Judges Question Past-Profit Payment Under RICO Law in Tobacco Case
A three-judge panel of the United States Court of Appeals for the District of Columbia Circuit on Wednesday "raised significant doubts" over whether the federal government can continue to seek $280 billion in past profits from tobacco companies as part of its racketeering lawsuit, the Washington Post reports (Leonnig, Washington Post, 11/18). The lawsuit alleges that Brown & Williamson, Philip Morris, R.J. Reynolds, Lorillard Tobacco and the Liggett Group violated the civil Racketeer Influenced and Corrupt Organization Act by misleading consumers about the health risks of smoking and directing multibillion-dollar promotional campaigns at children.
The Department of Justice made the allegations as part of a larger federal lawsuit first filed by the Clinton administration in 1999 that accuses the tobacco industry of conspiracy to mislead consumers about the dangers of smoking. The lawsuit seeks $280 billion in past profits, which represents revenues from sales to smokers younger than age 21 between 1971 and 2000, as well as interest. In addition, the lawsuit seeks $9 billion to pay for smoking-cessation programs and research into safer cigarettes. The trial, presided over by U.S. District Judge Gladys Kessler, began Sept. 21 and likely will last at least six months, with 100 witnesses expected to testify in person and 200 others to testify through depositions or testimony in other trials (California Healthline, 10/7). In July, the tobacco companies filed an interim appeal with the court that asks it to overturn a Kessler decision in May that allows DOJ to pursue their past profits (California Healthline, 7/8).
During the hearing, Michael Carvin, a lawyer representing the tobacco industry, argued that the lawsuit should have been filed under criminal RICO law, which would allow the government to seek money and require a higher burden of proof than civil RICO statutes. He also argued that going after past profits would not meet the intent of the law to "prevent and restrain" future violations (Zuckerbrod, AP/Louisville Courier-Journal, 11/17).
Carvin also argued that the $280 billion figure is inflated, and that the "government assumes no one would have smoked without the alleged illegal advertising." However, Deputy Solicitor General Michael Dreeben argued that the RICO laws were created to give courts "unprecedented new tools" by allowing judges wide discretion to impose remedies. "If their gains are ill gotten, they serve as a pool of capital to serve them in the future," Dreeben said of the tobacco companies (Janofsky, New York Times, 11/18).
The Wall Street Journal reports that "at least two of [the] three judges on the panel appeared to be skeptical about the government's effort to seek ... industry profits" (Ellison/Rayburn, Wall Street Journal, 11/18). Judge David Sentelle said, "This RICO law was passed with all sorts of testimony about racketeering and Mafiosi, and I've seen the government using it in court against everyone except racketeers and Mafiosi." Sentelle and Senior Judge Stephen Williams "repeatedly" questioned why the government did not file criminal charges because payment is not explicit in RICO (Washington Post, 11/18).
According to the Journal, the "most likely outcome" would allow the government to seek some money but require it to prove the money would be used by the tobacco companies to commit future fraud (Wall Street Journal, 11/18).