IN THE COURT OF COMMON PLEAS
FRANKLIN COUNTY, OHIO
STATE OF OHIO, ex rel.
BETTY D. MONTGOMERY
Attorney General
30 East Broad Street
State Office Tower - 17th Floor
Columbus, Ohio 43215-3428,
Plaintiff,
v.
PHILIP MORRIS, INCORPORATED
120 Park Avenue
New York, New York 10016,
and
RJR NABISCO, INC.
1301 Avenue of the Americas
New York, New York 10019,
and
RJR NABISCO HOLDINGS CORP.
1301 Avenue of the Americas
New York, New York 10019,
and
R.J. REYNOLDS TOBACCO COMPANY
Fourth and Main Streets
Winston-Salem, NC 27102,
and
BROWN & WILLIAMSON TOBACCO
CORPORATION
1500 Brown & Williamson Tower
Louisville, Kentucky 40232,
and
BRITISH AMERICAN TOBACCO
COMPANY, LTD
Milbank, Knowle Green, Staines,
Middelsex, England TW18 1DY,
and
B.A.T. INDUSTRIES, P.L.C.
Windsor House
50 Victoria Street
London, England SWIH ONL,
and
LORILLARD TOBACCO COMPANY, INC.
1 Park Avenue
New York, New York 10016,
and
THE AMERICAN TOBACCO COMPANY
INC.
Six Stamford Forum
Stamford, Connecticut 06904,
and
LIGGETT & MYERS, INC.
700 West Main Street
Durham, North Carolina 27701,
and
UNITED STATES TOBACCO CO.
100 West Putnam Avenue
Greenwich, Connecticut 06830,
and
THE COUNCIL FOR TOBACCO
RESEARCH-U.S.A., INC.
900 3rd Avenue
New York, New York 10022,
and
THE TOBACCO INSTITUTE, INC.
1875 "I" Street, N.W., Suite 800
Washington, D.C. 20006,
and
HILL & KNOWLTON, INC.
420 Lexington Avenue
New York, New York 10070,
Defendants.
JUDGE: Nodine Miller
COMPLAINT
REQUEST FOR DECLARATORY RELIEF
REQUEST FOR PERMANENT INJUNCTION
REQUEST FOR DAMAGES
REQUEST FOR EQUITABLE RELIEF
JURY DEMAND
Case No. 97CVH05 5114
COMES NOW the State of Ohio, on the relation of Betty
D. Montgomery, Attorney General (hereinafter "the Attorney General,"
"the State" or "Ohio") and for its causes of action
against the Defendants herein alleges, states, and avers as follows:
I. INTRODUCTION
1. The State of Ohio, through Attorney General Betty D.
Montgomery, brings this action for monetary damages, civil penalties, declaratory
and injunctive relief, restitution, and disgorgement of profits. This case
challenges a massive unlawful course of conduct and conspiracy perpetrated
by the Defendants. The Defendants’ unlawful conduct includes numerous unfair,
deceptive, anticompetitive and illegal acts, including without limitation
the following:
• Publicly undertaking, as a "paramount" special
responsibility, the duty of researching and disclosing to public health
authorities and the public at large, including the State of Ohio, the full
extent of the health risks of cigarette smoking, but then suppressing,
concealing, and distorting the state and extent of their true knowledge
of those risks;
• Creating and/or funding fraudulent "front"
organizations, such as the Tobacco Industry Research Council (later the
Council for Tobacco Research), which was held out to the public as an independent
research organization, but which was in fact secretly controlled by the
industry’s lawyers and public relations firms, and was used to prevent
the public from learning what Defendants knew about the health risks of
smoking and tobacco use and to create a false controversy about those heath
risks;
• 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 on short notice and making personal threats against their
own scientists who tried to publish research revealing what the industry
knew, and asserting improper claims of work-product and attorney-client
privilege to suppress and conceal the results of adverse scientific research;
• Engaging in unconscionable, unfair and deceptive acts
and practices by, among other things, sponsoring false, deceptive, and
misleading advertising, promotional and public relations campaigns intended
to confuse and create doubt among governmental entities, including the
State of Ohio, and the public about the health risks of cigarette smoking
and tobacco use;
• Making false and misleading representations
to Congress, other governmental entities, including the State of Ohio,
and the public regarding the health risks of cigarette smoking and tobacco
use, the addictive nature of nicotine, and the manipulation of nicotine
levels in cigarettes and smokeless tobacco products, with the intent to
defraud and knowing that the State and others would reasonably rely on
their representations;
• Conspiring in violation of Ohio’s antitrust law to eliminate
and restrain competition based on the health effects of smoking and tobacco
use, the addictive nature of nicotine, the deliberate manipulation of nicotine
levels in tobacco products, and by agreeing not to market "safer"
cigarettes;
• Conspiring in violation of Ohio’s antitrust law to shift
to the State the burden of health care costs for smoking and tobacco related
diseases; and
• Engaging in unfair, deceptive and unconscionable practices
by targeting marketing and advertising efforts to promote illegal sales
of cigarettes and smokeless tobacco to minors, and developing products
and deceptive advertising campaigns designed to appeal to minors.
