201
1

APPEARANCES . (Cont'd .)

2

For the Defendant : DAVID M . BERNICK, ESQ .
Brown & Williamson KIRKLAND & ELLIS
Tobacco Company 200 East Randolph Drive

xes
_

_

- ,r +r r rx ~ T

-""

-

3

xe

Chicago, IL 60601

~~
'---

4

(312) 861-2248

5

KENNETH N . BASS, ESQ .

KIRKLAND & ELLIS
655 15th Street, NW,
Suite 1200
Washington, DC 200D5
(20 2) 879-5000

6

aetvx-- .

-

7

.

8

- - - - - - - - - -

9

For the Defendant : ROBERT F. McDERMOTT, JR ., ESQ .
R .7 . Reynolds Tobacco Company PETER J . BIERSTEKER, ESQ .

,

10

JONATHAN M . REDGRAVE, ESQ .

_

JONES DAY

E"
esxc ..a=s_c, .

11

51 Louisiana Avenue, NW

12

Washington, DC 20001
(202) 879-3939

13
14
~

15

'
.

xFT . .r.

For the Defendant : DAVID WALLACE, ESQ
British American CHADBOURNE & PARKE, LLP
Tobacco (Investments), Ltd . 30 Rockefeller Plaza
34th Floor
New York, NY 10112
(212) 408-5498

16
For hhe Defendant :

'

17

AARON

H . MARKS, ESQ .

Liggett Group, Inc . NANCY ELIZABETH STRAUB, ESQ .

"'

KASOWITZ, BENSON,

18

,4

TORRES & FRIEDMAN

'

1633 Broadway

19

NewYork, NY 10019
(212) 506-1700

xcm_e
20
21
i

For the Defendant : JAMES A . GOOLD, ESQ .
Tobacco Institute COVINGTON & BURLING
1201 Pennsylvania Avenue, NW

22

Washington, DC 20009

(202) 662-6000
23

For the Defendant : BRUCE SHEFFLER, ESQ .
24

British American Tobacco CHADBOURNE & PARKE

30 Rockefeller Plaza
25
.)
1

New York, NY 10112
(212) 400-51D0

200

202

APPEARANCES : (Cant'd
1

2
3
4

For the Plaintiff
:
LINDA McMAHON, ESQ .
U .S . DEPARTMENT OF JUSTICE
Civil Division
1331 Pennsylvania Avenue, NW
Suite 1150
Washington, DC 20004

5

(202) 307-0448

6

FRANK J . MARINE, SR .,ESQ
U,S . DEPARTMENT OF JUSTICE
Criminal Division
Orgznized Crime and

7
8

Racketeering Section

9

Suite 700
Washington, DC 20530

Court Reporter:

EDWARD

N . HAWKINS, RMR

Official Court Reporter
2

Room 6806, U .S . Courthouse
Washington, D .C . 20001

3

(202) 682-2555

4
Proceedings reported by machine shorthand, transcript produced
5

by computer-aided transcription

1301 New York Avenue, NW

10
11

6

(202) 514-0908
For the Defendant :

DAN

7

W . WEBe,ESQ .

Philip Morris USA, Inc . THOMAS J . FREDERICK, ESQ .
12

WINSTON & STRAWN
35 West Wacker Drive

13

Chicago, IL 60601-9703

8

9
oszsss 10

P R 0 C E E D I N G 5

THE COURT : Good morning, ladies and gentlemen .
For the record, this is, of course, United States of

America versus Philip Morris, CA 99-2496 .
I think we can avoid having everybody identify

(312) 558-5700
14
15
16

17

For the Defendant : THEODORE V. WELLS, JR„ ESQ .
Philip Morris USA, Inc . ]AMES BROCHIN, ESQ .
PAUL WEISS RIFKIND WHARTON &
GARRISON, LLP
1285 Avenue of the Americas

New York, NY 10019-6064

statements .

A>ons 15

PATRICIA M . SCHWARZSCHILD, ESQ .
HUNTON & WILLIAMS
Riverfront Plaza, East Tower
951 East Byrd Street

Richmond, VA 23219
21

12

14

(212) 373-3089

20

themselves today . We are here today for the defendant's opening

13

18
19

11

23

24
25

wish to argue these in open court now? Do you want to talk at

18

hushing device .

19

the bench? I don't think that this ceremonial courtroom has a

Let me ask Mr . Cramer who knows everything .

(804) 788-8728
For the Defendant :
J . WILLIAM NEWBOLD, ESQ .
Lorillard Tobacco Company MICHAEL B . MINTON, ESQ .
THOMPSON COBURN LLP

It does So, therefore, if counsel want to argue at

21

the bench on the record, of course, that's fine, What do you

22

want to do everybody? But let's move along . You know me,

One US Bank Plaza
Suite 3500

23

St . Louis, MO 63101-1693

24

MR . BRODY : I can probably do it in about two minutes .
We have no problem in doing it in open court if the defendants

(314) 552-6000
oeao :4e 25

1 of 31 sheets

Counsel, we obviously have a full courtroom . Do you

16
17

oaaoa4 20
22

I am told that there are two or three objections to
demonstrative exhibits .

Page 199 to 202 of 319

don't object .
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 211
few minutes the government's complaint .

213
1

The governments complaint alleges a 50-year conspiracy
to deceive the American public about the health risks of
smoking . The only relief requested in the complaint is

That 30-second commercial speaks volumes about the

2

nature of the profound and fundamental change that has taken

3

place in the last few years .

4

equitable relief to prevent and restrain future RICO violations .

osar.iz 5

There is no request in this complaint for compensatory
damages to compensate victims for past misconduct .

6

Compare that commercial to the conduct discussed by the
government, by the defendants during the GOs, the ]Os, the 80s
and even part of the 90s .

And what is most important about that change with

7

There is no request for relief in this complaint for
punitive damages, to punish the defendants .

os4xi 10 THE COURT . Neither one would be allowed under the

decision that

8

respect to the

Your Honor has to make is that

9

those admissions about the health risks of smoking are

osrass 10 admissions that are irreversible . They are of a permanent,

11 statutc, isn t that corrcct4

71 Irrcvcrsiblc and cvcr lasting naturc . Thcy can ncvcr bc takcn

12

12 back .

MR,

WELLS : That is absolutely correct, Your Honor .

13

13 And it is not allowed under the statute, nor do they use any

Now, to appreciate the speed with which these profound

14 changes have come about, all we have to compare is the conduct

14 other theory or any other statute . That is absolutely correct .

os:4zss 15 of thc dcfcndants during thc 1994 Waxman

094340 15 So the solo issue is focuscd on prospcdivc rclicf of an

hearings,

and thcir

16 equitable nature to prevent and restrain future RICO violations .

16 conduct before Congress in 1998 .

17 Therefore, the core issue or certainly ane of the core

17 With respect to their appearance before Congress in

18 issues in this case should be how do the defendants today

18 1998, the Washington Post reported as follows . Chief executives

19 communicate with the American public with respect to the risks
os4a :io 20 of smoking? Do they communicate in a fraudulent manner, or do

19 of the once-defiant tobacco industry came before Congress
0948 24 20 yesterday contrite and conciliatory and made their stmngest

21 they communicate in a nonfraudulent manner?

21 public admissions ever that smoking is hazardous and addictive .

22 And what the evidence will show is that as of today

22 Their statements were in vivid contrast to decades of public

23 each and every defendant says to the American public in a clear

23 denials on those crucial issues,

24 and unambiguous way that smoking is dangerous, Smoking causes
oew4_se 25 disease . It causes lung cancer, emphysema, heart disease .

24 It is a new era in tenns of the tobacco landscape. And
oaassz 25 1 would point out-

212
1

2 that smoking is addictive, and each defendant also says there is

2

3 no such thing as a safe cigarette, regardless of how it is

3 (Laughter)

4 labeled, be it labeled light or low tar or full flavor . There

THE

COURT : Is that a news article or an editorial?

MR . WELLS : It is a news article, Your Honor.

4 You could take that up with the Post.

oevs_oe 5 is no such thing as a safe cigarette,

oe<ew4

5

THE

COURT : Oh, no . Oh, no .

6 And how do they make these communications?

6

7

7 characterized by these profound changes that is so critical to

THE

COURT : Is that very succinct and pithy phrase

8 actually included on any written materials that the defendants
9 have, whether on their Web site or in any form of advertising?
e

214

1 Each defendant also says to the American public today

1117

10

MR. WELLS : Absolutely, Your Honor, and we will show

MR. WELLS : But, Your Honor, it is this new era that is

8 Your Honor's Udtimate analysis with respect to the issue of
9 whether there's a future likely -- there's a likelihood of
a9VS :]5 10 future violations .

11 you the actual Web sites today . We will walk Your Honor through

11 Now, what I would like to talk about now is what will

12 the Web sites so you can see the actual wording .

12 the evidence show, what will the impact be nn the government's

13 Rut what 1 would like to dn nnw is I would like to

13 seven pillars of fraud when you consider the seven pillars in

14 start, not with a Weh site, but with nne of the TV commercials .
os4su4 15

8ut, we just dont say it on the Web sites . We also say it in

14 light of the admissions that the defendants make as of today

osasme 15

about the health risks of smoking .

16

newspapers advertisements, but we also say it, in the case of

16

17

Philip Morris, on television commercials . So we come right into

17

with Your Honor yesterday . If you start with number one- let

18

the homes of the American public .

18

me do this . It says seven pillars of the overarching scheme to

19

defraud . It then has seven rtems . I would ask Your Honor for

19

When people come home from work and turn on their TV

oeas :oi 20 they can hear our message. It's an unambiguous and clear

oasone 20

I'm going to use the same chart that Ms. Eubanks used

the moment to exclude youth marketing, Let's put it over to the

21 message . In essence, that we sell a dangerous product, that the

21

22 product is dangerous. There's no such thing as a safe

22

23 cigarette . Let me play, quickly, one of the commercials that

23

conceptual underpinning of a fraud is to keep secret from the

24

Amerk :an public that smoking is dangerous . That's the driver

24 you can hear throughout the homes of America .

oeasu 25

(Video shown .)

09/22/2004 07 :26 :56 PM

oasoat 25

slde . I'll address that last.
If you look at every one of the remaining items, the

for every one of the pillars .

Page 2 11 to 2 14 of 319

4 of 31 sheets

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 20

209

1 obviously was vacated .

1 would be prejudicial for arguments to be raised based on that

2 The material is not being offered for the truth of it

2 testimony today, particularly where Dr . Richmond is being called

3 or for the fact that it is the governing or applicable or

3 in this case as a fact witness .

4 existing law on the subject .

4 Obviously, we disagree with some of the assertions made

osnsa2 5 It is at least argued that it's going to he offered to

os:M n 5 about the testimony, but we think it would be highly prejudicial

6 show the defendants' state of mind, so the objection is

6 in this instance to allow defendants to proceed to make

7 overruled,

7 arguments-statements, arguments, based on a claim that that

8 Now, second objection . Mr. Bernick .

8 is somehow an accurate forecast of the evidence that will be

9

MR . BERNICK'. Good morning, Your Honar .

9 offered at trial .

ossasi 10 A couple of years ago I cross-examined Dr . Richmond at

osssrs 10 THECOURT . The original objection by the government

11 trial and hc madc ccrtain admissions that am vcry much contrary

11 was sustaincd bccausc thc govcrnmcnt hadn't hccn prescnt during

12 to the government's theory of this case .

12 that ; and, at that point that testimony was proffered as direct

13 We sought to introduce that testimony as part of our

13 testimony and for the truth of it .

14 evidence and Your Honor sustained an objection on the grounds

14 Certainly at this point, and for purposes of opening
os:ao :m 15 statcmcnts only, dcfcndants can arguc and prescnt a

osn :1o 15 thc govcrnmcnt was not prescnt .

16 The issue here today is completely different because

16 demonstrative exhibit that on cross-examination they are going

17 they have novr decided to sponsor Dr . Richmond as their witness .

17 to confront a witness with a certain statement that they will

18 He will take the stand and I will then confront him on

18 show .
19 It is not being offered for the truth of that

19 cross-examination, or I believe Mr . Webb will confront him on
oss1 32 20 cross-examination, with the admissions that he made under oath

osaos4 20 statement, not today and not even during the trial . It will be

21 in the prior case . It's completely fair cross-examination .

21 offered obviously to impeach that witness . Whether the

22 And all I'm doing for the court today is to preview

22 defendants can do it or not, that's a whole other thing as to

23 what it is that their own experts will admit on cross-

23 how that witness responds .

24 examinatbn because we know they are going to have to admit it .
oaxzso 25 They said it under oath .

24 The objection is overruled, everybody .

oa<o :as 25 Let's proceed already . We are a little late already,
208

2'10

1 With respect to the second piece of testimony from

1 Who is going to start for the defendants? Mr . Wells .

2

2

Dr . Elders, that's germane to the testimony and cross-examination

MR . WELLS : Counsel forthe government, counselforthe

3 of Dr . Carmona . Dr . Carmona is the current Surgeon General, He

3 defense, I'm sorry, Your Honor, they are telling me I'm not on .

4 however, is only -- he's now the third different Surgeon General

4 Is the power on?

oerao7 5 who has been called by a plaintiff in the tobacco litigation .

5

THE

COURT : Yes,

6 First there was Dr. Richmond, then there was

6

7 Dr . Elders, now there's Dr . Carmona . So all I did in the course

7 defense, Judge Kessler.

8 of Dr . Carmona's deposition was to basically give him the

8 As you know, my name is Ted wells and I am co-counsel

9 testimony of Dr . Richmond and the testimony of Dr . Elders that

oanazs 10 are both completely Inconsistant with the government's case and

MR. WELLS : Counsel for the government, counsel for the

9 for Philip Morriss
osaiis 10 I intend to cover three areas this morning . First, I

11 I asked him whether he agreed or disagreed with Dr . Elder's

11 will set forth for the court the conceptual framework for the

12 testimony . And his answer will come in . He's not really in a

12 corethemeafourdefense.

13 pnsitinn to disagree with it. PII show ynu that this morning .

13 Second, 1 will discuss the importance of focusing on

14 So again, this is part of cross-examination . Anything
osseao 15 can be used on cross-examination . It goes to the credibility of

14 the element of intent . Were the alleged false statements made
0941 43 15 In good faith or were they made in bad faith pursuant to a

16 the witness . So it's an entirely different issue from the one

16 fraudulent scheme?

17 Your Honor judged previously.

17 I hlyd, 1 wIII give the court a road map as to what each

18

18 of my colleagues who follow me will address in the order of

THE

19

oe3ess 20

CUURT : Mr . Brody,anything?

19 their presentations .

MR . BRODY : Two things, Your Honor.

First of all, Dr. Richmond has not been listed by the

21

Unltetl States as an expert wltness,

22

listed as a fact witness .

Dr . Richmond has been

Second of all, given Your Honor's ruling and given the

24

basis for your ruling, excluding Dr. Richmond's testimony from
the Felice Case, sustaining our objection to it, we think it

3 of 31 sheets

21 several years there has been such profound and fundamental
22 change in how the tobacco companies communicate with the

23

oe3e :oe 25

oanxn2 20 The core theme of our defense Is that during the last

23 American public about the health risks of smoking that there is
24 no likelihood of future RICO violations .
oaaza425 Wlththatthemeinmind,Iwouldllketodiscussfora

Page 207 to 210 of 319

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 217
1

And suppasedly the motivation, the very reason why the

1

entire underpinning of the suppression of evidence is we caii t

2

conspiracy alleged by the government was put together in the

2

let the secret out . We caii t let anybody know that smoking is

3

first place was to make sure that the public didn't know the

3

dangerous . Well, today we admit it, and that pillar is gone .

4

truth . Make sure that the public didn't know that smoking is

osso~4s 5

4

dangerous .

The only pillar that is left is one that is not

os~sxss 5

grounded on keeping secret from the public the fact that we sell

6

And if you start with the first one, adverse health

6

a dangerous product, and that Is youth marketing . Now, that is

7

effects ; that's the causation subscherne . It is grounded on

7

a very emotional issue, It's emotional to all of us because it

8

making sure that the public doesn't know that smoking causes

8

involves our children .

9

disease . Today, the defendants have admitted smoking causes

osei os 10

9

disease.

osu .ie 10

11

To thc cxtcnt thc ET5 subschcmc is subsumcd within that

And I would say, Your Honor, we will show you through
the evidence that today no defendant in this case is involved in

11

fmudulcnt activity in conncction with youth markcting . And I

12

item, today with respect to the question of secondhand smoke,

12

will discuss in a few minutes the Master Settlement Agreement,

13

you can go, for example, to the Philip Morris Web site and we

13

but I will say now, when the Master Settlement Agreement was

14

will play it later for Your Honor today, but what will you find?

oss :n 15

14

You will find that Philip Morris on its Wcb sitc says

os.nrz 15

negotiated, those dedicated state Attorney

Generals were

focused

on thc qucstion of youth markcting . That was of thc utmost

16

to the American public that public health officials have found

16

17

that secondhand smoke is harmful and that you should be guided

17

18

by the positions of the public health community . That is the

18

agreed as part of the settlement to extraordinarily restrictive

19

statement on the Philip Morris Web site to the public, be guided

19

marketing of conditions in the settlement agreement and we will

ossi ns 20

by the positions of the public health community with respect to

osssas 20

21

secondhand smoke .

22

21

So if you take these admissions that have been made and

23

you put them against item number 1, that pillar really no longer

24

exists today . That is a pillar basically that's collapsed,

oeszo7 25

If you look at pillar number two, myth of independent

22

importance to them .

It was of great importance to them . And the defendants

show you that the defendants today are compliant, are complying
with those provisions .

And that to the

extent there

are debates going on today

23

because the Master Settlement Agreement says you caii t market to

24

youth either directly or indirectly, most of the disputes relate

oess~za 25

to over how do you interpret the word indirect .

218

2'6

1

research . That pillar is predicated again on a concept of don't

1

2

develop and don't publish

research

2

not the stuff that RICO fraud is about. Now, if you think about

3

smoking is dangerous because then the big secret might get out,

3

where we are today, what you will see is that for all practical

4

people might know that smoking is dangzrous . Well, today since

4

oeszze 5
6

we admit smoking is dangerous, that pillar as of today is

oess~<s 5

collapsed .

6

Addiction.

7

8

that might suggest that

The defendants admit today that smoking is

addictive .

Now, those involve very complex, fine issues, They are

purposes, Your Honor, those seven pillars, I'II put the youth

marketing to the side, are basically crumbled .
Most of the government's allegations that vre will

7

tliscuss during the next several months are basically dated and

8

they are stale. And they are dated and stale because something

9

Four . Nicotine manipulation . Underlying nicotine

9

good has happened .

osszm 10

manipulation is the nntion that we can't let the public know

ossem3 10

The fact that their allegations are dated and stale I

11

that smoking is addictive . Well, we admit that it is addictive,

11

12

so that pillar is on the ground .

