[Intl-tobacco] The smoking gun: Australian memo on document destruction

[robert weissman]

http://www.smh.com.au/articles/2004/10/03/1096741899115.html?oneclick=true

Sidney Morning Herald
The smoking gun
October 4, 2004


An Australian memo is at the centre of a $US280 billion legal battle
between the tobacco industry and the US Government. Caroline Overington
and Stewart Fist report.

It sounds like a scene from a mobster movie: on a cold day in December
1953, a gang of drug pedlars met beneath a chandelier at New York's
Plaza Hotel.

Given the year, they probably arrived in big American cars. Given the
month, they would certainly have been wearing long, cashmere overcoats,
perhaps with snow on the shoulders.

This wasn't a meeting of the Mob. It was a meeting of cigarette company
executives. The drug they were pushing was legal: it was nicotine.

However, in a deeply creative move, the US Government has decided to
treat them like mobsters.

The Department of Justice has launched a civil action against the
tobacco companies that employed those executives, accusing them, of all
things, of racketeering. It hopes to use America's Racketeer-Influenced
and Corrupt Organisations (RICO) Act, which is normally used to pursue
mobsters, to bring the giant tobacco industry to its knees.

It is the biggest civil racketeering trial in history. The figures are
staggering: the US Government, through its lawyers, will seek the
largest civil damage award in US history: $US280 billion ($386 billion).
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The Justice Department has spent $US135 million pursuing the case, which
started in 1999, although the hearing didn't get under way in Washington
until last week. That amount easily eclipses the estimated $US50 million
it spent on the Microsoft antitrust case.

To prepare for the hearing, the Government's lawyers amassed a document
archive of 80 million pages. Cigarette makers have made another 42
million pages available (many tobacco industry documents are publicly
available at sites such as http://www.pmdocs.com). The two sides are
expected to call as many as 100 witnesses.

In order to prove fraud and racketeering, the Government must convince a
single judge that cigarette makers conspired for decades to hide the
dangers of smoking by destroying documents and pretending to fund
research that showed that smoking wasn't bad for the health.

Key to the Government's case is an Australian document known as the
Foyle Memorandum. The trial was delayed while an appeals court heard
arguments about the memo, which has been described as a document that
could "make or break" the case for either side.

No one outside the tobacco industry knows exactly what the document (or
documents) contain. US Government lawyers believe it is the advice of a
London lawyer, Andrew Foyle, who worked for the Australian office of
British American Tobacco, on whether the company should keep or destroy
internal paperwork in light of increasing litigation.

The Foyle Memorandum came to light when a Melbourne smoker, Rolah
McCabe, sued BAT Australia in 2002 after contracting lung cancer. The
court found BAT Australia had destroyed certain documents in what it
referred to as part of a "document retention" policy on which it had
been advised by lawyers. The findings were later appealed against and
overturned, but US lawyers have been chasing the Foyle Memorandum since.

BAT argues the memo is a protected lawyer-client communication. In June,
the judge presiding over the US case, Judge Gladys Kessler, ordered BAT
to provide the memo, saying the company had engaged in "inexcusable
conduct" in its two-year struggle to withhold it.

US Government lawyers believe the document could strengthen their
argument that tobacco companies committed fraud by lying about the
dangers of smoking and hiding that information from the public.

William Schultz, a former Justice Department lawyer who headed the
tobacco case during the Clinton administration, says the memo is key to
the Government's case. "I think, in the context of a fraud case,
evidence of intentional document destruction could be very relevant
because the whole notion of fraud is that you are deceiving the public,"
Schultz said last week. "Document destruction on a systematic basis
could be a central activity in the scheme of fraud."

That legal battle continues, but there are other links to Australia in
the US trial. Australian executives managed Philip Morris's policies on
smoking and health at various times in the 1980s and 1990s.

Australia is mentioned in many tobacco industry documents that are
already in the public domain. By the late 1980s Australia had developed
a reputation in the international industry for the ferocity of its
anti-smoking activists. The activist group BUGA UP (Billboard Utilising
Graffitists Against Unhealthy Promotions) - which slapped grafitti on
tobacco billboards around Sydney - was well known. Documents show US
tobacco executives were impressed by the Australian anti-smoking lobby's
success in having a sports and cultural levy added to cigarettes, to
fund a ban on tobacco sponsorship of sporting events.

