A panel of federal appellate judges raised significant doubts yesterday about whether courts can order tobacco companies to forfeit $280 billion in past profits if the government proves they engaged in civil fraud and conspiracy.
The tobacco industry has asked the U.S. Court of Appeals to prohibit a federal judge from requiring such a payment as she presides over the tobacco companies' civil racketeering trial. The federal government has charged that the tobacco companies engaged in a 50-year conspiracy to defraud the public on the dangers of smoking, and has set as a cornerstone of its case that the companies must give up the "ill-gotten gains" of their illegal schemes.
But two members of a three-judge panel of the court expressed skepticism about the government being able to demand such a payment in a civil case. They also questioned the government's decision to bring a large civil lawsuit against the industry under the Racketeer Influenced and Corrupted Organizations Act, a law designed for prosecuting mobsters.
"This RICO law was passed with all sorts of testimony about racketeers and mafiosi, and I've seen the government using it in court against everyone except racketeers and mafiosi," said Judge David B. Sentelle. Industry lawyer Michael Carvin told the judges that Congress specifically left the idea of such a payment out of civil racketeering laws. He said the government could seize corporate assets only if it is successful in prosecuting the companies for criminal racketeering violations, which would require a higher burden of proof.
"If the government wants to put money in the Treasury, they've got to jump through the hoops of bringing criminal charges and proving their case beyond a reasonable doubt before a jury," Carvin said.
Deputy Solicitor General Michael Dreeben argued that the law is meant to be overly broad so judges can impose the monetary remedies they believe are necessary to "prevent and restrain" a criminal enterprise from future violations.
But Sentelle and Senior Judge Stephen F. Williams repeatedly asked why the government had not filed criminal charges, echoing the argument that the payment was not spelled out in the law.
"It says what it says, and I don't know how you're not stuck with that," Sentelle said.
After the hearing, Justice Department officials declined to speculate on what the panel's decision might be.
William V. Corr of the Campaign for Tobacco-Free Kids said the government's case against the industry does not hinge solely on the $280 billion payment. Carvin acknowledged that the judge could order the companies to make changes in their business practices.
"This will be as brutal and as complicated a remedial order, even if the $280 billion is taken off the table," Carvin said.