12

It's good for society . Because it is good that the defendants

13

today do admit that smoking is dangernus and it's good for

14

Sorlety that defendants today admit that smoking is addlCtlve,

13
14
ossxoa 15

Design and marketing of low tar cigarettes . ln ferms

of marketing

a

low

tar

cigarette we

safe cigarette . Don't pay

tell the puhhr tha1P

attention,

is

no

for health reasons, to the

osss :n 15

submit is fatal to the government's case but, at the same time,

Now, in an effort to assist the court in understanding

16

title on the pack whether it says lights or low tar or low

16

17

nicotine .

17

Oecause in some respects the government and the defense in terms

18

of how do you predia the future, we are sort of like two ships

19

passing in the night.

18
19

oesazs 20

And with respect to the issue of design, we also say to
the public- well, let me back up . In terms of the design

theory, that was premised on the notion that we can't design a

oaseso 20

and evaluating our core theme, we have put together a graphic

The government says to the court : Focus on the past .

21

safer cigarette because then the public might realize that

21

The defense says to the court : Focus on the present . Which one

22

cigarettes we have been selling are not safe . But since we now

22

is the best predictor of the future?

23

admit that cigarettes and smoking is dangerous, that pillar also

23

24

is gone .

oessae 25
5 of 31 sheets

24
And, finally, suppression of evidence . Well, the

oaszio 25
Page 2 15 to 2 18 of 319

We recognize that there's case law that says that a
court may infer future conduct from the past . But we submit in
a situation like this where there has been profound and
09/22/20D4 07',26 :56 PM

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 239

241

1

different views . After all the dust has settled, what did the

1

community, stated the causation had been established and, as we

2

editors of the New England ]ournal say?

2

will talk about during the course of the case, the 1964 report

3

was an enormously visible development . It was carried by all
the press . It was the number one news story in the United

3

Both authors are dedicated, sincere proponents of their

4

points of view, each upholding what he believes to be the truth

4

mxsn 5

and nothing but the truth . Cach ready to admit that the whole

i ~ a3 s 5

States . The industry at this point is basically threatened,

6

truth has not yet been revealed to as aspiring man . He goes on

6

7

to say : Many conscientious observers believe that there are

7

8

strong indications, indications in favor of a causal

8

was up for discussion . And the industry responded to that

9

relationship in the vast majority of cases and no acceptable

9

threat and responded to that development. And in some rvays it

102943 10

evidence that disproves it .

11

1032 64 10

Othcrs rcmain unconvinccd or havc takcn a dctcrmincd

threatened in a profound way, There's no queslion about it
The very question of whether the industry can continue

responded well . In other ways it responded poorly .

71

And I'm going to bcgin by talking about the poor aspcct

12

stand behind Dr . Little. If it were so established and so set

12

of the industry's response, because as Your Honor is well aware

13

that to say otherwise was fraud, why is the New England Journal

13

it has come to define the industry today, what it did that

14

basically saying we still haven't reached a final conclusion?

14

wasn't a good idea . I'm going to focus on two things and they

,axs :us 15

Wc go on, as Your Honor ceard from the argumcnts this

iaoa1s 15

arc right up on the board right thcrc .

16

morning . The issue of whether there really was a consensus

16

17

pr'ior to 1964 has been put to the witnesses in this case . No

17

to hold a scientific view that was different from that of the

18

less than three different Surgeon General's have been asked this

18

Surgeon General .

19

very same question .

iosoas 20

First, the public causation position . It was one thing

19

Dr . Richmond is going to be called in this case . And

iassss 20

The Surgeon General's report used a new evolving lest
of causation that vvas different fmm what had been used in the

21

we believe that lie will have to stand by the testimony that lie

21

scientific

22

offered under oath a couple of years ago where he said, there

22

from what was appropriate in dealing with infedious

23

really wasi t a consensus until the Surgeon General's report had

23

you will hear expert testimony to this effect .

24

come out that smoking caused disease . That there were

imxoas 25

24

independent scientists who said smoking had not been proven to

mas<n 25

community over the years . It was a different model

disease and

you will see articles written by experts who are not

even aligned about the industry that recognized that it was a

240

242

1

cause disease . And others who said that it had been proven,

1

new test . So a scientist could say well I you disagree with

2

And, most critically, that he has no criticism of the people who

2

that new test . And that scientist -

3

before 1964 said not proven . No criticism,

3

4

Dr . ]oycelyn Elders, I asked her, was it wrong for the

4

io to_ss 5

tobacco industry to say prior to 1964, that there is controversy

imwws 5

6

out there. Answer : No,

THE COURT : Was it the'64 report or a different one
that also used a different definition of addiction?
MR. BERNICK : Yes . We're going to come to that when we

6

get to the addiction line, The '64 report addressed disease

7

And then when I confronted Dr . Carmona, who will

7

causation and also addressed addiction and found that smoking

8

testify as a witness in this case, with Dr . Elders' testimony 1

8

was a habit, not an addiction . And we will see that shift here

9

said -- I repeated, I said, Do you have a different view?

9

in a little bit .

ismez 10

He said : Well, I don't really know I would say it's

11

controversy . Certainly scientific discussion doesn't

12

necessarily mean controversy . But certainly

13

debating

thP

degree

scientists were
disease .

nt f .lns.lllty bPtW2Pn t(Ihrlr :fo .and

WP II nsP that

14

word

deglPe . What ah()nt WhethPr?

Do you have any criticisms of the tobacco

ioanas 15

industry for

16

reciting

17

issue of whether smoking caused disease prior to 1964 ?

18

were scientific discussions

on the

There's an objection and the answer is no .

19
1aal :so 20

the fact that there

m:vae 10

Only the government, only the United States today in
2004 says that for the industry to articulate a genuine

So the '64 report comes out, adopts a new test . The

11

industry says, we don't think that the test is the right test .

12

We think that old test is the right test .

13

14

im4o4 15

16

And

they could

scientific pnslhnn
industry again

that position .ls .l IPgIHm.atP
penplP not assnClatPd with the

h ."lvP h ."ld

beCanse other

continued to say the same thing .

There's testimony in 1965 by people who had no

17

connection to the tobacco industry, received no funding from the

18

tobacco industry, who said it had not been proven .

19
iazasa 20

There's testimony in 1969 basically to the same effect .
There were others who appeared in both proceedings who

21

sclentlflc debate was not only wrong, It was Intentlonal

21

dld have ties to the tobacco Industry and had received Industry

22

misrepresentation, it was fraud ; only the government today .

22

funding, but there were people who appeared before Congress who

23

had received no industry funding .

23
24
taazii 25

We come to 1964 . In 1964, there was a landmark
development which was the 1964 Surgeon General's Report . The
Surgeon General's Report stated the consensus of the scientific

11 of 31 sheets

24
iaas :as 25

Page 239 to 242 of 319

So the scientific position was that out there to be
artiailated . It was an increasingly minority position . Later
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 247
1

Another claim that's being made--we will skip over

They say, take a look at what Kendrick Wells wrote in

2

this slide -- another claim that's being made-- this is

2

January 1985 . He's a lawyer. And the statement was made to the

3

Dr . Carmona who I asked, I said, Would you likewise agree with

3

court that -except I'm going to be running out of time here .

4

me that the very fact that a scientist received funding from an

4

The statement was made to the court yesterday by, I believe it

ia4i~v 5

industry or the tobacco industry wouldn't tell you that a

ia~an :m 5

was Ms . Lubanks, she said at page 170 .

6

science or her science is good or bad? You would have to look

6

7

at the quality of the research and the quality of the scientist .

7

J . Kendrick wells in 1985, will confirm that the document

8

Is that fair?

8

destruction approach outlined by Mr . Northrup was implemented by

9
m4isi 10

Answer : Is that fair? That is fair and there will no
testimony ihat this was not high quality science .

The government also said thc lawycrs bandcd together

A memorandum authored by a Brown & Williamson lawyer,

9

Brown & Williamson . Wells directed members of the research and

ia.w .n 10

development center to collect documents related to be behavioral

11

and biological smoking and health studics . Once collected, thc

12

like brothers, like you see us here today, as part of a joint

12

documents were to be shipped .

13

defense .

13

11

14

10 41 <c

249
1

There was a united front that the industry mounted

the answer to

14

that is that it's

Suggest that this is actually what happened . It didn't
happen . The documents were gathered up, They were retained,

15

against litigation . And

16

absolutely correct, and it happens every day of the week in

16

17

connection with litigation that's mounted against multiple

17

1994 . They are still at Brown & Williamson today. Was it a

18

defendants in a cammon industry . There has been a joint

18

good idea? No . Did they have an impact, no, it did not .

19

defense .

19
The issue is not whether there's

ia4css 20

irtan :4s 15

a joint defense .

The

1045 02 20

They were produced to Congress in 1994 . They were praduced by
Brown & Williamson in tobacco litigation that's evolved since

There are other ideas that you will see, And I'm not
saying, and I think counsel has already suggested, we are not

21

issue is ahether the joint defense in some fashion impaired or

21

22

impacted the

22

benefit of hindsight or maybe even at the time . They were all

23

an appropriate way to the issues and whether as a result of it

23

great . There were bad ideas . My point is this, and our

24

there's some

24

submission to the court is this .

iowzn 25

necessary activities of the industry to respond in

kind

of fraud,

We are not here to revisit the question 'rf one of the

ia<sm 25

saying that somehow the lawyers didn't do anything with the

Against the touchstone of what this case is about,

25D

e48

1

lawyers did a good job in litigation, we are here because this

1

which is fraud, what actually happened with the lawyers' advice?

2

is a fraud case.

2

What was it really? Did the clients take it? And what impact,
if any, did it have?

3

Now, the lawyers, no questian about it, came up with

3

4

some ideas that were not terrific . One of the ideas was- this

4

iowzo2 5
6

is a memo that was written in 1977, Gee, you know, the CFR seems
to be going down the wrong road . Let's do something about it .

7

1042 53

And the fact there was a lot of consideration in the

8

late 197Ds about whether the SAB should be funding projects that

9

related to nicotine. And there was a

6

And that can only be determined by looking at each of

the events in the same fashion that we've looked at this event
carefully to be fair to the people who were involved .

7

By 1989 the drama begins to wind to its final

8

conclusion . The 1989 report of the Surgeon General comes out

SAB -- of SAB

9

and at the time that the report came out there were major

10

proposed grants relating to nicotine . It's the one instance in

mzsm 10

11

which there was the review . Some of the work went forward .

12

Some of the work did not go

13

and extensive research into nicotine .

14
ioaxn 15

forward .

review of

There was extensive review

The key thing, thnugh, is at the end of the day CTR

stayed in business. It went on to make an enormous

contribution

dynamics that were in place .

11

The industry's credibility had been dramatically

12

ernded . There were no new requests to regulate . And the flash

13

point that nccurred during the last perind nt time was very,

14

again, irnnic .

i¢as .io 15

But there was a person who was working for one of the

16

to the field of over 6,000 articles, Nobel laureates have

16

law firms that represented my client, a paralegal, he basically

17

received g rants from C I R .

17

walked off with all the

18

plaintiff's lawyer named Dickey Scruggs, and Dickey

19

became involved in the Attorney General litigation .

18

1043 27

ia<s~a4 5

What is the quality of the research? Nobody will say

this

will

it

20

oot high quality . Nobody will say that the researchers were

mns :zs 20

The documents made their way to Dc Kessler at the FDA .

21

somehow told what to do . There will not be evltlence of that In

21

They made their way to Representative Waxman . They made their

22

this case in connection with the SAB approved research .

22

way onto the Web sites and the whole world was a buzz .

24

was

Scruggs

that

ia4sso 25

say that

and he gave them to a

19

23

research was sensored . Nobody

documents,

Was it relevant? More than 500 citations to CTR

23

research appear in the Surgeon General's reports. Well, what
about some of these ideas?

13 of 31 sheets

24
masai 25

Page 247 to 250 of 319

The New York Times did an expose' . Look at all these

internal documents.

We have always known that this industry

was irresponsible . Now we can prove it . We can prove they
09/22/2004 07', 26 :56 PM

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 2"9

221

1

fundamental change, change that goes really to the very core of

1

2

why the so-called RICO mnspiracy was put together in the first

2

3

placa, that in that circumstance there has been such a change of

3

4

circumstances, such an intervening event, that it is

ossexi 5

6
7

4

inappropriate to use the past as a predictor of the future . And

that the best predictor of the future is where we are today .

left-hand side, left column is labeled distant past And I have

9

a picture of the Plaza Hotel, the Frank statement, and I end

11

12

6

Now, let me walk Your Honor through this chart . On the

8

osezsu 10

ia~oo :se 5

with the 1984 appearances before the Waxman Committee by the
tobacco company cxccutivcs .

13

at that 40- to 50-year period represented by that left-hand

14

column and make the inference that RICO conduct will continue or

osss :1c 15

Because RICO is about concerted conduct . It is not about a
situation where an isolated corporation or an isolated

individual does something wrong .
A RICO conspiracy and a RICO enterprise is about

8

concerted conduct, And the vehicle alleged in most cases was

9

CTR and TI . They are disbanded . There is no trade association

iaoi .is 10

today in this industry . There is no vehicle for concerted
conduct .

12
13

may continuc into thc future .

If you listened to the government's evidence yesterday,
the core vehicle for much of the RICO conduct was TI and CTR .

7

11

What the government wants Your Honor to do is to look

was a requirement that CTR, TI and CIAR be disbanded .

14
iaoias 15

And finally, you had possible FDA regulation . I mean,
think about how things have changed . You will hear from
Dr . Kessler tomorrow how the tobacco companies fought him tooth
and nail ovcr the issuc of FDA re7ulation . Yet today Philip

16

Now, the problem we submit is that there have been

16

Morris, the largest tobacco company in the world, lobbies and

17

intervening events . There have been changed circumstances .

17

works hard to bring FDA legislation about, to bring -

16

There's a gap. There's a gap that prevents the government from

18

19

using the past as the best predictor of the future .

o?se :z: 20

19

If you just widen the two columns, what you will see is

THE COURT'. Of course, that's not the position of the

industry.

iao2 :ao 20

MR. WELLS : It is not the position . And I think that's

21

what I have labeled : Period of profound change . And it is this

21

very telling, Your Honor. Because one of the questions is

22

period of these changed circumstances, which are really of a

22

whether there's a continuing RICO enterprise, are we continuing,

23

transformational nature, that vte believe precludes the

23

as the government alleges, to march in lock step? And the issue

24

government from ever meeting its burden of proving a reasonable

24

of FDA regulation is really the most fundamental issue

oasass 25

likelihood of future RICO wrongdoing .

iamzis 25

confronting this industry today .

222

22U

1

Now, let's ask : What happened? How did we get there?

1

2

How did these things come about? And what you uvill see through

2

are not in lock step, they are acting like

3

the evidence is that in

3

normally. Not in lock step, not in concert.

4

to create this period of profound change .

osss_is 5
6
7

the '90s a

number of factors converged

4

First, you had public and media outcry against the

iaozas 5

tobacco companies .
Second, you had congressional pressure . Pressure like

and 7Ds to keep from the American public the big secret that

they were selling a dangerous product .

8

like Dr. Kessler.

9

ienzss 10

11

brought by state Attorney Generals all over the United States,

11

12

over 40 state Attorney General's banded together .

12

14
osssso 15

THE COURT'. Tnclutling the Disirict of Cnlumhia, right?
MR . WFI I S . That's ahsnlutely cnrrect, Ynur Honnr .
And they banded together to bring laws drafted very

On Ihe core issue they are taking different positions,

and that is powerful evidence that they are not working together
as the government has alleged they did so hard during the 60s

the Waxman hearings, pressure brought on by dedicated servants

13

so

7

9

You had massive litigation . Massive litigation being

competitors act

6

8

ossawia 10

And on that most fundamental issue, these defendants

Now, Your Honor, I'd like to turn to a different point,

and that is that I want to talk for a minute about the distant
past.
Our core theme of the defense will be that because of

13

these prafound changes there is nn reasonahle likelihnnd nf

14

future RICO vinlafinns . But I want to say that althnugh we take

iunz .ie 15

the position that there is no reasonable likelihood of future

16

similar to the one before Your Honor, in order to create

16

RICO violations, that we do not concede in any way, shape or

17

profound change, to bring about profound change .

17

form that there ever was a RICO consptracy .

18
19

taao :0 20
21
22

23
24
taaoze 25

Finally, you had a new generation of management . You

had new people coming through all of these

companies

who were

brought up under a different period, had a different vision, had

a different ethlc.
And out of all of these various factors came this

change, came the admission of the health risks like the Philip
Morris commercial ; came the Master Settlement Agreement .

According --under the Master

09/22/2004 07 :26 :56

Pf4

Settlement Agreement,
Page

what we had

219

to

18
19

We will prove through the evidence there was no RICO
conspiracy, there was no RICO enterprise .

iaoaae 20

Now, in saying that I do not mean to concede in any way

21

that certain of the conduct by the tobacco companies In the past

22

was proper at all times.

23

From a social policy perspective certain of that

24

conduct was wrong headed, it was mistaken, and it was

iaon :aa 25

regrettable. But no matter how wrong headed nor no matter how

222

of

319

6

of

31

sheets

AC5001054253

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 203
1
2
3

THE COURT', I assume the defendants dmi t . You want to

2

testimany,

MR, BRODY : Your Honor, Steven Brody for the United

talking into it for some reason .

TIIE COURT'. Who wants to respond, please?

4

Mr. Redgrave,

6

MR . REDGRAVC : Good morning, Your Ilonor, Jonathan

Redgrave for the record with Jones Day .

7

MR, BRODY : The mic has been sort of moved here . Is
that better, maybe?

ossi ie 10

3

osu :ai 5

THE COURT : Mr . Brody, that mic sounds like you're oot

8
9

objection has been sustained, and the use of the Elders'

States . The objection--

6
7

1

use the exhibits .

4
osno~n 5

205

MR. BERNICK : No problem, Your Honor .

8

I'll be responding to the first issue raised by
Mr. Brody, Mr . Bernick will respond to the others.

9

The objections relate to two issues . First of all,

oss4 .ie 10

The first issue is with regard to the Middle District
of North Carolina decision that was vacated on appeal on

11

thcsc stcm from dcfcndants' dcmonstrativcs that thcy havc

11

jurisdictional grounds . Howcvcr, the govcrnmcnt docsi t havc

12

indicated they intend to use in their opening, which we received

12

any basis to argue that the demonstratives are improper because

13

from them last night .

13

the evidence yesterday, what the government portrayed the

14

evidence would be an environmental tobacco smoke, was that the

14
asx1 :xc 15
16

The first objection relates to their intention to use
six slidcs from a 1998 hliddlc District of North (brolina opinion

osxas 15

that has been vacated by the Fourth Circuit .

