The Fall of Big Tobacco
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Joe Camel ad
Public anger intensified in 1991, when studies revealed that the RJR advertising figure Joe Camel was almost as recognizable to 6-year-olds as Mickey Mouse.

Page Two

Business as Politics

When Tom Griscom joined R.J. Reynolds Tobacco Co. as a senior executive to work on government and public relations problems in 1991, he was stunned by what he discovered. While the company intimately understood its customers and their smoking preferences, it had little idea how the broader public saw it.

A Washington insider schooled by years of working for fellow Tennessean Sen. Howard H. Baker Jr. and in Ronald Reagan's White House, Griscom recommended polling.

"I don't know why we hired you," replied one irate executive, according to people familiar with the exchange. "We're in the business of making and selling cigarettes."

A compact man with a touch of the South left in his voice, Griscom was one of a handful of Reagan refugees who tried to teach Politics 101 to the corporate chieftains. The instructors included Craig Fuller, Vice President George Bush's chief of staff; M.B. Oglesby Jr., Reagan's deputy chief of staff; and Charles Black, a longtime Reagan adviser and GOP operative. They all encountered similar recalcitrance.

Tobacco's big five – Philip Morris Cos., RJR, Brown & Williamson Tobacco Corp., Lorillard Inc. and U.S. Tobacco Co. – had never needed polls, industry officials said. They knew many Americans disliked them, yet assumed that was largely a result of strident rhetoric by ragtag anti-smoking activists. For years, they relied for protection on southern Democrats who ran Congress, rewarding them with generous campaign donations, until they came to see Republicans as their most important allies.

But public anger at the industry had intensified starting in 1991, when studies revealed that RJR's advertising cartoon figure, Joe Camel, was almost as recognizable to 6-year-olds as Mickey Mouse. The next year, the Environmental Protection Agency detailed the medical risks in breathing secondhand smoke. That "fundamentally changed the debate," one former industry executive said.

By 1994, industry whistleblowers were smuggling small libraries full of internal documents confirming the critics' harshest accusations: that the firms had hidden evidence of the danger and addictiveness of cigarettes. That April, top tobacco executives testified on Capitol Hill, raising their hands to swear to the truth. They denied that cigarettes are addictive – a laughable assertion to most Americans.

But the swearing-in was also an important moment in the evolution of the CEOs. As one industry pollster put it: "They saw themselves portrayed as bandits."

Big Tobacco's political operatives finally got to take their soundings – and the results were startling.

"We were losing our audience," a former ranking industry executive said.

The angriest Americans, pollsters found, were from the growing group that had watched relatives and friends die of tobacco-related diseases. Ex-smokers came next. But what most surprised cigarette executives was the reaction of current smokers. Tobacco lobbyists had always thought of them as a kind of centurion guard. But the industry found its own customers were turning sour and endorsing tough measures to rein in youth smoking. The most militant were smokers who had tried and failed to quit.

Said one industry consultant, "Many, many smokers say, 'Tobacco companies hooked me, I can't get off and they should drop dead.'"

A New Brand of Strategy

After facing the brutal numbers, the industry's top executives began to consider a major change in strategy. In 1994, top executives of RJR and Philip Morris convened a series of meetings in New York to broach what had once been unspeakable – the idea of sacrificing profit to calm an angry public.

"It was an incredibly dramatic step," said one executive involved in the talks. Fear was the motivation.

Realistically, the wealthy companies had a long way to go before they would actually lose money. Their profits were still enormous, with an increasing share coming from foreign countries. But what they – and their stockholders – wanted was stability, some certainty of what they'd have to pay to resolve the growing claims against them.

Those talks would become the outline of all that followed. At first, the executives discussed only giving up Joe Camel and the Marlboro Man, the ad "icons" that helped sell two of the most popular brands. A team of top managers proposed other voluntary reforms, such as restricting vending machines and free samples – puny concessions today, but radical at the time.

The internal talks sputtered along until the stakes got higher still. In December 1994, Griscom was summoned from his North Carolina home for a mission that would consume the next three years of his life: RJR wanted him in Washington to oversee secret talks with the government.

Washington was humming with rumors about the tough new smoking regulations being drafted by Food and Drug Administration Commissioner David A. Kessler. In the eyes of the frantic tobacco executives, Kessler's zealous reformers intended to regulate them out of business.

The tobacco strategists decided to send one of their most reliable emissaries straight to the president. On Aug. 9, 1995, Clinton flew to North Carolina for a speech and was greeted at the airport by his old friend, Gov. James B. Hunt Jr. As the pair rode to Charlotte in the president's limousine, Hunt made his pitch.

"I'm concerned that efforts to reduce teenage smoking not hurt our tobacco farmers," Hunt recalled telling the president. "There are other ways this can be done, including a very active and strongly financed public information campaign to convince kids this is not the right thing to do."

Tobacco is the number one cash crop in North Carolina, Hunt reminded Clinton. "It affects a quarter-million people and hundreds of millions of dollars in this state."

Clinton made no promise, but Hunt was encouraged by his feel-your-pain sympathy. But the next day, Clinton sided against the tobacco-state politicians and their time-honored argument. He would allow the FDA to regulate tobacco as a drug.

Within hours, the industry reverted to its never-give-an-inch posture, filing a lawsuit challenging FDA's authority (a suit that has long been awaiting a ruling by the federal appeals court in Richmond). "Make no mistake; the real hidden agenda here is prohibition," said Philip Morris vice president Steven C. Parrish.

But behind their public bluster, industry executives had come to place more hope in compromise than confrontation. Sporadically, over the next several months, the industry floated alternatives to Kessler's plan with Congress and the administration, but nothing took.

Then, on Aug. 9, 1996, a jury ruled against a cigarette maker for the first time, awarding the family of Florida lung cancer victim Grady Carter $750,000. Tobacco stocks plummeted, and Brown & Williamson's Martin Broughton began rounding up his fellow CEOs for another round of meetings about how to buy some relief.

Shortly after Clinton was reelected in November, RJR's chief executive Steven F. Goldstone traveled to Raleigh, N.C., on behalf of all the CEOs and asked Gov. Hunt to reach out to Clinton again. Tobacco's "fight to the death mentality" had to end, Goldstone said.

Two days before Christmas, when Clinton flew to North Carolina for a holiday tour of Camp Lejeune, Hunt was waiting for him. Sitting in the presidential helicopter, the governor told Clinton the cigarette makers were ready to bargain and had appointed J. Philip Carlton – a former state Supreme Court judge, the son of a tobacco warehouser and friend of White House Chief of Staff Erskine B. Bowles – as their spokesman. Clinton said he would play. He said longtime confidant Bruce R. Lindsey would be his point man.

Finally, the industry figured, a deal was possible.

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