As a direct, foreseeable or proximate result of these
and other actions, the State of Ohio has suffered substantial damages.
The Attorney General seeks to recover those damages and enjoin the continuing
deceptive and unlawful practices described below.
2. The diseases related to and caused by cigarette smoking
and other tobacco use have killed or sickened millions of Americans over
the last several decades, and the harm continues. In order to earn larger
profits, tobacco companies and their allied interests have chosen to ignore
and actively suppress the truth concerning the health hazards of smoking
cigarettes and using other tobacco products. As a direct result, Ohio citizens
entitled to Medicaid benefits and other medical, pharmaceutical and health
care assistance from the State through a variety of State-funded programs
have contracted smoking-related and tobacco-related diseases including,
without limitation, cancer, emphysema, and heart disease. The care and
treatment of these Ohio citizens has placed a significant financial burden
on the State and its taxpayers. This fiscal burden on all of Ohio' citizens
rightfully should be borne by the Tobacco Companies and their allied interests.
3. Under the Ohio Constitution and other laws of the State
of Ohio, the State is responsible for the health, safety and welfare of
its citizens, and the Attorney General has the duty to protect the interests
of the general public. The State of Ohio, on the relation of Attorney General
Montgomery, brings this action under State law for money damages, civil
penalties, declaratory, equitable, and injunctive relief, indemnity, restitution,
disgorgement of profits, investigative fees, costs and expenses. As set
forth more particularly below, the various Defendants, over a long period
of time and continuing to the present day, conspired to deceive the State
and its citizens about the addictive properties of nicotine and the full
extent of the health risks of using tobacco products. Every year in Ohio,
thousands of addicted smokers and tobacco users suffer disease and die
from using Defendants' products precisely as Defendants have designed and
intended for those products to be used. Through a well-organized campaign
of fraud, intimidation, and deception, Defendants have avoided legal responsibility
for engineering, manufacturing and selling the most deadly and harmful
consumer products in history, while reaping billions of dollars in profits.
4. As a direct and foreseeable result of these and other
wrongful actions by the Defendants, consumers and the State of Ohio have
suffered substantial damages. Over a period of many years, the State has
paid hundreds of millions of dollars in medical assistance for tobacco-related
health care costs that would not have been incurred absent Defendants'
misconduct. Defendants created an ongoing public health crisis of unrivaled
proportions, all the while knowing and appreciating that the State of Ohio
would be required to pay for the health care costs of its indigent and
needy citizens who suffer from tobacco-related illnesses and disease processes.
Under time-honored principles of equity, the State of Ohio is entitled
to restitution and indemnity for the medical assistance funds it has paid,
because under the circumstances, it would be unjust and unconscionable
for the Defendants to retain the benefits the State of Ohio conferred upon
them or to profit in any way from their illegal course of conduct. Further,
by intentionally and/or willfully concealing the risks and hazards of smoking
and using smokeless tobacco, Defendants consciously misled, prevented and
delayed the State of Ohio from taking such steps as necessary to avoid
certain health care costs directly attributable to tobacco-related illnesses
and disease processes.
5. The Defendant Tobacco Companies control nearly the
entire market for cigarettes in the United States. Their longstanding conspiracy
to mislead the public about the harmful and addictive effects of cigarette
smoking has placed the Defendants among the most profitable businesses
in the world. The breadth and boldness of the conspiracy recently was displayed
before Congress when, in April of 1994, the Chief Executive Officers of
the leading cigarette manufacturers testified under oath that they do not
believe that smoking causes death or that smoking is addictive. In truth,
the Defendants themselves have known for much longer than the scientific
community and public health authorities, including those in the State of
Ohio, that cigarettes are both addictive and deadly.
6. Despite representations to the contrary, Defendant
Tobacco Companies carefully calibrate, control and manipulate nicotine
in cigarettes and smokeless tobacco so that beginning smokers and users
of other tobacco products will become addicted to nicotine and develop
a physical and psychological dependency that can be satisfied only by continued
use. As a direct result of Defendants' knowledge of and methods chosen
to manufacture tobacco products, most users find it extremely difficult
and painful, and in many cases impossible, to withdraw from their physical
dependency on nicotine.
7. With full knowledge that they are selling an addictive
and deadly product, Defendants deliberately and willfully advertise, promote
and market cigarettes and smokeless tobacco in such a way as to target
promising markets of new customers, particularly minors. Every day, according
to reputable studies, 3,000 American youths are enticed by Defendants'
unconscionable, unfair and misleading advertising and marketing ploys and
start smoking or using smokeless tobacco, each then becoming a potential
addict and life-long profit center for the Defendants.
