>>> In September 1999, the US Justice Department filed suit against several tobacco companies and two tobacco industry front groups, attempting to recover health-care costs for treating people who had developed smoking-related diseases. The suit claims that the companies have engaged in "fraud" and other "unlawful conduct" while pushing their poison on the public for the past five decades. Specifically, the DOJ says that the industry has knowingly lied about disease, addiction, "low tar" claims, and marketing to children. On top of that, the cig makers are charged with intentionally making their products more addictive and with refusing to release less harmful cigarettes which had already been developed.

In January 2003, the Justice Department filed several lengthy documents to support its charges. These findings of fact are based on the tobacco industry's own documents and the statements of its executives, scientists, etc. The existence of these filings was first reported by the pub-editors of Corporate Crime Reporter, who were allowed to look at the filings at Justice headquarters but were not allowed to have copies of them. For a while, the DOJ balked at releasing these documents of obvious public import, but it finally relented. I filed a Freedom of Information Act request for them and was soon told that the documents had been (quietly) placed on Justice's Website.

Immediately below are links to these detailed, damning documents on the DOJ site (in Acrobat format). Below that is a text version of the Executive Summary. On the next page, you'll find text versions of a few of the most devastating portions of the filings.

Jump to: Executive Summary | excerpts

Preliminary Proposed Finding of Fact in US v. Philip Morris, et al.:

part one [26 megs]
part two [17 megs]
annotations [4.8 megs]

Preliminary Proposed Conclusions of Law in US v. Philip Morris, et al. [4.6 megs]

The original complaint in US v. Philip Morris, et al. [184K]

More info on the Justice Department's litigation against the tobacco industry is here

The preliminary proposed findings of fact submitted by the United States establish facts consistent with the allegations set forth in Counts 3 and 4 of the United States' first amended complaint. Both counts are brought under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1964(a) and (b). These facts establish entitlement to equitable relief, including the disgorgement of Defendants' ill gotten gains. As set forth in these preliminary proposed findings of fact, the evidence establishes that Defendants have engaged and are engaged in an extensive scheme to deceive and defraud the public and consumers of cigarettes, in violation of RICO. Moreover, the Defendants' past unlawful conduct indicates a reasonable likelihood of future violations.

Cigarette smoking and exposure to secondhand smoke kills nearly 440,000 Americans every year. The annual number of deaths due to cigarette smoking is substantially greater than the annual number of deaths due to illegal drug use, alcohol consumption, automobile accidents, fires, homicides, suicides and AIDS combined. Approximately one out of every five deaths that occur in the United States is caused by cigarette smoking.

At the end of 1953, the chief executives of the five major cigarette manufacturers in the United States at the time – Philip Morris, R.J. Reynolds, Brown & Williamson, Lorillard, and American – met at the Plaza Hotel in New York City with representatives of the public relations firm Hill & Knowlton and agreed to jointly conduct a long term public relations campaign to counter the growing evidence linking smoking as a cause of serious diseases. The meeting spawned an association-in-fact enterprise to execute a fraudulent scheme in furtherance of their overriding common objective – to preserve and enhance the tobacco industry’s profits by maximizing the numbers of smokers and number of cigarettes smoked and to avoid adverse liability judgments. The fraudulent scheme would continue for the next five decades.

As a result of the Plaza Hotel meetings, the companies launched their long term public relations campaign by issuing the “Frank Statement to Cigarette Smokers,” a full page announcement published in 448 newspapers across the United States. The Frank Statement included two representations that would lie at the heart of Defendants' fraudulent scheme – first, that there was insufficient scientific and medical evidence that smoking was a cause of disease; and second, that the industry would jointly sponsor and disclose the results of “independent” research designed to uncover the health effects of smoking through the new industry-funded Tobacco Industry Research Committee (“TIRC”), later renamed the Council for Tobacco Research (“CTR”). At the same time that Defendants announced in their 1954 "Frank Statement to Cigarette Smokers" that "we accept an interest in people’s health as a basic responsibility, paramount to every other consideration in our business," it established a sophisticated public relations apparatus in the form of TIRC – based on the "cover" of conducting research – to deny the harms of smoking and to reassure the public. Once the essential strategy of generating controversy surrounding the scientific findings linking smoking to disease was organized and implemented in 1953-54, the industry's approach was unwavering for five decades.

