry _shield_ in 1954.
That was the year statistical accusations relating smoking to diseases
were leveled at the industry; litigation began; and the Wynder/Graham reports
were issued. CTR has helped our legal counsel by giving advice and technical
information, which was needed at court trials . . . . [T]he _public relations_
value of CTR must be considered and continued . . . . It is very important
that the industry continue to spend their dollars on research to show that
we don't agree that the case against smoking is closed."
b. "CTR is best & cheapest insurance the tobacco
industry can buy and without it the Industry would have to invent CTR or
would be dead."
c. "Historically, the joint industry funded smoking
and health research programs have not been selected against specific scientific
goals, but rather for various purposes such as public relations, political
relations, position for litigation, etc. . . . In general, these programs
have provided some buffer to public and political attack of the industry,
as well as background for litigious (sic) strategy."
d. "Historically, it would seem that the 1954 emergency
was handled effectively. From this experience there arose a realization
by the tobacco industry of a public relations problem that must be solved
for the self-preservation of the industry."
e. "To date, the TIRC program has carried its fair
share of the public relations load in providing materials to stamp out
brush fires as they arose. While effective in the past, this whole approach
requires both revision and expansion. The public relations program
. . . was like the early symptoms of diabetes--certain dietary controls
kept public opinion reasonably healthy. When some new symptom appeared,
a shot of insulin in the way of a news release . . . kept the patient going."
f. "When the products of an industry are accused
of causing harm to users, certainly it is the obligation of that industry
to endeavor to determine whether such accusations are true or false. Money
spent for such purpose should not be regarded as a charitable contribution
but as a business expense--an expense necessary to keep that industry alive.
In view of the billions of dollars of annual sales of our industry our
expenditures for health research has been of a minimal order."
g. "For nearly twenty years, this industry has employed
a single strategy to defend itself on three major fronts--litigation, politics,
and public opinion. While the strategy was brilliantly conceived and executed
over the years helping us win important battles, it is only fair to say
that it is not--nor was it intended to be--a vehicle for victory. On the
contrary, it has always been a holding strategy, consisting of creating
doubt about the health charge without actually denying it. . . . In the
cigarette controversy, the public--especially those who are present and
potential supporters (e.g. tobacco state congressmen and heavy smokers)--must
perceive, understand, and believe in evidence to sustain their opinions
that smoking may not be the causal factor."
h. A July 1963 industry report acknowledged that the TIRC
was not qualified to conduct research in reaction to the Surgeon General's
report because it "was conceived as a public relations gesture . .
. and it has functioned as a public relations gesture." The report
noted that the TIRC did not have breadth of research to adequately respond
to the Surgeon General.
112a Despite overwhelming scientific evidence, and the
confirmation of this evidence by their own internal research, the cigarette
manufacturers and their trade associations continue to deny uniformly that
there is a causal connection between cigarette smoking and adverse health
effects, or that nicotine is addictive. As one industry representative
testified: "[A company can't represent that] smoking doesn't cause
cancer. You can't say that. But you can say it is a risk factor, and scientifically
it hasn't been established. And that's what the research is for . .
. I don't agree [that nicotine is addictive]. Emphasis added. From what
I've read on nicotine is that it contributes to the flavor, the taste of
the product." These representations are intentionally misleading,
unfair and deceptive. They are moreover a result of the industry's ongoing
conspiracy and combination arising from the Plaza Hotel agreement, and
are done to maintain its market and profits from a deadly and addictive
product.
113. Special Projects was not the only instance where
the industry used lawyers to shield the truth. For example, in 1984, BAT
began internally plotting how to shield documents produced by scientists
from discovery. This plan included having BAT's "scientific literature
review publication . . . set up as a Law Department function." BAT
internally noted that "Direct lawyer involvement is needed in all
BAT activities pertaining to smoking and health from conception through
every step of the activity. This is a direct admission of BAT's efforts
to shield adverse scientific information from seeking the light of day.
This goal was being frustrated because "[t]he problem posed by
BAT scientists and frequently used consultants who believe cause is proven
is difficult."
