[Intl-tobacco] WSJ on Philip Morris apology

[Robert Weissman]

July 26, 2001
Wall Street Journal
Marketplace

Philip Morris Apologizes for Report Touting Benefits of Smokers' Deaths
By GORDON FAIRCLOUGH   Staff Reporter of THE WALL STREET JOURNAL

Trying to defuse a widening public-relations crisis, a top executive at
Philip Morris Cos. apologized for a company-funded report calling cost
savings from smokers' early deaths one of the "positive effects" of
cigarette consumption.

 "We understand that this was not only a terrible mistake, but that it was
wrong," Steven C. Parrish, a senior vice president, said in an interview
Wednesday. "To say it's totally inappropriate is an understatement."

Philip Morris officials in the Czech Republic last month distributed an
economic analysis concluding that cigarettes aren't a drain on the
country's budget, in part because the government saves money on health
care, pensions and housing when smokers die prematurely.

Sen. Dianne Feinstein, a California Democrat, last week wrote a letter to
Philip Morris chief executive Geoffrey C. Bible after reading about the
Czech report. Mr. Bible answered in a letter dated Tuesday, saying that
the funding and release of the study "exhibited terrible judgment as well
as a complete and unacceptable disregard of basic human values."

"All of us at Philip Morris, no matter where we work, are extremely sorry
for this," he added.

The Czech study, commissioned by Philip Morris and produced by consulting
firm Arthur D. Little International, weighs the costs of tobacco use, such
as medical care for sick smokers, against benefits, including revenue from
excise taxes on cigarettes. The study found that in 1999 the Czech
government had a net gain of $147.1 million from smoking.

The study's conclusions were reported last week in The Wall Street Journal
and since then have sparked blistering commentary. "Tobacco companies used
to deny that cigarettes killed people. Now they brag about it,"
columnist Ellen Goodman wrote in the Boston Globe. On ABC's "Politically
Incorrect," host Bill Maher endorsed the study's conclusion that cigarette
smokers aren't a drag on public finances, but called Philip Morris
"industrial scum" and said that "smoking is a drug" and "cigarette
companies are the pushers."

The report and the outcry have dealt a serious blow to Philip Morris's
efforts to rehabilitate its reputation. The company has been reaching out
to its critics and pouring $100 million a year into feel-good ads
promoting corporate good deeds, such as donations to food banks and
shelters for battered women. The goal has been to persuade politicians,
potential jurors and the public that Philip Morris has changed.

 The company also has been lobbying to have Congress give the Food and
Drug Administration limited authority to regulate tobacco. The company
wants to persuade doubting lawmakers that it has reformed its business
practices and is credible enough to have its views on regulation taken
seriously. The Czech report threatens to undo some of the progress.

"This is just more evidence that they haven't changed," an aide to a
senior Democratic senator said of the study. "It reinforces the notion
that everything they say has to be taken with a great deal of skepticism."

The publicity surrounding the report "is obviously a big setback," said
Mr.  Parrish, who has played a high-profile role in efforts to repair the
company's image. "Hopefully we'll be able to get beyond it."

For antitobacco groups, blunting Philip Morris's image-polishing campaign
is a top priority, and the Czech study has given them powerful new
ammunition. Thursday, the American Legacy Foundation, a Washington, D.C.,
antismoking group, is running an ad in major newspapers across the country
that makes reference to the report. The ad shows the foot and leg of a
cadaver in a morgue. A toe tag reads: "$1,227. That's how much a study by
Philip Morris said the Czech Republic saves on health care, pensions and
housing every time a smoker dies."

(American Legacy said The Wall Street Journal refused to run the ad. A
spokesman for Dow Jones & Co., publisher of the Journal, said the paper
"has standards, which include rules against running ads that have morbid
or ghoulish images for shock value.")

 Mr. Parrish said Philip Morris has canceled plans for similar studies in
Poland, Slovakia, Hungary, and Slovenia. The Czech report was prepared
without the knowledge of officials at Philip Morris's New York
 headquarters, he said, and was done in anticipation of a debate over
excise-tax increases on cigarettes in the Czech Republic. A Philip Morris
spokesman said the company remains "concerned" about a tax increase, which
public-health experts advocate because demand for cigarettes falls as
prices rise.

 In a letter sent Friday to employees of Philip Morris's international
tobacco business, John R. Nelson, the unit's CEO, said: "It is clear that
we made a mistake in funding and publishing this study. I regret this
mistake, and I ask our entire management team to be more vigilant on these
issues in the future."

Says Mr. Parrish: "Rest assured we won't be doing this again."

Write to Gordon Fairclough at gordon.fairclough@wsj.com