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Documents
from Philip Morris Dear Colleague by Rep. Waxman - June 14th More information on this issue -------------------------------------------------------------------------------- The U.S. House of Representatives is considering legislation that would block the Department of Justice's litigation against the tobacco companies. This federal tobacco litigation is designed to recover potentially hundreds of billions of dollars paid by federal taxpayers to treat tobacco-illnesses. It also seeks injunctive relief to stop the tobacco companies from marketing to children and engaging in other deceptive and illegal practices. The legislative provisions blocking the federal tobacco litigation are contained in riders inserted in appropriations bills. The effect of these riders is to block the Justice Department from obtaining essential litigation funds. The rider in the VA-HUD appropriations bill expressly states that no money budgeted for litigation support may be used "for the purposes of supporting litigation against the tobacco companies." The rider in the Commerce-State-Justice appropriations bill repeals the authority that the Attorney General is using to pay for the lawsuit. The following fact sheets provide background information about the federal litigation, the effect of the riders, and related issues: •"Facts about the Federal Tobacco Litigation". This fact sheet provides basic facts about the federal lawsuit, such as the legal causes of action, the size of the potential recovery, the use of funds recovered, and the potential equitable relief available. •"Effects of the Appropriations Riders". This fact sheet describes the appropriations riders and explains their effects. The effects of the riders include blocking the VA from obtaining potentially tens of billions of dollars to pay for medical care for veterans and blocking the Medicare trust fund from receiving potentially hundreds of billions of dollars. The Justice Department would also be blocked from seeking court orders to restrain the tobacco companies from marketing to children. •"Response to Tobacco Industry Arguments". This fact sheet outlines the industry's arguments in support of the appropriations riders and provides responses. •"Statistics on the Health Effects of Tobacco". This fact sheet provides basic facts about the impact of tobacco on public health, including statistics on youth smoking and the costs of treating tobacco-related illnesses. •"Tobacco Industry Campaign Contributions". This fact sheet summarizes the extent of tobacco industry campaign contributions and lobbying. •"Quotes from Tobacco Industry Documents". The last three fact sheets contain quotes from internal tobacco industry documents regarding marketing to children, the addictiveness of nicotine, and the health effects of smoking. These internal documents reveal the extent of the industry's deceptive practices and represent a core element of the Justice Department's suit. -------------------------------------------------------------------------------- Filing of the Federal Suit. In September 1999, the Justice Department filed suit in U.S. district court in Washington, D.C., against 11 tobacco manufacturers and their parent companies. The suit alleges that decades of deceit by the tobacco industry have caused federal taxpayers to spend billions paying for tobacco-related illnesses. The suit seeks recovery of these funds, as well as injunctive relief to stop the companies from marketing to children and engaging in other deceptive and illegal practices. Legal Causes of Action. The suit was filed under statutory provisions designed to permit the government to recover medical costs attributable to the wrongdoing of others and to obtain injunctive relief. The litigation was brought under three federal statutes: the Medical Care Recovery Act (MCRA), the Medicare Secondary Payer provisions of the Social Security Act, and the civil provisions of the Racketeer Influenced and Corrupt Organization Act (RICO). Relationship to State Suits. The federal lawsuit is similar to the litigation brought by the state attorneys general against the tobacco companies, using many of the same legal theories and much of the same evidence. The main difference is that the state lawsuits sought to recover funds paid by state taxpayers, whereas the federal lawsuit seeks to recover funds paid by federal taxpayers. Magnitude of Potential Recovery. The size of the potential recovery is enormous. Under their settlement agreement, the states recovered $246 billion from the cigarette manufacturers -- approximately 15 times the annual amount spent by state Medicaid programs on tobacco-related illness. The amount of money paid by federal taxpayers is even larger than