17

16

It's the Flue-cured Tobacco versus EPA case, It was

18

vacated by 313 F 3d 852, and we object to the use of the vacated

19

opinion in the apening,

osss :oo 20

The second relates--

21
22

know?

23

MR, BRODY : Three, Your Honoc

24

THE COURT : Why don't you present them all, please?

osraoe 25

MR, BRODY : The second objection relates to the

causal link between secondhand smoke and disease .

17

They then cited to the scientific evidence they said

18

could not be disputed on page 73 and included the EPA risk

19

assessment that was the subject of the Middle District of North

oss4 :4 20

THE COURT'. How many objections do you have, just so I

dcfcndants also disputcd, on pagc 72 of thc transcript, the

Caralina decision .

21

Now, in the course of this trial, Your Honor, we are

22

going to offer the evidence with respect to that decision, not

23

for the truth of the matter asserted, but we are going to use it

24

first to show the state of mind of the defendants . That

oeas~ua 25

decision shows what the defendants were saying and why they were

204

206

1

defendants' intention to use and to blow out on the screen

1

2

testimony--

2

saying it
Second, it shows that not just the defendants were

3

THE COURT : Blow up,

3

saying what they were saying with respect to the environmental

4

MR . BRODY : Blow up on the screen, testimony from

4

tobacco smoke but an independent judge, separate and apart from

osrazi 5
6

Dr . ]ulius Richmond, former Surgeon General of the United

oeasns 5

States, from a deposition .
We objected on

7

804(b)

1 and 32(a) grounds . Your Honor

the truth of the matter asserted, but there is another person

7

out there stating it .

8

sustained that objection in Order 630 . So we object to the use

8

9

of that .

9

oeove 10

Defendants' answer to that, as I understand it, is well

aaosm 10

11

they anticipate cross-examining Dr . Richmond at trial on that

11

12

subject . They shnuld be allowed to use it .

12

W think, given
P

13

14

osazse 15

1hP

fact

that depnSltlnn we dldrl t hivP a

we were
c
CINn(e to develop the tPstlmnn,v
that

nnt prPs

nt at

for the reasons that we stated arguing it to Your Honor, and for

these defendants, looking at the facts, stated, and it's not for

6

13

14

os:3s :44 15

And third and finally, of course, we are entitled to
use that decision with respect to cross-examining the

plaintiffs' experts with respect to ETS and dlsease causation,
so those are nonhearsay basis for the use of that .
And certainly, Your Honor, the last point I would make

on this is T wnnld believe the (nnrt is wPii able to determine
the proper welghr to he afcnrdPd to snCh a dellSlnn and T think
there's no basis to exclude demonstives at ao opeoing statement .

16

the reasons that your sustained the objection that it should not

16

17

be used .

17

Mr. Brotly. Of course, I've never seen a lawyer turn down an

18

opportunity -- I'm sorry, Mr. Brody, go ahead .

18
19
osaaao 20

Lastly, Your Honor, they've indicated their intention

to blow up onto the screen testimony from a deposition of former
Surgeon General Jocelyn Elders . Dr. Elders

is

not a

witness in

THE COURT', Two sentence reply if you need it,

19
oeae :ae 20

MR . BRODY : You've given me two sentences, so I'll just

say that the opening statement

is

supposed to be a

preview

21

this case . She's not on anyone's witness Ilst, They haven't

21

the admissible evidence, and It's not admissible evidence, It's

22

listed her . They haven't indicated any intention to list her or

22

a

23

to have her as a witness and so that is the final objection .

23

remanded with instructions to dismiss it in the Fourth Circuit

24

opinion . Again, that's 313 F 3852 .

24
osasso 25

So there are three objections : The use of the vacated
Flue-cure decision, the use of the Richmond testimony where our

09/22/2004 07 :26 :56

PM

Page

203

to

vacated

oazs :zs 25
206

of

opinion . It was vacated with the instructions --

THE COURT', The objection is overruled . The opinion
of

319

2

of

31

sheets

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 223
regnsttable, it wasit the results of a RICO conspiracy . And in

1

2

focusing on the issue of whether or not there was a RICO

2

because it is based on an abundance of evidence and it is based

3

conspiracy I would ask Your Ilonor to focus on the issue of

3

on evidence that will show profound and fundamental change and,

4

specific intent

4

just as importantly, irreversible and permanent change .

iaacu 5

6

Ask yourself : What was the state of mind of the person

who made the alleged false statement?

7

When they say the RICO conspiracy was formed at the

8

Plaza Hotel in December of 1953, ask : What was in the minds of

9

those people in that hotel back in 1953? Don't read onto their

100448 10

And it is a powerful and compelling presentation

ia~oroe 5

Thank you, Your I lonar .

6

THE COURT : Mr . Bernick, please,

7

MR. BERNICK: Can we turn this on here? Thank you .

8

Good morning, Your Honor, David Bernick for Brown &

9

state of minds the actions that somebody in 1970 engaged in .

11

i oa:m

225

1

Williamson .

moesa 10

This is o big caso . Thcrc arc a lot of pcoplc hcrc

I would like to take the court right to the backbone of

71

thc govcrnmcnt's case and in thc timc that I have address

12

today . But I would ask you, you've been trying mail fraud and

12

specifically each of the basic elements of that case because the

13

wire fraud cases longer than anybody in this courtroom, Your

13

key to this case is to deal with these issues on a very specific

14

Honor, and I would ask you to use the same traditional

14

basis .

15

principlcs in this casc that you

16

17

19

in any of thosc

cases .

Thcy havc a very simplc backbone for the casc ; that

iaoes~ 15

The other point we are going to try to ask the court to

focus on and bring out is the issue of historical context .

18

1005 23 20

use

We are going to show you through the evidence that many

of the alleged false statements were made in the context of a

16

there was a conspiracy in 1954, that it was maintained for

17

50 years, that the violations continue today, and that

18

injunctive relief is necessary .

19

long-running public debate where you had the health community on

iaosas 20

In order to address those basic elements, I want to
recreate that history sequentially, starting out first with the

21

one side, you had the tobacco industry on the other side, and

21

22

you had Congress as the ultimate arbiter in terms of what

22

23

regulations, if any, would be passed .

23

own time capsule for what actually happened in 1954, We want to

24

break open that capsule and actually give the court a much

24

ious_n 25

And to the extent these statements are made in the

context of that public debate are made to influence

iaos :zs 25

allegation of the conspiracy .
The government yesterday created a time capsule, their

broader context, a much more specific piece of evidence that

224

226

1

congressional action, those statements will be protected, we

1

2

submit, by both the First Amendment and the Norr-Pennington

2

3

Doctrine . And, furthermore, that evidence is still relevant as

3

4

to the state of mind of those persons who spoke or made the

4

ious_m 5

alleged false statements at the tlme,

6

iaos :4~ 5

Now, I just want to give Your Honor a road map of what

deals with whether there was a conspiracy in 1954,
The question we're going to address : Was there the

conspiracy that is the

fundamental

foundation of their case?

Second, they have pursued the theory that there's been

essentially no change . That the fraud has continued . That it's

6

dominated the industry . That it's dominated the marketing and

7

each of my colleagues who follow me will address . The first

7

sale of cigarettes . We're in a static world . And that today

8

person to follow me will be David Bernick and he will give Your

8

that same enterprise continues as need of remediation . So we're

9

Honor a historical overview . He's going to start in the 1950s

9

going to walk through that basic history .

imasse 10

I'd like to begin with the conspiracy . Mr . Marine

and walk Your Honor right through . He's going to give you

iaeo :as 10

11

evidence detail after detail, and what you will see is a story

11

yesterday created a somewhat dramatic story and a somewhat

12

that's very dynamic.

12

specifc story. Exeartives called in by telegraph to attend a

13

meeting in a luxury hntel in New Ynrk Cify . Hadn't been

14

together for years bPcansP nf anhtrnst rnnCerns . But the

13
14
iausai 15
16

fYs not a static stnry . it's an evolutinnary sfnry .

And Mr .

hazartlous

17

18

alSn talk

about relief.

And

he will

he

maooo 15

cigarettes.

16

Mr. t5lersteker will be folllowed by Mr . Newbold who

Then he

will

be followed by Mr . McDermott who

18

will

talk

19

10100 20

about two topics ; ETS and youth marketing,

21

Flnally, then Mr, Marks from Llggett will talk .

21

22

And the last speaker will be my co-counsel, Mc 1Nebb .

22

23

And Mr . Webb is going to conclude our presentations really where

24

I began, wi[h a focus on where we are today and how there is no

1001 25

reasonable

7 of 31 sheets

likelihood

of future RICO violations

threat to the industry was so profound that they had no choice

but to get

17

will talk about nicotine manipulation .

19

ta0ssi 20

Bernick will

followed by Mr . Biersteker who will talk about low tar, less

together.

And there on December 14th, says Mr . Marlne, he says,

the first meeting of the enterprise took place in the Plaza
Hotel

in

New York

City on

December 14th

in

response to the

telegrams that Mr . Hahn had sent On that day, he says, the
agreement was forged ; the conspiracy began .
He says present were the principal executives from

23

defendants American, Brown and Williamson, Philip Morris,

24

Reynolds and Lorillard, as well as

m:u :as 25
Page 223 to 226 of 319

relations

firm

John

Hill

of the

public

of Hill and Knowlton .
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 22?
1

That these people got together, that they forged the

229
1

who have their offices in New York were authorized to engage the

2

bond, and that Mr. Hill, basically the PR guy, says here's how

2

services of Hill and Knowlton . They weren't thei'e on

3

we will reassure the American population . I lere is how we're

3

December 14th . They hadn't even been retained .

4

going to do it . Now, what is their proof of that?

4

And what was the intent? Was there an intent even on

ions< 5

Well, they shared uvith you what I take to be some of

ia~i4oz 5

6

their best evidence . They shared with you a Hill and Knowlton

6

there a belief thaz cgarettes were hazardous? Was there a

7

document that goes back to that same period of time . They say :

7

determination that we've got to defend ourselves by lying about

8

See Hill and Knowlton really was involved . And what were they

8

our own beliefs? That's not what's reflected in this document .

9

saying, that the industry had to recreate confidence, had to

mn 12 10
11

miaso 10

Thcy also rcly and thcy showcd you ycstcrday, cvidcncc

The research group, it says, including men from six of
the companies present, which has been actively cooperating with

71

thc Damon Runyon Fund and its rolc in thcsc activitics camc up

that postdates significantly--this is from years later where

12

for discussion .

13

people after the fact are characterizing what the purpose of the

13

14

TIRC was, that it was conceived as a public relations gesture.

14

Now, thc intcresting thing about thcsc two picccs of

m:nmc 15

What was the Damon Runyon Fund? Well, the Industry was
already funding through the Damon Runyon Fund cancer research
cvcn bcforc this mccting took placc . Basically, giving moncy

16

evidence is even if you go with nothing else in the case, does

16

17

it establish the conspiracy, does it even go to the conspiracy

17

18

that they allege?

18

the cooperation of the National Institutes of Health of the

19

United States of America Public Health Service in working out a

19
12 19

9

reassure the smoker .

12

~oazm 15

10

December 14th absent Ilill and Knowlton to mislead anybody? Was

Their conspiracy caii t just be public relations . It

that others could determine how to use .

It was recommended that this group undertake to enlist

20

can't be that the industry was simply assuring people . For

21

there to be fraud, there has to be intent and the intent has to

21

the present controversy would be developed . This was considered

22

be born of knowledge or belief by industry that in fact

22

highly advisable . They would give to the program an aspect of

23

cigarettes were harmful, that the industry knew or believed that

23

independence to the program to a degree not obtainable in any

24

they were harmful, and that they specifically and deliberately

24

other way .

io :mse 25

massi 20

set about the process of lying, misrepresenting their beliefs .

program of scientific investigation through which the facts in

imis~as 25

What was the intent? The intent was to make a

228

1

Yet there is nothing in any of the documents that the

230

1

commitment to let the research spell out the answer to the

2

government showed the court yesterday that begins to address

2

question, and rather than doing the research in-house to have it

3

that issue of intent .

3

done in a way that the independence of the research never could

4

The intent to create a public relations campaign does

4

be questioned . Never could be questioned .

ioazse 5

not establish knowledge and belief that cigarettes are harmful,

imis~ss 5

This was the promise that was then made . All the

6

It does not establish an intent to mislead anybody . You can't

6

7

find in these documents any mention, even in these internal

7

8

documents, that there was an actual intent to defraud anybody .

8

January 1, 1954, what does it say? Big tobacco firms map

9

Their best proof is completely defectlve of that score .

9

counter attack. The group

isaais 10

Even more interestingly, we do have evidence that goes

imisie 10

events surroundings this meeting confirmed that intent .
It was public. There was no secret about the meeting .

further

plans to set up vast research

facilities to search out the causes of cancer .

11

directly to that same issue . Mr. Marine said, and this is

11

12

vital, he said the meeting was on December 14th . He said Hill

12

this organization . We have an intent to do good science . This

13

and Knnwltnn was there . He said this was a Hill and Knnwltnn

13

is how it's gning tn take place . There was transparency with

14

nrrhestratPd p

ioax4i 15

ri it was their

hralnChlld .

14

Well, there are actual minutes of what happened on

m:isos 15

So basically it's transparent . We are going to form

the

Department of j ustlCP . The Department

nf

j nShCP was

informed about the plans of the industry out of concern that the

16

December 14th . There was a meeting . These are minutes of the

16

department might believe that this was part of an antitrust

17

meeting . And Mr . Hahn was there . He was the boss . He was the

17

problem .

18

head of American Tobacco, which at that time was the number one

18

19

company and today is long gone because it didn't do so well over

to :m :oo 20
21
22

the years . The major conspirator somehow brought about his own
demise as a result . Well, he was there,

21

But you don't find Hill and Knowlton there . They

weren't there at all . Mc Marine was simply wrong . What was

24

going on? How do we know that Hill and Knowlton wasiit there?
Because at the same meeting, the five members of the committee

09/22/2004 07 :26 :56

PM

Page

227

statement of the

to

industry that

they had formed to go ahead and

do this research . The promise was then repeated in the Frank
statement .

22

23

toaaas 25

19

mass 20

And the department was given specifically the mission

In addition, there will be an advisory board of

23

scientists disinterested in the cigarette industry, a group of

24

distinguished men from medicine, science and education will be

m:n :az 25
230

invited to serve on this board . These scientists will advise
of

319

8

of

31

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 231

233

1 the comm'dtee on it's research activities .

1 lose its value because it will have lost its posture in ihe

2 Now is that public relations? Sure it's public

2 scientific community . End of sermon . You had to keep your

3 relations. Was it fraud? Was it wrong for the industry

3 fingers out of the pie .
4 Because If people believed that that SAB was really

4 intending to do research to take credit for it? No .

irtmio 5 simply doing the industry's bidding, the integrity of the SAB

iomz4 5 Was it wrong for the industry on the basis of this

6 commitment to assure smokers? That's not fraud . That's not a

6 would be compromised and the whole ability to say that the

7 statement that misleads people about your belief that cigarettes

7 industry was being responsible would be compromised .

8 actuallycauseharm .

8 What happened? The industry followed through on its

9 The truth of the matter is that ihis is the commitment

9 commitment . The SAB was chosen . And there will be no evidence

101741 10 that was made and it was borne out . And the fact that there was

msnse 10 in the case the SAB formed in 1954 was comprised of people who

11 PR actually had precisely the oppositc effect from what's becn

71 were anything less than thc distinguishcd scientists who were

12 argued to the court. What's been argued to the court is, it's

12 promised by the Frank statement.

13 almost like PR if you touch it, it must be misleading to

13 These are a couple of examples, They are really people

14 somebody .

14 who came from the National Cancer Institute who were on the

U :n :uc 15

But the commitmcnt that was madc was very significant

iazo :44 15

16

because it was made publicly . Because it was made publicly they

16

17

had to pursue the research in a way that was unimpeachable and

17

18

this was recognized . Yesterday, you were shown a part of a

18

this research or this research or this research . It said .

19

document .

reviewed grant proposals that came in .

The industry in essence, didn't say : We want you to do

19

Money is here, h1ake a grant proposal and the SAB will pass on

This is a later document that was written by a tobacco

iazcas 20

it and we may fund it . And ihat way all the research gets done

21

industry executive . He says : It's my sober judgment that CTR

21

22

as it now operates is the greatest public relations asset you

22

23

have in the problem of tobacco and health,

23

properly so, that the mission of the research is to allow the

24

scientific community to inquire into this effort . And the

ioae :n 20

PR. Fraud . Misleading, lNhatdoestherestofthe

24
1011332

original board of the SAB . And what is it SAB did? Thc SAB

25

paragraph say? It says-

iasezs 25

by people on the outside .
And the industry is able to say that the mission, and

dlrection taken by the SAB, that was their decision . It was

232

234

THE COURT : Where does that come from, by the way?

1

their mission . It was their determination about the direction

MR . BERNICK . This is from exhibit - it was one of

2

to pursue .

t h e i rex hibi ts .

3

THE COURT'. I don'1 need the number, Mr . Bernick, but

just give me the context .

iase4s

MR, BERNICK : 1976, 1977 memo that was written by the

S o we come to t he fi rst per o
i d o f t ime, 1954 to 1964,

4

and we will peel off a piece of what will be an overall history

5

ofactlvities .

6

The SAB was formed and tire no strings attached SAB-

former head of CTR, I believe. I don't remember his name

7

approved research program began underway completely consistent

offhand . But it was an executive with one of the tobacco

8

with the undertakings that were made in the Frank statement .

companies, an internal document dealing with CTR .

9

Now when I peeled that off I peeled off another time

io :iaoi 10 Because, as Your Honor will see, CTR got reviewed again

ie•zzms 10 line that we're going to do, which is the public causatlon

11 and again as time went on and people said : Gee, do we still

11 position about which the government -- around which the

12 want to do this? And this was a statement that was made in

12 government's case principally turns . Why are we talking about

13 connection with the prncess ot review .

13 both things at nnce4

14 Now the government gave you that one sentence taken out
ioasas 15 of the middle but the rest of it says : Now, for a general

14 The reason that we're talking ahouf both things at nnce
i¢2am 15 is that essentially during this period of time, Your Honor, ihe

16 observation, while it is true that TIRC was formed to meet the

16 industry externalized both functions in a way . The research

17 public relations need - see what the government has said - the

17 into the fundamental causes of disease that were- diseases

18 CTR has become in your wisdom the instrumentality for the

18 that were associated with smoking was research that was to be

19 discharge of your responsibility to know all that you can know

1oa9ae 20 about the part tobacco might play in human disease .

