Thursday, July 05, 2012

New Book Tells "Some of the Story" About Department of Justice's Lawsuit Against Big Tobacco

A new book written by Sharon Eubanks, JD, and Stanton Glantz, PhD, entitled “Bad Acts: The Racketeering Case Against the Tobacco Industry,” (American Public Health Association, 2012) tells the story of the Department of Justice's successful lawsuit against Big Tobacco, which resulted in a racketeering verdict against the tobacco industry. Eubanks is the attorney, formerly with the Department of Justice, who led the prosecution team. Glantz is a professor of medicine and an American Legacy Foundation Distinguished Professor in Tobacco Control at the University of California San Francisco School of Medicine.

According to a press release issued by the American Public Health Association, Eubanks stressed that: "The book ... addresses what was lost along the way — things like trust and adherence to the rule of law. I did not want the story of this case to get lost, or worse, to be retold with revisionist historical perspectives. The book is important because it shines a light on what can happen when those responsible for following the rule of law fail to apply the rule of law."

The Rest of the Story

Speaking of respect for the rule of law, it turns out that Eubanks consistently failed to heed the clear instruction from the D.C. appellate court that monetary remedies (such as tobacco industry payments for a national smoking cessation program) would not be allowable because under the civil remedies provisions of RICO, only forward-looking remedies are allowable. Her persistence in ignoring the clear mandates of the appellate court led to her attacking Assistant Attorney General Robert McCallum, who she claimed intentionally tried to weaken the case by lowering the amount of the requested smoking cessation remedy (from $130 billion to $10 billion).

After she left the DOJ, Eubanks told The Age (Australia), in an exclusive interview, that McCallum "took 'aggressive actions' to destroy a multibillion-dollar fraud case against tobacco companies" and "undermined the case once it became apparent that prosecutors could win." Eubanks was reported to have stated that McCallum "took aggressive actions to destroy our efforts when it became clear that we had firm legal bases for seeking much more meaningful remedies from the court."
Some of Eubanks' reasoning to support her position was revealed in a Pete Yost (AP) article. According to that article, Eubanks' position is based on a contention that McCallum interfered in the case by insisting on a reduction in the government's proposed remedy from $130 billion to $10 billion. She apparently claimed that "McCallum mischaracterized a court order in his statements to Capitol Hill, making it appear that U.S. District Judge Gladys Kessler criticized the government's embrace of smoking cessation as a remedy in the lawsuit."

The article explains that: "In his comments to the Senate, McCallum noted an order from the judge that the appeals court ruling 'struck a body blow to the government's case.' Eubanks said the 'body blow' language had nothing to do with a smoking cessation remedy and 'to make that suggestion is misleading.'"

Eubanks also complained that political appointees at DOJ wrote her closing arguments for her, in which she made the request for the reduced smoking cessation remedy.

McCallum was cleared of any wrongdoing by the DOJ Ethics Office, which ruled that McCallum's "actions in seeking and directing changes in the remedies sought were not influenced by any political considerations, but rather were based on good faith efforts to obtain remedies from the district court that would be sustainable on appeal. Accordingly, we concluded that you did not engage in professional misconduct or exercise poor judgment."
What the rest of the story reveals is that Eubanks was plagued by a misconception of what the D.C. Court of Appeals ruled in disallowing the government's request for disgorgement of past tobacco industry profits as a remedy in this RICO-based litigation.

Somehow, Eubanks viewed the Appeals Court decision as only disallowing the disgorgement remedy, but not presenting any barriers to the $130 billion smoking cessation remedy.

However, what the appellate court ruled was not that somehow, the disgorgement remedy was inappropriate for some reason specific to disgorgement. Instead, it ruled that the disgorgement remedy was inconsistent with the RICO statute because that statute requires any remedy to be designed to prevent and restrain future RICO violations, not to punish or remedy past violations.

The language of the Appeals Court was quite clear: "Section 1964(a) provides jurisdiction to issue a variety of orders 'to prevent and restrain' RICO violations. This language indicates that the jurisdiction is limited to forward-looking remedies that are aimed at future violations. ... Disgorgement ... is a quintessentially backward-looking remedy focused on remedying the effects of past conduct to restore the status quo."

Without a doubt, the government's proposed $130 billion smoking cessation remedy was designed to punish the industry for, and remedy the effects of, past wrongdoing. The government had requested that the industry pay to provide smoking cessation programs to smokers who had already become victims of the industry's alleged RICO violations.

As I argued back in April 2005 (when the appellate court decision was first announced), such a program is not consistent with the appellate court's interpretation of the RICO statute because it represents a backwards-looking remedy that is measured by past wrongdoing and awarded without respect to whether future wrongdoing will take place.

Like disgorgement, the smoking cessation remedy "is measured by the amount of prior unlawful gains and is awarded without respect to whether the defendant will act unlawfully in the future. Thus it is both aimed at and measured by past conduct." These words, directly from the appellate court decision, indicate with little doubt that the $130 billion smoking cessation remedy was not allowable and would certainly not have passed legal muster with the appeals court.