8. These marketing strategies further the conspiracy to
distort the truth about tobacco and health. The net effect of Defendants'
unlawful, unfair, deceptive, and unconscionable conduct, over the past
several decades, has been to convey the message that intensive and thorough
scientific and medical research has uncovered no reliable or conclusive
evidence about the real health effects of smoking and tobacco use. As described
by one industry representative, Defendants' campaign of deception has been
a "brilliantly conceived and executed" strategy to "creat[e]
doubt about the health charge without actually denying it." Defendants
knew that if smokers and other tobacco users fully appreciated the risks
of addiction and death, many would never have tried cigarettes or smokeless
tobacco or would have quit, and Defendants would have lost the enormous
profits they accumulated by shifting the costs of their conduct onto the
State of Ohio and others.
9. Armed with coffers full from the highly profitable
sale of an addictive product, the Defendants have successfully fended off
legal attacks with a litigation strategy of expense, attrition and delay.
According to an attorney for Defendant R.J. Reynolds Tobacco Company, "[T]he
aggressive posture we have taken regarding depositions and discovery in
general continues to make these cases extremely burdensome and expensive
for plaintiffs' lawyers, particularly sole practitioners. To paraphrase
General Patton, the way we won these cases was not by spending all of [R.J.
Reynolds's] money, but by making that other [expletive] spend all his."
10. Defendants' conduct has generated a terrible human
tragedy. Tobacco use is the leading cause of premature death in the United
States. According to the federal Centers for Disease Control and Prevention,
each year cigarette smoking kills more than 400,000 Americans, exceeding
the combined deaths caused by automobile accidents, AIDS, alcohol abuse,
use of illegal drugs, homicide, suicide, and fires. Tobacco-related illnesses
account for one of every five deaths each year in the United States.
11. Tobacco use, including cigarette smoking, causes,
among other serious illnesses, cancer, pulmonary diseases, and coronary
heart disease:
a. Cancer -- Many chemicals in cigarette smoke have been
determined to be carcinogenic. Cigarette smoking is responsible for at
least 30% of all deaths from cancer. Cigarette smoking causes more than
85% of all lung cancer, which has now surpassed breast cancer as the primary
cause of death from cancer among women. Smoking is linked to cancers of
the mouth, larynx, esophagus, stomach, pancreas, uterus, cervix, kidney
and colon, among others.
b. Pulmonary Disease -- Smoking is the cause of more than
80% of deaths from pulmonary diseases such as emphysema and bronchitis.
These diseases have a particularly profound social impact because of the
prolonged and extended suffering and disability of their victims.
c. Heart Disease - Cigarette smoking is one of the major
independent causes of coronary heart disease. Smoking is also responsible
for thousands of deaths from cardiovascular disease, including stroke,
heart attack, peripheral vascular disease and aortic aneurysm.
12. Smokeless tobacco, including snuff and chewing tobacco,
has been shown to cause oral cancer, gum disease and tooth loss. Long term
snuff users are 48 times more likely than non-users to develop cancers
of the gingiva (gums) and buccal mucosa (cheek) and four times more likely
to develop mouth cancer than non-users. Persons using chewing tobacco are
six times more likely to develop cancer of the mouth or hypopharynx and
three times more likely to develop cancer of the oropharynx than non-users.
13. The impact of cigarette smoking on the nation is staggering.
In May of 1993, the Office of Technology Assessment advised the United
States Congress that in 1990 smoking related illnesses cost United States
taxpayers a total of approximately $68 billion, broken down as follows:
$20.8 billion in direct costs; $6.9 billion in indirect costs for morbidity;
$40.3 billion indirect cost for mortality.
14. The State of Ohio greatly bears the horrible human
and financial costs of tobacco use including cigarette smoking. Thousands
of Ohio citizens become ill or die each year from tobacco-related diseases,
and the costs related to smoking and other tobacco use in Ohio are in the
hundreds of millions of dollars each year.
15. The State of Ohio seeks monetary damages, civil penalties,
declaratory and injunctive relief, restitution, disgorgement of profits,
investigative fees, costs, and other appropriate relief for the Defendants'
wrongful conduct as described and alleged in this Complaint. The State
also seeks injunctive relief to require the Defendants to cease marketing
tobacco products to children, and seeks an Order requiring the Defendants
to disclose their research on tobacco use, smoking, addiction and health,
requiring the Defendants to fund a legitimate remedial public education
campaign on the true health consequences of using tobacco products, and
requiring the Defendants to fund cessation programs for nicotine dependent
tobacco product users who look to the State for provision of their health
care.
16. In this action, the Attorney General seeks (i) to
secure for the people of the state of Ohio a fair and open market, free
from unfair, deceptive, and unconscionable 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 halt the marketing of tobacco products to minors; (v) to disgorge
Defendants' profits from their sales of tobacco products in violation of
state law; (vi) to decrease usage of tobacco products by underage Ohioans;
and (vii) to obtain restitution for unjust enrichment.