114. The Kansas City law firm of Shook, Hardy & Bacon
and other lawyers played a critical role in furthering the conspiracy to
suppress and conceal information about the adverse health effects caused
by the use of tobacco products. The lawyers' strategy was to attempt to
protect damaging tobacco-related documents from disclosure under the
attorney-client
or work product privileges regardless of whether such documents were prepared
in anticipation of litigation or represented confidential communications
made between lawyer and client for the purpose of rendering legal advice.
Lawyers routinely provided a number of non-legal services to the defendants
such as deciding which CTR "special projects" should receive
funding, dispensing funding to the "scientists" involved in such
projects and designing the scope and approach of the special project. Shook,
Hardy & Bacon also undertook to coordinate the tobacco companies CTR
"special projects" subterfuge.
115. For example, in 1976, Donald K. Hoel of Shook, Hardy
& Bacon wrote to in-house lawyers at the various tobacco companies
that a study to measure environmental tobacco smoke should be modified
in such a way so that the study would yield more favorable results for
the tobacco companies' position. The study was subsequently modified to
deemphasize the role of second-hand tobacco smoke relating to indoor
environmental
quality.
116. In addition, a May 19, 1981 letter from Ernest Pepples,
vice president and general counsel of Brown & Williamson, to Patrick
Sirridge of Shook, Hardy & Bacon requests that Sirridge evaluate the
qualifications of various scientists seeking to conduct scientific studies
for Brown & Williamson. Shook, Hardy & Bacon responded by
providing
biographical sketches of potential consultants including whether they previously
had taken a scientific position favorable to the industry's position. Sirridge
also cooperated with Pepples' request in 1984 to transfer the funding of
some helpful research by a cooperative scientist from a CTR account to
a law firm project: "I do not think . . . that we should continue
burdening CTR with such programs, and instead suggest that they be handled
as law firm projects."
117. In 1972, William Shinn of Shook, Hardy & Bacon
wrote to tobacco company officials that a potentially favorable study should
be secretly funded by the tobacco companies as a "special project
(non-CTR)" in order to make the study appear independent of the industry
and thus heighten its perception as unbiased and reliable.
118. By becoming intimately involved in the funding and
design of these scientific studies, these lawyers attempted to further
the conspiracy and fraud of the tobacco companies and CTR by (1) clothing
such studies in the attorney-client or work product privilege in order
to protect them from disclosure if their results were unfavorable, and
(2) creating the perception that CTR and the tobacco companies were fairly
and appropriately fulfilling their obligations and promises to the public
that they would, in a vigorous and unbiased manner investigate and report
to the public the link between their products and human disease.
119. At least one tobacco company used similar tactics
in-house to suppress and avoid disclosure of its internal research on smoking
and disease. At a time when the company was resisting discovery in a number
of personal injury lawsuits, Brown & Williamson's general counsel,
J. Kendrick Wells, recommended in a memorandum dated January 17, 1985,
that most of the company's biological research be declared
"deadwood"
and shipped to England. He recommended that no notes, memos or lists be
made about these documents. Wells stated, "I had marked certain of
the document references with an X . . . which I suggested were deadwood
in the behavioral and biological studies area. I said that the "B"
series are "Janus" series studies and should also be considered
as deadwood." ("Janus" was a name of a project that attempted
to isolate and remove the harmful elements of tobacco.) Wells further
recommended
that the research, development and engineering department also should
undertake
"to remove the deadwood from the files."
120. Similarly, in a 1978 memo, B&W's Pepples wrote
that use of the CTR avoids the dilemma of a manufacturer that needs to
know the state of the art, but "on the other hand cannot afford the
risk of having the in-house work turn sour. . . . The point here is the
value of having CTR doing work on a nondirected and independent fashion
as contrasted with either in-house or under. B&W contract which, if
it goes wrong, can become the smoking pistol in a lawsuit!"
121. Thus, the tobacco companies and their lawyers have
misused claims of attorney/client privilege to insulate CTR-funded research
projects and internal documents from disclosure to the public and to government
officials. This conduct demonstrates the falsity of the tobacco companies'
representations that they would jointly fund objective research and report
the results of that research to the public.
H. Beyond 1953: The Continuing Conspiracy to
Restrain Trade.