I have no doubt that Judge Kessler was fully aware that the "body blow" that the appeals court dealt to the DOJ case was not merely a result of the striking down of disgorgement, but the fact that it also cast doubt on the legality of the other major monetary remedies being sought by the government. That she allowed the government to go ahead with these monetary requests anyway does not indicate that she was giving final approval to such remedies, only that she thought it most prudent to at least allow the government the opportunity to present its requests. But she cautioned DOJ, in the most clear terms, that she was surprised that the government did not seem to be paying much attention to the appellate court decision.

What the rest of the story reveals is that McCallum essentially was forced to intervene in the case and "take over" because the trial team was not able to, or for some other reason not inclined, to respond appropriately in the wake of the appellate court decision by modifying its remedies requests to be consistent with the Court's interpretation the civil remedies provisions of the RICO statute.

If anyone undermined the case, it was the trial team, by refusing to craft an effective set of remedies that could pass appellate court scrutiny and have any decent chance of being upheld upon appeal, even if Judge Kessler was not convinced that such remedies were inappropriate.

I wrote, back in April 2005, that "the Department of Justice should focus the remedies portion of its case on the following two remedies that I think are both consistent with section 1964(a) (and likely to withstand appeal) and likely to have substantial public health benefits in terms of reducing tobacco use and improving health:
  • requiring substantial changes in cigarette advertising and marketing, including measures to prevent the marketing of cigarettes to youths and to prevent certain deceptive aspects of the marketing, such as the potential health value of "light" and "low-tar" cigarettes; and
  • requiring substantial changes in cigarette labeling and packaging, including larger, stronger, and more graphic warning labels.
In fact, I argued that the potential value of the DOJ case rested upon how successful it is in bringing about substantial, meaningful changes in tobacco product advertising, marketing, labeling, and packaging, which could directly prevent the tobacco companies from engaging in most of the alleged RICO violations in the future.

In other words, it was clear to me that the monetary remedies were never going to see the light of day and that pursuing these multi-billion dollar remedies might look good in the public's (and anti-smoking groups') eyes, but from a legal perspective, it was wasted and misplaced effort. In the months between the appellate court decision and the end of the trial, the real effort should have been placed on crafting remedies that would be effective in preventing and restraining future RICO violations, not in trying to squeeze the maximum possible money out of the industry to fund all the pet tobacco control programs of anti-smoking groups.

To proceed with closing arguments in which the government asked for a remedy which was clearly viewed by the governing court as being inconsistent with the law would have been an embarrassment. McCallum needed to intervene in order to save some face and at least present a remedy with some small chance of seeing the light of day (I don't think that even the $10 billion remedy, which has some forward-looking components, was reasonable, but it was a heck of a lot better than the $130 billion remedy, which was entirely backwards-looking).

And at least, by altering the closing arguments, it is clear that DOJ had read the appellate court decision. Up until that point, it wasn't even clear that DOJ was aware of the decision.

This information leads me to question why it was that the trial team was so seemingly blind to the appellate court's ruling. It would seem to me that trial lawyers would want to scour through the appellate court's decision with a fine-tooth comb, bathing in its clear direction that it provided to strengthen their case. It's like being handed the key to the promised land with directions how to get there.

What the DOJ trial team did was basically ignore the directions and proceed on the path they had already been taking, even though they were clearly headed in the wrong direction.

I can't explain this. I suppose one possibility is that the trial team had developed close relationships with a number of the prominent anti-smoking groups and didn't want to disappoint these groups by throwing out the monetary remedies, which would possibly have heaped scorn upon them. Might the trial team have been concerned that they would have been attacked and accused of wrongdoing just like McCallum was?

Another possibility is that the trial team spent so much time devoted to the case that they became so passionate about the issue that it clouded their clear legal judgment. Perhaps they believed so strongly in the cause that they simply failed to see that the same reasoning which the Appeals Court used to disallow disgorgement would apply just as well to the monetary remedies.

In addition to Eubanks' failure to respond appropriately to the appellate court decision, I am criticizing what I see as an inability to consider an alternative viewpoint - the perspective that the legal strength of the case is dependent not upon the amount of money you ask for, but the strength of the legal arguments you make.

With the $130 billion remedy, the government didn't have a legal foot to stand on. With the $10 billion remedy, at least the government was standing on one foot.

What McCallum did was not undermine the case at all. What he did was strengthen the case by staving off a huge legal embarrassment for the Department and giving the government at least a sporting chance of walking away with some monetary remedy, albeit not as large as the anti-smoking groups would have liked.

None of this is to detract from the efforts of Eubanks and the DOJ team to bring Big Tobacco to justice. The case is a landmark one and I applaud the team for its efforts and dedication. Nor am I impugning the motives of the DOJ. In fact, I think they acted out of over-zealousness about the ethical issues in the case. However, there is this other side to the story that is not revealed in the book and which I think deserves to be told.

Knowing the rest of the story is important to tobacco control practitioners because it reminds us that public health interventions need to be consistent with the provisions of the law. Ignoring the law and trying to extract non-lawful payments from wrongdoers does not do a service to the public's health. Asking for $130 billion and receiving $0 billion does not contribute to improving the public's health. Spending more time crafting forward-looking remedies, such as more stringent regulation of cigarette advertising and marketing practices, may have resulted in public health gains.

No comments: