June 19, 1997
Matthew Myers
National Center for Tobacco-Free Kids
1707 L Street, NW, Suite 800
Washington, D.C. 20036
George Dessart
American Cancer Society
1599 Clifton Rd.
Atlanta, GA 30329
David A. Ness
American Heart Association
7272 Greenville Ave.
Dallas, TX 75231
Lonnie Bristow
American Medical Association
515 North State St.
Chicago, IL 60610
Dear Matthew Myers, George Dessart, David A. Ness and Lonnie Bristow:
A disturbing transformation is discernible in the approach of the public health advocates who have been involved in the litigation settlement negotiations with the tobacco industry and among those public health advocates who have supported them. While they originally promised only to support an exploration of the negotiation option, they have now become active proponents of a settlement deal* -- even before the final settlement package is completed. This premature support for a settlement suggests that those involved in the negotiations and their close supporters have become invested in the negotiation process, and that this has distorted their ability to evaluate clearly the costs and benefits of a deal. At minimum, the venality and historic duplicity of the tobacco industry are sufficient for any public health advocate not to lend credence to any tobacco industry deal that immunizes it from the only branch of government whose processes they could not buy or rent -- the judiciary.
As you know, the White House has indicated that it will not support a tobacco settlement that
does not have the support of the public health community. Thus, although you do not represent
many public health associations or groups, your support for a settlement, if it continues, will be
utilized by both the tobacco companies and Bill Clinton to grease the skids for legislative adoption
of the settlement package.
I am writing now to urge you to reconsider your position on the settlement. For all the decades of
work of public health advocates to curtail tobacco use and tobacco company abuse of power, in
truth the anti-tobacco horse has only just left the gates in the race to prevent tobacco-related
death and disease. This is not the tired old nag we have ridden for so many years, but a powerful
horse, energized by the continuing disclosures of tobacco company documents, with the ability to
go the distance.
The Center for Tobacco-Free Kids' False Choice
In its June 12 "Why Consider an Agreement with the Tobacco Industry," the Center for
Tobacco-Free Kids states, "A comparison of the status quo with the possible benefits of an
agreement demonstrates why an agreement bears serious consideration from a public health
perspective." This proposed framework for analysis is doubly flawed.
First, it only suggests weighing the "possible benefits" of an agreement, without regard to the
costs of a settlement. The costs, however, are likely to be substantial. They include the inevitable
restriction on the rights of victims (the youthfully addicted and the non-smokers) and tobacco
company liability (a point to which I return below), the sacrifice of present and future litigation
and discovery leverage over the tobacco industry, the drying up of the litigation-related tobacco
industry document disclosure, and the near-certain arrest of political momentum here and abroad
against the industry following a settlement and the corresponding relaxation of media vigilance.
Second, the analysis is overly pessimistic in its static assessment of tobacco control efforts in the
absence of a settlement. As the Center for Tobacco-Free Kids' statement notes, absent a
settlement, tobacco control advocates can count on continuation of the state Medicaid suits,
continuation of the private suits relating to addiction and the probable implementation of the FDA
rule. These are powerful and substantial tools for promoting public health and corporate
accountability -- the lawsuits alone could cost the industry many times the $300 to $400 billion
over 25 years discussed in connection with the settlement. This potential financial liability is
dramatic and real. Wall Street takes seriously the threat of massive liability, which is why tobacco
industry stock values remain depressed despite high industry profits -- and the jump in tobacco
stock prices following announcement of the settlement negotiations signals that Wall Street
believes industry legal liability is more hazardous to the industry's health than any settlement might
be. The tobacco companies take the liability threat seriously as well, which is why they have
agreed to come to the negotiating table at all. Even though very inadequate for the human damage
done, $300 billion spread over 25 years is more than any industry would be willing to pay for a
so-called "nuisance settlement."
Even more importantly, with the strong momentum operating on behalf of tobacco-control forces
spreading abroad, in coming months and years we can expect -- in the absence of a settlement -- a
host of new disclosures, initiatives, regulatory controls and lawsuits not yet contemplated. As
Minnesota Attorney General Hubert Humphrey III said at a news conference yesterday, "Six
months ago, the private attorney who now reportedly represents 20 states said in the Wall Street
Journal that the campaign against Big Tobacco had 'reached a high-water mark.' 'It's foolish not to
settle now,' he was quoted as saying. If we'd settled then, we would have missed the historic
settlement admissions by Liggett & Myers, the North Carolina judge's confirmation that nicotine
is a drug and cigarettes are subject to full FDA regulation. We would have missed the Baltimore
billboard cases, the Massachusett additives case, and the sight of a retired senior executive of
Philip Morris taking the fifth in one of four federal criminal grand jury proceedings." We would
not have seen the disclosures by Congressman Waxman of Liggett documents detailing
suppression of research the company thought would reduce harm from cigarettes by as much as
90 percent, Attorney General Humphrey added. And, I might add, we would not have been able
to incorporate new scientific research on the effects of environmental tobacco smoke into the
calculus of the harm caused by the tobacco industry -- and into the calculus of the industry's
potential legal liability, given the litigation advantages of bringing environmental tobacco smoke
suits over addiction suits.
The choice is not between the a stagnant status quo and the terms of the settlement. Rather, it is
between a dynamic current environment in which tobacco control forces are gaining ground daily
and a settlement which will effectively freeze tobacco control efforts for the foreseeable future.
Public health advocates would do well to remember how historically the tobacco drug addiction
companies have arranged for "concessions" that matter little toward protecting the public health
and diminishing their power.
The Settlement Terms: Full of Holes
As reported in the media and recounted in the Center for Tobacco-Free Kids June 12 paper, the proposed terms of settlement compromise critical principles, are surprisingly weak and fail to include effective enforcement mechanisms. The financial burdens (note the discounted present value of the $300 billion over 25 years) to the industry are simply transferable to their addicted customers through modest price increases.
Corporate liability and victims' rights: The Center for Tobacco-Free Kids has repeatedly asserted that a minimum condition for a settlement is that "the rights of victims of the tobacco industry to seek compensation for the injuries they have suffered should not be abridged and the tobacco industry should not be immunized from accountability for its wrongdoing."*
The settlement completely violates this principle. The settlement will reportedly include a ban on further class actions against the industry, and even against consolidated cases against the industry. While individuals will still be able to bring cases on their own -- permitting the Center for Tobacco-Free Kids to make the deceptive claim in its June 12 statement that, with a settlement, "the rights of individuals to sue will not be abridged" -- they are extremely unlikely to do so. The costs of litigation against the industry are enormous; they can only be absorbed by plaintiff's lawyers who have the prospect of collecting a share of damage awards to large groups of plaintiffs.
Litigating an individual case is unlikely ever to be feasible -- which means the industry may, in practical impact, be obtaining the pure immunity that public officials and public health advocates have agreed is unacceptable.
Even if private consolidated suits were able to progress, the proposed $4 billion annual cap on liability, or whatever alternative liability limit scheme may be chosen, amounts to de facto immunity for the industry -- purchased at the cost of $4 billion a year, or whatever final non-inflation adjusted sum is agreed upon. The key for the industry is capping overall liability and assuring balance-sheet predictability.
Whether that predictability comes in the guise of something called "immunity" or "an annual cap" or an "annual limit on individuals' ability to collect compensation" is completely irrelevant to Big Tobacco. To the industry, all of these labels mean the same thing: practical immunity no other industry possesses. Four billion dollars annually is a small maximum price for the industry to pay to guarantee the stability of tort-law suppression it craves.
The effort to draw a bright line between "immunity" and the various schemes of limited liability is misleading and dishonest. Indeed, the prospect of "immunity" may well have been floated by the tobacco companies just as they could switch to a position of disguised immunity and appear to have retreated.
Proponents of the settlement must at the very least honestly acknowledge that the agreement would in fact restrict victims' rights and effectively shield the industry.
Marketing and Advertising Restrictions and Regulations: While the reported terms of settlement do appear to include some advances in marketing and advertising restrictions, as well as in areas such as health warnings, the benefits of these gains are easily overstated. In the United States and abroad, the tobacco industry has shown extraordinary resourcefulness in circumventing these sorts of restrictions.