1. The "Gentlemen's Agreement".
122. The industry's 1953 combination and conspiracy was
supplemented and aided by a commitment jointly to conduct research because
of "a general feeling that an industry approach as opposed to an individual
company approach was highly desirable." This approach was desirable
to prevent, among other things, competition on the basis of health risk
comparisons.
123. As part and in furtherance of the agreement not to
compete to develop a "safer" cigarette, there was a
"gentlemen's
agreement" among the manufacturers to suppress independent research
on the issue of smoking and health, for the purpose of and with the effect
of restricting output. Despite increasing market demand, the tobacco
manufacturers
agreed not to market any safer or alternative products. The means of effecting
this output reduction conspiracy included suppression of independent research
and policing violators, as described below. This agreement was referenced
in a 1968 internal Philip Morris draft memo, which stated, "We
have reason to believe that in spite of gentlemans (sic) agreement from
the tobacco industry in previous years that at least some of the major
companies have been increasing biological studies within their own
facilities."
This memo also acknowledged that cigarettes are inextricably intertwined
with the health field, stating, "Most Philip Morris products both
tobacco and non-tobacco are directly related to the health field."
124. As indicated by this memo, it was believed within
the industry that individual companies were performing certain research
on their own, in addition to the joint industry "research." Some
companies viewed the strengthening demand for safer and alternative products
as a potential future marketing opportunity. But the fundamental understanding
and agreement remained: That information and activities deemed harmful
to the unified, defensive posture of the industry or inconsistent with
the noncompetition conspiracy would be restrained, suppressed, and/or
concealed.
No company or industry trade organization stood behind the
"promise"
the defendants had made. As American Tobaccos CEO testified, "[If
the health studies are correct], consumers have the right to know whatever
is affecting their health. I think that's what, the public health agencies
and the government have that responsibility." Emphasis added.
125. The agreement not to compete was explicitly referenced
in an October 1964 memorandum entitled "Reports on Policy Aspects
of the Smoking and Health Situation in U.S.A.":
The informal agreement between TRC members not to make
health claims was explained to Philip Morris.
126. Defendants' activities in furtherance of the
output-restriction/non-competition
combination included restraining, suppressing, and concealing research
on the health effects of smoking, including the addictive properties of
tobacco products, and restraining, concealing, and suppressing the research
and marketing of safer cigarettes. Despite the ability to produce
"safer"
cigarettes, the defendants did not market such products, except in limited
test markets, because it was understood within the combination that no
company would characterize or promote a product as biologically
"safer."
127. Like all classic cartels, defendants policed their
conspiracy internally and externally. One member of the conspiracy, U.S.
Tobacco, went so far as to terminate an employee and apologize to the Big
6 cigarette companies when the employee was quoted in a New York Post
article referring to smokeless tobacco as less dangerous than smoking.
Ernest Pepples of Brown & Williamson reported this in a memo, where
he wrote that he had been called by UST's General Counsel, Jim Chapin.
Pepples stated, "Chapin says the statements quoted were unauthorized
and do not represent his company's views. He has asked me to extend
U.S. Tobacco's apology to each of the cigarette companies and advised me
that the individual quoted in the article is no longer employed at U.S.
Tobacco. Chapin says U.S. Tobacco has instituted smoking and health
seminars throughout the company." This action is totally contrary
to the self-interest of U.S. Tobacco, and is consistent with the conspiracy
among the defendants not to compete on the basis of safety and health.
2. Suppression of Liggett's "Safer" Cigarette.
128. In response to perceived growing demand, several
companies researched the possibility of marketing "safer" (less
harmful to humans) cigarettes. One of the ways in which the defendants
acted in concert to exclude the products from the market and further excluded
potential new entrants by patenting the processes for these less harmful
products, which they neither marketed nor licensed to any other actual
or potential competitor.
129. In response to demand, Liggett was one of the defendants
which was successful in researching and actually developing a less biologically
active cigarette. However, in response to retaliation and threats from
coconspirators, Liggett agreed not to market this product after an apparent
threat of retaliation by another manufacturer.