II. PARTIES, JURISDICTION AND VENUE
17. Plaintiff, State of Ohio is a body politic governed
by the Constitution and laws of Ohio, and is entitled to bring this action
pursuant to the laws of Ohio. This suit concerns significant matters of
state-wide public interest and is brought on the relation of the Attorney
General, pursuant to the Attorney General's constitutional, statutory,
and common law powers to act on behalf of the State and certain of its
agencies, including the Ohio Department of Human Services. The State seeks,
among other forms of relief, the specific measures set forth below:
a. Consumer Protection Enforcement. The Attorney General
has broad authority to institute actions under the Ohio Consumer Sales
Practices Act, Ohio Revised Code Section 1345.01 et seq.,
to safeguard Ohio citizens from, among other things, unconscionable, unfair
and deceptive acts and practices, including the use of false and misleading
advertising and the marketing of dangerous products to minors. Under this
authority, the Attorney General seeks civil penalties, restitution, disgorgement
of profits and appropriate declaratory, equitable and injunctive relief,
including but not limited to a permanent injunction to require Defendants
to cease marketing tobacco products to children, to disclose their knowledge
of and research into smoking, smokeless tobacco, nicotine addiction, and
the impact of tobacco products on health, to publish corrective advertising,
to fund a legitimate public education campaign on the health consequences
of smoking and smokeless tobacco and cessation programs for nicotine-dependent
smokers and smokeless tobacco users, other remedial measures, investigative
fees and expenses, and other appropriate relief.
b. Restraint of Trade. Ohio’s antitrust law, Ohio Revised
Code Section 1331.01 et seq., (herein referred to as the
"Valentine Act") gives the Attorney General broad powers to protect
the public and foster fair and honest interstate and intrastate competition
by instituting actions against persons who conspire to restrain trade and
commerce or monopolize markets in Ohio. Ohio Revised Code Section 109.81
empowers the Attorney General to bring this action. Under this authority,
the Attorney General seeks damages, civil penalties and appropriate injunctive
or other equitable relief, including but not limited to a permanent injunction
to require Defendants to disclose their knowledge of and research into
smoking, smokeless tobacco, nicotine addiction and the impact of tobacco
products on health.
c. Medical and Health Care Costs. Among other things,
the State seeks restitution for the tobacco-related health care costs paid
by the State and/or the Ohio Department of Human Services through their
statutory medical program, established pursuant to Ohio Revised Code Section
5111.01 et seq. Under the Ohio Medicaid program, ORC Section
5111.01 et seq., the State, in financial partnership with
the federal government, provides financial assistance for a broad range
of health care services to eligible low income Ohio residents. A significant
portion of the monies that the State has paid out, and will continue to
pay out, to recipients under the Ohio Medicaid program is for health care
costs attributable to tobacco-related illnesses and diseases.
18. Defendant Philip Morris, Incorporated (Philip Morris
U.S.A.) (hereinafter "Philip Morris") is a Virginia corporation
whose principal place of business is located at 120 Park Avenue, New York,
New, York 10016. Defendant Philip Morris manufactures, advertises, promotes,
markets 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, including in Ohio.
19. RJR Nabisco Holdings Corp. (hereinafter "RJR
Nabisco Holdings") is a Delaware corporation whose principal place
of business is 1301 Avenue of the Americas, New York, New York 10019. 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." Individually
and through its agent, 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. RJR Nabisco Holdings, individually
and through its agent, R.J. Reynolds Tobacco Company, advertises, promotes
and sells its tobacco products throughout the State of Ohio.
20. RJR Nabisco, Inc. (hereinafter "RJR Nabisco")
is a Delaware corporation whose principal place of business is 1301 Avenue
of the Americas, New York, New York 10019. RJR Nabisco is the parent corporation
of R.J. Reynolds Tobacco Company. According to RJR Nabisco, its "worldwide
tobacco operations are managed in the U.S. by R.J. Reynolds Tobacco Company."
Individually and through its agent 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. Individually and through
its agent, R.J. Reynolds Tobacco Company, RJR Nabisco advertises, promotes
and sells its tobacco products throughout the State of Ohio. On information
and belief, RJR Nabisco directly dictates and controls the world-wide sales
and marketing efforts of its tobacco subsidiary through its RJR Nabisco
Executive Council. In addition, RJR Nabisco exercises detailed and hands-on
control of the marketing of individual RJ Tobacco brands. Also on information
and belief, RJR Nabisco supervises and controls tobacco-related litigation
involving its tobacco subsidiary, R.J. Reynolds Tobacco Company.
21. Defendant R.J. Reynolds Tobacco Company (hereinafter
"R.J. Reynolds") is a New Jersey corporation whose principal
place of business is located at Fourth and Main Streets, Winston-Salem,
North Carolina 27102. Defendant R.J. Reynolds manufactures, advertises,
promotes, markets and sells Camel, Vantage, Now, Doral, Winston, Sterling,
Magna, More, Century, Bright Rite and Salem cigarettes and other tobacco
products throughout the United States, including in Ohio.
