Government Suit Against Big Tobacco Dealt Setback

W A S H I N G T O N, Sept. 28, 2000 -- A judge today dealt a blow to thegovernment’s effort to recover billions of dollars from cigarettemakers for treating ill smokers, dismissing two of the claims in afederal lawsuit against the industry.

U.S. District Judge Gladys Kessler ruled the government couldpursue federal racketeering claims against the industry but couldnot use the Medical Care Recovery Act or the Federal EmployeesHealth Benefits Act to recover Medicare expenses related to illsmokers.

The judge said that if the government wanted to recover expensesdating 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 torecover Medicare and FEHBA expenses,” Kessler ruled.

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

Racketeering Claims PossibleThe judge, however, ruled the government could proceed with twoothers of its claims under federal racketeering laws.

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

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

“At a very minimum the government has stated a claim forinjunctive relief: whether the government can prove it remains tobe seen,” she wrote.

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

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

The government argued it is legally entitled to seek paymentsdating back to 1954, when the Justice Department alleges thecigarette makers began conspiring to mislead the public about thedangers of smoking.

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

Republicans and members of Congress from tobacco states havetried to deny the Justice Department money to pursue the lawsuit.In June, they suffered a bipartisan defeat when the House voted215-183 to allow Justice to get $4 million each next year from thedepartments of Defense, Veterans Affairs and Health and HumanServices, which are the client agencies in the case.

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

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

Big Tobacco Accused of Hiding DataWhen the lawsuit was filed last September, Attorney GeneralJanet Reno accused the tobacco industry of putting profit abovepublic health by concealing data that showed nicotine is addictiveand smoking causes disease.

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

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

Kessler rejected that request today.