From the outset, the dual functions of TIRC/CTR, public relations and scientific research, were intertwined. Rather than carefully and critically assessing the emerging scientific data concerning the harms of smoking, TIRC/CTR focused its energies and resources in two areas. First, in its public relations capacity, it repeatedly attacked scientific studies that demonstrated the harms of cigarette smoke and worked to reassure smokers about cigarettes. Second, it developed and funded a research program that concentrated on basic processes of disease and that was distant, if not completely irrelevant, to evaluating the immediate and fundamental questions of the risks and harms associated with smoking.

Similarly, the Tobacco Institute actively designed and wrote issue statements, advertisements, pamphlets, and testimony that advanced the Defendants’ jointly formulated positions on smoking and health issues, including denying that smoking cigarettes was addictive and caused diseasess, and supporting the false claim that the link between smoking cigarettes and adverse health effects was an "open question." In this way, the functions (public relations and research) of these two entities were integrally related; both were fully committed to the Defendants' goals of denying and discrediting the substantial scientific evidence of smoking’s harms and convincing the public (especially smokers and potential smokers) that smoking was not harmful to health.

Defendants repeatedly represented to the public that they sponsored independent research aimed at discovering the health effects of smoking. Indeed, Defendants claimed that they created TIRC/CTR to administer this effort. These statements were misleading and deceptive half-truths, because the Cigarette Company Defendants1 used TIRC/CTR to serve as a "front" organization to advance their public relations and litigation defense objectives. Through CTR, the Cigarette Company Defendants funded "Special Projects" – research projects conceived and directed by committees of industry representatives, including lawyers, to support scientists who had shown a willingness and ability to generate information and provide testimony that could bolster the industry's litigation defenses before courts and governmental bodies and cast doubt on the scientific evidence that smoking caused cancer and other diseases.

Similarly, Defendants also sponsored jointly funded research through lawyer-administered "Special Accounts" – to recruit and support industry-friendly researchers to serve as expert witnesses in litigation and to represent the industry's scientific position in legislative and regulatory proceedings.

Cigarette Company Defendants created and used other jointly supported entities for similar ends, such as the Center for Indoor Air Research (CIAR) which took the lead in denying and distorting the harms of secondhand smoke, as known as environmental tobacco smoke, to further the industry's position that exposure to cigarette smoke and environmental tobacco smoke was not harmful.

Within the individual Cigarette Company Defendants, high-ranking corporate employees and lawyers feared that if they conducted research internally that confirmed that cigarettes cause disease and are addictive, such research, if disclosed, would jeopardize the unified legal position taken by the Defendants and would expose not just that company, but the entire industry, to legal liability and product regulation. Of course, the Cigarette Company Defendants did, in fact, recognize internally that cigarettes caused lung cancer and other diseases: they recognized the legitimacy of the scientific consensus, and the limited amount of internal research that their scientists did perform confirmed the results of mainstream scientific study.

The public statements issued through organizations like TIRC/CTR, the Tobacco Institute, CIAR, and by Cigarette Company Defendants themselves, were flatly inconsistent with Defendants' actual knowledge about the link between smoking and disease. At the same time that Defendants assured the public through their “Frank Statement” that “there is no proof that cigarette smoking is one of the causes [of cancer],” internally they documented a large number of known carcinogens in their products and replicated mainstream scientific research showing the health effects of smoking. Defendants’ internal documents acknowledge that their public denial that smoking cigarettes causes disease both was contrary to the overwhelming medical and scientific consensus – established through extensive epidemiological and other scientific investigation by the early 1950s – and was intended to convince smokers and potential smokers that there remained genuine scientific “controversy” about whether smoking caused disease.

In their efforts to prevent restrictions on where and when people could smoke, in the face of growing evidence since the 1970s of the adverse health effects of secondhand smoke, Defendants engaged in similar conduct and misleading public statements concerning the health effects of secondhand smoke. Defendants approached the issue of the health effects of exposure to secondhand smoke, or environmental tobacco smoke (ETS) with a sense of urgency, based on their concern as expressed in internal documents, that in the United States, the ETS issue would have a devastating effect on sales. Defendants specifically saw concerns about the health effects of ETS as a threat to the "number of smokers & number of cigarettes they smoke." Defendants designed a sophisticated public relations and research strategy to attempt to "alter public perception that ETS is damaging," but did so despite their specific, internal acknowledgment that there was a "[l]ack of objective science" to support their public relations campaign. But this lack of objective science did not stand in Defendants' way. They asked: "Is $100 million campaign worth an x increase in sales?" The answer: "Yes."