130. Liggett initiated its safer cigarette project, called
XA, in 1968. After a minimal expenditure of only $14 million, Liggett was
able, internally, to proclaim the project a success in 1979. By applying
an additive of palladium metal and magnesium nitrate to tobacco to act
as a catalyst in the burning process, Liggett found that "[c]igarette
tar has been neutralized" and that there was "[n]o evidence for
new or increased hazard . . . ."
131. Using this process, Liggett was able to produce cigarettes
"which are believed to be of commercial quality." These cigarettes,
however, were never marketed.
132. Liggett abandoned its XA project for the reason,
among others, that it faced retaliation from industry leader Philip Morris
if Liggett broke ranks. Another reason for abandoning the project was fear
that the marketing of a "safer" cigarette would be, in essence,
a confession that its, and the industry's other cigarettes, were not safe.
Thus, one Liggett executive wrote that, "Any domestic activity will
increase risk of cancer litigation on existing products."
133. James Mold, who was assistant director of research
at Liggett during the development of the safer cigarette, the XA project,
has provided testimony including the following overview of the XA project
and its abandonment:
a. Mold stated that the XA project produced a safer cigarette.
He stated, "We produced a cigarette which was, we felt, commercially
acceptable as established by some consumer tests, which eliminated
carcinogenic
activity . . . ." Emphasis added.
b. Mold testified that after 1975, all meetings on the
project were attended by lawyers, lawyers collected all notes after the
meetings, and all documents were directed to the law department to maintain
the attorney-client privilege. He stated, "Whenever any problem came
up on the project, the Legal Department would pounce upon that in an attempt
to kill the project, and this happened time and time again."
c. Mold testified that he was at a conference of scientists
in Buenos Aires prepared to present his research regarding a less harmful
cigarette when he received a "frantic call" from legal counsel
and was told not to present the paper or issue the press release. He was
instructed not to publish his results in the Journal of Preventative
Medicine.
d. Mold was asked why Liggett didn't market a safer cigarette.
He answered, "Well, I can't give you, you know, a positive statement
because I wasn't in the management circles that made the decision, but
I certainly had a pretty fair idea why. . . . [T]hey felt that such a cigarette,
if put on the market, would seriously indict them for having sold other
types of cigarettes that didn't contain this, for example. Also, there
was a meeting we held in . . . New Jersey at the Grand Met headquarters
. . . at which the various legal people involved and the management people
involved and myself were present. At one point Mr. Dey who at that time,
and I guess still is the president of Liggett Tobacco, made the statement
that he was told by someone in the Philip Morris company that if we tried
to market such a product that they would clobber us."
3. Brown & Williamson's Efforts to Develop a Safer
Cigarette
134. Brown & Williamson also developed "safer"
cigarettes, which it did not market despite promising test results, because,
among other reasons, such efforts would violate the output-restriction
conspiracy. Jeffrey Wigand, a former Vice President for Research and
Development
for Brown & Williamson, states that he was instructed by the President
of the company to abandon all efforts to develop a safer product. He has
testified that he was told, generally, "That there can be no research
on a safer cigarette. Any research on a safer cigarette would clearly expose
every other product as being unsafe and, therefore, present a liability
issue in terms of any type of litigation." Brown & Williamson's
Project "Ariel" used a heating, as opposed to burning system.
Its Project "Janus" was intended to identify hazardous components
of cigarette smoke so they could be removed.
135. Brown & Williamson also conducted research on
tobacco substitutes or analogues, as did a number of the other companies.
These substitutes were sought as a means to duplicate some of the effects
of nicotine without toxic or harmful effects. For example, Brown &
Williamson's parent BAT developed "Batflake," a tobacco substitute.
Laboratory tests showed that use of "Batflake" reduced a number
(though not all) of the harmful effects of smoking in direct proportion
to the amount used in a cigarette. So far as is known, none of the substitute
products was ever marketed in the United States. In 1980, BAT and Brown
& Williamson abandoned the "safer" product search:
"Dangerous
area [research into irritation and smoke inhalation]. Please do not publish
or circulate. No more work is needed on biological side." Emphasis
added.
136. Despite increasing market demand for their products,
such innovative products were not marketed because of the agreement not
to compete; i.e. to restrict output of alternative or safer products.
