Government Suit Against Big Tobacco Dealt Setback

A judge today dealt a blow to the government’s effort to recover billions of dollars from cigarette makers for treating ill smokers, dismissing two of the claims in a federal lawsuit against the industry.

U.S. District Judge Gladys Kessler ruled the government could pursue federal racketeering claims against the industry but could not use the Medical Care Recovery Act or the Federal Employees Health Benefits Act to recover Medicare expenses related to ill smokers.

The judge said that if the government wanted to recover expenses dating to the 1950s, it should have acted sooner.

“Congress’ total inaction for over three decades ‘precludes’ an ‘interpretation’ of MCRA that would permit the government to recover Medicare and FEHBA expenses,” Kessler ruled.

“Accordingly the government’s MCRA claim must be dismissed,” the judge ruled.

Racketeering Claims Possible The judge, however, ruled the government could proceed with two others of its claims under federal racketeering laws.

That means the government can continue to try to prove that the cigarette makers misled the public about the dangers of smoking and should be forced to surrender the profits from past years resulting from what it called “unlawful activity.”

“Based on the sweeping nature of the government’s allegations and the fact that the parties have barely begun discovery to test the validity of these allegations, it would be premature for the court to rule,” Kessler wrote, explaining why she did not dismiss the entire lawsuit.

“At a very minimum the government has stated a claim for injunctive relief: whether the government can prove it remains to be seen,” she wrote.

Government Ready to Proceed At the Justice Department, Assistant Attorney General David W. Ogden said, “We are pleased the court has ruled that we can go forward with this important case. We look forward to proceeding to trial and holding the tobacco companies accountable for the fraudulent conduct alleged in this lawsuit.”

The government sued the major tobacco companies last year seeking to recover $20 billion a year spent by Medicare and other federal health plans to treat smoking-related illnesses.

The government argued it is legally entitled to seek payments dating back to 1954, when the Justice Department alleges the cigarette makers began conspiring to mislead the public about the dangers of smoking.

The tobacco companies asked Kessler to dismiss the entire lawsuit, prompting today’s ruling.

Republicans and members of Congress from tobacco states have tried to deny the Justice Department money to pursue the lawsuit. In June, they suffered a bipartisan defeat when the House voted 215-183 to allow Justice to get $4 million each next year from the departments of Defense, Veterans Affairs and Health and Human Services, which are the client agencies in the case.

The Senate Appropriations Committee, however, has approved a bill that would block the transfers.

The government estimates the lawsuit will cost a total of $40 million this year and next year.

Big Tobacco Accused of Hiding Data When the lawsuit was filed last September, Attorney General Janet Reno accused the tobacco industry of putting profit above public health by concealing data that showed nicotine is addictive and smoking causes disease.

Company officials fought the lawsuit rather than settle, as they did in 1998 by agreeing to pay the states $246 billion over 25 years to cover the cost of treating sick smokers in the Medicaid program, which serves the poor and disabled.

One tobacco company, Liggett Group, argued separately that it could not be sued under the racketeering provision because it broke with the other companies four years ago, settled with five states and agreed to help the states pursue the other companies.

Kessler rejected that request today.

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