Monday, July 24, 2006

IN MY VIEW: $130 Billion Smoking Cessation Remedy Would Be Strong Incentive for Future RICO Violations

Regardless of the true motivations of Associate Attorney General Robert McCallum in dictating that the DOJ tobacco trial team replace a proposed $130 billion backwards-looking smoking cessation remedy with a $10 billion partially forwards-looking one, one thing is quite clear: this action did not have the effect of undermining, weakening, or destroying the case, as anti-smoking groups have led the public to believe.

The reason? Because the $130 billion remedy is in direct conflict with the D.C. Appeals Court ruling that the only remedies allowable under the civil remedies provisions of the RICO statute are those which directly "prevent and restrain" future RICO violations. If they are not measured by future activity, designed to prevent future violations, and expected to be reasonably effective in preventing future violations, then they do not meet the statute's requirements, at least in the opinion of the Appeals Court.

What few people seem to realize (at least those within the tobacco control movement) is that the originally proposed $130 billion smoking cessation remedy is not only not allowable because it is backwards-looking (measured by past actions of the industry), but it is not allowable because it would not serve to prevent or restrain future RICO violations. In fact, I believe it would significantly increase the incentive for the tobacco company defendants to engage in future RICO violations in order to replace the customers they would lose from smoking cessation and to restore lost profits due to the payment of so much money.

By requiring the defendants to pay huge sums of money, the Court would be creating a strong incentive for the company to find some way to restore that money. And the most logical way to do that would be to recruit new smokers. This could be done most effectively by deceiving them about the health effects and addictiveness of cigarettes: in other words, through the very alleged RICO violations that the DOJ suit is aiming to address.

My own research has demonstrated that brand switching is simply not a prevalent enough phenomenon to allow tobacco companies to replace these huge sums of money. Less than 10% of smokers were found to switch cigarette brands in any given year and only about 5% switched to brands of another company.

Introducing new cigarette brands, especially reduced exposure brands, would be a second option to restore the lost funds. But absent the Philip Morris-supported FDA legislation pending in Congress, cigarette companies will not begin to market such products out of fear of potential litigation.

Thus, the only feasible option is to recoup the money by being more effective and more aggressive in recruiting new smokers, particularly young ones. In this way, the $130 billion "remedy" would actually serve as a strong incentive for companies to engage in RICO violations in the future.

There is simply no way I see that the originally proposed smoking cessation remedy could be defended as being allowable under the RICO statute, especially as that statute has been interpreted by the D.C. Court of Appeals.

This means that even if McCallum was blatantly trying to protect the tobacco companies under the direction of the Bush Administration, he was not effective in doing so. It means that contrary to the claims of anti-smoking groups, McCallum's actions did not undermine or in any way destroy the case, even if that was his intent.

As much as we in tobacco control might want to see huge sums of money awarded for smoking cessation and other anti-smoking programs, we have to work within the confines of the law. Accusing McCallum for destroying the case because it eliminates the possibility of receiving huge amounts of money for anti-smoking activities may be a headline-grabber, but it is misleading, based on a faulty understanding of the legal issues involved in the case, and unhelpful when it comes to actually protecting the public's health, as opposed to just talking about it.

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