Just as Defendants long denied, contrary to fact, that smoking does not cause disease, Defendants also made numerous false and misleading statements denying that smoking is addictive over the past several decades. Indeed, no later than 1988, there was an overwhelming medical and scientific consensus that cigarette smoking was a drug-driven behavior of dependence, and that nicotine was the drug delivered in cigarette smoke responsible for creating and sustaining addiction. Relying on long discarded and discredited definitions of addiction, Defendants publicly attacked the scientific and medical evidence of addiction when, in fact, overwhelming documentary evidence demonstrates that Defendants openly recognized, from at least the early 1960s, that nicotine was responsible for the pharmacological effects that keep people smoking. Indeed, researchers for Cigarette Company Defendants saw themselves as being in the “nicotine business” and conceived a pack of cigarettes as a “day’s supply of nicotine.” As with Defendants’ statements designed to undermine the scientific evidence of smoking’s harms, the statements denying addiction were knowingly false and misleading when made, and intended to avoid product regulation, to bolster the industry’s defenses in smoking and health litigation, and to avoid increasing consumers' concerns about smoking.

Defendants’ awareness of the critical importance of nicotine to the cigarette smoker, and thus to the continued profits of the industry, were such that the Defendants dedicated extraordinary resources studying nicotine and its effects on the smoker. The evidence shows that Defendants have long had the ability to modify and manipulate the amount of nicotine that their products could deliver (including removing all nicotine), and have studied extensively how every characteristic of every component of cigarettes – including the tobacco blend, the paper, the filter, and the manufacturing process – impacts nicotine delivery. Indeed, Cigarette Company Defendants' internal documents indicate that, in light of Cigarette Company Defendants’ recognition that “no one has ever become a cigarette smoker by smoking cigarettes without nicotine,” Cigarette Company Defendants have designed their cigarettes with a central overriding objective – to ensure that the smoker could obtain enough nicotine to create and sustain addiction. Accordingly, Defendants’ numerous public statements that they do not and have not manipulated the delivery of nicotine to the smoker are false.

The understanding of nicotine’s primary role in keeping people smoking and Cigarette Company Defendants’ desire to capitalize on smokers’ growing desire for a less hazardous cigarette in the face of growing evidence of the health effects of smoking, underlie another central component of the scheme to defraud – the design and marketing of so-called “low tar/low nicotine” cigarettes. Cigarette Company Defendants have introduced new design features to counter and blunt the effects of landmark scientific and medical discoveries of smoking’s effects. Cigarette Company Defendants introduced and heavily promoted filtered cigarettes after the seminal epidemiological studies indicating a disease-causing role for smoking in the 1950s, and then developed and pushed “low tar/low nicotine” ventilated cigarettes with “reconstituted” or puffed tobacco in the years after the 1964 Surgeon General’s Report. Cigarette Company Defendants marketed these products as "safer" – first explicitly, later implicitly – to give smokers an alternative to quitting and thereby to keep them smoking and buying cigarettes. There is evidence that substantial percentages of smokers perceive “low tar/low nicotine” cigarettes (also described by other terms such as “light,” and “lowered tar”) as less hazardous than full-flavored brands a stepping stone to quitting. Cigarette Company Defendants made these design changes even though they had no actual evidence – and did not pursue any – that these features caused any measurable reduction in the harm to the growing population of “low tar” smokers. In fact, they had evidence to the contrary. The evidence establishes that Cigarette Company Defendants learned from their internal research that smokers of low tar products would modify their smoking behavior to obtain the needed dose of nicotine. This change in smoking behavior, known as “compensation,” resulted in smokers of “low tar” cigarettes receiving levels of tar that approached, if not exceeded, the amount of tar received by smokers of full-flavor cigarettes. Indeed, the wholesale shift to a market dominated by the sale of "low tar/low nicotine" products has not resulted in a meaningful reduction in the incidence of lung cancer and other smoking related diseases.