No other member of the conspiracy broke ranks by competitively marketing
products with improved biologic performance despite individual competitive
reasons for marketing such product: "Within B & W, we have rarely
attempted to develop new products specifically designed to deliver low
CO [carbon monoxide], except perhaps a prototype of FACT that was kept
ready on a turn-key basis in the event of a marketing need for such product.
This was done through a combination of filter ventilation, cigarette paper
permeability, and appropriate cigarette paper additive. Needless to
say, such need did not arise." Emphasis added.
4. Philip Morris: Avoiding an Industry War.
137. Philip Morris also explored research to develop a
safer cigarette, or, in the words of one memorandum to the board of directors,
cigarettes with "superior physiological performance." This
memorandum
noted competitive pressures to produce "less harmful" cigarettes.
However, the memorandum was careful to state that, "[o]ur philosophy
is not to start a war, but if war comes, we aim to fight well and to win."
Philip Morris never broadly marketed such a "safer" cigarette.
Its documents recognize the strong market demand and state that "after
much discussion we decided not to tell the physiological story which
might have appealed to a health conscious segment of the market. The
product as test marketed didn't have good _taste_ and consequently was
unacceptable to the public ignorant of its physiological superiority."
Subsequently, taste was improved and Philip Morris attempted to promote
the product. However, "The imposition of FTC rules and the industry
advertising code took the starch out of the program . . . ." Emphasis
added.
5. Reynolds' Safer Product.
138. Reynolds also developed an alternative product which
had reduced physiological consequences. Except for a brief test in several
cities, because of the output-restriction conspiracy Reynolds did not market
its safer product, "Premier."
139. The Federal Trade Commission Cigarette Advertising
Guides, adopted September 22, 1955 and modified March 25, 1966, did not
allow claims based on unsubstantiated health effects. However, it was clear
in the industry that the Guides could be modified if justification was
shown. Indeed, the 1966 modification of the Guides was based on development
of a method, albeit not without difficulties of its own, of measuring tar
and nicotine content. In the context of development of a potentially less
hazardous product, a Brown & Williamson document by Addison Yeaman
states, "I would submit that the FTC in the face of 1) the industry's
research effort, 2) the truth of our claims, and 3) the _public interest_
in our filter, cannot successfully deny us the right to inform the public."
In truth, the defendants used the FTC Guides as a shield behind which it
concealed its agreement not to compete. The voluntary agreement with the
FTC was characterized by the Consumers Union as being "to the industry's
advantage and to the public's disadvantage . . . ."
140. The Cigarette Advertising Code, adopted by the defendants,
was another mechanism used to enforce the illegal agreement not to compete
on the basis of safety or health characteristics of tobacco products. Among
other provisions, it prohibits health claims in industry advertisements
unless the "Code Administrator," to whom all cigarette
advertisements
are required to be submitted, approves of the advertisement. The Code,
a blatant restraint of trade, provided a mechanism to monitor and police
defendants' illegal agreement.
6. The Industry Position on "Safer" Cigarettes.
141. In furtherance of their illegal combination and conspiracy,
defendants collectively denied that a safer cigarette could be produced.
142. A memorandum authored by an attorney at the firm
of Shook, Hardy & Bacon, long-time lawyers for the cigarette industry,
confirmed that there was an industry-wide position regarding the issue
of a safer cigarette.
143. The 1987 memorandum was written in the context of
the marketing by R.J. Reynolds of a smokeless cigarette, Premier, which
heated rather than burned tobacco. The Shook, Hardy attorney wrote that
the smokeless cigarette could "have significant effects on the tobacco
industry's joint defense efforts" and that "[t]he industry position
has always been that there is no alternative design for a cigarette as
we know them." The attorney also noted that, "Unfortunately,
the Reynolds announcement . . . seriously undercuts this component of
industry's
defense." This fundamental position of the "industry" defense
had been identified much earlier. In 1970, David Hardy of the Shook, Hardy
firm wrote to DeBaun Bryant, General Counsel at Brown & Williamson,
expressing concerns about some of the industry research into alternative
products. In critiquing the minutes of a conference, he stated: "It
is our opinion that statements such as [references to research into safer
products, products which are less biologically active, and to _healthy
cigarettes_] constitute a real threat to the continued success in the defense
of smoking and health litigation. Of course, we would make every effort
to _explain_ such statements if we were confronted with them during a trial,
but I seriously doubt that the average juror would follow or accept the
subtle distinctions and explanations we would be forced to urge. . . .