that spent by the state taxpayers. Federal taxpayers pay approximately $25 billion a year to treat tobacco-related illnesses (excluding Medicaid). If the federal suit is successful, a recovery in the same proportion as that of the states would exceed $375 billion. Use of Funds Recovered. The law specifically states that funds recovered under MCRA must be returned to the agencies that paid for the care giving rise to the claim. Accordingly, any money recovered on behalf of the Department of Veterans Affairs or the Department of Defense health programs will be returned to those programs. Since the VA spends $4 billion annually treating tobacco-related illnesses and the Defense Department spends $1.6 billion, these underfunded programs could potentially receive tens of billions of dollars. Funds recovered under the Medicare Secondary Payer provisions will be returned to the Medicare Trust Fund. Any monetary recoveries under RICO would go to the federal treasury. Injunctive Relief. Under RICO, the court has authority to prevent and restrain deceptive and unlawful conduct. Using this authority, the Justice Department can seek court orders to prevent the tobacco companies from marketing to children. The court could impose numerous restrictions beyond those agreed to by the tobacco companies and the states. For example, the court could limit the use of advertising in stores or in youth-oriented magazines, restrict the use of cigarette vending machines, or ban tobacco-company sponsorship of concerts or auto racing. -------------------------------------------------------------------------------- How the Tobacco Lawsuit Is Funded. The tobacco litigation is funded by the Justice Department as well as by the Departments of Health and Human Services, Veterans Affairs, and Defense -- all agencies on whose behalf the Justice Department is seeking to recover health care costs. Under section 109 of the 1995 Commerce-Justice-State Appropriations Act, the Justice Department is allowed to accept reimbursements from client agencies to handle litigation involving unusually high costs. The Department is using this authority to fund the tobacco lawsuit. What the Appropriation Riders Do. Several appropriation bills contain riders which effectively "defund" the tobacco litigation and shelter the tobacco companies from federal liability. In the House, a rider in the VA-HUD appropriation bill expressly states that no money budgeted for litigation support may be used "for the purposes of supporting litigation against tobacco companies." A rider in the Commerce-State-Justice appropriations bill expressly prohibits the transfer of funds under section 109 for affirmative lawsuits, such as the tobacco litigation. In the Senate, a rider on the Senate Agriculture appropriation bill repeals section 109 entirely. The Effect of the Appropriations Riders. These riders would effectively halt the tobacco lawsuit. According to the Attorney General, "if these provisions are enacted into law...we would have no ability to continue our litigation." Implications for VA and Defense Health Programs. The VA spends $4 billion annually treating tobacco-related illnesses and the Defense Department spends $1.6 billion. Under the Medical Care Recovery Act, any recovery of these costs would be returned to the VA and Defense health programs. In effect, the riders block the VA and DOD from obtaining potentially tens of billions of health care dollars. Implications for the Medicare Trust Fund. Medicare spends $20.5 billion per year on tobacco-related illness. Under the Medicare Secondary Payer provisions, any recovery of these costs would be deposited in the Medicare trust fund. If the lawsuit is not defunded, these dollars could add years to the solvency of Medicare or fund a prescription drug benefit. Implications for Children's Health. In addition to preventing a monetary recovery, the riders in the appropriations bill will block the Justice Department from seeking court orders to restrain the tobacco companies from marketing to children. Now that the Supreme Court has invalidated the FDA tobacco rule, continuation of the federal lawsuit holds the best remaining promise for effective federal regulation of tobacco. -------------------------------------------------------------------------------- Claim: The Justice Department previously concluded that it had no case against the companies. The Attorney General testified in April 1997 that the federal government had no authority to file suit to recover tobacco-related health care cost. Response: When the Attorney General testified before the Senate Judiciary Committee, she addressed her comments to the issue of the actions filed against the tobacco industry by the states to recover Medicaid expenses. Under the law, Medicaid