Accordingly, Cigarette Company Defendants’ touting of cigarettes as “low tar” has been misleading and deceptive. The “low tar/low nicotine” claim was based on the tar and nicotine yields as measured by a smoking machine in a test known as the FTC test. Under the FTC test, the machine “smoked” the cigarettes very differently from human smokers, in part because of human smoker's compensation. Cigarette Company Defendants were aware of this from their own research, and designed their cigarettes in a way that would yield low FTC tar and nicotine numbers, but would permit the smoker to obtain much higher yields of nicotine and tar. Until 1999 at the earliest, no Cigarette Company Defendant informed smokers of the effect of their decision to design cigarettes to provide elastic yields – that “low tar/low nicotine” cigarettes are likely to deliver tar and nicotine levels that bear little relation to, and likely far exceed, the reported FTC yields.

As part of the scheme to defraud, Cigarette Company Defendants have intentionally marketed cigarettes to youth under the legal smoking age while falsely denying that they have done and continue to do so. As is evident from Defendants’ own documents, the Cigarette Company Defendants have long recognized that the continued profitability of the industry depends upon new smokers entering the “franchise” as smokers die from smoking-related diseases or quit. Defendants have similarly known that an overwhelming majority of regular smokers begin smoking before age eighteen. In 1966, Defendants, in the face of threatened federal advertising restrictions, adopted a voluntary advertising code in which they pledged to refrain from marketing activity likely to attract youth. Thereafter, Defendants continued unabated their efforts to capture as much of the youth market as possible, effectively ignoring the voluntary advertising code and designing advertising themes, marketing campaigns, and
promotional activities known to resonate with adolescents.

Defendants’ internal documents indicate their awareness that the majority of smokers
began smoking as youths and develop brand loyalty as youths, that youths were highly
susceptible to advertising, and that persons who began smoking when they were teenagers were very likely to remain lifetime smokers. For example:

A March 31, 1981 report conducted by the Philip Morris Research Center entitled "Young Smokers Prevalence, Trends, Implications, and Related Demographic Trends" stated that "Today's teenager is tomorrow's potential regular customer, and the overwhelming majority of smokers first begin to smoke while still in their teens . . . it is during the teenage years that the initial brand choice is made."

A September 22, 1989 report prepared for Philip Morris by its main advertising agency, Leo Burnett U.S.A., described Philip Morris’s marketing’s target audience as a "moving target in transition from adolescence to young adulthood."

An August 30, 1978 Lorillard memorandum stated: “The success of NEWPORT has been fantastic during the past few years. . . . [T]he base of our business is the high school student. Newport in the 1970s is turning into the Marlboro of the 1960s and 1970s.”

A July 9, 1984 report circulated to the heads of B&W’s Marketing and Research Development departments stated "[o]ur future business depends on the size of [the] starter population."

In a November 26, 1974 memorandum entitled "R.J. Reynolds Tobacco Company Domestic Operating Goals, R.J. Reynolds stated its "[p]rimary goal in 1975 and ensuing years is to reestablish R.J. Reynolds’s share of growth in the domestic cigarette industry," by targeting the "14-24 age group” who, “[a]s they mature, will account for key share of cigarette volume for next 25 years. Winston has 14% of this franchise, while Marlboro has 33%. - SALEM has 9%--Kool has 17%." The memorandum indicated that R.J. Reynolds "will direct advertising appeal to this young adult group without alienating the brand's current franchise."

A September 27, 1982 memorandum written by Diane Burrows, R.J. Reynolds Market Research Department, and circulated to L.W. Hall, Jr. Vice President of R.J. Reynolds Marketing Department, stated: "The loss of younger adult males and teenagers is more important to the long term, drying up the supply of new smokers to replace the old. This is not a fixed loss to the industry: its importance increases with time. In ten years, increased rate per day would have been expected to raise this group’s consumption by more than 50%."

Defendants targeted young people with their marketing efforts, their selection of which
marketing activities to pursue and to shape the themes and images of those activities, and allocated substantial resources researching the habits and preferences of the youth market, including these research efforts. For instance:

An October 7, 1953 letter from George Weissman, Vice President of Philip Morris, discussed an August 1953 Elmo Roper report on a study of young smokers commissioned by Philip Morris, stating that "industry figures indicate that 47% of the population, 15 years and older, smokes cigarettes" and that "we have our greatest strength in the 15-24 age group."

The "1969 Survey of Cigarette Smoking Behavior and Attitudes" performed by Eastman Chemical Products for Philip Morris contained detailed analysis of beginning smokers, including interviews with 12-14 year olds.