22. Defendant Brown & Williamson Tobacco Corporation
(hereinafter "Brown & Williamson") is a Delaware corporation,
with its principal place of business at 1500 Brown & Williamson Tower,
Louisville, Kentucky 40232. Defendant Brown & Williamson is a subsidiary
or division of Defendant B.A.T. Industries, P.L.C. Defendant Brown &
Williamson manufactures, advertises, promotes, markets and sells Kool,
Barclay, BelAir, Capri, Raleigh, Richland, Laredo, Eli Cutter and Viceroy
cigarettes and other tobacco products throughout the United States, including
in Ohio.
23. Defendant British American Tobacco Company, Ltd. (hereinafter
"BATCO") is a British Corporation whose registered office is
Milbank, Knowle Green, Staines, Middelsex, 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 Ohio.
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 Ohio. 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 Ohio.
24. Defendant Hill & Knowlton, Inc. (hereinafter "Hill
& Knowlton") 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 disseminating 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. Hill & Knowlton is
a participant in the conspiracy described herein and has caused harm and
affected commerce in the State of Ohio.
25. Defendant B.A.T. Industries, P.L.C. (hereinafter "B.A.T.
Industries") is a British corporation with its principal place of
business at Windsor House, 50 Victoria Street, London, England SWIH ONL
and may be served with process at said address pursuant to the Hague Convention
through Plaintiff's counsel. Through a succession of intermediary corporations
and holding companies, Defendant B.A.T. Industries is the sole shareholder
of Defendant Brown & Williamson. Through Defendant Brown & Williamson,
Defendant B.A.T. Industries has placed cigarettes into the stream of commerce
with the expectation and the intention that substantial sales of cigarettes
would be made in the United States, including in Ohio. In addition, Defendant
B.A.T. Industries as a principal, or through its agents and/or co-conspirators,
conducted significant and critical research for Defendant Brown & Williamson
on the issues of smoking and health in humans. Further, Defendant Brown
& Williamson is believed to have sent to England the results of research
that it conducted in the United States on the issue of smoking and health
in humans in an attempt to remove sensitive and inculpatory documents from
the jurisdiction of United States courts in Ohio and elsewhere. These documents
were and are subject to the control of Defendant B.A.T. Industries. Defendant
B.A.T. Industries has been involved in the conspiracy alleged herein and
the actions of Defendant B.A.T. Industries have effected and caused harm
in Ohio.
26. Defendant Lorillard Tobacco Company (hereinafter "Lorillard")
is a Delaware corporation whose principal place of business is located
at 1 Park Avenue, New York, New York 10016. Defendant Lorillard manufactures,
advertises, promotes, markets and sells Old Gold, Kent, Triumph, Satin,
Max, Spring, Newport and True cigarettes and other tobacco products throughout
the United States, including in Ohio.
27. Defendant The American Tobacco Company (hereinafter
"American Tobacco" or "ATC") is a Delaware corporation
whose principal place of business is located at Six Stamford Forum, Stamford,
Connecticut 06904. Defendant American Tobacco is or was a subsidiary or
division of American Brands, Inc. Defendant American Tobacco manufactures,
advertises, promotes, markets and sells Lucky Strike, Pall Mall, Tareyton,
Malibu, American, Montclair, Newport, Misty, Barclay, Iceberg, Silk Cut,
Silva Thins, Sobrania, Bull Durham and Carlton cigarettes and other tobacco
products throughout the United States, including in Ohio. On December 21,
1994, Defendant American Tobacco was purchased by Defendant B.A.T. Industries
who, on information and belief, has succeeded to the liabilities of Defendant
American Tobacco by operation of law, or as a matter of fact.
28. Defendant Liggett & Myers, Inc. (hereinafter "Liggett"
or "Liggett & Myers") is a Delaware corporation whose principal
place of business is located at 700 West Main Street, Durham, North Carolina
27701. Defendant Liggett & Myers manufactures, advertises, promotes,
markets and sells Chesterfield, Decade, L&M, Pyramid, Dorado, Eve,
Stride, Generic and Lark cigarettes and other tobacco products throughout
the United States, including in Ohio.
29. Defendant United States Tobacco Company (hereinafter
"US Tobacco") is a Delaware corporation whose principal place
of business is located at 100 West Putnam Avenue, Greenwich, Connecticut
06830. Defendant U.S. Tobacco manufactures, advertises, promotes, markets
and sells Sano cigarettes. U.S. Tobacco also manufactures, advertises,
promotes, markets and sells approximately 88% of the smokeless tobacco
(snuff and chewing tobacco) sold in the United States under various brand
names including Happy Days, Skoal and Copenhagen. U.S. Tobacco advertises,
promotes, markets and sells its tobacco products throughout the United
States, including in Ohio.
30. Defendant The Council for Tobacco Research - U.S.A.,
Inc. (hereinafter "CTR"), successor in interest to the Tobacco
Industry Research Committee ("TIRC"), is a nonprofit corporation
organized under the laws of the State of New York with its principal place
of business at 900 3rd Avenue, New York, New York 10022. Defendant CTR
was created by the Tobacco Company Defendants to disseminate false information
regarding the health risks and hazards of smoking.