The industry began to test marketing and legal initiatives in Australia
in the 1970s. For instance, the industry successfully trialled
scientific PR tours in Australia to test how media would respond to
experts wheeled out by the tobacco industry.

A mid-1980s worldwide initiative to counter the rising fear of passive
smoking was named Project Downunder in honour of Australian initiatives
and possibly Australian executives who championed the cause.

A Tobacco Institute memo from the US dated February 10, 1988, outlines
some of project's aims: "1. Provide smokers with a positive feeling
about themselves and their custom through the alleviation of the
'second-class citizen' treatment many smokers face in public places. 2.
Improve the general PUBLIC perception of smokers, smoking and the
tobacco industry..."

A landmark Australian court case on passive smoking also helped shape
the tobacco industry's strategies around the world.

In 1986 the Tobacco Institute of Australia published a newspaper
advertisement about cigarette smoke under the heading: "A message from
those who do ... to those who don't." The ad said in part: "There is
little evidence and nothing that proves scientifically that cigarette
smoking causes diseases in non-smokers."

The institute later published a correction after prompting by the then
Trade Practices Commission. However, Australian consumer groups -
represented by the Consumers Federation of Australia (then known as the
Australian Federation of Consumer Organisations, or AFCO) - were
unsatisfied and sought a ruling in the Federal Court to ensure the
institute would not repeat the earlier advertisement.

The case examined whether there was "little evidence" that environmental
tobacco smoke (ETS) caused disease in non-smokers and whether there was
scientific proof. In 1991 the court ruled the original statement was
"false and misleading" as of 1986.

As recorded by a Philip Morris memo issued a week later, Justice Trevor
Morling ruled: "There is more than a little evidence and indeed
scientific proof that environmental tobacco smoke causes lung cancer,
respiratory disease (limited to such disease in children under 12 months
of age) and attacks of asthma in non-smokers."

This case was so significant that it partly prompted the industry in
1987 to form an "international ETS consultant program" overseen from New
York.

"Approximately 70 scientists [including three Australians] in the major
international markets of concern to [Philip Morris International] have
been recruited to the program," notes a 1989 Philip Morris memo.

"Six of our UK consultants have prepared affadavits that are to be used
in defence of the AFCO case in Australia," notes the memo.

The program completed "several hundred specific activities or events"
around the world in the first two years of operation, the memo notes.

"These have included numerous press briefings, repeated briefings of
important government officials, the publication of a number of review
articles on the science of ETS, several air quality monitoring studies,
convening of a number of scientific conferences, submissions of comments
on smoking restriction proposals being considered in a number of
countries, testimony before a variety of legislative bodies ... and
approximately 100 separate presentations at major international
scientific meetings challenging the unwarranted health claims that have
been made concerning ETS," it says.

Following the 1991 ruling, a group of international industry lawyers met
in London to consider the implications for the industry. This became the
International ETS Management Committee.

THE current US trial case is about "a 50-year pattern of
misrepresentation, half-truths and lies", the US Justice Department
lawyer Frank Marine said in a five-hour opening statement before a
Washington court last week.

Marine, who specialises in cases of racketeering and fraud, said
cigarette makers deliberately set up bogus research and PR centres such
as the now-defunct Tobacco Institute, to con the public into thinking
that it was doing research on its products, and that research showed
that cigarettes were not necessarily addictive, nor harmful to health.

"Why did the defendants pursue this course of action? Money, pure and
simple," said Marine.

In response, lawyers for the tobacco companies will argue that a key
meeting at the New York Plaza Hotel - which resulted in all American
cigarette companies agreeing to release a "Frank Statement to Smokers"
that said smoking was not harmful to health - was not a secret. Indeed,
it was reported by newspapers at the time.

The tobacco industry's lawyers will also argue that statements it made
about the relative safety of smoking were consistent with scientific
evidence available in the 1950s and 1960s.

The federal case - which could take as long as six months - is separate
from a huge claim bought by America's state governments that ended in
1998 with tobacco firms agreeing to pay $US250 billion to cover the
states' cost of health care for sick smokers on welfare.