19 done by outsiders on a no-strings-attached basis .
io2nal 20 W hen it came to assessing the state of what sclence

21 It Is my soberjudgment that CiR as It now operates Is

21 sald that on that subject, the Industry could have designated an

22 the greatest public relations asset that you have in the problem

22 individual internally or taken a poll internally among the

23 of tobacco and health and this is now key .

23 individuals within the companies to say ; well what do you all

24 But the moment CTR becomes or the attempt is made to
toaesa 25 use it as a public relations instrumentality, your asset will
9 of 31 sheets

24 think? Of course, whatever the industry said on that subject
iosnse 25 would enjoy no credibility externally .

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 281

179
which is caustion from our conduct .

At the end of the day I have one last comment . I know
that I've run out of time, and that is at the end of his

presentation -

1

I want to talk about defendants' conducted ieserch .

2

They did -- in fact, Ms . Eubanks yesterday said the defendants

3

conducted lots of research .

4

TI IC COURT'. Mr . Bernick, you have to answer to your

i is ., .u

5

Secondly, the defendants put potentially safer
cigarettes on the market .

co-counsel . I dldn't give you the time . I gave you the time

6

Third, they competed on the basis of risk reduction to

limits for the day . That's why I keep quiet .

7

the extent -- to the extent permitted by the underlying science

8

and the regulatory environment that governed what they could and

9

they could not say .

MR, BERNICK : But I still have to answer them, You can
see I've already been beaten up a little hit in this process .

n ai ~s 10 The public health was the statement that was made.

nrsso 10 And last, after I go through all three of those points,

11 Mr. Marinc says thc public hcalth is rcally at issuc hcrc . You

11 and I'm going to do it scparatcly with thrcc scpomtc cigaretic

12 can make a difference, Your Honor, and that is what they asked

12 design approaches .

13 Dr . Eriken . Tell us what would be in the interest of public

13 The first is lower tar .

14 health .

14 The second is something called selective reduction .

n az :m 15 That's not, with all respcct to counscl and thc court,

n :4srz 15 Sclcctivc rcduction is an attcmpt to rcach insidc thc thousands

16 it's not what the law says that we are here for. We are here to

16 of chemicals inside cigarette smoke and pluck out one or two or

17 deal with the question of whether there's a threat of continuing

17 a group of compounds that I thought to pose a health risk .

18 violation and whether divjorgement, whether money, which is what

18 And the last one I'm going to address are innovative

19 they are talking about, is a way of-an appropriate way under

19 products, primarily products that heat rather than burn tobacco .

nazzi 20 the law of dealing with d.

nasss 20 And I want to do that separately with each of those three

21 And the argument does not sit well with the government .

21 approaches, because the underlying science and the regulations

22 As consumption has gone down, tax receipts have increased, the

22 that governed what these defendants could and could not say

23 government in any one year, 2001, gets $7 billion in excise

23 about those different design approaches is different and it

24 taxes. The CDC has recommended that they budget 4 billion as a
mvzoe 25 maximum, 1 .6 billion as a minimum to the states. Look what the

24 explains why their behavior in each of those spheres was
n :<sin 25 different

290
1 And lastly, after I've laid that out, I want to come

2 control, $65 million .

2 back and say what will the evidence show is wrong with the

3

3 government's theory, its RICO theory, with respect to less

THE

COURT : That was Congress's decision, wasn't it?

4 It's not the executive's decision .

11

4212

5

MR,

4 hazardous cigarettes .

BERNICK : Precisely . But for the government to

6 in the 1950s . In the 1950s, Your Honor, you will hear evidence

7 should address the public health issue in our own way here

7 that there was an association between smoking and lung cancer

8 through disgorgement, that's not appropriate . It falls into the

8 and it was a dose response relatlonship .

nwio

10

9 W hat does that mean? That means that the more

Ms . Eubanks very capably said, this is an industry

nzeai 10 cigarettes you smoked, the longer you smoked, the greater your

11

that's only interested in money . That that motive is not an

11

12

appropriate motive .

12

13

But this case at the end of the day, Your Honor, has

14

boiled douvn to just that request from the government . This case

15

is all about money . And I'm out of time and I appreciate the

16

opportunity .

14

recommended on the basis of this observation, as this dose

nas :5s 15

So may I have the next side, please?

And you will see, this is Dr. Wynder. Dr. Wynder was a

18

MR, BIERSTEKER : Not as much as I would like, Your

18

21

19
Thank you very much . I'm Peter Biersteker representing

R.J . Reynolds .

response relationship, that less would probably be less risky .

16
17

Honor.

And Mr . Bernick put up one slide, I'm gning to put up
another one . What scientists at the time did is thaf they

1 HL COURI'. Mr . Biersteker, do you have any time left?

20

risk of lung cancer .

13

17

19
114,11

n_<s :2s 5 So let's start with lower tar and I want to start back

6 say - to make that decision, but then to say that somehow we

9 same category that was decried yesterday .

n axz4

282

1 federal government's appropriating to the states with tobacco

n_nnio 20
21

very important figure . He was at Slone-Kettering . These are a
number of quotes he made, but you can see his comments indeed

were even specifically addressed to the tobacco Industry where
he says they should pursue this strategy without delay .
And indeed defendants did start to compete . In 1952

22

I was going to speak softly and quickly .

22

23

Your Honor, I want to cover four points with respect to

23

one percent of the market was filtered cigarettes, and by 1959

24

it was

24
n as :oo 25

less hazardous cigarettes, including a little bit of low tar
that Mr . Bernick talked about

21 of 31 sheets

icar :z9 25
Page 279 to 282 of 319

nearly half .
There was also very vigorous competition within the
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 237
1

1

2

came to the industry aiticulating its view of what the evidence

2

3

showed, it was the SAD's view that was articulated .

3

4
imxz~is 5

6
7

10 23 s,

So the SAB itself reviewed the evidence and when it

Now, was this a good idea? It was a good idea, we

4

would say, but more fundamentally, how does it square with the

government's theory of this case?

misrepresented . And yet yesterday there was a very interesting

9

statement made that I think is of the essence here and

10

highlights the importance of what the industry did in yet a

11

diffcrcnt way .

lung cancer, Dr, Hammond? That'sjust what we're trying to find
out. We don't know yet .

How different is that from exactly was said in the

7

Frank statement, which is that these experiments are not

8

regarded as conclusive in the field of cancer research . The

9

experimenter himself said that they were not conclusive .

iazes1 10

The statement was made, and I think it was Mr . Marine,

13

very capable presentation and the statement was made : He says :

14

What counts is corporate intent . Corporate intent . That's what

i a23sn 15

This was Dr . Cuyler Hammond, one of the leading
researchers of the time . I le says, daes smoking really cause

6

They say intent, They say we knew and we

8

12

irt2s :zn 5

established, were they alone?

As we go forward in the 1950s the picture evolves, but

11

still thcrc is an activc and important issuc in thc minds of

12

people who have nothing to do with the tobacco industry,

13
14

this casc is all about .

ia2rtse 15

1957, testimony before Congress by Surgeon General
Birney himself, It is a controversial area in which some well
known scicntists havc opinions which diffcr from somc of thc

other people whom you have heard in these

meetings.

16

Yet, he also said, in order to determine the corporate

16

17

intent where did they get their evidence from? They get their

17

18

evidence from this individual scientist or this individual

18

been made and he says . We believe that this is as far as we

19

scientist . What they want to say is that there's no one

19

should go at this time until and when we have additional

1024 11 n 20

21
22

individual, but that anybody who did anything working within the

company all of a sudden creates the

company's

intent .

information.

21

Now that's curious . If you had two different people,

23

one of whom believed that there was causation and the other one

24

that didn't, how would the companies intent be inferred there?

ioa4se 25

iazzis 20

He goes on to talk about the announcements that have

in 1959 Dr . Birney comes back on the scene . He's still the

23

Surgeon General . I hope I can get my slide here. And lie

24

How could you possibly do it?

That's as far as he was prepared to go . Now, later on

22

publishes an article in the Journal of the American Medical

mszn 25

Association in 1959 where he says, in very careful words, lie

1

says something to the effect that the scientific evidence now
implicates, implicates -Your Honor asked for the clear

236

1

238

Instead, the more reasonable approach is that companies

2

always act through people but they also acte at the top . A

2

3

company makes a decision . They act and you infer their intent

3

language . There wasn't clear language . It says implicates

4

from what they say was the reason for the act . And you infer

4

smoking as the principal etiological factor in the increase of

5

lung cancer . That's what Dc Blrney wrote .

isa4_4s 5
6

their Intent from the action itself .

1027 40

How did the industry act? The industry acted by

6

What I have excerpted here is that in the same journal,

Journal of

7

establishing the 6AB and by externalizing the scientific

7

the

8

research on this issue . And the industry acted by adopting the

8

appeared in response to Dr . Birney and it says. Oh, a number of

9

position that the SAB took with respect to causation .

9

authorities who have examined this same evidence cited by

ioasos 10

What was that position? This is 1960 . Scientific

ie•ze :a4 10

the American Medical Association, an editorial

Dr . Birney do not agree with his condusions . In the very same

11

Advisory Board meeting, Charleston, South Carolina . Perhaps the

11

journal . Who wrote that editorial? It was one of the people in

12

most signifirant development has been the general recognitlon

12

the Surgeon General's office itself . The Surgeon General's

13

that we, do

13

(IffICP Cnnld nnt

14

fhe PxtPnt nf

iD2sss 15

yet have the answers that
tnhaCCn nse and the incidence of

nnt

not prove a causal

an ass(Irl .ltkln bPtwPPn

relationship :

that the

hing

cancer dnPs

And

14

experimental

i¢2e :zs 15

agree nn this snbj erf.
the disagreements wPnf on . This is l amlary

1961, journal of the New England

Journal

of Medicine,

fr) tnne

what

16

verification is essential and

17

factors which need to be considered . I hat was the view of the

17

18

SAB. That was the view that was espoused by the industry .

18

the principal researchers and proponents of the idea that

19

cigarettes cause disease at the time, and Dr . Clarence Cook

19

10 25 4s 20

that there are a number of other

16

But they weren't alone . Let's go back in time . What

10 2 eat 20

were people that were completely disassoclated from the industry

21

saying outside, people who were authorities, people who were

21

22

actually conducting their research that led to the view among

22

23

scientists that smoking caused disease?

23

24
1a2s :os 25

To go back to 1953, 1954, when the Frank statement came
out and when it said we don't believe that this has been

09/22/2004 07 :26 :56

PM

Page

235

24
1029 02 25

to

238

does

it recite?
In November 196n, Dr . trnest L . Winder, who is one of

Little, appeared and they basically presented their separate and
opposing views .
W ho was Dr. Clarence Cook Little? He was the

scientific director of CTR . The research part of the-- what
became the research part of the TIRC . Clarence Cook Little was
the scientific director . So it's now the debate between the two
of

319

10

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31

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 245
1

on by the 70s and 80s, people who tended to testify, tended to

1

people were on TV, like Brennan Dawson and the issue of

2

have this view also testified for the industry .

2

causation came up, they would address it, but the whole idea of

3

proactively and aggressively seeking to win the issue of

4

causation or fight to withdraw in the court of public opinion,

3
4
imn,n 5

The industry came to rely upon the testimony of experts
tested in a court of law that their causation position still had
a reasonable basis .

6

i¢a :zs 5

There's one thing to have the scientific view, it was

that was a battle that was long, long gone .

6

We will see in a minute -- we will see in a minute that

7

another thing to take this matter to the court of public

7

this event, this whole campaign had profound continuing effects

8

opinion, and yet that is what the industry did after 1964, They

8

and ultimately brought about the capitulations that we're going

9

to talk about in a minute. The seeds of the problem were sewn

9
103543 10

continued to fight the battle in the court of public opinion .
They did so sometimes with arrogance . This is arrogance.

11

1038 44 10

My clicnt, Amcrican Tobacco, took out an ad in the Ncw

71

here . It was a problem of credibility . Nobody believed that
they hcard from the tobacco industry .

12

York Times basically saying, We're not going the advertise here

12

13

any more saying, we believe the anti-cigarette theory is a bum

13

to the court that perhaps the industry did not do a particularly

14

rap .

14

good job, and that was with respect to the role of lawyers,

~oa:us 15

Okay . You scc, thc govcrnmcnt pointed out ycstcrday a

So we go on to the second area in which we would submit

iaos :aa 15

Rcmcmbcr, it was thc SAB that dctcrmincd what thc focus

16

document that reflects a cynical view of the world, one in which

16

of the research was going to be, but when the'64 report came

17

everybody is very carefully cutting very careful lines on the

17

out and created this- recognized this consensus, the industry

18

issue of how to articulate the causation position .

18

was threatened on many fronts: Litigation fronts, regulation

19

fronts. Who knows what was going to happen?

19
iosaas 20

The government ably and correctly yesterday pointed out
these events and pointed out how out of touch the industry was

iasss4 20

There was a proper role for lawyers to play in this

21

with respect to these issues after the 1964 report, but they

21

process because there were legal proceedings that were going to

22

didn't tell you the rest of the story .

22

have a tremendous impact an the future of the industry .

23
24

imxs~4s 25

The rest of the story is that in a period of time the

23

industry came to recognize that the very adoption of this public

24

position was the worst -- was in a sense eroded its credibility

isaea, 25

So, there's no problem from our point of view and we
would submit to the court that this is correct . Lawyers had to

be involved . There was an important role for them to play, but

244

in the most profound way. It was the worst thing that was

1

2

happening to the industry .

2

3
4

iaxsss 5
6
7

1037

246

1

In 1979, in connection with the Surgeon General's
report that was issued 15 years after the first report, the

industry came out with its own document that was designed to
kind of respond to the Surgeon General,
They held a highly-visible press conference the day

the real question is : What kind of role should they play?
Now, the government takes issue with many things that

3

lawyers did, and some of them are, we believe, correct and some

4

of them, we believe, are not correct .

iaaes4 5

One thing that the lawyers did is that when research

6

proposals came in to the CTR to be funded and the SAB said, Nah,

7

we don't think so, but the lawyers thought that it might be

8

before the report was released and they essentially tried to

8

useful, or the companies thought that it might be useful for

9

preempt the whole thing . But they then went ahead afterwards

9

purposes of dealing with immediate issues that were being faced

es 10

and they analyzed and said, well, oneof the editorials that

iszois 10

in the regulatroy arena or the litigation arena, they said,

11

came out later on, were we successful in convincing anybody of

11

let's go ahead and fund the research . Those were the so-called

12

ourvlew7Andtheanswerwas,wefailedmiserably . Werealiaed

12

special projects .

13

that notntly was paying aftentinn to us .

13

14
iana2 15

And, essentially, f)r. Richmond, who will testify in

14

this case, who was the Surgeon General at the time concluded by

ioaooo 15

Ynur Honor might say, well, there was a Int nf the
lawyers calling the shots . And the answer is that lawyers
suggest or approve research all the time . The real question is

16

looking into the situation himself from afar outside of the

16

17

industry, that this is exactly what the industry was going to

17

18

have to conclude . That it would no longer be productive to

18

the quality of this research that was done through special

19

attack the government's conclusions regarding causation .

19

projects was very high .

ta3oso 20

And by 1984 --this is why this line is shaded a little

what's the quality of the research?
And the reason that I've displayed this slide is that

mno :as 20

These are top notch researchers coming from major

21

blt--theIndustry--theTobaccoInstltute,Inpartlcular,

21

academlcInstltutlons . Theypubllshtheresultsofthelr

22

took the view that the better idea was to go into a responsive

22

studies in peer reviewjournals, and there is no evidence in

23

mode only .

23

this case that somehow the scientists were not permitted to say

24

what they wanted to say . In fact, many of these articles came

24
1a3e :oi 25

They would still respond if asked . They would still
appear. If there was some other issue that had come up and

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out with conclusions that were unfavorable to the industry .
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1

acted intentionally . The industry's credibility was absolutely

1

interest in people's helth as a basic responsibility pammount

2

back, front and centec

2

to every other consideration in our business,

3
4
m4a~n 5

The suits followed . And as Your I lonor can see, the

3

industry ultimately capitulated, The industry, this pillar,

4

ia,a :az 5

this series of pillar wilted under the heat .

6

This is not something that's happened recently. The

Now, I don't know that we can say exactly how the
industry intended this at the time, except that it reads out
very plainly as a major commitment to its responsibility, but it

6

turned out to be true perhaps in a way that the industry never

7

industry acknowledged -- acknowledged these things years ago,

7

foresaw, zn industry has had to live up to in the following way .

8

1998 .

8

9
104714 10

The SAB program CTR was terminated . The causation
position was conceded . It was given up . And the language on

Honor,

causes

were buying the cigarettes, did n't want to wait around for the
SAB to conduct its research, for science to issue a definitive

11

thc Wcb sitcs, Vour

12

disease . People have testified under oath in court, smoking

12

13

causes disease . It's happened, Statements precisely that ck :ar

13

had a concern and, therefore, from a commercial point of view

14

have been made, and they can't be taken back . You can't go back

14

the industry had absolutely no choice but to be responsive to

I a4nxc 15
16

to datc is clcar : Smoking

9
1050 24 10

What happened was that the consumers, the people who

in court and say, "Oh, gcc, wc changcd our mind .' Vou can't go

Honor, for the court's benefit, I would like to take a break

19

shortly after 11 : 00 o'clock after I fill out a little bit more
of this, if Your Honor will find that appropriate .

21

told

Congress

that nicotine wasn't addictive?

MR, BERNICK : I'm sorry?

24

answcr.

The consumers believed that there was a problem, they

this problcm . And that's rcally what drovc thc product rescarch
and development activities .

17

It was one thing for the industry to say with a

18

blessing of outside scientists that causation had not been

19

established scientifically .

iawse 20

THE COURT : The industry change its mind after CEOs

23

iowaoe 25

16

I want to quickly move to some other areas . And Your

18

22

m:oo :4z 15

back to Congress and say, "Oh, gee, we changed our mind ."

17

1047 52 20

71

THE COURT : Didn't the industry change its mind after

the CEOS told the Waxman hearings that nicotine was not

It's another thing to tell the customers who were

21

worried about disease, Oh, that's okay . You dami t have to

22

worry . Go ahead and smoke and we're not going to make any kind

23

of change,

24

iaseas 25

So, of course, they wanted to respond to what the

marketplace was saying . And as a commercial matter, the health

252

1

Absolutely,

and the addiction line would

be on there in just a moment .

4

iowaie 5

1
MR . BERNICK .

2

3

254

addictive?

That position also has been conceded . That is, you

will see that addlction-I'II pull the addictlon up right now .

issuehastotallydominatedtheactivitiesofthisindustry,

2

Within a period of years there wasn't a single

3

cigarette product, single cigarette company that wasn't coming

4

out with design changes that were designed to meet this concern,

iase2s 5

but here were the problems .

6

Addiction was an issue before '64, but not really, wasn't a

6

7

public issue. And I'll show you some slides here in a minute to

7

8

take you through the sequence .

