Shift in Tobacco Suit Is Assailed

WASHINGTON —  With the government’s giant racketeering case against cigarette makers nearing a close Wednesday, rancor spread beyond the courtroom as lawmakers demanded an investigation of possible political interference in the government’s case.

At least eight Senate and House Democrats -- including Sen. Edward M. Kennedy (D-Mass.) and Rep. Henry A. Waxman (D-Los Angeles) -- asked the Justice Department inspector general to investigate why senior officials apparently ordered the department’s trial team to cut their most costly demand against the industry by more than 90%.

Without explanation, government lawyers late Tuesday asked U.S. District Judge Gladys Kessler to order an industry-funded five-year, $10-billion smoking-cessation program -- instead of the 25-year, $130-billion program they had outlined previously.

In a statement issued Wednesday evening, Justice Department spokesman Eric Holland stressed that the $10-billion program was only “an initial requirement” that could be extended in the future if court-appointed monitors decide the industry is committing fraud. “All decisions relating to this case were appropriately made based upon the legal merits of the case,” he said.

Several lawmakers, however, expressed concern that top political appointees were overruling the trial lawyers to shield the industry from an expensive loss.

Citing reports Wednesday in the Los Angeles Times and the Washington Post, lawmakers asked the department’s inspector general, Glenn A. Fine, to determine whether high-ranking officials -- including Associate Atty. Gen. Robert McCallum, the department’s No. 3 leader -- had improperly interfered.

“The administration needs to explain their sudden change in course,” said Sen. Tom Harkin (D-Iowa). And Sen. Richard J. Durbin (D-Ill.) accused the Justice Department of “selling out the American people.”

“I am deeply troubled by the appearance that Bush administration political appointees pressured career Justice Department attorneys to protect tobacco companies,” said Rep. Martin T. Meehan (D-Mass.), who also signed one of two letters to Fine.

Regarding the call for an investigation, spokesman Holland said the inspector general “will, no doubt, consider the request.”

The controversy also prompted an unusual exchange in court Wednesday, when tobacco company lawyers gave closing arguments in the 8 1/2 -month trial. Ted Wells, an attorney for Philip Morris USA, said the sudden change provided “the most powerful evidence ... that this whole thing is a house of cards.”

Kessler replied: “Perhaps it suggests that there are some additional influences being brought to bear on what was the government’s case.”

Months ago Kessler urged the two sides to reach a settlement -- with no result so far. There was speculation Wednesday that the dramatic reduction of the government’s smoking-cessation proposal was part of an attempt to facilitate talks by narrowing the distance between the parties on the size of a settlement.

In a five-hour summation, tobacco attorneys accused the government of hypocrisy and said it had failed to prove the companies conspired to mislead the public. Cigarette makers did not violate the anti-racketeering -- or RICO -- statute, but even if they did, their lawyers argued, the remedies were improper.

The shift to $10 billion for smoking cessation has further reduced the threat to the companies if Kessler finds them liable, as most observers think she will.

The government originally sought forfeiture of $280 billion in allegedly ill-gotten profits. That possibility was eliminated in the midst of the trial when the U.S. Court of Appeals for the District of Columbia ruled that forfeiture was not an available sanction under civil provisions of RICO. The Justice Department has until July 20 to appeal to the U.S. Supreme Court.

Kessler may decide she cannot adopt other government proposals either because of the appeals court’s ruling that sanctions under RICO can only be aimed at preventing future acts of fraud, not at undoing past misconduct.

The lawsuit accuses the companies of carrying out a decades-long disinformation campaign to boost cigarette sales by lying about the addictiveness of nicotine and the risks of smoking and secondhand smoke. The suit alleges 145 acts of mail and wire fraud, linked to specific ads, news releases and pamphlets distributed by the industry.

To rule for the government, Kessler must find that the industry not only committed fraud in the past, but also that the fraud is likely to continue.

Tobacco lawyers said the conduct of their clients, while questionable at times, did not rise to the level of fraud. They also say the government has refused to acknowledge that the companies have been forthright with the public since their 1998 settlement with the states.

Along with Philip Morris, a unit of Altria Group Ltd., defendants include Brown & Williamson Tobacco and R.J. Reynolds, which have merged to form Reynolds American Inc.; British American Tobacco; the Lorillard Tobacco unit of Loews Corp. and Vector Group Ltd.’s Liggett Group Inc.

David Bernick, a lawyer for Brown & Williamson, blasted the government for claiming to need more tobacco money to advance public health goals -- over and above the $23 billion in annual revenue to state and federal governments from cigarette taxes and settlement payments. Governments use the money “to do their sewer systems and other things like that,” said Bernick, while devoting less than $1 billion to fighting smoking.

“What in the world is the credibility of coming in here ... and saying, give me more [money],” Bernick said. “It is hypocrisy.”

Industry lawyers also ticked off government-proposed sanctions that they said aren’t authorized by RICO.

The smoking-cessation program, whatever its cost, fits in that category, because it focuses on past harm rather than future misconduct, Wells, the Philip Morris attorney, said.

Peter J. Biersteker, an attorney for R.J. Reynolds, said the law also precludes the government’s request for fines against tobacco companies if youth smoking doesn’t decline by targeted amounts.

And Robert F. McDermott, another Reynolds attorney, said there was no legal basis for a ban on price-cutting promotions -- a measure sought by the government on grounds that teens are especially price sensitive.

Offering “super-competitive prices ... just isn’t a RICO violation,” he said.

Ninety minutes will be allotted to both sides for rebuttal today. Then Kessler, who tried the case without a jury, will be left to ponder 45,000 pages of testimony by more than 240 witnesses, along with about 15,000 exhibits. A ruling isn’t expected for weeks or months.