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February 19th, 2010:

U.S., big tobacco take racketeering case to top court

Reuters, Dan Margolies,

19th Feb, 2010

WASHINGTON (Reuters) – The government and three cigarette makers separately asked the U.S. Supreme Court on Friday to review a racketeering verdict against major tobacco companies that was upheld by an appeals court last year.

Altria Group Inc’s Philip Morris USA unit and two co-defendants filed to overturn the verdict, while the government argues the appeals court wrongly denied the disgorgement of billions of dollars in ill-gotten gains by the tobacco industry.

In May, a three-judge panel of the U.S. Court of Appeals for the District of Columbia affirmed a trial judge’s verdict against the cigarette makers, finding they violated federal anti-racketeering laws by conspiring to lie about the dangers of smoking.

If the Supreme Court agrees to take the case, it could redefine the reach of the Racketeer Influenced and Corrupt Organizations Act.

Besides Philip Morris, maker of Marlboro cigarettes, the appeals court ruling was challenged Friday by Lorillard Inc, home of the Kent and Newport brands, and the R.J. Reynolds Tobacco unit of Reynolds American Inc, maker of Camel and other cigarettes.

The case was filed in 1999 by the Clinton administration, which originally sought $289 billion in damages. During the original trial, which began in 2004, the Justice Department under the Bush administration scaled back its demands to $14 billion for anti-smoking campaigns.

The government had also sued Vector Group Ltd’s Liggett Group, British American Tobacco Plc and its Brown & Williamson unit and two now defunct industry groups: the Council for Tobacco Research and the Tobacco Institute.

U.S. District Judge Gladys Kessler ruled in 2006 that the companies broke the law and could no longer use expressions such as “low tar” or “light” in their cigarette marketing. But she said she did not have the authority to force them to fund a smoking cessation program.

The appeals court found that Kessler was limited to “forward-looking” remedies aimed at future racketeering violations but properly precluded imposing smoking-cessation and public-education remedies.

The Supreme Court may take months to decide whether to review the case.

“There is a lot of risk here for the industry,” said Edward Sweda, senior attorney for the Tobacco Products Liability Project at Northeastern University School of Law in Boston.

Sweda said that if the Supreme Court agreed with the government, cigarette makers might find themselves ordered to cough up hundreds of millions, or even billions of dollars, for anti-tobacco advertising.


In its petition to the Supreme Court, the government argued that the appeals court had “eviscerated the relief available” in the biggest civil racketeering case ever brought by the United States.

The ruling “thwarted” the trial court’s efforts to craft appropriate relief “to remedy the ongoing effects of fifty years of unlawful racketeering activity — unlawful acts that have harmed and continue to harm the lives and health of many millions of Americans,” the government stated.

The tobacco companies argued in their petitions that the government had improperly invoked the racketeering statute and that the appeals court was overly deferential to Kessler.

“Given the critical underlying legal issues in this case, we strongly believe it is ripe for review by the Supreme Court,” said Michael Robinson, a spokesman for Lorillard.

Because the case raised free speech issues, the companies argued, the appeals court was obliged to make an independent examination of the record.

A judge or jury “should not have the virtually unreviewable authority to make factual findings that deny a defendant its fundamental First Amendment freedoms,” Philip Morris said in its petition.

The companies also argued that the appeals court erred when it found that a group of corporations could form a racketeering “enterprise” — a notion they said conflicted with the language of the racketeering law.

The appeals court found that Philip Morris, Lorillard, Reynolds and the other defendants had formed such an enterprise, by informally associating, coordinating research and conducting marketing activities with one another.

(Reporting by Dan Margolies; Editing by Tim Dobbyn and Gerald E. McCormick)

Smokes and mirrors

The Standard – Thursday, February 18, 2010

I refer to the articles “Failed tobacco tax sees hopes go up in smoke” (The Standard, January 25) by Nicole Alpert of the Lion Rock Institute and “Youth quitters find smokes too much of a temptation” (The Standard, February 10), which quoted Deanna Cheung of the Tobacco Control Concern Group.

Alpert states that tobacco taxation does not work, increases tobacco smuggling and refers to a previous “study” issued by the self-interest TCCG as if it were gospel.

This non-peer-reviewed study, which represents just 0.25 percent of Hong Kong’s total smokers, interviewed 2,008 smokers with the offer of replacement packs of toxic cigarettes in return for the toxic ones the smokers held. The TCCG implied that this study applied across the board in Hong Kong.

It claimed that 49.9 percent of cigarettes sold in Hong Kong in 2009 (5.8254 billion) were not duty paid, hence the government was losing vast tax amounts; that 18.9 percent could be illicit (1.1 billion); 11.1 percent fake or parallel imports (646.6 million); 7.8 percent were from magical unknown sources (454.3 million); and of the remaining 12.1 percent (704.87 million), 192.42 million sticks came from legal duty free border shops and 26.78 million were bought legally overseas.

It omits the missing portion of this total figure, which amounts to 485.65 million sticks. Hence they allege, without a shred of evidence, that 280 40-foot containers filled with contraband tobacco evaded Hong Kong tobacco tax last year.

The World Health Organization and World Bank say tobacco taxation is the single most effective fiscal health measure governments can take to prevent youths starting smoking and to reduce overall smoking by 4 to 7 percent.

The Tobacco Atlas reveals 30 percent of cigarettes worldwide are smuggled and that the source of the smuggling is the tobacco companies themselves as admitted in online UCSF Legacy tobacco documents and a Guardian newspaper quote from Kenneth Clarke of British American Tobacco.

The TCCG stated that Hong Kong tobacco tax is the second highest in Asia. Actual comparisons per 1,000 sticks are: Hong Kong 159 euros (HK$1,703), Melbourne 203 euros, Paris 265 euros, Singapore 265 euros, New York 300 euros, London 369 euros, and Dublin 423 euros. Hence the cigarette price in Hong Kong is only 60 percent, 53 percent and 43 percent of that in Singapore, New York and London, respectively.

In an Economist Intelligence Unit survey of the world’s most expensive places to live, Hong Kong is 11th, ahead of Dublin in 13th. Yet cigarettes cost 423 euros per 1000 in Dublin versus just 159 euros for the like amount in Hong Kong in 2009.

Hong Kong people should treat this attempted misinformation with the contempt it deserves, emanating from an industry whose chief executives swore on oath that nicotine is not addictive and whose major players were convicted under US RICO anti- racketeering laws.

James Middleton

Chairman anti tobacco committee

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