[E]mployees in both companies [Brown and Williamson and British American
Tobacco] should be informed of the possible consequences of careless
statements
on this subject."
144. All defendants were keenly aware of the risk to the
industry if any of them sought a competitive advantage by developing
and marketing a safer product. The risk was avoided by agreeing to not
compete on that basis. As one industry representative testified: "[A]s
a company, we cannot position our products as being healthy. We've already
agreed that they are a risk factor [the _agreement_ referenced is the industry's
acceptance of the warning labels on cigarette packages]. . . . [W]e wouldn't
run any advertising that positions any of our products as being healthier
than others."
145. As part of the conspiracy, the companies agreed to
avoid research that might produce bad results for the industry. For example,
on March 31, 1980, Philip Morris scientist Robert Seligman wrote Lorillard
scientist Alex Spears, suggesting "subjects to be avoided." These
subjects included developing new tests for carcinogenicity, attempts to
relate human desires to smoking and tests which would show the
"addictive"
effect of smoking on carcinogenicity.
7. Suppression of the R.J. Reynolds "Mouse House"
Research.
146. For a period of time in the late 1960's, R.J. Reynolds
had a state-of-the-art laboratory in Winston-Salem, nicknamed "the
mouse house." Here, scientists conducted research with mice, rats
and rabbits and began to uncover promising avenues of investigation into
the mechanisms of smoking-related diseases. In 1970, this entire research
division was disbanded in one day, and all 26 scientists were fired without
notice. Company attorneys had collected dozens of research notebooks,
still undisclosed, from the biochemists several months before the firings.
8. Suppression of Philip Morris Research on Nicotine
Analogues.
147. In the early 1980s, researchers working at a Philip
Morris laboratory in Richmond, Virginia worked to develop a synthetic form
of nicotine that would avoid its cardiovascular complications. However,
in April 1984 the company abruptly shut the laboratory. The researchers
were fired and threatened with legal action if they published their work.
148. The research was conducted by Victor J. DeNoble and
his colleague Paul C. Mele, who remained silent about their work under
confidentiality agreements imposed by Philip Morris until testifying in
1994 before a congressional committee in Washington.
149. The research was so secretive that laboratory animals
were brought in at night under cover. The researchers discovered that nicotine
demonstrated addictive qualities and that the animals self-administered
the substance, pressing levers to obtain nicotine. The researchers also
discovered nicotine analogues, artificial versions of nicotine. These analogues
affected the brain much like nicotine. But the analogues did not seem to
produce the harmful cardiovascular effects of nicotine. Thus, rats using
the analogue behaved as if they had a nicotine "high" but did
not show signs of heart distress such as rapid heart beat.
150. By 1983, the research was becoming particularly problematic.
A number of personal injury cases had been filed against the industry,
with nicotine dependence a critical issue. In June 1983, DeNoble was called
to the Philip Morris headquarters in New York to brief top executives.
Following the meeting, company lawyers visited the lab and reviewed research
notebooks. There were discussions of shifting the research out of the company,
perhaps to DeNoble and Mele as outside contractors or to a lab in Switzerland,
to distance Philip Morris from the results.
151. Finally, in April 1984, the researchers were abruptly
told to halt their work, kill all the rats, and turn in their security
badges. The researchers also were forced to withdraw a paper on the addictive
qualities of nicotine, even after it had been accepted for publication
by a scientific journal.
I. History of Industry Knowledge that Smoking
is Harmful
152. Even before defendants represented in the Frank Statement
that "there is no proof that cigarette smoking is one of the causes"
of lung cancer, an industry researcher had reported the contrary.
153. As early as 1946, Lorillard chemist H.B. Parmele,
who later became Vice President of Research and a member of Lorillard's
Board of Directors, wrote to his company's manufacturing committee:
Certain scientists and medical authorities have claimed
for many years that the use of tobacco contributes to cancer development
in susceptible people. Just enough evidence has been presented to justify
the possibility of such a presumption.
