Kessler Recommends Settlement in DOJ Lawsuit Against Tobacco Companies
U.S. District Judge Gladys Kessler, who is presiding over the Department of Justice's civil racketeering lawsuit against several U.S. tobacco companies, on Monday held a private meeting with industry CEOs, their attorneys and DOJ lawyers to urge both sides to settle the case, the Washington Post reports. Michael Szymanczyk, CEO of Philip Morris, and Susan Ivey, CEO of R.J. Reynolds, attended the two-and-a-half-hour meeting (Leonnig, Washington Post, 6/21).
Kessler in an order issued on Monday said the meeting was "a routine, informal discussion with the parties urging them, once again, to consider the advantages of settling this case rather than the risks of litigating it" (AP/Richmond Times-Dispatch , 6/21). Kessler "has been pressing both sides to settle, particularly since the government two weeks ago scaled back the amount of damages it would ask for, partly to make a settlement easier," the Wall Street Journal reports (O'Connell/Blackstone, Wall Street Journal, 6/21).
Neither side commented on the meeting, which was Kessler's first chance to meet with the parties since allegations of political interference in the case were reported. DOJ lawyers on June 7 announced during closing arguments that they would seek $10 billion to fund smoking-cessation programs for five years instead of the $130 billion over 25 years that government lawyers had previously argued was needed.
News reports have said that senior political appointees at DOJ pressured lawyers to reduce penalties and soften the testimony of government witnesses.
At the request of 50 Democratic lawmakers, DOJ's Professional Responsibility Advisory Office has launched an investigation to determine whether there was political interference in the case. A group of senators also has requested that Attorney General Alberto Gonzales remove Associate Attorney General Robert McCallum from involvement in the case.
According to the Post, McCallum "told career government lawyers to reduce their recommended penalties." McCallum, who formerly was an attorney for a law firm that represented R.J. Reynolds, said the reduction was necessary in order to comply with an earlier appeals court ruling (Washington Post, 6/21).
Reps. Marty Meehan (D-Mass.) and Henry Waxman (D-Calif.) on Monday urged DOJ to investigate whether government lawyers pressured Max Bazerman, a business professor at Harvard University, to weaken his testimony for the prosecution. Bazerman last week contacted the House Committee on Government Reform to report that DOJ attorneys in late April asked him to tone down his testimony on potential risks posed by the tobacco industry, as well as penalties that could be administered (Johnson, USA Today, 6/21).
Bazerman said in an interview with the Post that a DOJ attorney told him that McCallum would not allow him to testify unless he changed testimony. Bazerman had previously recommended that the court appoint a monitor and consider removing senior tobacco company management. Bazerman said he was requested to say that removing senior management would be "legally inappropriate" under certain circumstances.
Meehan and Waxman in a statement said that such pressure "cannot possibly be justified," adding, "But it did directly benefit senior tobacco executives -- many of whom are major donors to the Republican Party -- whose jobs could have been threatened by the remedies proposed by Professor Bazerman" (Washington Post, 6/21). The lawmakers added, "Bazerman's testimony adds to the rising suspicions that favoritism to the tobacco industry may, in fact, be the root cause of the changes in the requested penalties."
Bazerman did not change his testimony and was allowed to testify in May (USA Today, 6/21).
Kessler has given DOJ lawyers until the end of this week to list their demands in the case.
One provision "currently on the table" is an agreement by defendants to use standard definitions of the words "light" and "ultra-light" to describe cigarettes, the Journal reports. DOJ lawyers have argued that the term "light" is fraudulent because it leads consumers into believing that low tar cigarettes are less harmful than regular cigarettes.
The tobacco companies also are likely to agree to fund antismoking programs, according to people familiar with the situation. Another possible agreement could be "a series of marketing restrictions that closely resemble those in the states' earlier lawsuit settlement," according to tobacco company executives, the Journal reports. This settlement would allow DOJ to add its own enforcement powers to ensure that the terms of the state lawsuit are met.
One person close to the case said a settlement could be reached within weeks (Wall Street Journal, 6/21). If a settlement is not reached, Kessler will decide whether the industry engaged in conspiracy to commit fraud and will decide which, if any, penalties to enforce. Antitobacco advocates oppose a settlement.
William Corr, executive director of the Campaign for Tobacco-Free Kids, said, "The government should not settle this case now while it is under a cloud of political interference or under the weak terms proposed by the government in its closing argument" (Washington Post, 6/21).
In related news, tobacco companies and magazine publishers have agreed to eliminate tobacco advertising in editions of Time, Newsweek, People and Sports Illustrated that are sent to school libraries. The nationwide deal with state attorneys general follows a 2003 agreement that banned tobacco ads from classroom editions of the magazines.
Diana Pearson, a spokesperson for Time, said, "Beginning in mid-July, Time, Sports Illustrated and People magazines will offer tobacco companies the opportunity to remove or edit their advertisements in magazines that go to public elementary, junior high and high school libraries throughout the United States." Pearson added that the advertisers will pay no additional costs (AP/Richmond Times Dispatch , 6/21).