claims – even claims to recover federal Medicaid costs – must be pursued by the states. Her comments did not deal with the issue of recovering Medicare and other payments by federal taxpayers, which only the federal government is authorized to recover. Claim: Funding for this suit takes away funds for veterans health care. Response: Actually, the opposite is true. Money recovered under the Medical Care Recovery Act as the result of the lawsuit will be returned to the VA, where it can be used for health care purposes. Given that the VA spends $4 billion a year treating tobacco-related illnesses, the potential recovery for underfunded VA health care could be tens of billions of dollars. Claim: There is no precedent for use of section 109 in affirmative litigation. Response: Contrary to proponents of the riders, section 109 has been used in affirmative litigation in the past. For example, it has been used in a case to recover royalties from oil companies, when the Justice Department accepted funding under section 109 from the Department of Interior. It has also been used in custom fraud cases, when the Justice Department accepted funding under section 109 from the Customs Service. Claim: Federal funds to support tobacco litigation will be used to enrich trial lawyers. Response: The Justice Department has not engaged any lawyer on a contingency fee basis. Early in the case, the Department retained one outside law firm, the firm that represented the state of Minnesota in its successful tobacco litigation, to obtain the benefit of its prior experience. This was a limited arrangement on terms that were favorable to the government. (Under the contract, which ran for three months, the firm provided assistance to the Department at a reduced rate of $75 per hour, well below its normal billing rates, with total payments less than $80,000.) The tobacco case is currently being argued by Justice Department attorneys and there is no expectation that the Department will contract with outside counsel. -------------------------------------------------------------------------------- Deaths Caused by Tobacco. Tobacco use is responsible for more than 430,000 premature deaths each year. Smoking kills by causing chronic lung disease, coronary heart disease, and stroke as well as cancer of the lungs, larynx, esophagus, mouth, and bladder. Comparison to Other Causes of Death. Tobacco use is the leading cause of premature death in the United States. In fact, one out of every five deaths is caused by tobacco use. Tobacco use causes twice the number of deaths caused by AIDs, alcohol, motor vehicles, homicide, drugs, and suicide combined. Projected Future Toll. If current smoking patterns continue, an estimated 25 million Americans who are alive today will die prematurely from smoking-related illnesses, including an estimated 5 million children. Worldwide, 500 million people who are alive today will eventually die from tobacco-related causes. Youth Smokers. The tobacco industry maintains its market by recruiting youth to replace smokers who die or quit. About 5 million children smoke in the United States. Each day, another 3,000 children become regular smokers. One out of every three of these children will eventually die from tobacco-related causes. Other Adverse Health Effects. Smoking causes or contributes to a variety of debilitating physical and medical problems. Chronic coughing, emphysema, and bronchitis are products of smoking, and smokers are more susceptible to influenza. Smokers are more likely to suffer from periodontal disease. Smoking can also cause the early onset of menopause among women, incontinence, and reduced fertility, and increases the risk of impotence by 50%. Health Care Costs. Tobacco-related illnesses cost the federal taxpayer approximately $25 billion a year, excluding the federal share of Medicaid. The Medicare program pays $20.5 billion annually to treat tobacco-related illnesses; the Veterans Administration pays $4 billion; the Department of Defense pays $1.6 billion; and the Indian Health Service pays $300 million. In addition, tobacco-related health care costs the Medicaid program nearly $17 billion a year, of which federal taxpayers pay nearly $10 billion. Overall, public and private payments for tobacco-related care totaled nearly $90 billion in 1997. -------------------------------------------------------------------------------- Total Campaign Contributions. The tobacco industry is one of the largest contributors to political campaigns. Since 1991, the industry has spent over $31.8 million dollars in campaign contributions. Support for Republicans. The tobacco industry has directed the overwhelming majority of its contributions to Republicans -- approximately 80% of all campaign donations this decade. The 1998 