31. Defendant The Tobacco Institute, Inc. (hereinafter
"Tobacco Institute") is a New York corporation whose principal
place of business is located at 1875 "I" Street, N.W., Suite
800, Washington, D.C. 20006. Defendant Tobacco Institute has since its
incorporation in 1958, operated as the public relations and lobbying arm
of the Tobacco Companies.
32. Defendants Philip Morris, RJR Nabisco Holdings, RJR
Nabisco, R.J. Reynolds, Brown & Williamson, BATCO, B.A.T. Industries,
Lorillard, American Tobacco, Liggett & Myers, and US Tobacco collectively
are referred to herein as "The Tobacco Companies."
33. Defendant CTR (successor to TIRC) and Defendant The
Tobacco Institute are collectively referred to herein as "The Tobacco
Trade Associations."
34. All Defendants are collectively referred to herein
as the "Tobacco Industry" or the "Tobacco Cartel."
35. At all pertinent times, Defendants acted through their
duly authorized agents, servants, and employees who were then acting in
the course and scope of their employment, and in furtherance of the businesses
of said Defendants. At all pertinent times, the Tobacco Trade Associations
were the agents, servants, and/or employees of the Tobacco Companies and
acted within the scope of said agency, servitude and/or employment.
36. The Defendants listed above, and/or their predecessors
and successors in interest, did business in the State of Ohio; made contracts
to be performed in whole or in part in Ohio; and/or manufactured, tested,
sold, offered for sale, supplied or placed in the stream of commerce, or
in the course of business materially participated with others in so doing.
Defendants further knew such tobacco products would be substantially certain
to cause injury to the State and to persons within the State thereby negligently
and/or willfully and or intentionally causing injury to the State, and
as described herein, committed and continue to commit tortious and other
unlawful acts and conduct in and with consequences in the State of Ohio.
37. The Defendants listed above, and/or their predecessors
and successors in interest, did business in the State of Ohio; made contracts
to be performed in whole or in part in Ohio; and/or manufactured, tested,
sold, offered for sale, supplied or placed in the stream of commerce, or
in the course of business materially participated with others in so doing,
cigarettes and smokeless tobacco products that the Defendants knew to be
defective, unreasonably dangerous and hazardous. Defendants further knew
such tobacco products would be substantially certain to cause injury to
the State and to persons within the State thereby negligently and/or willfully
and or intentionally causing injury to persons within Ohio and to the State,
and as described herein, committed and continue to commit tortious and
other unlawful acts and conduct in and with consequences in the State of
Ohio.
38. The term "addictive" used in this Complaint
is synonymous and interchangeable with the term "dependence-producing";
both terms refer to the persistent and repetitive intake of psychoactive
substances despite evidence of harm and a desire to quit. Some scientific
organizations have replaced the term "addictive" with "dependence-producing"
to shift the focus to dependent patterns of behavior and away from the
moral and social issues associated with addiction. Both terms are equally
relevant for purposes of understanding the drug effects of nicotine.
39. The term "tobacco products" as used in this
Complaint includes, without limitation, cigarettes, and smokeless tobacco,
including snuff, and spit, loose and chewing tobaccos.
40. This Court has jurisdiction over the subject matter
of this action pursuant to, among other authority, the provisions of the
Valentine Act, O.R.C. Section 1331.01 et seq. and the Ohio
Consumer Sales Practices Act, O.R.C. Section 1345.01 et seq.
41. Venue is proper in the Common Pleas Court of Franklin
County, Ohio, pursuant to, among other authority, the provisions of the
Valentine Act and the Ohio Consumer Sales Practices Act.
III. CONSPIRACY ALLEGATIONS
42. 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.
43. Each Defendant is sued individually as a primary violator
and as a co-conspirator and aider and abettor, and the liability of each
arises from the fact that each Defendant entered into an agreement with
the other Defendants and third parties to pursue, and knowingly pursued,
the common course of conduct to commit or participate in the commission
of all or part of the unlawful acts, tortious acts, plans, schemes, transactions,
and artifices to defraud and/or deceive and/or mislead alleged herein.
44. Such acts of conspiracy and aiding and abetting included,
among other things, falsely advertising, marketing, promoting and selling
tobacco products as safe, non-addictive, and not containing levels of nicotine
manipulated by Defendants to cause and maintain addiction.
45. The liability of each Defendant arises from the fact
that each committed and/or engaged in a conspiracy to accomplish the commission
of all or part of the unlawful and/or tortious conduct alleged herein,
and/or intentionally, and/or willfully, knowingly, with evil motive, intent
to injure, ill will and/or fraud and without legal justification or excuse,
engaged in the conduct herein alleged.
46. The Defendants, and/or their predecessors and successors
in interest, performed such acts as were intended to, and did, result in
the sale and distribution of cigarettes and other tobacco products in the
State of Ohio and the use and consumption of cigarettes and other tobacco
products by residents of the State of Ohio.