The most promising of the elements of the settlement is the implementation of youth smoking targets. But these targets are set far too low and the penalties are relatively insubstantial. John Garrison, chief executive officer of the American Lung Association, estimates the penalty for the industry failing to meet the targets is only about a nickel a pack, an amount the industry can easily absorb.
In these areas of marketing and advertising restrictions and related regulations, the rush to settlement is particularly inappropriate. General commitments are meaningless when it comes to the tobacco industry, which has defeated its opponents too many times in the past through creative interpretation of commitments and obligations. What matters are the details and the precise wording of the agreement. These cannot be analyzed until the settlement is made public, and they cannot be analyzed quickly.
The least that can be expected of any tobacco-control advocates enamored by the proposed deal
is that they withhold judgment and not appear at a joint press conference with the industry until
they receive the benefit of reviews and appraisals by teams of independent, talented and
experienced public health experts who have hitherto not had access to the fine print.
Disclosure: Although the June 12 statement claims that under a settlement, "Decades of deception
will come to an end and the industry will tell the truth about what it knows," in fact the settlement
will reportedly permit this tobacco drug-dealing industry to continue to conceal documents which
deal with corporate conduct and documents which the industry claims are covered by a highly
stretched attorney-client privilege.
This is utterly unacceptable. The failure to gain access to the documents which most clearly tell the story of the industry's conspiracy and fraud points up an essential flaw in the settlement negotiation approach: it is not possible for negotiators to assess reasonably the value of all present and future class-action suits against the industry without first knowing what damning evidence could possibly be presented in a courtroom and in the court of public opinion for future regulatory initiatives.
As Attorney General Humphrey said, "The depth, the persuasiveness of this knowledge of this conspiracy and fraud is overwhelming. There has never been anything like it. We owe a fundamental duty to future generations to see this through -- to make sure we don't settle until ALL the information is available to the public." And, Attorney General Humphrey adds, "Minnesota is very close to getting the most incriminating documents; the 500,000 they've held back under the guise of attorney-client privilege."
Monitoring Corporate Behavior: The provisions suggested on monitoring corporate behavior are laughable. They are ridiculously vague, and rely solely on self-regulation. If there is an industry for which self-regulation is singularly absurd, it is the tobacco industry.
Implementation: There is no apparent acknowledgment in the materials distributed by proponents of the deal that the tobacco industry is not likely to assist with the implementation of its terms in good faith. Once settlement implementation legislation is introduced in Congress, the industry's corporate attorneys can be expected to have it amended and changed in ways that will worsen the terms of the deal -- even if some tobacco-control advocates are unable to discern the import of those amendments at the time. Once a settlement has been made law, the industry can be counted on, through their experienced law-firm masterminds of obstruction, to delay interminably Food and Drug Administration efforts to adopt effective tobacco regulations, irrespective of the commitments the industry may have made during the current negotiations. This future problem of intricate regulatory and judicial obstruction is all the more serious because citizen group advocacy and media scrutiny of the industry will inevitably decline after a settlement that closes off access and opportunities is finalized. The industry, however, will remain voracious.
The Cruel Hoax of a "Global" Settlement
Almost totally absent from the settlement negotiations has been any serious discussion of international tobacco control issues. Since it is widely understood that the industry's strategy is to maintain constant sales in the United States and the industrialized countries while growing in the huge markets of the developing world and Eastern Europe and the former Soviet Union, this is more than an incidental oversight.
On June 17, international tobacco-control advocates from 19 countries released a joint statement
in which they decried efforts to negotiate a "global" settlement that only covered the United
States. "A settlement of the U.S. tobacco lawsuits that does not incorporate international tobacco
control measures will fail to address the major tobacco-related public health problems," the
advocates stated.
"Even worse," they noted, "a U.S. tobacco settlement in the absence of global controls may
actually exacerbate public health threats in the developing world. If sales fall in the United States,
or the U.S. companies are forced to pay a substantial settlement award, the tobacco multinationals
can be expected to intensify their invasion of the Third World and Eastern Europe, pursuing
marketing and corporate acquisition strategies with even greater determination. The drying up of
information potentially associated with a settlement, and the inevitable loss of political momentum
which will accompany a settlement, will also damage tobacco control efforts outside of the United
States."