A 1976 Brown & Williamson document containing information drawn from a study of smokers stated that "[t]he 16-25 age group has consistently accounted for the highest level of starters."

In 1958 and 1959, R.J. Reynolds commissioned a series of studies of high school and college students, interviewing in sum almost 20,000 students as young as high school freshmen regarding their smoking habits and brand preferences.

In 1980, the R.J. Reynolds Marketing Development Department issued a series of internal reports entitled "Teenage Smokers (14-17) and New Adult Smokers and Quitters" which surveyed the smoking habits of fourteen to seventeen year olds.

Knowing that advertising and promotion stimulated the demand for cigarettes, the
Cigarette Company Defendants used their knowledge of young people’s vulnerabilities gained in this research in order to create marketing campaigns (including advertising, promotion, and couponing) that would and did appeal to youth, in order to foster youth smoking initiation and ensure that young smokers would choose their brands. These campaigns have intentionally exploited adolescents’ vulnerability to imagery utilizing themes that are, to this day, the same as they have been for decades: independence, liberation, attractiveness, adventurousness, sophistication, glamour, athleticism, social inclusion, sexual attractiveness, thinness, popularity, rebelliousness and being "cool."

The Cigarette Company Defendants continue to advertise in youth-oriented publications; employ imagery and messages that they know are appealing to teenagers; increasingly concentrate their marketing in places where they know youths will frequent such as convenience stores; engage in strategic pricing to attract youths; increase their marketing at point-of-sale locations with promotions, self-service displays, and other materials; sponsor sporting and entertainment events, many of which are televised or otherwise broadcast and draw large youth audiences; and engage in a host of other activities which are designed to attract youths to begin and continue smoking. And yet, to this day, in the face of evidence of their explicit recognition of the importance of the youth market, research into the best ways to obtain the youth market, and development of advertising campaigns to designed to capture it that have remained largely unchanged for more than thirty years, the Defendants publicly deny their efforts to appeal to the youth.

Defendants' fraudulent scheme also has influenced how the Cigarette Company Defendants have designed their cigarettes. From the early 1960s, Defendants' cigarette design and research efforts were predicated on the understanding that the introduction of a cigarette that was actually less hazardous to its users would constitute an admission that all other cigarettes brands were more harmful. Accordingly, Defendants delayed and avoided development of potentially safer products, chose not to incorporate design features that they believed were likely to reduce the delivery of harmful constituents in cigarette smoke, and failed to meaningfully test their cigarettes, including "low tar/low nicotine" brands, that they developed or actually sold in order to assess whether different design modifications actually reduced the harms caused by smoking. As a result, Defendants have collectively, in the past five decades, introduced and sold a paltry number of innovative products for which the companies failed, prior to their introduction, to pursue the evidence necessary to ascertain whether they present any actual likely harm reduction to humans.

Efforts to stifle innovation and enforce the understanding that less hazardous products should not be developed were aggressive. In one instance, after Defendant Liggett spent twelve years and $15 million developing a cigarette – the XA – that its research showed to be significantly less carcinogenic than its conventional cigarettes, it killed the entire project before marketing the cigarette to consumers after Defendant Brown & Williamson threatened Liggett's "very existence" if it marketed the cigarette. Brown & Williamson also threatened to freeze Liggett out of joint defense agreements and exclude Liggett from the Tobacco Institute. Delivered through Brown & Williamson's representative on the Tobacco Institute's Committee of Counsel, the threat was based on Brown & Williamson's fear that selling XA would be an admission against the interest of all Cigarette Company Defendants.

In short, Defendants' scheme to defraud permeated and influenced all facets of Defendants' conduct – research, product development, advertising, marketing, legal, public relations, and communications – in a manner that has resulted in extraordinary profits for the past half-century, but has had devastating consequences for the public's health. There is substantial evidence that, even after the 1998 Master Settlement Agreement, the global settlement that Philip Morris, R.J. Reynolds, Brown & Williamson, and Lorillard entered with the States, Defendants continue to engage in activities that further the aims and objectives of the longstanding fraudulent scheme.

As the preliminary proposed findings of fact demonstrate, the United States is entitled to the equitable relief sought under RICO, including disgorgement of proceeds in the amount of $289 billion.

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