IV. ADDITIONAL JURISDICTIONAL ALLEGATIONS
REGARDING BAT INDUSTRIES, P.L.C.
47. 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.)
48. 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 Ohio 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 Ohio.
49. 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.
50. BAT-II has purposely availed itself of the American
economy, including the Ohio cigarette and financial markets. BAT Group
tobacco revenues in Ohio -- sales ultimately directed and controlled by
BAT-II -- likely exceed $100 million dollars annually; on the average,
the BAT Group recognizes over one quarter of a million dollars each day
for the sale of its cigarettes in Ohio. Over time, BAT-II has reaped millions
of dollars of profits from Ohio 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 Ohio 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.
51. BAT-II regularly does and solicits business in the
Ohio financial community. Over many years, BAT-II representatives -- including
the chairperson of the BAT-II board -- have solicited individual and institutional
investors in Ohio for investments in BAT-II securities and debt instruments.
This solicitation was part of an aggressive marketing plan over years by
BAT-II to solicit greater American investment, and likely involved very
substantial Ohio dollars. BAT-II employees and board members visited Ohio,
distributed documentation, solicited participation in BAT-II finances and
otherwise engaged in and solicited business here.
52. Furthermore, BAT-II has directly and substantially
engaged in key decision-making for the research, development, design, manufacture
and marketing of hundreds of millions of dollars of cigarettes sold in
Ohio. 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 U.S. 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 Ohio
(as well as other states). BAT-II is the hub of the BAT Group industrial
enterprise, which sells hundreds of millions of dollars of cigarettes in
Ohio. In short, BAT-II regularly does or solicits business in Ohio.
53. BAT-II is also subject to personal jurisdiction for
causing tortious injury by an act or omission in Ohio. BAT-II has participated
in a fraud against Ohio and the public; has assured that substantial scientific
and other knowledge not be disclosed to Ohio and its citizens; has directed
the research and design of cigarettes sent into Ohio 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.
54. BAT-II also has minimum contacts with Ohio 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 Ohio.
55. 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.
56. The United States, including Ohio, 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 Ohio.
V. FACTUAL ALLEGATIONS
A. Background
57. 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. Approximately
20,000 Ohioans die each year from diseases related to smoking.
58. 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.
59. 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 significant
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.
60. 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 falsely under oath before Congress
that smoking was not addictive, and have made similar false statements
under oath during deposition testimony as recently as the spring of 1997.
B. The Cartel's Pre-Conspiracy Advertising and Promotional
Activities: False Claims of Health and Safety
61. 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 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.
62. 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."
63. 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."
64. 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."
65. 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
66. The Defendants and their co-conspirators knew that
published information about health risks would (i) increase consumer demand
for safer tobacco products, (ii) induce some competitors to promote their
own brands or denigrate competing brands on the basis of relative health
risk, (iii) materially reduce their profits and market shares, and (iv)
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 based on health
claims or in the market for "safer" or alternative products and
agreed to suppress adverse information concerning health risks and addiction.
67. In the early 1950’s, 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."
68. 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."
69. 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." (Italics in original.)
70. Hartnett's proposal was an invitation to his competitors
to agree to restrain independent economic best interest and competition
in favor of collusion.
71. 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. 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.
72. 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.)
73. 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 is a violation of the
Ohio Valentine Act.
74. At the time of the December 15, 1953 meeting, the
cigarette industry did not have a trade association. According to a 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.
75. 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."
76. 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.)
77. Thus, at the December 15, 1953 meeting the course
of conduct agreed to included, 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."
78. 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."
79. John Hill of Hill and Knowlton 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").
80. 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 named 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.
81. 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.)
82. 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.
83. 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.
84. 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.)
85. 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.)
86. In compliance with the noncompetition conspiracy,
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."
87. 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
88. The cigarette industry announced the formation of
the TIRC on January 4, 1954, with newspaper advertisements placed in virtually
every American city, including cities in Ohio, 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.
89. 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 Ohio. 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 would necessarily
lead to the assumption by the Tobacco Companies of the health care risks
and costs inherent in the production of a product hazardous to health,
and thereby reduce the cartel's sale of tobacco products and profits.
E. Repeated False Promises to the Public
90. 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.
91. Other public statements issued by the tobacco industry
through the TIRC/CTR or the Tobacco Institute, repeated several themes:
(1) that the industry was working to report the full and complete truth
concerning tobacco and health, (2) that those 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:
(1) 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.)
(2) 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.)
(3) 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.
(4) 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.)
(5) George Allen, President of the Tobacco Institute issued
a report pledging that for the benefit of the "public interest"
the Tobacco Institute 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.)
(6) 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.)
(7) On May 28, 1962, the TIRC in a release confirmed that
its purpose was to "make the facts known to the public." (Emphasis
added.)
(8) 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." (Emphasis added.)
(9) In 1979 the Tobacco Institute issued a document entitled
"Tobacco Industry Research on Smoking and Health." In it, the
Tobacco Institute 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.
