A massive Justice Department lawsuit against tobacco companies filed in federal court yesterday provoked industry outrage and raised questions about whether the Republican-controlled Congress would agree to fund the costly litigation.
Cigarette manufacturers denounced the suit, which charges the industry with racketeering and seeks billions of dollars for federal health-care costs, as politically motivated and without legal or factual basis. They were joined by broader business interest groups that warned of possible ramifications for other politically unpopular industries.
"I think the business community in this country should feel very insecure now," said Bruce Josten, executive vice president for government affairs for the U.S. Chamber of Commerce. "What's dangerous and new here, in a precedent-setting sense, is the concept of suing an industry for money to fund government programs, plain and simple."
Greg Little, associate general counsel of Philip Morris, the nation's biggest tobacco company, said, "We will not succumb to politically correct extortion. We will not settle this lawsuit. We will defend this case vigorously, and we expect it to be thrown out promptly."
The 88-page complaint against nine tobacco companies and two industry groups alleges that beginning with a 1954 meeting at the Plaza Hotel in New York, tobacco executives conspired to mislead the public about the dangers of smoking, forcing taxpayers, through the Medicare program and others, to pay medical expenses for millions of victims of lung cancer and other diseases.
The suit seeks to recover a portion of the more than $20 billion annually the U.S. government estimates it has spent over the last four decades on costs associated with cigarette smoking.
"Smoking is the nation's largest preventable cause of death and disease, and American taxpayers should not have to bear the responsibility for the staggering costs," Attorney General Janet Reno said yesterday.
While the timing of the lawsuit surprised the industry, the filing itself did not, as President Clinton had mentioned it as a possibility in his State of the Union address early this year. In a brief appearance at the White House yesterday, Clinton said, "The taxpayers of our country should have their day in court."
Republican presidential front-runner George W. Bush, however, was critical of the move. The Texas governor "hopes the era of 'big government' is not being replaced by the era of 'big lawsuits,' " said Scott McClelland, a Bush campaign spokesman.
Justice Department officials said they will need $20 million to go forward with the case. But while acting Civil Division chief David W. Ogden said he was optimistic about the funding, congressional Republicans said those expectations were misplaced. Over the summer, Congress had denied a Justice request for money for a tobacco suit. "I don't believe it's likely that will change," said Dan DuBray, spokesman for Rep. Harold Rogers (R-Ky.), who chairs the panel on Justice funding.
Although it would be difficult for the department to find the funding elsewhere in its budget, a Clinton administration official was confident there would be enough money to pay the costs without congressional approval.
Ogden said the statutes of limitations will permit the government to go back three years to recover costs under the Medical Care Recovery Act, which affects veterans and millions of federal employees, and six years under the Medicare law governing health care payments for the elderly.
There is no statute of limitations under the powerful federal racketeering statute, which will enable the government to seek a portion of any ill-gotten tobacco profits over the past 45 years and to sue the industry to halt misleading advertising and marketing.
Industry officials said the Justice Department had told Congress in 1997 that it had no legal basis to pursue a claim, but Reno said yesterday that assessment applied only to Medicaid, the health care program for the poor. Medicaid payments were at issue in cases brought by state governments against the industry that last year resulted in a $200 billion settlement.
The Justice Department also said yesterday that there are no "pending criminal division investigations" of the industry, signaling that a long-standing criminal probe of tobacco executives is now closed. Ogden said information gathered in the criminal probe would not be used in the civil litigation, assigned to U.S. District Court Judge Gladys Kessler.
Bonnie Herzog, a tobacco industry analyst, said the case is unlikely to go to trial. "Ultimately, I think this will result in some type of national settlement, and this will be the vehicle to force the government and the industry back to the negotiating table," Herzog said. "This is going to be a battle."
Tobacco stocks, already depressed by the threat of a lawsuit, declined modestly yesterday.
Staff writers Helen Dewar and Charles Babington and staff researcher Alice Crites contributed to this report.
In the Lawsuit
* Philip Morris Inc.
* Philip Morris Companies Inc.
* R.J. Reynolds Tobacco Co.
* Brown & Williamson Tobacco Corp.
* Lorillard Tobacco Co.
* American Tobacco Co.
* British-American Tobacco PLC
* British-American Tobacco (Investments) Ltd.
* The Council for Tobacco Research
* The Tobacco Institute Inc.
The U.S. wants
* Recovery of federal health care expenditures under the Medicare program, Defense Health Programs, the Veterans Administration, the Office of Personnel Management's Federal Employee Health Benefits plan and other programs.
* Disgorgement of ill-gotten gains.
* Disclosure of all relevant research on smoking and health.
* Establishment of programs to address the ongoing effects of defendants' conduct, including funds for smoking cessation, research, and counter-advertising.
CAPTION: Attorney General Janet Reno and David W. Ogden of Justice Department's civil division announce federal lawsuit against major tobacco companies.