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US slashes tobacco reparations demand by $120bn: Political pressure feared as prosecutors ask for only $10bn
by David Teather    The Guardian
Entered into the database on Thursday, June 09th, 2005 @ 12:03:24 MST


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A political row is brewing over a US government decision to slash the penalty it is seeking in a long-running racketeering case against the tobacco industry.

The department of justice dropped its bombshell, that it was seeking only $10bn (£5.5bn) instead of $130bn, into closing arguments late on Tuesday in the Washington DC trial.

District judge Gladys Kessler, who is hearing the case, yesterday questioned what lay behind the decision. "Perhaps it suggests that there are some additional influences being brought to bear on the government's position."

Democrats accused the government of bowing to big business. "Big tobacco is one of the top donors to Republicans and it is getting what it paid for," said New Jersey Democrat Frank Lautenberg.

Shares in Altria, which owns cigarette maker Philip Morris, climbed 1.24% to $68.62, while RJ Reynolds Tobacco rose 1.2% to $83.99.

The case accuses the tobacco industry of orchestrating a 50-year conspiracy to hide the health effects and addictive nature of cigarettes. In closing arguments, justice department lawyers said the industry had misled people with "half truths, deceptions and lies that continue to this day". The case has been in court for eight and a half months.

During the trial government lawyers had outlined a proposal that the industry pay more than $5bn a year for a smoking-cessation programme for 25 years to fund telephone advice lines, clinics and research.

The demand has been cut to an annual $2bn for five years. The justice department issued a statement describing the fresh proposal as "an initial requirement" that could be extended if court-appointed monitors found further evidence of fraud. "This proposal has been designed to be a forward-looking remedy to prevent and restrain future wrongful conduct."

John Wunderli, senior assistant general counsel to Altria, said: "They haven't offered us any explanation. It was just an end of the day, seemingly casual reformulation of what they are asking for."

Anonymous sources have suggested, though, that the justice department was pressed to cut the penalty by people higher up in the organisation.

"It feels like a political decision to take into consideration the tobacco companies' financial interests rather than the health interests of 45 million addicted smokers," William Corr of the Campaign for Tobacco-Free Kids told the Washington Post.

The justice department filed the case five years ago under the civil Racketeer-Influenced and Corrupt Organisations act, Rico. There have been 44,000 pages of testimony from more than 80 witnesses.

Former attorney general John Ashcroft in 2001 tried to settle the case, begun by the Clinton administra tion, or shelve it but public pressure forced it back.

There will be short rebuttals from both sides today. A ruling is not expected for weeks.

Government lawyers proposed additional remedies including banning the terms "mild" and "light" cigarettes, an acknowledgment that sec ond-hand smoke causes cancer and a ban on price cutting promotions.

Tobacco companies have argued that the remedies are not permitted under Rico. In closing, their lawyer, Ted Wells, said: "Your honour should not take up the government's invitation to engage in social policy engineering."

The industry won a victory in February when an appeals court ruled that the government could not seek $280bn in allegedly ill-gotten gains.

The defendants include British American Tobacco, Brown & Williamson, Philip Morris USA, RJ Reynolds and Lorillard Tobacco.