It is no surprise that the tobacco industry maintains a double standard in its practices in the
industrialized world versus those in the developing countries and Eastern Europe. But it is
shocking that public health advocates would proceed so far in the negotiations without
considering the effect of their activities on public health outside of the United States.
Absent from the Settlement
One useful way to assess the shortcomings of the reported settlement is to measure it by what it does not include, but might have.
The settlement does not protect the right of victims to sue the industry. It does not even leave open the possibility of class-action suits, based on new theories as new evidence emerges from corporate disclosures and scientific research.
The settlement does not include full disclosure provisions, so that the documents for which the industry claims its exaggerated attorney-client privilege come to light.
The settlement does not include tough performance standards for youth smoking and meaningful penalties. An example of more stringent standards and penalties is contained in Congressman Waxman's NO Tobacco for Kids Act. The NOT for Kids Act would 1) force each company to reduce sales to children, 2) by 90 percent, 3) in six years. Those companies which failed would have to pay $1 per cigarette pack they sell per consecutive year of violation. A three-year failure to meet the reduction standard, for example, would lead to a $3 per pack fee.
Moreover, the proposed settlement does not tax tobacco, and the total cost of the proposed settlement is reportedly expected only to add approximately 40 cents to the cost of a pack.
The settlement does not include provisions designed to create independent institutions and mechanisms to scrutinize and hold accountable the tobacco companies. A beginning approach to this challenge is contained in Representative Waxman's Tobacco Accountability Act's proposed establishment of a board to receive, review and make public the documents for which the industry unjustifiably claims attorney-client privilege and which would be endowed with subpoena power to investigate the industry.
The settlement reportedly does not include measures to control the use of U.S. tobacco products outside of the United States. The June 17 statement by international advocates sets the following as a standard: "To avoid doing public health harm, a settlement must set a worldwide floor on U.S. tobacco company practices, and the practices of their subsidiaries and those firms over which they exercise de facto control, including trademark licensees, without limiting the ability of countries to require companies to exceed the global minimum standard." The statement includes 13 specific suggestions for how a settlement should be structured to achieve this end.
Notably absent from the settlement, as reported, is a most-favored nation clause that requires the tobacco companies to offer all concessions they make domestically to other countries around the world.
Concluding Notes
There are two final matters which need to be addressed. First, the public health community is broad and deep. Somehow, however, it has come to pass that, in the context of the tobacco control negotiations, the public health community is perceived to consist principally only of two major U.S. health charitable associations and the American Medical Association.
While the charitable associations have done some admirable tobacco-control work in the past decade or so, they were unfortunately not the trailblazers in tobacco control work. Similarly, while the AMA has in recent years taken strong stands against the industry, it was deplorably reticent in criticizing the industry while it maintained a political alliance with the tobacco companies and accepted grant money from them for a number of years. Longstanding leadership in tobacco control has come from an array of public health professionals, consumer groups and from countless grassroots tobacco-control organizations. In light of this history, and since the "public health community" is in the unusually influential position of being able to exercise an effective veto over a settlement, will you, as the chief public health advocates of a settlement, agree to defer your endorsement until the broad-based and open Kessler-Koop advisory committee has made a full evaluation of the settlement? Otherwise, you risk furthering the serious split in the public health community.
Second, in any settlement, substantial sums will be allocated to smoking cessation and anti-smoking education programs. In the interests of preserving independent judgment as to the merits of the settlement, will you pledge not to accept any of the settlement funds for these or other purposes?
The consequences of a settlement are deadly serious. The high stakes require candor and criticism
among friends, and genuine introspection by all parties. I hope you will reflect on this letter in the
spirit in which it is written, reconsider your support for this premature and flawed settlement and
join the American Lung Association in rejecting what it characterizes as a "global bailout for the
industry." I look forward to your response.
Sincerely,
Ralph Nader
P.O. Box 19312
Washington, D.C. 20036
202-387-8034