8

program, had to say that nothing that could be done up there on

9

the joint basis could affect the businesses themselves .

Basically,

9

imne~m 10

addiction as

well was conceded, not in 1994 .

Obviously, they said otherwise . But since 1998, since the MSA

Number one, there were antitrust restrictions . The
statement of origin and purpose for the 5AB program, the CTR

iasmi 10

So product research could not be done on a joint basis,

11

the industry executives have testified to addiction, and the

11

it had to be done by the companies individually because of

12

industry , not

of them, but the industry formally

12

antitrust concerns.

13

and nn the Weh sites, the industry cnmpanies say, in different

13

14

IangnagP, that the

ia4s :os 15

necessarily all
addiction

--that rlgarettes by tndaY S

14

standards are considered to be addictive .

There was another issue . As a result of som® nt the

advertising, as a result nf these

develnpments Srlentlhrally,

ioscn 15

the FTC said you caii t make any representation about whether

16

your products are good or bad for anybody . You're foreclosed

17

it's an important area and It's the last one that I'll cover in

17

from doing it.

18

detail .

18

16

19

ia4ew 20

Let me talk a little bit about product research because

Product research is a very different and complicated

story that is also the same in a way as one I've just told in

19

1052 13 20

The third problem was that science hadn't identified
what it was about cigarettes that might he leading to this
disease, so how do you change them?

21

the sense that there's dynamism and change, but It's also got a

21

22

lot of distinctive issues to it, and it evolves in a different

22

commercialize a product, you can't claim it's safe without

23

kind of way . Let me pursue it in this fashion, Your Honoc

23

science to support it . And there was no science that would tell

24

you that a product was going to be safe or not, because nobody

24
1049m 25

The Frank statement made this commitment that the
government has featured prominenty . It said : We accept an

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to

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254

So you can't do research together . If you

had isolated a constituent and the epidemiology doesn't tell you
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1 pursue it in more detail .

1 but the Surgeon General In 1989 acknowledged that that linkage

2 In the late 1950s and early 1960s there were concerns

2 had not been established, had not been proven and the

3 about advertising and marketing to kids . Remember, at that time

3 investigations came up negative .

4 most of the smoking ages were either 18 or 16 in the United

4 1oe Camel was investigated by the FTC, and in a very

n 2vza 5 States .

1127 ~

:2z 5 plain opinion says, we don't find the evidence that this was

6 The advertising code was adopted by the industry in

6 designed or had the effect of causing kids to start to smoke .

7 1964, made a series of very specific commitments, No blanket

7 That was trend number two .

8 commitment that somehow it was not legitimate to market to

8 Regulations, investigation, and then trend number three

9 people who were of age, that is between the ages of 18 and 21,

9 is the industry was basically not on the front line prior to

nnri 10 this time. Kids smoking was felt to be a problem of peers and

.nnse 10 but the advertising code was adopted .

11 What you scc from this point farward arc thrcc basic

it family, but ovcr time that position bccamc untenable and thc

12 trends, and the three basic trends are designed to deal with a

12 industry began to actually go about the process of trying to

13 central problem that knows no easy answer .

13 help,

14 You saw this document cited yesterday from the yellow

14 By the time that the NSA came along all three of these
n nss 15 trcnds wcre still undcrway, but most prominently thc idca that

.n 24 :uv 15 language . Counsel said, But the industry docs not this is
16 a -- they played Brennan Dawson, who was a spokeswoman for TI in

16 the industry has got to acknowledge its responsibility to take

17 a Larry King Live interview, and this is a section that they

17 steps to limit access of kids to their advertising, and

18 clipped out -- but the industry does not target kids . In fact,

18

Mr. McDermott is going to talk about that some more .

19 W here do we stand at the end of the day with this

19 you will only find tobacco ads in publications that are

nss .ie 20 board? What proposition does it establish? Are they pillars

icas :n 20 primarily geared towards older people ; adults, in fact .

21 They didn't play what she said just before that when

21 all lined up one after another all uniform, static, stable, all

22 she was answering the question . What she said just before that

22 the same? Or is what you see really a series

23 is very, very sound and insightful to the problem that exists,

23

24 There's a tension, The tension is allowing cigarette

of

stories?

Stories that are driven by problems, problems

24 associated with a product about which our culture is very

11 25 _se 25 companiestofollowtheirFirstAmendmentrights-usetheir

nss :<z 25 conflicted .
268

270

1 First Amendment rights and advertise a legal proper on the one

1 We recognize the right of people to make choices . At

2 hand and on the other the fad that -- advertise there are

2 the same time, we also recognize that this product is dangerous

3 probably people-- there are people who are not of age who are

3 and it kills people . And this is a controversy that's been out

4 going to sea the ads.

4 there for a long time .

11 25 _s4 5 And that's the tension . Got a legal product people

nssss 5 W hat these stories really evolve is the very complex

6 should be able to advertise . At the same time you know that

6 series of factors that basically have d riven how that tension

7 people who aren't of age and shouldn't smoke are going to see

7 has been resolved over time . Very difficult

8 it . So, how do you resolve that tension?

8 This is not something that any one organization

9

THE

COURi . Isn't that Supreme Court reference, wasn't

11

9 controls or dictates . There are no secrets here . There's
nasas 10 nobody who is in control . These are all much more difficult

11 2610 10 that to a pornography case?
MR . BERNICK : You know, I don't know what she was

11 problems . They are problems like the problem that Brendan

12 actually referring to at that time, whether it was a pornography

12 Dawson identified .

13 case or nnt . Birt this is all the area of cnmmercial speech .

13 i've got one more story tn tell hetnre I get to reli®f

14
nzsr

THF
15

COURT'. I understand what ynur argument is .
MR . BERNICK'. Fairenough .

14 and it's one that nohody has talked ahnut sn far at all .
nss :zs 15 It's a problem and it's a story that really deals with

16 Three trends, Trend one is regulations limiting where

16 the consumer. Because their case is a case about hotv our

17 you can advertise, what your channels of access are .

17 conduct was deceptive, deceptive to consumers, and how it

18 This happened in the 1970s . The TV and radio ban took

18 actually deceived consumers, because otherwise they can't get

19 place .

19 what they really want, which is disgorgement .

1121 4s 20 Trend two, investigation and research into whether

nsese 20

And the story is a story about how consumer perception

21 advertlsing actually causes kids to start to smoke . And

21

has evolved and I'm only going to focus on the period of time

22 investigations of particular ad campaigns to see whether they

22

from 1964 forward .

23 were designed to cause kids who were underage to smoke .

23

driven consumers? What is deceptive or not deceptive with

24

respect to consumers?

24 The research did not establish that advertising causes
n2nos 25 initiation . In our view it still hasn't established that today,
09/22/2004 07 :26 :56 PM

nnos 25

You can go back to the 1950s, But what has

You can see, Your Honor, that I've got the same time

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1
2

CERTIFICATE
I,

EDWARD

N . HAWKINS, Official Court Reporter, certify

3 that the foregoing pages are a correct transcript from the

4 record of proceedings in the above-entitled matter .
5
6
7

Edward

N . Hawkins, RMR

8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25

31

of

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sheets

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1

2
3

nmsas

This is 1981, and you will see a whole series of

THE COURT : How much longer do you have, Mr. Bernick?

5

MR . BCRNICK'. I don't know . My colleagues will tell me

8

I have, I'm told, 23 minutes, so I'll be happy to take
a break now,
THE COURT'. I think we do need to take a break at this
time . So everybody let's take our 15-minute morning break .

nsi rs

leave us in a very difficult positian and it illustrates the

4

problems that we've had on an ongoing basis .

6

of slides about addiction . Obviously, the wealth of common

7

experience of smokers has long for decades led to the perception

8

that Mark Twain articulated, that once you start, it's hard to

9

quit . Everybody has known that .

10
11

12

(Recess concluded at 11 :19 a .m.)

12

14

Mr. Marine share the costs of a specially-certified court

15

reporter who can take it down about 1 million words per minute .

16

n

22 01

MR . BERNICK . I apologize to the court, and I've

What about addiction? Let me show Your Ilonor a couple

5

(RCcess began at 11' .04 a .m .)

THE COURT : Mr . Bernick, I am going to make you and

And that is up to the Surgeon General, but it does

3

11

13

nas :oe

I i~ze2a

down to the second .

9
10

That's correct .

2

recommendations that were made exactly to the same effect .

7

1105 02

1

4

6

265

Generalhimself .

Your Honor will see use of the word addiction long
before 1964 in the common parlance .
Prior to 1964, habit and addiction, Your Honor, were

13

used almost interchangeably by scientists and doctors, This is

14

a report that came out of the Royal College of Physicians in

15

England in 1962 . It's thc equivalent of their first Surgeon

16

General's office .

17

already offered my apobgies to the court reporter, but I can

17

18

also blame my codefendants here who have -- they gave me

18

there are smoking habits as if it doesn't really make a

19

30 seconds more during the break. It took me 15 minutes to get

19

difference,

nas :zo 20

30 seconds more out of them .

11 22 14 4

And you can see it saying smokers may be addicted and

20

So when you see that magic word addiction coming out of

21

Your Honor, if I could proceedV

21

22

THE COURT : Yes, please .

22

period of time, that's no secret . That's how doctors and

23

MR, BERNICK : Let's finish the last segment with

23

scientists were talking at the time, The word obviously gets

24

picked

24

nas_4a 25

respect to product research and talk about what's happened more

recently and then Mc Biersteker again will give Your Honor more

nseaz 25

a document, particularly one written in Britain in the pre-1964

up .
In fact, in the United States, the CTR in 1962 funded

264
1 this article this says that smokers, heavy smokers appear to be

2 Unfortunately, the endorsement that the industry

2 true addicts. There wasn't any sensitive about the issue, and

3 enjoyed for its efforts in the 1980s has eroded . Premier was a

3 that's why during this period of time I don't have a line,

4 very novel development by the Reynolds Company, did not meet

n

a

266

1 detail .

_oi 5 with the approval of the health authorities and ultimately was

4 because it's not a matter of real public controversy or debate .
11 22 54 5 Liars are not being burned with representalions about

6 unsuccessful.

6 addiction . Now in 1964 the Surgeon General engaged in

7 You will hear about hundreds of millions of dollars

7 systematic review and concluded that smoking was a habituation,

8 that have been spent by other companies, again without success .

8 not an addlction . That's the 1964 report .

9 The design for nicotine strategy, lots of research not

9 As a result, again it just is not an area where there's

nsmie 10 mmmercialized, we will go through that in detail, and the FTC

n~n.iz 10 any public discussbn . That began to change in the mid-1980s .

11 is now revisiting their rating system . They are obviously

11 As proposals were made to contain a warning saying that

12 entitled to do it . They haven't change it yet. It's still

12 cigarettes are addictive, and then finally in 1988 the Surgeon

13 there .

13 General decided tn issue a new report in 1988 fthat now cnncluded

14 Bnt what are we left with? We are left with very

14 that nicntine is add ictive after all.

1120 si 15 significant uncertainty about how we can live up to the

n zzoa 15 At this point the industry did develop a public

16 commitment that we have made and that we want to meet because

16 position saying that we disagreed, that we thought that the

17 its commercially in our interest to meet, which is to be

17 analysis that had been done in'64 was correct .

18 responsive to the concern of people who still want to smoke .

18 Your Honor will hear that there are other people in the

19 The most disconcerting news came from the Surgeon
n2oso 20 General when I took his deposHion, I said, If you were asked

19 industry who believe that that analysis is correct, but at the
nszae 20 time that the Industry threw in the towel in 1998 and basically

21 today by a cigarette company how does the Surgeon General's

21 conceded the causation position, addiction followed shortly

22 office suggest, or what is the direclion that the Surgeon

22 thereafter . Again, capitulation .

23 General's office suggest is a way of producing a cigarette that

23 I'm not goirg to talk about ETS . Mr . McDermott is

24 might be safer, your answer would he that the Surgeon General's
nm :oe 25 office does not have any such suggestion? And the answer was :
17 of 31 sheets

24 going to talk about ETS . I only have a couple observations
n24ne 25 about smoking just to lay out the history and Mr . McDermott will

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 271
line and the same questions I have now created a shape, and

1

that's the word, that's the concept that people still quit . In

2

the shape is the trend of per capita consumption in the United

2

fact, the '88 report recited that 40 million people had quit

3

States and you can see that it's fallen .

3

smoking as a result of their own decisions and their help from

4

others, even as the Surgeon General adopted the term addiction .

4
.n 3mu 5

6

Essentially, what happened in 1964 is the government
said : Cigarette smoking cause disease . The industry said, as

you've heard, Not proven .

7

And what dld the consumer do? The consumer voted with

8

his or her feet . They quit . They quit in the tens of millions

9

of

people .

i i~voo 5

What about the industry? This case boils down, Your

6

Honor, it boils down quickly . We have a whole series of issues

7

historically . But where are the issues today? They are

8

different issues? They are limited issues . They are focused

9

issues .

Why? Well to a certain extent the information was

nssrs 10

11

alrcady thcrc . Thcrc was nothing now in thc scnsc of thcsc

11

authorities

12

people because, as was indicated by the American Medical

12

public debate about the science, it's simply a scientific issue .

13

Association even before the warnings came out, everybody has

13

14

known about this problem for the last 10 years, But the

15

warnings did

n?oae 10

n» :or

273

1

16

come

MSA regulation . Is it good or not? What will health

THE COURT : About ETS?

14

out .

n x :as 15

In 1968, after the warnings came out, Dr . Horn, who was

say about product rescarch? ETS is no longcr a big

MR. BERNICK: About ETS, and Your Honor will hear that
from Mr . McDCrmatt .

16

But it's not an issue that's being -- advertisements

17

a significant smoking and health authority, says you can stand

17

taken out of newspapers, it's a scientific discussion and a

18

on a raoftop and shout smoking is dangerous at the top of your

18

scientific issue, and you will hear that discussion from

19

lungs and you would not be telling anybody anything they did not

19

Mr. McDermott because unfortunately, Your Honor, I'm going to

.nscis 20

already know .

21

n?a .i4 20

I'm going to go through these very quickly . A whole

run other of time and I still have yet to get to relief .

21

It then leaves the remaining question . If you then

22

series of polls show that as time goes on astronomically high

22

take the consumer of today and the conduct of today, are there

23

rates of recognition and acknowledgement, even by kids, that

23

continued violations and are they deceptive and deceiving to

24

smoking harmful to health,

24

consumers? Three answers to that question .

mtim2 25

This is 1968 . This is 1971 . This is a whole series of

na4az 25

One answer to that question looks back at the history

272

274

1

them from '77 to '90 . Kids actually, adults actually

1

and says, well, what of the people -- what of the people who

2

overperceived the risks of smoking .

2

were there at the time said has driven this history? And the

3

answer there is clear from the Surgeon General in 1989 . No

4

discussion about how the industry was impeding the effort .

3
4

m3i_so 5

You will hear evidence that people think that smoking
is more dangerous than in fact it is . All this was recognized

by the Surgeon General in 1989, The Surgeon General basically

na4so 5

And I asked Dr . Carmona the same question . I said,

6

went back over this whole period of time and said, There's been

6

Dr . Cannona, is there anything -- has any people talked to

7

a massive antismoking campaign and it's been awesomely

7

you -- have your experts even talked to you about the idea that

8

tremendously successful .

8

somehow the industry is a problem in the antismoking campaign?

9

nozos 10
11

And I won't recite because I don't have time, you know,

chapter and verse of how the Surgeon General analyzed what it
was that drove the success and how

12

successful

it was .

113510o 10
11

And you know what's not there in reviewing the entire

And his testimony, Your Honor, was :

9

12

at.
The Surgeon General today, in terms of what the office

looking

fnharco

industry

spectnim of ariivities, including atlvertising, including

13

does, is not

14

InhhyingF

14

remaining nbsfacle in the path of success .

The Surgeon General never once said that the tobacco

fnr

how the

13

nazz4 15

Nobody even

suggested that that was something that they should be looking

is th®

last

n3sz4 15

I have a chart that I won't show . Where are we today

16

industry has tlefrauded people, misled people, has impaired,

16

in terms of what controls smoking behavior? They are back with

17

impeded, in some fashion stifled or prevented from being

17

a model that has no

18

successful this massive antismoking campaign, and it continues,

18

19

even after 1989 . Again and again there has been a focus .

1132 4s 20

19

So what do we end up with? We have a changing

nasat 20

21

consumer . Historically we would say Informed . They were.

21

22

Socially accepted . Unregulated . Adult . A habituated chooser .

22

23
24
na3 :oe 25

Where are we today? Consumers are stigmatized . They
are restricted . Limits where you can go . They are adult. They

are still choosers, although they are

19 of 31 sheets

addicted

choosers . Poow

relationship with reality .

Their model is that I as the tobacco company talk to
the consumer and the consumer looks to me for

information about

whether smoking is dangerous or not; looks to me for information

about what the real properties of the cigarettes are .
The world is much more complex, much more

23

multifactorial . History shows that what we are doing today is

24

not deceptive to anybody and it's not deceiving anybody.

nasnt 25

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But the government's own case--this is fact number
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1

2

Let's take a look at nonmonetary relief . If there were

3

something there today that we were doing that was deceptive and

4

deceiving to consumers, shouldn't they be saying, Your Honor,

iueis 5

6

277

two . The government's own case es[ablishes the same thing .

1

profits with illegal conduct, i .e ., there is no record from the

2

government of ill-gotten gains . They weren't even asked to do

3

it .

4

tell them to stop . Tell them to stop .

iiai 5

6

The answer to why is that the facts aren't there and they know

7

gone, Their complaint was everything . You got to do this . You

7

it,

8

got to do this. Their interrogatories, you got to do this, you

8

9

got to do this .

nsass 10

What's happened to their nonmonetary relief case? It's

I was instructed by the Justice Department that was not
an issue which the economists were supposed to handle . Why?

9

And yet they only found one expert that they could find

nss .ie 10

11

who would even give them the proposal, that was Dr . Eriksen . I

11

12

won't show you the chart because I'm running out of time . But

12

13

Dr . Eriksen couldn't produce any evidence, empirical evidence,

13

14

that anything he was proposing was, in fact, going to have any

n~c :uo 15
16

n

beneficial effect .

m ao

And, most significantly, all of his proposals were

Dr . Richmond again . Are you aware of any study that
says that consumers look to the industry to learn about the
health effects of smoking? No .
What difference do our statements make to anybody

today? Nobody pays attention to it and they know it .
What about advertising? I asked Surgeon General

14

Ca rmona . Is there any consensus that's been expressed that

15

advertising causes initiation, and the answer is we have not

16

expressed an opinion .

