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Last Updated: Saturday, 5 February 2005, 09:21 GMT
Why tobacco was seen as a racket
It may seem odd to bracket some of America's best known corporate names with mafia dons and underworld mobsters but that is precisely what the government of the United States wanted to do.

Philip Morris and other tobacco companies were accused of conspiring and running "Racketeer Influenced and Corrupt Organisations".

Under the Rico legislation, which was designed to break organised crime rings, the companies were accused of conspiring to defraud the public for 50 years.

The Department of Justice sought the "disgorgement" of the profits from this alleged fraud, a cool $280bn.

Plaza plot

The conspiracy, the government said, started on 15 December, 1953 at a grand room in the Plaza Hotel on the south-east corner of Central Park in New York.

There is no doubt that executives from the major tobacco companies met there and discussed the state of the industry, including the scientific research on the effects of smoking.

It was the government's contention that they then agreed to present a unified strategy denying the harmful effects - and that added up to fraud. Scientific evidence was mounting that tobacco was both addictive and harmful.

Despite that evidence, the industry devised a scheme to, according to the charges, "preserve and enhance the tobacco industry's profits by maximising the number of smokers "and to avoid adverse liability judgements" linked to the adverse affects of nicotine.

'In good faith'

This meant, for example, denying that nicotine was addictive.

Eleven years ago, there was a moment of true drama at a Congressional hearing when the presidents of the big tobacco companies sat in a line in a Congressional hearing and were asked whether they thought nicotine was addictive.

In the space of 30 seconds, each of them, one by one, denied their product's addictive quality. That, the government alleges, was part of the conspiracy.

The companies have changed their stance over the years.

Philip Morris, part of Altria, now accepts that nicotine is harmful. Altria's General Counsel, William Ohlemeyer, told the BBC last year that statements made in the past may have been wrong but they were not dishonest.

In other words, that when the executives said nicotine was not addictive, they were stating what they believed, and not behaving like mobsters defrauding the public.

Up in smoke

The government presented internal industry documents that its lawyers hoped would indicate beyond doubt that scientists within the companies knew exactly what the true nature of tobacco was, even though the view presented to the public was much more benign.

The real question for the purposes of this case has been how long the deceit lasted.

William Ohlemeyer said, when the case came to court last September, that to get the full "disgorgement" of profits under the Rico legislation, the government would have to prove that the conspiracy was still going on and that it would continue.

Since the tobacco industry now accepts that nicotine is harmful, it is hard to argue that it continues to deceive the public.

And two of the three judges at the District of Colombia's Court of Appeals appear to have agreed.

Judge David Sentelle wrote in his ruling that "disgorgement is not an available remedy" under the legislation.

He went on, "even if disgorgement were available, the government's model fails the... test for permissible disgorgement that will 'prevent and restrain' future violations".

Court rejects $280bn tobacco case
04 Feb 05 |  Business
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19 Mar 03 |  Business

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