154. As early as 1953, prior to the issuance of the Frank
Statement, RJR's Claude Teague created an internal survey of cancer research
and concluded that "studies of clinical data tend to confirm the relationship
between heavy and prolonged tobacco smoking and the incidence of lung
cancer."
Teague recommended that "management take cognizance of the problem
and its implications to our industry."
155. After the 1954 "Frank Statement," the tobacco
industry's breach of its assumed duty to report objective facts on smoking
and health was virtually immediate. As evidence mounted, both through industry
research and truly independent studies, that cigarette smoking causes cancer
and other diseases, the tobacco industry continued publicly to represent
that nothing was proven against smoking. Internal documents show that the
truth was very different. The tobacco companies knew and acknowledged among
themselves the veracity of scientific evidence of the health hazards of
smoking, and at the same time suppressed such evidence where they could,
and attacked it when it did appear.
156. Internal cigarette industry documents reveal, for
example:
a. A 1956 memorandum from the Vice President of Philip
Morris' Research and Development Department to top executives at the company
regarding the advantages of _ventilated cigarettes_ stated that: "Decreased
carbon monoxide and nicotine are related to decreased harm to the circulatory
system as a result of, smoking. . . . Decreased irritation is desirable
. . . as a partial elimination of a potential cancer hazard."
b. A 1958 memorandum from a Philip Morris researcher to
the company's Vice President of Research, who later became a member of
its Board of Directors, stated "the evidence . . . is building up
that heavy cigarette smoking contributes to lung cancer either alone or
in association with physical and physiological factors . . . ."
c. A 1961 document presented to the Philip Morris Research
and Development Committee by the company's Vice President of Research and
Development included a section entitled "Reduction of Carcinogens
in Smoke." The document states, in part:
To achieve this objective will require a major research
effort, because Carcinogens are found in practically every class of compounds
in smoke. This fact prohibits complete solution of the problem by eliminating
one or two classes of compounds.
The best we can hope for is to reduce a particularly bad
class, i.e., the polynuclear hydrocarbons, or phenols . . . .
Flavor substances and carcinogenic substances come from
the same classes, in many instances.
d. A 1963 memorandum to Philip Morris' President and CEO
from the company's Vice President of Research describes a number of classes
of compounds in cigarette smoke which are "known carcinogens."
The document goes on to describe the link between smoking and bronchitis
and emphysema:
Irritation problems are now receiving greater attention
because of the general medical belief that irritation leads to chronic
bronchitis and emphysema. These are serious diseases involving millions
of people. Emphysema is often fatal either directly or through other respiratory
complications. A number of experts have predicted that the cigarette industry
ultimately may be in greater trouble in this area than in the lung cancer
field.
e. A 1961 "Confidential" memorandum from the
consulting research firm hired by Liggett to do research for the company
states:
There are biologically active materials present in cigarette
tobacco. They are:
a) cancer causing
b) cancer promoting
c) poisonous
d) stimulating, pleasurable, and flavorful.
f. A 1963 memorandum from the Liggett consulting research
firm states:
Basically, we accept the inference of a causal relationship
between the chemical properties of ingested tobacco smoke and the
development
of carcinoma, which is suggested by the statistical association shown in
the studies of Doll and Hill, Horn, and Dorn with some reservations and
qualifications and even estimate by how much the incidence of cancer may
possible [sic] be reduced if the carcinogenic matter can be diminished,
by an appropriate filter, by a given percentage.
157. A 1965 report to the B&W Executive Committee
on research activities at BATCO's facility at Harrogate. The report acknowledged
that BATCO's research found that smoke is "weakly carcinogenic"
and noted that these "results may have more impact since they will
come from a tobacco supported facility." The report noted that release
of the contents of the Harrogate report "would have a significant
impact on the American tobacco industry." The results of this report
were not released by the industry.
158. These internal Liggett documents sharply contrast
with the information Liggett provided to the Surgeon General in 1963. Liggett
withheld from the Surgeon General the views of its researchers and consultants
that the evidence shows cigarette smoking causes human disease. A "Draft
of an Outline for a Background Paper on the Smoking Problem to be Used
in Connection with a Presentation of Arguments Before the Surgeon General's
C