17

irrelevant, Why? Because all of his proposals were not even

17

18

designed to be affected by the court . They were public health

18

Dr . Eriksen -- is there disagreement within the scientific

19

policy proposals . He says, make a difference in the public

19

community on this subject .

nszoe 20
21

health aspect of tobacco control .

I then said, is there disagreement -- this is of

nas :<s 20

That's not what we are here for . We are here to deal

And he acknowledges, I would say that there are critics

21

who are not funded by the tobacco industry, are not part of the

22

with remedying and preventing -- we are here to deal with

22

tobacco industry who feel that way . Yes, that's my

23

preventing a future violation of RICO .

23

understanding, that advertising has not been proven to cause

24

people to start to smoke .

24
nazm 25

So, the case that the government has made with respect
to nonmonetary relief started out broad, by the time they got to

naess 25

I then asked, with respect to deceptive advertising --

276

1

their experts it was going down . If you take a look at the

2

proposed findings, there's not a single

3

tells Your Honor what they believe that you should do,

4

nal 17

3

MR . BERNICK : It does have an expert,

4

Well, Dr . Eriksen himself will say he believes that the

cessation programs, or the court ought to have money to police .

6

recognizes that this is not something that's just a tobacco

7

There's no specific proposal about what the industry is doing

7

industry issue, It's a genuine issue of scientific debate on

8

today . It's misleading anybody .

8

which there is no consensus, and that's what we believe the

9

testimony will show .

rc<oia 5

What's the case all about? At the end of the day --

this is point 3 on why it is that they can't establish that

evidence is there to establish that causal link, but he also

nzm,e 10

With respect to the Surgeon General, he was actually

11

connection and don't want to . It's all about money . It's all

11

shown some of the ads that they say are deceptive . He's not

12

about disgorgement .

12

aware of any marketing since 1955 . He doesn't recall, nor do I

13

feel that he has the expert -- if we were deceiving people, why

14

would

14

n=e :os 15

384

And yesterday what was nonmonetary relief, you heard it

does have a conflicting expert, does it nat?

was 90 seconds saying, Gee, there ought to be money to fund

13

11

2

6

11 37m 10

38 28

that

THE COURT : On that particular issue, the government

5

9

11

proposed finding

278

1

And to get disgorgement they recognize that it has to

be ill-gotten gains . And to show that they are

ill-gotten

gains, yes to counsel for the government, proximate cause is a

nao :ns 15

the

Surgeon General

of the

United States give a very

different answer?

16

necessary feature of this case . They have to show that our

16

17

violations have caused ill-gotten gains and that disgorgement of

17

to switch that would otherwise have quit? Their own experts,

18

those profits will prevent a restraint of future violations .

18

Dr . Eriksen says, I'm not aware of a specific study that has

19

They don't even try .

19

even addressed that issue .

20

They go beyond that . They say not only with respect to

What about whether lights have actually caused smokers

nncaa 20

They don't have a causation case . They don't have a

21

current violations, they say we want to go all the way back for

21

linkage case . That's what -- it's not a question of reasonable

22

years and disgorge all of that by way of discouraging or

22

approximation . It's not whether it's 280 billion or 28 billion

23

preventing where we are today .

23

or 28 million . That's not the issue .

24

Now, in point of fact their own experts have not done

24

s 25

the analysis . They have done no analysis that seeks to link up

naczn 25

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to

278

They don't have a case for anything because they have
not gone down the road of establishing what the law requires,
of

319

20

of

31

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 ?55
about cvntituents, it just tells you about associations .
What was the answer? Well, the answei's kind of
implicit in the sequence of ads that Your Honor was shown by
counselforthe government yesterday .
I believe Ms . Eubanks showed you these early ads that

257
1

Ellis, who was a consultant to BATCo, said, Let's see if we can

2

produce a device, and ended up being named Areal,that gives

3

smokers what they want, which is nicotine but without the tar

4

that'sbeenlmplicated,

i¢ss4s 5

And there is quote from a contemporaneous document,

made a bunch of claims that basically assured people that their

6

19G2, that says : The purpose of the research regarding nicotine

cigarettes were okay, but you notice how there's this big gap

7

was not the addiction of the new papulation of people, it was a

from L954 to 1973 . What happened drn ing that period of time?

8

direct response to the question : How do you make a safer

9

product?

Well, what happened was in 1955 the FTC passed the
regulations and the FTC regulations said you can't make these

iasess 10

It's now cynlcally characterized as being efforts to

clalms any mare . That's why the claims all of a sudden

11

research into how to hook people, but in point of fact the

disappeared .

12

motivation was completely to the contrary . Was the idea that

13

pcoplc smokc for nicotinc novcl?

Wcll, what happcns in 1973? By 1973, thcrc had bccn an
intervening development that then made possible all ofthe ads

14

that appeared later on, none of which made an explicit health

mmn.te 15

claim, but all of which talked about reductions in tar .
The intervening event was Dn Wynder and others, people
who had done the research, to say there was a problem with

16

tobacco as addicts to their dmg . The idea that people smoke

17

for nicotine was not novel .

18

cigarettes, They said, reduce the tar . We think that that's

19

1ss3ee 20 the right way to go . This is his testlmony before Congress in

No . This is an article that was published in Lancit in
1942 where a researcher says : Smokers show the same attitude to

The Surgeon General in 1964 in concluding the cigarette
smoking was a habit, not an addiction, still recognized that

iosese 20 nicotine was an important physiological factorand psychological

21 1957 .

21 factor in the smoking pmcess .

22 So what's happened? The consumer marketplace is primed

22 So, all of these different areas were all ariented

23 for changes in the properties of cigarettes to meet the issue of

23 towards the same fundamental obligation which was to respond to

24 disease, They are primed,
las4~oi 25 The industry can't represent that any change is gaing

24 the contmversyt ia~sssl 25 What happened as we go forward here? What happened was
256

258

1 to make a difference, but the public health authorities, tire

1 that we get to a period of time after 1964 that I'II call, for

2 people who are doing the research can make precisely those

2 want of a better word, the golden age . This was the golden age

3 representations, So they suggested that we reduce deliveries .

3 of research about how to change the product, 1964 to basically

4 They also later on specifically advocated, the

4 the last few years .

lasan 5 govemment advocated to consumers that they switch to lower

ia~sria 5 What happened in terms of the design of the product?

6 delivery products . And what did they we do?

6 Well, deliveries fell dramatically . This is a chart taken hom

7 Our commercial pararnount respansibility was to meet

7 the Surgeon General's own report in 1939, and it basically talks

8 those guidances and meet that demand and that is exactly what we

8 about how deliveries of tar and nicotine have fallen since the

9 late 1950s as a resuk in theirtotality of innovations

9 did . And that's why Yorn Honor sees that over this period of
losvie 10 time, in the gwernment's own exhlbit, they go from these health

iam :,a 10 Introduced by the tobacco industry .

11 claims, which we couldn't make, to low delivery, which others

11 Plow, you heard today -- people ae can show your Honor,

12 said was the right way to go, even though we couldn't say that

12 Your Honor will see, that this pragress was applauded, was

13 it mas any safer.

13 applaudrcl, by penple whn were -- had no ties to the industry and

14

We

r:nnldn't say that it wa5 Lafer . We fnuldll t prnvP

laslsn 15 that it was safer . But the health authorities said, we think

14 'NPm totally fnfllCed on (hIC ISSne .
i¢snsl 15 You will hear reports that say nobody has done more

16 it's the nght way to go . It may well be a solutlon, We think

16 than the Industry has done to try to reduce these dellverles .

17 you should do it and that's exactly what it is that we did .

17 You will also hear from Mr. Biersteker exactly how all

18 So, endorsement becomes a key Issue, I here's other

18 of this was totally endorsed by the United States Govenlment .

19 research that gets done in the early period of time . There's

19 So what do we hear about this from the government yesterday?

toss io 20 chemistry research that gets done, W hat are the constituents of

iase :az 20 Well, there was another fraud here, another fraud . And

21 smoke?

21 the frautl was this is all according to the ETC method of

22 And then there's deslgning for nlcotlne . Remember all

22 measurement, and tile ETC doesn't mimic what smokers actually do,

23 those documents from forelgn laboratotles In the early 1960s

23 Flow they reallzerl when they made that statement that

24 that talk about nicotine addiction? What was all that about?
t¢ss¢e 25 Well, somebody had a very smart Idea, Sir Charles
15 of 31 sheets

24 the industry told the fTC that individual smokers could smoke
ia5ele 25 clgarettes dlfferently, They recognlzed thls, so thaCs not
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 303

305

1 700-page monograph . Not only did it publish it, it went out and

1 fact . No, backforrvard . Forward .

2 talked to -- it talked to the public health community, it talked

2 This is good, Next one .

3 to the FDA, it talked to the FTC, and finally launched the

3 This is from the government'S finding of fact on low

4 product .

4 tar and nicotine and their findings of fact on other less

iris~v 5 Now the government makes claims in this lawsuit about

5 hazardous cigarettes .

6 my client's Premier cigarette. The first claim it makes is that

6 What I've done here because I'm running out of time is

7

7 I've broken this down, our chart . With respect to low tar

R.J . Reynolds suppressed the marketing of premier . Never

8 forthrightly made any health claims for the product .

8 cigarettes, the government basically says smoker new the health

9 Let's take a look at the ad that actually ran . My

9 risks . They were going to quit smoking unless they got

izznae 10 reassurance . And so these defendants made health claims in

ivasw 10 client called Premier the cleaner smoke, and it said that by
11 hcating the tobacco, they substantially rcduccd controversial

11 order to rcassurc .

12 compounds that are generated with traditional tobacco burning

12 What does their theory go like with respect to other

13 cigarettes .

13 less hazardous cigarettes?

14 And the government looks at that ad and says, Nope, no
12 :n :1s 15 health claim hcrc . And yet laok at what it says about my

14 Smokers doubted the health risks . They will quit if
ixzs :za 15 thcsc companies admit that thcrc are risks . The companics did

16 client's Salem cigarettes . Says, health claims everywhere .

16 not make health claims . They suppressed innovation to avoid an

17 They are advertised as light . They have a white package . They

17 admisslon . This theory is unsatisfactory for a number of

18 have light filters . They even go so far as to say it

18 reasons .

19 communicates a health message because an employee's colors that
iamas 20 arellght.

19 First, it's got that heads I win, tails I lose quality
12 2ose 20 to it . It really didn't matter what these defendants did as we

21 They find a health message on the right. They doii t

21 saw with the carbon-filtered cigarettes : Saratoga and Tareyton.

22 find one on the left. It's inconsistent, Your Honor . Indeed,

22 Second, the starting point is mutually inconsistent .

23 it's not only inconsistent with their own claims in this case,

23 Smokers know the health risks . Smokers -the health risks . It
24 can't be both. Smokers either knew or they doubt it .

24 it's inconsistent with what the Surgeon General of the United

mn_4o 25 States concluded at the time my client was marketing the Premier

i2zmsz 25 Second - a third, rathec It attributes to these

304

306

1 cigarette .

1 defendants irrational behavior .

2 And at that time the Surgeon General of the United

2 On the one hand, the government says that these

3 States took a look at the advertisements for Premier and he says

3 defendants made health claims to reassure for lower tar products

4 to me, this suggests a health claim that the product is safe or

mn_s4 5 safer than conventional products, and on that basis the Surgeon

4 that weren't really less hazardous .

i2eeus 5 On the other hand, they chose not to make health claims

6 General of the United States urged the FDA to assert

6 for cigarettes, such as the selective reduction cigarettes and

7 jurisdiction over the product as a drug delivery device .

7 the tobacco heating cigarettes, that were less hazardous .

8 Now, Premier was withdranm from the market in 1989 . It

8 Why on earth would these defendants do that? They
9 would have no incentive whatsoever to engage in that kind of

9 had a bunch of consumer acceptance problems . It tasted pretty

ineee 10
11

bad . It was hard to light . It was hard to light. And there
are a bunch of problems .

12

12

1121 11 10 Irratlonal behavior .
11 Additionally, it ducks the hard questions. What are

But these defendants didn't give up . ynu will find

13

that addifinnal tobacco heating technologies are heing pursued

14

right now . My client has a revamped rigarefte on the market

1 . e 15

called Eclipse . It's available at CVS, 7Eleven and elsewhere .

12 the hard questions? Well, if smakers know the health risks and
13 making healih claims reassures them, why didn'f fhese companies
14 make health claims for every potentially less hazardous

irzios 15 cigarette or vice versa .

16

Philip Morris has got a product called Accord .

16

17

tlrowm and Williamson went back and tried to dust off

17 were healths risks cause them to quit, why did these companies

18

the patent that it had on a tobacco-burning technology 25 years

19

earlier, could n't get it to work, but they continued to try .

1ziaso 20

18 compete on the basis of tar and nicotine yields? The
19 government's theory ducks the hard questions .

Jonathan, if I could have the next board?

21

If smokers doubted and making admissions that there

inisz 20

Because I'm fast running out of time, I'm going to skip

And, finally, it ignores the evidence . The evidence

21

concerns the underlying scientific Informatlon In the regulatory

22

some material and I'll go to my final topic, What will the

22

environment in which these defendants had to compete . And let

23

evidence is show is wrong with the government's RICO theory?

23

me just briefly do this and then I'll sit down,

24

First what is that theory.

fziaez 25
27 of 31 sheets

24

If we could have the allegation from the findings of

122212

25

Page 303 to 306 of 319

I know I've driving you nuts, Dan . The next slide,

please .
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 299

301

1

Ranove a couple of the carcinogens in cigarette smokes or a

1

defendants could not substantiate health claims for products

2

group of compounds that are thought to pose a health hazal'd .

2

that incorporated selective reduction technologies .

3
4
irlo~xs 5

And this was pursued simultaneously with attempts to
lower tar and nicotine from the 1950s all the way up until and
including today. It's a line of resource that has been pursued

3

And indeed, the truth of this is borne out, I think, in

4

the 30(b)(6) witness that the government designated on less

izuos 5

hazardous cigarettes, and in her testimony she basically said, I

6

but it's a really tough road to hoe . It's a tough road to hoe

6

don't think there's ever been a safer cigarette and I am not

7

for a number of different reasons.

7

even certain that it's possible,

8
9
ivosi 10

First of all, the compounds that these defendants were

8

supposed to take out over time changed . There was a moving

9

target . And indeed Dr . Fisher, one of the experts for the

Ivsse 10

Now there's one issue I want to respond to, and that is
yesterday the government showed you this Philip Morris'
document . If we have it . Thank you .

11

governmcnt, basically admitted in his deposition that if you

71

12

don't know it, what the target is, what a less hazardous

12

filtered cigarettes been around since the'60s . This is where

13

cigarette would actually be, it's pretty hard to make progress

13

they showed you that Philip Morris decided not to tell the

14

toward that goaL So that was the first problem .

~za~ :ov 15

14

The second problem was that it was tcchnically quite

I214 17 15

This was for a carbon filtcrcd cigarcttc . Carbon

public about the physiologic superiority of its Saratoga carbon
filtered cigarette .

16

difficult. There are about 4800 compounds that have been

16

17

identified in cigarette smoke and they form a dynamic mixture as

17

government says, Gee, these defendants made health claims for a

18

the tobacco is burned and they travel relatively quickly through

18

number of cigarettes, including Tareyton cigarettes, implying

19

the tobacco rod and out the end of the cigarette .

19

that Tareyton was either not harmful or less harmful .

iz :n :zz 20

And vn the technical challenge is to reach into that

Yet, in its findings of fact in this case, the

Isinsz 20

And what was the feature about a Tareyton cigarette of

21

dynamic mixture of compounds and to pick out one compound or a

21

22

group of compounds that yau want to eliminate . It's a

22

blown up the language above Tareyton lights and it says, unique

23

technically very difficult thing to do.

23

charcoal filter . Heads, I win ; tails, you lose, Your Honor.

24

mn_n 25

There's a third problem, and the third problem is one

24

of acceptance, when you taken out a group of compounds from

lalasi 25

which the government complained? It had the best filter . I've

Philip Morris doesn't say anything about its carbon filter and

that's pursuant to a conspiracy .

300

cigarette smoke you can alter its sensory characteristics in a

1

2

way that smokers might not find desirable .

2

something about its unique charcoal filter and the government

3

says they are making misrepresentations . No way they could win .

3
4

mn_w 5

However, where these obstacles could be overcome, these
defendants incorporated selective reduction technologies in

their commerclal cigarettes. It didn't happen that often, but

American tobacco I believe made Tareyton . It said

4

lals~as 5

All right . With respect to selective reduction then,

it's something these defendants have pursued for 50 years . It's

6

where they could do it, they put them into commercial cigarettes

6

technically difficult, or consumer acceptance problems, but the

7

and they put them on the market .

7

bottom lirle, real problem is, you can't substantiate a health

8

claim to the satisfaction of the FTC which requires

9

substantiation for any claim that you would want to make .

8
9
12 12 1

302

1

e 10

But here is what they didn't do . They didli t tout them
as safer. And why didn't they as a general rule of thumb make

any health claims for selectlve production technologies? You

Izlsza 10

Let's talkabout innovative product . As I showed you

11

don't have to look any further, Your Honor, than the

11

earlier, Your Honor, by 1980 the tar and nicotine yields of

12

government's response to request for admissions in this case .

12

cigarettes have flattened out . And my client, recognizing that

13

this had occurred, spent hundreds of millions nf dollars and

13
14

izmw 15

First, after 50 years of study the HnitEVt States admits
in this case ttNt therP s nn agreement, still, abnllt what

14

compound, it eliminated or reduced from cigarette smoke, would

12 15 42 15

9 years nf effnrt tn try tn think nlltSlde the bn%, and they came

up with the product that Mr . Bernick alluded to, Premier .

16

result in a safer or less hazardous cigarette, We still don't

16

Premier was a product that heated tobacco but it did not burn

17

know today .

17

it .

18
19

Second, while the government gave these defendants the

18

FTC test upon which they could compete with respect to lower tar

19

And by heating tobacco, you can reduce nicotine from
the tobacco and you can reduce the flavorful compounds that are

and nicotine yields, the United States has not endorsed any

Izissz 20

found in tobacco, but what you don't get is you don't get any

21

bloassay, any chemical test, any battery of test as sufflclent

21

tar, No tradl[lonal tobacco tar at all Is generated because the

22

to prove that one cigarette is safe or safer or less hazardous .

22

tobacco isn't burned .

1212 52 20

23

Well, absent agreement on what constituents of

23

24

cigarette smoke should he removed, absent agreement on a

24

fz1s :14 25

standard, a test or a group of tests that you could use, these

121617 n 25

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to

302

And my client tested this product in a whole range of
tests, chemical tests, toxicological tests, biological tests,
even tests with human smokers, and it published it all in a
of

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1

2

1 office, and I found out that's not true . That Lorillard had not

nicotine yields -- no, the next one, please . There we go.