The federal case will also be more difficult to win. To prove
racketeering, the US Government must convince the court that cigarette
companies not only conspired to hide and deny evidence that smoking
could kill, but also that they will offend again.

Lawyers for the tobacco companies say this is impossible, since all
cigarette packets now carry health warnings, as do advertisements in the US.

Besides BAT, defendants in the trial include Altria Group's Philip
Morris USA, Loews Corporation's Lorillard Tobacco Company and Vector
Group's Liggett Group.

In its opening statement, delivered to the court last week, Philip
Morris USA's lawyer, Ted Wells, said the tobacco industry never
"purposely lied to the public about the dangers of smoking".

"We do not concede in any shape or form that there was a racketeering
conspiracy," Wells said.

"Some of the conduct by individuals in the past was wrong-headed,
mistaken and even regrettable but it wasn't a conspiracy."

Tobacco lawyers also argued that the Government's case was focused
entirely on the past, and ignored the fact that cigarette makers today
go to great lengths to warn consumers about the dangers of smoking.

"We have acknowledged that we're in the business of selling a dangerous
product," Wells said.

"Each of the defendants say to the American public in a clear and
unambiguous manner that smoking is dangerous. They [the public] can hear
our message. It's an unambiguous and clear message that we sell a
dangerous product."

Judge Kessler - who will decide the case - questioned whether that
admission was being communicated directly to the American public.

"Is that succinct and pithy phrase actually on any cigarette packaging
or on any company websites anywhere?" she asked.

In his opening statement, Peter Biersteker, a lawyer representing RJ
Reynolds, argued that cigarette makers had tried to make their products
safer.

As evidence, he cited the development of low-tar or "light" cigarettes
in the 1970s. Studies have shown these are no better for smokers than
"high-tar" cigarettes but, Biersteker said, nobody understood that at
the time. Indeed, until recently, governments advised smokers to switch
to "low-tar", not knowing it did no good.

Biersteker said cigarette companies had rushed to introduce filters when
it was shown that the more a person smoked, the more likely he or she
was to develop lung cancer. In 1952, only 1 per cent of cigarettes had
filters; now, almost all do.

The Government's first witness - who took the stand on Friday, was the
former Food and Drug Administration chief, David Kessler.

He told the court that, as recently as 1994, there was evidence that the
tobacco industry was deliberately managing the level of nicotine in
cigarettes to keep people addicted.

As well as presenting evidence about the manipulation of nicotine
levels, the Government's lawyers will attempt to demonstrate seven
"pillars" to the tobacco industry's plan to defraud consumers: A
campaign to deny that smoking and exposure to tobacco smoke cause
adverse health effects; Propagation through the tobacco groups of the
"myth" that the industry was researching its products; Denial that
nicotine is addictive; Denial that cigarette makers manipulate nicotine
levels to create and sustain addiction among their customers; Marketing
of "light" cigarettes as less hazardous, even though the industry's own
evidence shows they are not; Marketing to children, and; Suppression
of evidence of smoking's danger by destroying some incriminating documents.

The grandson of the founder of RJ Reynolds Tobacco, Patrick Reynolds,
who is now president of the Foundation for a Smokefree America, last
week told USA Today newspaper that companies like his grandfather's had
for years "claimed publicly that cigarettes never cause disease, and now
they should pay the price".

The US Government will cite studies that suggest cigarettes are
responsible for one in five deaths in the United States, or nearly
500,000 deaths a year.

"The defendants' recent, superficial changes in behaviour in reaction to
this and other lawsuits are too little, too late," said Matt Zabel,
deputy associate attorney-general.

If the US Government wins, however, it may have another problem on its
hands. A $US280 billion settlement would effectively bankrupt the
nation's cigarette companies if it was payable in a lump sum.

The US would then be faced with a choice: it could either close them
down, which would mean the loss of thousands of jobs, or it could sell
them to some unknown, probably foreign buyers. Alternatively - and very
improbably - it could run them itself. This would, at least, cut out the
middle man. As Philip Morris likes to say: "Washington makes more money
when Philip Morris sells a pack of cigarettes than Philip Morris does."

The more likely scenario is that, as with earlier cases, the fine would
be paid progressively over a number of years. However, in that case, the
tobacco companies could simply raise retail prices to cover the cost of
progressive fines.

With Reuters, Associated Press and Bloomberg