Election Cycle. In the 1998 election cycle, the tobacco industry contributed over $8 million dollars to federal political campaigns. Philip Morris alone gave the GOP over $2 million in campaign contributions, making it the top contributor of soft money to the Republican Party. The 2000 Elections. The tobacco industry has already contributed $2.5 million in campaign contributions for the 2000 elections. Over 80% of these donations have gone to Republicans. Philip Morris has contributed over $1 million in soft money to the GOP and currently stands as the party's second largest corporate contributor. "Air Tobacco". Tobacco companies have also provided Republican lawmakers with subsidized travel on their private corporate jets. These lawmakers, who include Majority Leader Dick Armey, Majority Whip Tom DeLay, and Senate Majority Leader Trent Lott, regularly fly on tobacco industry jets, but reimburse the companies only for the value of a first class airplane ticket, an amount that accounts for just a fraction of what the travel would cost in the private market. The tobacco industry used this loophole in 1997 and 1998 to provide the GOP with over $10.4 million in travel benefits, while receiving just over $600,000 in reimbursements. No Democrats were provided travel by the industry. Lobbying Expenditures. In addition to paying millions in campaign contributions, the tobacco industry also spends tens of millions of dollars on lobbying per election cycle. In the 1998 cycle, the industry's lobbying expenditures topped $100 million dollars. In 1998, two tobacco companies, Philip Morris and Brown & Williamson, had the two highest lobbying expenditures of any company, spending $25.2 million and $23 million each. -------------------------------------------------------------------------------- Marketing to Children Although the tobacco companies deny in public that they market cigarettes to children, their internal industry documents describe their youth-marketing plans in detail. Here are some excerpts from these documents. 1973: "Realistically, if our Company is to survive and prosper, over the long term we must get our share of the youth market. ...Thus we need new brands designed to be particularly attractive to the young smoker." (RJR research planning memorandum) 1974: "[T]his young adult market, the 14-24 age group, ... represent[s] ... tomorrow's cigarette business. As this 14-24 age group matures, they will account for a key share of the total cigarette volume -- for at least the next 25 years. ... [O]ur strategy becomes clear for our established brands: 1. Direct advertising appeal to the younger smokers." (Presentation by C.A. Tucker, RJR Vice President of Marketing, to the RJR Board of Directors) 1975: "Marlboro's phenomenal growth rate in the past has been attributable in large part to our high market penetration among younger smokers ... 15-19 year-olds. ... [M]y own data, which includes younger teenagers, shows even higher Marlboro market penetration among 15-17 year-olds. The teenage years are ... important because those are the years during which most smokers begin to smoke, the years in which initial brand selections are made, and the period in the life-cycle in which conformity to peer-group norms is greatest." (Memorandum to R.B. Seligman, Philip Morris Vice President for Research and Development) 1978: "The success of NEWPORT has been fantastic during the past few years. ... [T]he base of our business is the high school student. ... It is the ‘In' brand to smoke if you want to be one of the group." (Memorandum to Curtis Judge, President of Lorillard Tobacco Co.) 1981: "Today's teenager is tomorrow's potential regular customer. ... [T]he overwhelming majority of smokers first begin to smoke while still in their teens. ... [I]t is during the teenage years that the initial brand choice is made. ... The smoking patterns of teenagers are particularly important to Philip Morris: ... Because of our high share of the market among the youngest smokers, Philip Morris will suffer more than the other companies from the decline in the number of teenage smokers." (Memorandum to R.B. Seligman, Philip Morris Vice President for Research and Development) 1990: "Target smokers are approaching adulthood. ... Their key interests include girls, cars, music, sports and dancing." (Report by Total Marketing to RJR on Camel Brand Promotion Opportunities) -------------------------------------------------------------------------------- Addictiveness of Nicotine In public, the tobacco companies denied for decades that nicotine is addictive. But internally, their own scientists and executives have long know about the dangers and addictiveness of nicotine. Here are some excerpts about nicotine from internal industry documents. 