3

ix2zv

309

What the evidence will show is that reducing tar and

2 commissioned a survey of 7-year-olds,

Lower tar cigarettes . Is it technically feasible?

3

4

Yes, it was . It was less technically challenging than the other

5

approaches to cigarette design .

6

What

Mr. Marine was referring to was actually a 1969

4 survey that was done by a cigarette filter company known as
iz2s :as

Was there an agreement on what to do? Absolutely . For

5 Eastman Chemical Company. It was done in'G9 . It was not
6 commissioned by Lorillard . Three years later the Eastman

7

decades and decades the government and the public health

7 Chemical Company provided a copy of that to Lorillard . It wound

8

community were telling these defendants to reduce the tar and

8 up in its files and it was produced . But I wanted to clear that

9

nicotine yields of their cigarettes .

9 up before I began .

ia2z4i 10 Did the government and public health community

izsess

10

THECOURT . Thank you .

11 contribute to demand? Ycs . Wc had you know, thc government

11

12 was out there telling people if you aren't going to quit,

12 Mr. Bernick talked at length about how the government urged

13 switch,

13 these defendants to make safer cigarettes and to produce low tar

MR . NEWBOLD : Your Honor, Mr . Bicrstckcr and

14 cigarettes,

14 Did the government provide an objective standard?
1222 58 15 Absolutely . Wc had thc FTC test . Wc had a basis upon which wc

ixz¢ss 15 Now I would like to talk to you about two of thc

16 could compete . Now, let's look at the other side of the chart .

16 government's allegations against us, which they claim to be

17 Technically feasible . A lot harder to do the selective

17 fraudulent misconduct, but which are nothing more really than

18 reduction, a lot harder to do the tobacco heating stuff. Was

18 these defendants following the suggestions of the government in

19 an attempt to make a less hazardous cigarette .

19 there agreement on what to do?
12 e 12 20 No, Your Honor . You saw the government's responses to

iasese 20 The two subschemes or allegations that I want to talk

21 requests for admission in which they agreed that was - they

21 to you about is first, yesterday Ms . Eubanks said that the low

22 admit there was no agreement on what should be done .

22 tar ads that we ran 30 years ago were fraudulent because they

23 Did the government and public health community

23 implied that low tar cigarettes were safer than regular full

24 contribute to demand?
naz4

25

24 flavor cigarettes .

No . The government wasn't out there telling people,

12211, s 25 The second allegatbn that I would like to talk to you
308

1 about is that the government maintains that we manipulated the

2 a carbon-filtered cigarette . They didn't say that .

2 nicotine in our cigarettes in order to addict smokers .

3 And finally, did the government provide an objective

3 Both of these allegations are false, Your Honor .

4 standard? And the answer there is no, too . There was no test .
nase 5 There was no standard . There was no basis upon which these

4 I will first talk about the ads that the government
1227 34 5 says are fraudulent . There are five low tar ads referenced in

6 defendants could substantlate health claims for other

6 the government's complaint as alleged racketeering acts .

7 potentially less hazardous cigarettes like they could for the

7 Yesterday, the government talked about one of the ads,

8 lower tar cigarettes where they had the FTC test .

8 which was an ad for a True cigarette, which is made by my client

9 And I submit to Your Honor that these realities explain
121111

3'10

1 Gee, if you're going to not quit smoking, you ought to switch to

10 the defendants' conduct in developing less hazardous cigarettes,

9 Lorillard and which is a low tar product . And that ad says, 'I
1227 55 10 thought about all I'd read and said to myself, either quit or

11 not any illogical half-century long RICO conspiracy .

11 smoke True ." And then in the bottom, it says, "the low tar/low

12

12 nlcotinecigarette . Thlnkaboutit ."

Thank

13

THF

14
izszsz

you

very

much .

COURT : Mr . Plewhnld .

13 All of the low tar ads the government complains ahnut

Mr. Nevrbold, please try to keep it slnw .
15

14 in its complaint were run 3f1 years ago, in the 1 970s, and the

MR . NEWBOLD : I'm sorry?

irzs .is 15 common theme is that all the ads encouraged a smoker to choose a

16 THE CUURi', Try to keep your speed slow,

16 low tar brand if they were going to smoke .

17

17 What the government is saying, in effect, is that our

18

MR . NEWtlOLD : Slowly?

THE

19

18 purpose was to lie to smokers about low tar and low nicotine

CUURT : Please .

MR . NEWBOLD : Good afternoon, Your Honor. My name is

tzzsn 20 Bill Newbold, I represent Lorillard Tobacco Company .

19 cigarettes ; that when it came to marketing cigarettes to
1228 35 20 consumers, that we should not encourage a smoker to smoke a low

21 Before I begin with the topics that have been assigned

21 tar brand because there was no difference between low tar brands

22 to me, I would like to address one issue . Yesterday, Mr . Marine

22 or high tar brands . There was no bad or worse. They are all

23 stated that Lorillard had commissioned a survey of 7-year-olds

23 terrible,

24 and Your Honor asked for the exhibit number, and I have never
122542 25 heard that before. So I looked into it over the evening of the
09/22/2004 07 :26',56 PM

24 But, as other speakers have said, you have to look at
122853 25 all these allegations that happen 30 years ago and put them in

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 283

28 .5

1

filtered category . There was competition in what was called at

1

method that would enable people to compare the yields of tar and

2

the time the tar derby,

2

nicotine from different cigarettes .

3
4
n 4n« 5

And indeed Mr. Bernick started to show this chart . I'm

3

going to extend it out over the decades, but this is the decline

4

in the sales weighted average, what's the average tar and

And then in 1972 the fTC went beyond permitting these
defendants to include tar and nicotine yields in their ads, it

i isoov 5

required them to do it . The fTC had a pending regulation . It

6

nicotine yield of every cigarette smoked in America . And that's

6

entered into a voluntary agreement with these manufacturers

7

what happened from 1950 to 1960 as filters were introduced .

7

requiring them to put FTC tar and nicotine yields in their ads .

8

Now the competition in the 1950s was a little messy .

9

Mr. Bernick put up a slide from the hearing that Congress held

1148 03 10

8
9

in 1957 called, False and misleading cigarette advertising colon

1150 se 10

Now this series of events was very important It was
important for this reason . It gave these defendants a basis
upon which they could compete. They could compete on the basis

11

filtcrcd cigarcttcs . And indccd, the FTC stcppcd in to rcign in

11

of thc FTC tar and nicotine yiclds, and thc FTC regulations

12

competition .

12

basically created an exception to substantial requirements, The

13

FTC determined that the FTC's tar and nicotine yields were not a

14

health claim .

13
14

Mc Bernick discussed, for example, in 1955 the FTC
required substantiation . The problem was there wasn't a

11 4s :m 15

standard . Everybody was measuring tar and nicatinc in different

icci .1o 15

16

ways, and so the results were not comparable from one cigarette

16

and nicotine yields using the FTC's test without substantiating

17

to another, which was what led in part to the congressional

17

an actual health benefit to the consumer .

18

hearings of'57.

18

19
n4e :zi 20

In 1960, the FTC stepped in and said, Forget iL You

19
n scs 7 20

can't compete any longer on the basis of tar and nicotine

So thcsc dcfcndants could compctc on the basis of tar

In addition to the change in FTC regulation, what

happened was that the government and the public health community
forcefully communicated essentially the following message to

21

yields. These defendants were prohibited from putting them in

21

22

their advertising . The FTC basically reasoned that if you

22

23

include the tar and nicotine yield in an ad, you're making a

23

aren't going to quit, you should quit to a lower tar and

24

health claim .

24

nicotine cigarette,

mvasa 25

All right . Let's turn to the next period of time,

smokers .
They said, essentially, you should quit, but if you

nseso 25

In fact, in a midcourse review conducted in the 1980s

284

286

1

basically 1961 or so to 1972 . And the common sense notion that

1

by the department of HSS, the Public Health Service, actually --

2

the less tar and nicotine you get, the less risk you're going to

2

the government, rather, actually took credit for stimulating

3

have is something that suddenly gained very

3

demand for lower tar and nicotine cigarettes.

4

scientific report

mvs_n 5

significant

In

4

And what happened starting in the 1960s is that

nszn 5

response,

the defendants further reduced the tar and

nicotine yields of their cigarettes . As you can see, in the

6

epidemiologic studies showed that smokers of filtered cigarettes

6

sales weighted average, tar and nicotine extended through a

7

got less lung cancer than smokers of unfiltered cigarettes . And

7

further period of time .

8

what happened in response to those scientific findings?

8

9

May I have the next slide, please?

naaze 10

9

The government and the scientific community strorgly

nszre 10

11

urged that these defendants reduce the tar and nicotine yields

11

12

nf their cigarettes .

12

13
14
n4eun 15
16

in fact, Mr . Bernick f think showed you the U .S. Puhlic

Healfh Service statement in 1966

that the

13

evidenre strongly

suggested that the lower the tar and nicotine the less harmful

14
nszma 15

would be the effect .

Public

Health Service also

did

was

progressive

18

recommend action be taken that would result in the

19

reduction of the tar and nicotine content of cigarette smoke .

ii so :oo 20

for further reduction necessary tar and nicotine yields
continued unabated .

Your Honor is going tn hear lots of quotations abnut
this during the cnurse nf trial . Tn the interest of time, and
because Mr. Rernick has only stolen time from me, I'm nnly going
to show you one . This comes from the Banbury, report .

The Banbury conference was held . It was academics. It

16

But what the U .S .

17

Now let's jump over a long time period . Let's loakat
the 1973 to the 2000 perbd . What happened then? Well, calls

Well, in response to the request of the public health

in

was people Involved

18

companies weren't there . This was in 1979 and 1980 .

Health Servlce . Ihe tobacco

And the guy who wrote the

19

nszss 20

the

Public

17

Public

Health Service

statement in 1966 about lower tar and nicotine cigarettes came

21

communlty, what dld the FTC do? The FTC came back to the Issue

21

back, It was Cuyler Hammond, and again he came back to that

22

of whether or not tar and nicotine references should be

22

statement and he said, What would I change about it? And he

23

permitted in ads, and they decided in 1966 that yes, they should

23

added the word that I put up there in red, Very strongly

24

be .

24

suggest .

111017 25

In 1967 the FTC

09/22/2004 07 :26 :56

PM

adopted

its method, a standardized

Page

283

to

1153 13s
286

25

Again, the public health community was solidly
of

319

22

of

31

behind

sheets

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 259

261

1 theirtheory .

1 What aboutthe Surgeon Generalofthe United States?

2 To say, well, yeah, the government knew that the FTC

2 Was this a secret from the Surgeon General? There's an

3 method might not pick up individual variations, but it didn'1

3 indication that somehow the Surgeon General didn't know . When

4 know - the government d idn't know and the Surgeon General

4 Surgeon General was endorsing the idea of low deliveries, he

mssa2 5 didn't knaw that people count them safe . So that systematically

ii~oe4s 5 didn'tknow.

6 if deliveries of tarand nicotine fell too low, that

6 Well, the 1981 report starts out as Your Honor will see

7 systematically smokers would smoke more and get the nicotine

7 in the preface, the pagejust before the one displayed saying,

8 that they needed .

8 We've stood by lower delivery cigarettes in 1965 . We stood by

9 The statement was made by counsel . As I recall very
mesoo 10
11

consciously hid that from thc govcrnmcnt?

12

Consciously hid that from the publia

13
14

ioss : ic 15

9 lower delivery cigarettes in 1979 . This was the Public Health

specificlly, Your Honor asked, Are you saying this was

Now there's a little slippage there .

n 02 04 10 Service speaking . Where are we in 1981?

11 Wc still stand by our rccommcndation that pcoplc who

Ms. Eubanks said,

12 can't quit should switch, but there are caveats . W hat's caveat
Your Honor says

13 number five? Smokers may increase the number of cigarettes they

from the public. So apparently, it's not the government, it's

14 smoke and inhale more deeply when they switch to lower yield

thc p ublic .

16

nmzzc 15 cigarcttcs . Compcnsatory bchavior may ncgatc any advantagc of

And then later on, while defendants may have told the

16 the lower yield product or even increase the health risk. Big

17

FTC about individual smoker variations, defendants dld not

17 secret,

18

acknowledge compensation because that would have required them

18 The other area where work went forward was on bioassay

19

to admit that nicotine is addictive .

iass :z: 20

19 research . Research in the laboratory to determine what the

The earliest research on compensation, published

nm2 :4e 20 activity of different kinds of smokes were .

21

research, was actually sponsored by tobacco industry money .

21 This research omasioned a lot of discussion within the

22

This is - article in 19671hat deals with how the injection of

22 industry about whether it should take place and they have

23

intravenous nicotine affects smoking habits,

23 referred, as they properly should, to evidence of an agreement

24

ioss_s2 25

This study was supported by a research grant from the

American Medical Assoclatlon Research and Education Foundation .

24 that basically said when it came to this issue that is biology,
nmeas 25 that was not for the indivldual companies, it should be done -

260

262

1 This was funded by the tobacco industry, But it goes on .

1

2 This is research that was funded by the TRC in Britain .

2 and some discussions .

3 The TRC in Britain is funded by the tobacco industry in Britain,

3 What's key--and the lawyers didn't like this either,

4 including BATCo and other companies that Your Honor will hear

left to the SAB, left to the CTR . And there were some documents

4 You will see the lawyer documents . Oh, we got to get the file .

n~oaz : 5 The research got done, The research got done . All of this

nams 5 about .

6 What the TRC did was they basically continued on the

6 research got done . Aims research, mouse and painting

7 idea that Sir Charles had had early on of focusing on nicotine .

7 inhalation, There's one problem . It didn't give a consistent

8 They picked that up as an industry enterprise . And articles

8 answer. There was no standard that had been developed .

9 came out in the 1970s, early 1970s, specifically pursuing the
nmu_v 10 issue of compensation .

9 W hat about designing for nicotine? All of these
nnmo 10 documents that say, Well, gee, there's Philip Morris . Think of

11 Where is the secret from the public? Where is the

11 a cigarette package as a storage container for a day's supply of

12 concealment? This is out there in the open . In point af fart,

12 nicotine .

13 honks were puhlished . This is a Thornton bnnk in 1978 .

13 4Ve have already seen that was not a secref theory . A

14 Thorntnn was a scientist with BATCn .

14 lot of people believed in that theory . In fart, hack in the

nmo47 15 This smoking book is all about smoking behavior . It's

nmz :cs 15 TRC, this is 1968, funded by the tobacco industry . And what is

16 littered with articles and data regarding compensation and when

16 Dr . Armitage saying?

17 the ISC, which is the independent research organization in

17 It's worth noting that someone smoking a

18 Britain, came out with its third report, they specifically

18 literally fingertip control of how much nicotine he takes into

19 recited : The industry has told us, however, that the level of
nm :oi 20 nicotine in some cigarettes has already reached a point where

cigarette is

19 his mouth . Smoking for nicotinee
nnn .lo 20 W here

is the

Philip Morris

secret? How

is

that any

different

from

21 consumers are trying to malntaln their nlcotlne Intake by

21 what

22 methods of compensation . These include increases in puffing, et

22 not only was this something that was being published, but the

23 cetera, et cetera, et cetera . Where is the secret?

23 idea of the tobacco industry doing research to figure out how to

24

THE

COURT'. Mr . Bernick, what is the date of that?

nmeaa 25 MR BERNICK', This is 19-Ithlnk it's 1983 .
09/22/2004 07 :26 :56 PM

24 deliver more

was saying In Its Internal documents? And

nicotine

in relationship to tar, it was advocated,

n on :n 25 the industry was recommended to do this research by the Surgeon
Page 259 to 262 of 319

16 of 31 sheets

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 ?9t

293

1

compared smokers of the same number of cigamttes perday . If

1

2

you smoke 20 high tar cigarettes, let's compare your lung cancer

2

And the government's right, the correlations are

3

risk to somebody who smokes 20 lower tar cigarettes and see if

3

somewhat on the low side . But the government failed to

4

there any differences,

4

appreciate, I think- and what you will hear from the

n ss~oi 5

Basically that raises an empirical question . Do

izoe4s 5

well as smoking them harder .

government's own expert, Dr . eenowifz, who they describe as the

6

smokers who smoke lower tar and nicotine cigarettes smoke more

6

foremost expert in the world on nicotine, is that if you know

7

of them and offset the benefit that the epidemiologic studies

7

something about mrrelation, it doesn't tell you anything about

8

suggest they get on a per cigarette basis?

8

compensation .

9
1159 20 10

11

This was an issue that was examined in 1980 . May 1

9

have the slide please? Next one . Wait . That's it . I'm sorry.

izozas 10

Ycs, that's it.

12

71

Dr . Garfinkel, and he is at the American Cancer

tmc, tao .

12

13

Society, and the American Cancer Society did a big survey, over

14

a million people . And Dr, Garfinkel looked at this issue and in

.nss :xe 15

You could have a very high correlation and at the same
time have very high levels of compensation and the opposite is

1908 at thc Banbury confcrcncc hc rcportcd ovcr a long pcriad of

And what the evidence will show in this trial, Your

13

Honor, is If you go back to this very same data that the

14

government talked about that their expert, Dr . Benowitz will

imzlo 15

talk about, and you calculatc thc pcrccnt compcnsation that you

16

time people tend to smoke the same number of cigarettes

16

17

regardless -- regard less of the tar and nicotine yields of those

17

18

cigarettes .

18

d isagreement about Monograph 13 .

19

even among those individuals who

19
n ss :se 20

Well, Monograph 13 looked at the exact same data that
Dr . Garfinkel was looking in 1980 . You can see that that chart

ia:o2ss 20

find consistently, that compensation is not complete .

In addition, there is some fairly significant
Indeed,thereisdisagreement
participated

in its

preparation. I don't have time to show you all of these

21

is very hard to read, I know Your Honor, but basically it

21

excerpts, but let me show you one from a document we obtained

22

suggests that people increase the number of cigarettes they

22

discovery of, I believe in this case .

23

smoke per day as the nimtine yield of the cigarette declines,

23

24

It's got a slope.

24

Well, in the context of this lawsuit we obtained

11012 25

izoesi 25

Yes, This is Dr . Holford . He's at Yale. And what
happened was that there was a dispute between some of the

authors of Monograph 13 and some indlviduals at the Natbnal

292

294

1

discovery of how that calculation was done, and it turns aut

1

2

that Monograph 13 made a mistake .

2

3
4

i .amze 5

When you correct that mistake and you replicate the

3

results and you run it again, as corrected, the line becomes

flat People do not smoke more cigarettes per day on average

1203 07

basically said that he agreed with the critical comments and he

was not persuaded by the reasoning of Monograph 13 .

when they are smoking lower tar cigarettes . That's what the

6

evidence will be.

7

iin1 10

Now, does compensation occur? Absolutely. Absolutely .
Is it complete? No, Your Honor . The evidence will not be that

it is complete .