(Emphasis added.)
92. 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:
(1) 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."
(2) 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."
(3) 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."
(4) 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.
(5) 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."
(6) 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."
93. 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:
(1) "After millions of dollars and over 20 years
of research: The question about smoking and health is still a question."
(2) "[N]o particular ingredient, as it occurs in
cigarette smoke, has been demonstrated as the cause of any particular disease."
(3) "[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."
(4) " A $35,000,000 program."
(5) "In the interest of absolute objectivity, the
tobacco industry has supported totally independent research efforts with
completely non-restrictive funding."
(6) "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."
(7) "The findings are not secret."
(8) "From the beginning, the tobacco industry has
believed that the American people deserve objective, scientific answers."
(9) "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."
94. On March 24, 1965, the Tobacco Institute 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, Boyman
Gray of RJR, represented that "it has not been established that smoking
causes lung cancer or any other disease."
95. 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."
96. 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.)
97. 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.
98. 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."
99. 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.
100. 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.
101. The Tobacco Industry Defendants recognized that their
conspiracies were intended to, and had the effect of, maintaining their
profits by avoiding the health care costs associated with the production
of an unsafe product, and shifting such costs to other payors, such as
Ohio and other governmental entities. A July 22, 1985 briefing document
entitled "B&W’s Public Issues Environment" details the industry’s
knowledge that, absent the successful defense of litigation at all costs,
the tobacco industry could be required to contribute a "large percentage
of profits" in order to pay for health care costs:
B&W would continue the strategy of intensive litigation
of each case with the objective of exploiting each case’s favorable factors
and a policy of no payments to plaintiffs in settlement of cases. In the
event manufacturers experience losses in the smoking and health cases,
the selection of contingency strategy would depend upon the scope of the
losses. During the planning period the most attractive strategy probably
will be to continue intensive litigation of the cases with no settlement
payments and the acceptance of losses as charges against income. The current
insurance coverage of $1,000,000 would quickly be absorbed and the adoption
now of internal financial structures to fund losses could be a negative
influence on juries. Such structures should be re-evaluated if losses occur.
A possible contingent strategy of settlement also should be reassessed
on an opportunistic basis. Pressure will develop in the Congress for a
superfund legislation [pursuant to which corporations that produce hazardous
substances are taxed, and the resulting fund is used to pay for the costs
associated with the release of hazardous substances] applicable to smoking
and health lawsuits if large scale plaintiff victories occur; such a fund
would be financed by contributions from cigarette manufacturers amounting
to a large percentage of profits.
F. The True Nature of the TIRC: A Front for the Tobacco
Cartel
102. 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.
103. 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.
104. 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.
105. 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.)
106. 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.
107. In 1970, H. Wakeman, 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.
Wakeman 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, Wakeman wrote "we are interested
in evidence which we believe denies the allegation that cigaret [sic] smoking
causes disease." Wakeman 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.
108. 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."
109. 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 smokers) -- 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.
110. A 1974 report to the CEO of Lorillard from a research
executive described CTR's scientific projects as having 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.
111. 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 .
. . ."
112. 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."
113. 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
for the purpose not only of promoting tobacco sale and use, but also to
avoid liability costs for injuries and health care. 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."
114. 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.
115. 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.
116. 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
117. 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.
118. 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 industry’s 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."
119. The industry has been successful in using the CTR
"Special Projects" division to conceal harmful information from
the public and to shield the Tobacco Defendants from payment of health
care costs in product liability litigation. 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.
120. 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."
(Emphasis added.)
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.
121. 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]. From what I've read on nicotine
is that it contributes to the flavor, the taste of the product." (Emphasis
added.) 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.
122. "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." (Emphasis added.)
123. 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.
124. 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
de-emphasize the role of second-hand tobacco smoke relating to indoor environmental
quality.
125. 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."
126. 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.
127. 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.
128. 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."
129. 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!"
130. 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"
131. 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.
132. 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 and maintaining industry profits by shifting the
product liability costs that would have been borne by the Tobacco Defendants
due to the adverse health consequences of tobacco use to other payors in
health care markets. 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."
(Emphasis added.) 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."
133. 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 non-competition conspiracy would be restrained, suppressed, and/or
concealed. No company or industry trade organization stood behind the "promise"
the Defendants had made. As American Tobacco’s 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.)
134. 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.
135. 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."
To do so would be at least an implicit admission that tobacco products
were not and are not safe, thereby leading to liability for health care
costs.
136. Like all classic cartels, Defendants policed their
conspiracy internally and externally. One member of the conspiracy, US
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." (Emphasis added.) 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
137. 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.
138. In response to demand, Liggett was one of the Defendants
who was successful in researching and actually developing a less biologically
active cigarette. However, in response to retaliation and threats from
co-conspirators, Liggett agreed not to market this product.
139. 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 . . . ."
140. Using this process, Liggett was able to produce cigarettes
"which are believed to be of commercial quality." These cigarettes,
however, were never marketed.
141. 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."
142. 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
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