1962: "Smoking is a habit of addiction." (Report by Sir Charles Ellis, Science Advisor to the Board of Directors of British American Tobacco Co. (BATCo), the parent company of Brown & Williamson Tobacco Corp.) 1963: "Nicotine is addictive ... We are, then, in the business of selling nicotine, an addictive drug." (Memorandum by Addison Yeaman, General Counsel of Brown and Williamson Tobacco Corp.) 1969: "[D]o we really want to tout cigarette smoke as a drug? It is, of course, but there are dangerous F.D.A. implications to having such conceptualization go beyond these walls." (Memorandum to Helmut Wakeham, Philip Morris Vice President for Research and Development) 1972: "In a sense, the tobacco industry may be thought of as being a specialized, highly ritualized and stylized segment of the pharmaceutical industry. ... [A] tobacco product is, in essence, a vehicle for delivery of nicotine. ... Our Industry is ... based upon design, manufacture and sale of attractive dosage forms of nicotine. (RJR Research Memorandum) 1972: "Think of the cigarette as a dispenser for a dose unit of nicotine." (Philip Morris Research Report) 1978: "Very few consumers are aware of the effects of nicotine, i.e., its addictive nature and that nicotine is a poison." (Memorandum by H.D. Steele, Brown & Williamson Brand Manager) 1978: "The strong addiction to cigarette[s] removes freedom of choice from many individuals." (Report by S.J. Green, BATCo Director of Research and BATCo Board Member) 1980: "A cigarette as a ‘drug' administration system for public use has very very significant advantages. ... Other ‘drugs' such as marijuanha, amphetamines, and alcohol are slower and may be mood dependant. ... Let us provide the exquisitness, and hope that they, our consumers, continue to remain unsatisfied. All we would want then is a larger bag to carry the money to the bank." (BATCo Research Memorandum) 1980: "I believe the thing we sell most is nicotine." (Memorandum by T.S. Osdene, Philip Morris Director of Research, to R.B. Seligman, Philip Morris Vice President for Research and Development) -------------------------------------------------------------------------------- For decades, the tobacco industry has publicly denied the dangers of smoking. Internal industry documents show, however, that at the same time that the industry was publicly denying these dangers, the industry's own scientists and executives were fully aware of them. The following excerpts contrast the industry's public statements with excerpts from the industry's internal documents. Public Statements by the Industry "[T]here is no biological or chemical proof that smoking is causally related to the diseases and conditions which are claimed to be statistically associated with smoking." (1969 Testimony of Joseph Cullman, Chairman and CEO of Philip Morris, before Congress) "[T]here is no serious significant health hazard for the average person who smokes in moderation. ...[A]mong the active researchers in these fields, there is no great preponderance of feeling that cigarette smoke is carcinogenic." (1972 Testimony of Dr. Sheldon C. Sommers, head of the scientific review board for the Tobacco Industry Research Council, before Congress) "[N]o causal link between smoking and disease has been established ... . [S]cience to date after much research including over $100 million funded by our industry, indicates that no causal link has been shown." (1982 Testimony of Edward Horrigan, Chairman and CEO of RJR, before Congress) "I'm unclear in my own mind as to whether anybody dies from cigarette smoking-related diseases." (1998 Testimony of Geoffrey Bible, Chairman of Philip Morris, in the Minnesota tobacco trial) Internal Company Documents "The evidence implicating smoking as being causally related to cancer of the lung is very strong. ...[I]n the absence of the smoking habit, in particular of the cigarette smoking habit, the lung cancer death-rate in the community would be a small fraction of its present level. It is clear that every form of smoking increases the risk of lung cancer." (1960 report to BATCo, parent company of Brown & Williamson) "Obviously the amount of evidence accumulated to indict cigarette smoke as a health hazard is overwhelming." (1962 RJR research report) "[W]e are of the opinion that [the research] proves beyond all reasonable doubt the causation of lung cancer by smoke." (1970 memorandum from the General Manager of Research at Gallaher Ltd., American Tobacco Co.'s sister company) "Let's face the facts... . Nitrosamines as a class are potent carcinogens. ... Tobacco-specific nonvolatile nitrosamines are present in significant amounts in cigarette smoke." (1970 memorandum to T.S. Osdene, Philip Morris Director of Research) |
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