11

Let's talk about the FTC. The FTC has examined the
issue of compensation many times over the course of the year and

8

has not seen fit to change anything . It hasii t changed its

9

method . It hasn't changed the requirement that these defendants

izmi 10

The best possible measure of the extent of compensation

to Dr . Holford, and Dc Holford took a look at it and he

5

7

9

And the National Cancer Institute bucked the issue up

4

6

8

Cancer Institute .

continue to report FTC tar and nicotine yields .

11

And, in fact, likewise it's now been three years since

12

is to look at biological markers . In fact, I think the

12

Monograph 13 came out, and while, as Mr . Bernick pointed out,

13

gnvernment said this year .

13

the FTC is still cnnsidering the issne, it has nnt seen fit tn

14

change its method . And the, FTC is in the alnne .

14

THF CDURT'. Rioingiral what?
MR . McDERMOTT : Biological markers, metabolic

12 31 12 15

16

by-products of compounds like nicotine that are fairly unique to

17

cigarette

18
19

tznt 22 20
21
22

The evidence will show that countries around the world

16

limit, they set maximum amounfs of machine-measured tar and

smoke .

17

nlcotlne yields . You cannot buy a cigarette in the turopean

Indeed, I think the government said that yesterday,

18

Union today that is not a light or ultra-light cigarette .

19

That's the maximum that you're allowed to sell .

And what government said is there isn't going to be a big

correlation between the FTC yield of the cigarette and how much
nicotine

a smoker has got In

his

body .

And, by the way, those measures, those biologic

23

measures take into account both forms of compensation because

24

they measure how many total nlcotine is in the body . So it

120136 25

imz :ae 15

takes into account compensation of the number of cigarettes as

09/22/2004 07 :26 :56

PM

Page

291

to

izm :as 20

Finally, even the government's own witnesses in this

21

case are going to dlsagree, Some of them are going to say -- I

22

don't know what that is, not mine -- some of them are going to

23

say that smokers of filtered cigarettes have less risk than

24

smokers of unfiltered cigarettes .

izon :zs 25
294

Some of the government's witnesses are going to say the
of

319

24

of

31

sheets

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 28?

289

1 the notion . They continued to encourage these defendants to

1 yield oigarettes were actual ly safer to smokels .

2 reduce the tar and nicotine yields of cigarettes . And the

2 Lo and behold, the evidence will show that these

3 defendants responded . They responded with the FTC method in

3 defendants not only made those products, not only put them on

4 place .

4 the market, but competed .

nez~x2 5 You can see that there was very vigorous competition

i 1~ss :aa 5 Now, after this lawsuit was flled, two years after this

6 among different cigarette brands on the basis of tar and

6 Iawsuit was filed, in 2001 Monograph Le was published from the

7 nicotine yields, Everybody trying to claim they were the

7 National CancerInstitute and it raised serious questions about

8 lowest, far example, in the very low tar categories .

8 the perceived wisdom that lower tarand nicotine cigarettes were

9 As the brands proliferated, as you got more and more

9 indeed less hazardous.

11 5349 10 brands with differing levels of tar and nicotine these

115en 10 AndIsubmittoYourHonorthattheevidenceduringthe

11 defendants adopted descriptors to basically differentiate

11 couree of this Mal will show that the attempt by Monograph 13

12 products and to put them into categories .

12 and the govemment to explain away the consistent results of

13 Some of them like thcsc up on the board were called

13 cpidcmiologic studics showing that the lower the tar and

14 ultra low because they were very low in tar and nicotine

14 nicotine, the less tire lung cancer won't be persuasive . Let's

ns4 :oz 15 cigarettes . Others in the middle were called low tar or lights

Icart4r 15 talk about that for a minute .

16 or milds . And then you had your full-Flavared cigarettes on top

16 Epidemiologic studies compare tl1e lung cancer risks of

17 of that .

17 smokers of different kinds of cigarettes . And as I have told

18 And the FTC took a specific look at the use of

18 you earlier, there were earlier reports in the'60s that smokers

19 descriptors and it said that it was okay to use descriptors such

19 of unfiltered cigarettes got more lung cancer than smokers of

n~_1e 20 as low tarto characterize a cigarette provided, Your Honor,

11sr :a1 20 filtered cigarettes .

21 provided that that characterization was based on the FTC test

21 There have been scores of studles, literally scores of

22 results . And that's what these defendants did . And the sales

22 studies and these epidemiologic studies are the best way to

23 weighted average fell some more .

23 evaluate whether one cigarette is less risky than another . And

24 We've now taken it out all the way through I think

24 you don't have to take my word for it . You can take tire

111412 25 approximately the year 2000 and 1999, And what's kind of

11~sr.1n 25 government's expert Dr . Samet word for it who Monogmph 7 said
288

290

1 interesting about this is you will see the downward trend sort

1 that's the only way that you can deteimine whether or not one

2 of flattens out in about 1980 . Why did that happen?

2 cigarette is less risky than another under circumstances of

3 Well, there were basically two reasons. The first

3 natural use, because they look at the way people smoke as they

4 reason was consumer acceptance . There were cigarettes on the
ns4~4i 5 market that were so low that basically the vast majority of

4 smoke the product in the real world .
11~s7 a : 5 What does the government- what does Monograph 13 have

6 smokers didn't like them and they didn't smoke them . And the

6 to say to try to explain away the consistent result that even

7 second reason was technology had sort of reached its limit .

7 Monograph 13 recognizes is that there's been a whole slew of

8 Those cigarettes that I had up on the board, the

8 studies and the repeatedly show that the pmple who smoke lower

9 1 milligram cigarettes, they have tar and nicotine yields so low
.1as m 10 that they cannot be reliably measured in the FTC test . It's
11 basically as low as you can go. So the tedinology had sort of

11 And they eome up with the idea of compensation . You

12 reached a limit as well .

12 will hear a lot about compensation as the trial pmgresses, but

to
hnard concerning

13 let's sum up hzsically what happened from 1950
14 with respect tn the fust three pnints

on

the

J000

nssn 15 lowtar .
16

9 tar cigarettes get less lung cancer, even the monograph itself
lrnsz 10 acknowledges that.

13 let me briefly say that there are two different fonms of

14 compensation .
nse :us 15 The first form of compensation is when you smoke a

I

lie evidence will establish,

Your Honor, that the

16 clgarette more Intenslvely . When you puff on it harder, when

17 govemment and the public health community encouraged these

17 you take more puRs, when you smoke it down closer to the butt .

18 defendants to reduce the tar and nicatine yields af thelr

18 t5ut that form of compensatlon, and is Indeed the most important

19 cigarettes .
1155 :33 20

I

19 form, is taken into account in the epidemiologic studies because

lie

evldence

will establish that

the government and the

1158 :23 20 they

look at

the

way

people smoke Cl9arettes

in the

real

world .

21 public health community helped to create demand for lowertar

21 So the epidemiologic studies are net of any tendency of

22 and nlconne cigarettes .

22 smoker's lower

23 The evidence will establish that the government gave

23

24 these defendants a basis upon which they could compete and
n5sso 25 exempted them from having to show that lower tar and nicotine
23 of 31 sheets

There's

tar cigarettes to smoke them mare intensively .
a second potential form of compensatlon, and

24 that's how many cigarettes do you smoke a day?
n 5ea4 25 And most of the eVldemlologlc

Page 287 to 290 of 319

studies,

Your Honor,

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 3"t

313

1 its proper historical context . And what is the proper

1 least choose the bad, not the worst because the bad is not as

2 historical context?

2 bad for you as the worst because it's a low -- I'm not doing

3 In the 1970s when these ads were run, everybody in the

3 justice to this ad, Your I lonor .

4 (Laughter)

4 public health community believed that bw tar cigarettes were
ix2s~i4 5 less hazardous .

iz~sl4v 5 TIIL CDURT'. I don't think so .

6 Everyone in the public health community believed that,

6

7 number one, you should not smoke, period, but if you do smoke,

7 Well, having failed miserably in this little attempt to

8 if you must smoke, you should choose a low tar brand, because

8 use a Power Point .

9 everyone in the public health community believed in the 1970s

MR . N EWBDLD : So much for hlg h-tech,

9 The point of it, Your Honor, is that both the ad, which

ia2sss 10 that low tar cigarettes were less hazardous .

izssao 10 you couldn't see, and the public service pamphlets had a very

11 And dcspitc what Ms . Eubanks said, thc Surgcon Gcncral

11 simplc mcssagc, which is Doi t smokc, but if you must smokc,

12 certain-theevldencewillbethateveryoneknewabout

12 choose a low tar brand .

13 compensation, and even knowing about compensation in the 1970s,

13 And I'm saying to you, Your Honor, that when you judge

14 the public health community said, If you must smoke, smoke a low
1x2ss4 15 tar brand .

14 our intent and what we meant to do when we were running these
inate 15 low tar ads, likc quit or smokc Tmc, that you havc to look at

16 The FTC wanted the tobacco companies to compete on the

16 it within the context of the 1970s. That we had no intent to

17 basis of tar. The public health community wanted consumers to

17 defraud smokers . We were simply following the suggestions and

18 be able to choose a cigarette on the basis of tar.

18 the lead of the government .

19 When we were running these ads in the 1970s the public
izso :n 20
21

health community was very clear : Don't smoke, but if you do

Our purpose was to manufacture and market what the public health

21

community was endorsing, what they were asking us to do. We did

smoke, choose a low tar brand .

22

Now, they didn't keep this message to themselves . They

23

got this message out to the American public both in print and on

24

N ads . Here is an example of a Public Health Service pamphlet

i .xoai 25

19 Our purpose, Your Honor, was not to deceive people,
ias3ss 20

22

it . We manufactured a low tar cigarette . We advertised a low

23

tar cigarette, and we gave people the option of choosing it .

Of course, Your Honor, hearkening back to one of the

24

ivawn 25

that was run in the 1970s .

earlier presentations about now in the distant past, this is the

3'2

314

1 Five ways to reduce the risks of smoking . This is from

1 distant past . This was over 30 years ago. These ads are not

2 the United States Department of Health, Education and Welfare .

2 being run today.

3 What is the number one way to reduce your risk of smoking?

3 My second topic is alleged nicotine manipulation . The
4 government says that we manipulated cigarettes to addict

4 Choose a cigarette with less tar and nicotine .

iva :z4 5 smokers, What they are really saying here, you know,

nao_si 5 In 1973 another ad was run by the public health
6 community . If you must smoke -- and it shows a guy smoking a

6 manipulation is one of these horrible evil words .

7 cigarette walking over a diving board into a barrel of sharks .

7 If you say "control" or "alter", it wouldn't sound so

8 But it says, If you must smoke, take some of the danger out of

8 bad, but when they say "manipulate" what they are really trying

9 smoking . Choose a cigarette with less tar and nicotine.

9 to convey is the fact that we sold cigarettes that were spiked

io 10 The difference between brands can be more than 2-to-1 .

izvn,e 10 with nicotine and we did that to addict smokers to keep our

11 See how your brand compares . Find out how much you can reduce

11 market going, and that's false .

12 your tar and nicotine intake by switching tn another brand or to

12

13 annther version ot the hrand you are now smoking .

13 than"manipulate ."

14
1231 30 15

And just in case people weren'1 reading these public
service pamphlets, these ads and these pamphlets were also run

THE

14
¢b :m

15

CI

IRT'. "Spiked" doesn't sound a whole lot better

MR . NFWHDI 0 : I'm snrry, Yrnu Honor .

THE

CDURT'. I said 'spiked' doesn't sound a whole lot

16

on TV. Here is an example of a public service ad that was run

16 better than "manipulate,"

17

during the'/Us when our low tar ads were running .

17

18

(Pause)

19

Well, I will now describe to you -

1eaziz 20

19 manipulate, and what they really mean is that you're really had

(Laughter)

21

MR . NtW13ULU : No, it doesii t. tlut see, that's what

18 they mean to say . Instead of saying control, they say

iz3s :a1 20

In this ad there Is this goofy-looking guy with the

21

because you spiked those cigarettes .
But I will tell you, Your Honor, that there will be

22

long hair with the 1970s sunglasses on, and he said, When it

22

absolutely no evidence that any of these defendants ever added

23

comes to cigarettes -- let's see . I -- when it comes to

23

any nicotine to their commercial cigarettes in order to create a

24

low tar medium nicotine cigarettes .

24
tzaz3o 25

cigarettes, there is the bad and the worst . They are all bad .
They are all terrible . Don't smoke, but if you must smoke, at

29 of 31 sheets

1235s e 25

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297

1 veiy lowest ultralow tarcigarettes are saferthan otland

1 the top pait are prefaced with "in theory" statement .

2 some of the govenmtent witnesses are going to say it doesii t

2 When you get to the bottom of the dacument you will see

3 matter. You could smoke an unfiltered Camel or you could smoke

3 that there's sort of a break and the government diropped a line .

4 one of those very low, ultralow tar cigarettes, your risk is the

4 And I would just like to read that line . It reads as follows .

txaa~<o 5 same . Even the government's own witnesses are not going to be

izoros 5 If -- if, Dr . Teague says, as claimed -- by whom -- by

6 able to agree on this point .

6 some antitobacco critics, the alleged health hazard of smoking

7 And finally, I guess what I come down to at the end of

7 is directly related to the amount of tar to which the smoker is

8 the day is that we cannot conclude with any degree of ceitainty

8 exposed each day and the smoker basis his consumption on

9 that lower tar cigarettes pose less risk, but the weight of the

9 nimtine, then a present low tar/low nicotine cigarette offers

t2aass 10 evidence, the weight of the evidence, Your Honor, will suggest

iaoe 04 10 zem advantage .

11 that that's probably the case .

11

12 But even if Your Honor were to disagree, even if Yaur

12 that were being postulated by the public health community to

13 Honor wcrc to find that in light of today's science lower tar

13 smokers smoke the nicotine, the kinds of studie that doctor -

14 cigarettes are not less hazardous, and if you were to reach that

What

Dr . Teague was doing is he was looking at theories

14 I mean, that Mr . Bernick showed to you during the course of his

1205 10 15 finding, that still doesn't help the govemment out Because

ixos .is 15 presentation today and saying what are the implications for how

16 these defendants did what they did in the context of the

16 we design a cigarette?

17 scientific infonnation that was available to them in the 1950s

17 That's what's going on in this document . It's not that

18 and in the 1960s and in the 1970s. They didn't have the benefit

18 my client R .] . Reynolrl; Tobacco Company had any secret knowledge

19 of all of the evidence that's available to us today .

19 about compensation .

tzas es 20 So, what the government does is it has to resat to

izussz 20 Yesterdaythe government also referred to Barclay, and

21 sort of a revisionist history . And herethe govennment alleges

21 they suggested that these defendants in connection with Barclay

22 that these defendants knew about compensation all along, knew

22 were going to try to suppress information about compensation .

23 that it was complete, and therefore must have known, must have

23 I want to bring to Your Honor's attention some

24 known, that lower tar and nicotine cigarettes were no safer .

24 additional facts related to the Barclay cigarette . The Barclay

t .a, :4s 25 I want to look at a couple of exhibits, I guess the

izoesz 25 cigarette, even though it was a 1 milligram cigarette in the FTC
296

298

1 exhibit was mine after all, the one you had up eadier.

1 test, was really about a 3-milligram cigarette . And the reason

2 This was an exhibit the government showed you

2 was it had a filter when smokers put their lips on it, it would

3 yesterday, It's a study dane by Dr . Goodman at Philip Morris,

3 collapse and R would become less effective .

4 and in this study Dr. Goodman finds that smokers of Marlboro
nua_ic 5 Light cigarettes get about as much tar and nicotine, the same

4 And so my client, R .] . Reynolds Tobacco Company and
izos :as 5 Philip Morris, they look at their competitors products and they

6 time nicotine as smokers of Madboro regular cigarettes, the

6 saw this feature in the Brown &'Nilliamson Barclay cigarette .

7 full flavored ones .

7 6ut far from conspiring to keep it secret, what happened was

8 What the government didn't tell you is there are only

8 Philip Morris took out an ad in Europe talking about it and

9 nine people in this studX What the government didn't tell you
t2nr.v 10 this is but one of 15 studies that Philip Morris has conducted

9 Philip Morris and R.] . Reynolds together went public . They went
i2ns :ze 10 to the FTC and they complained about it and the FTC mnducted an

11 on this very issue .

11 investigation .

12 And in the other 14 studies -- if I aould have the next

12

13 slide, plaass -- the lower the tar antl nirntins yield of tile

13 rigarsttes and we will move on to fhe next nne . Defendants made

14

flgarPtte,

the

IPCs

tar

and

nlfntlne

that

the

smoker

At

the

e.nd of theP day -- let me wrap LIP on Icwer tar

14 pingleSsNPly InWer tar flgarettes . They

was

tznsas 15 receiving . In the 14 other studies that Philip Morris did, the

did

Sn atthe nrghlg

izos :4i 15 of the public health and scientific communities .

16 govemment chose to only tell you about one .

16 I hey did so in order to meet demand that was in part

17 The next thing that the government did . It showed you

17 created by the government and the public health communities, and

18 a tlocument from my client, Dr . I eague, and basically read out

18 they competed on the basis of H C[arand nicotine yields which

19 the quote that says at the bottom there, that there's zero

19 the government wanted them to do . The gOvernment gave them that

1207 02 20 advantage to a smoker for a lowertar antl nicotine cigarettes .

12:is :as 20 standartl upon which they could compete, and they didn't have to

21 The interesting thing about this document it doesii t

21 substantiate an actual health benefit .

22 contain any date . It doesn't refer to any data . What the

22 Flow let's talk about selective reductlon antl Your Honor

23 govemment chopped off at the top of thls exhlblt was where

23 wlll see that world looks very dlfferent .

24

Dr . Teague said - and I can't show it to you because I didn't

t¢ni¢2 25 deslqnate It -- says In theory . So all of those statements at
25 of 31 sheets

24 A selective reduction again is an effort to
izio .ie 25 qualltatlvely change smoke In a way to make It less rlsky,
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 315

317

1

the cigarettes in the process of reconstitute] leaf, which is

1

2

used in a cigarette, cigarette manufacture, and the nicotine is

2

3

lost during that process and then it's put back in .

3

the United States the amount of ammonia which is used does not

4

really alter the amount of free nicotine in a cigarette .

4
in,v 5

But the evidence will be that we don't spike our
cigarettes . That as a matter of fact there's more nicotine in a

and the taste .

Secondly, in the cigarettes that are manufactured in

iz~esa 5

In fact, the Surgeon General has said that the amount

6

natural tobacco leaf today than there is a commercial cigarette

6

of nicotine in a cigarette that you buy in the United States

7

that you can buy over the market .

7

today is almost entirely bound nicotine, not the free nicotine

8

that the government is talking about that we tried to create to

9

addict smokers .

8
9
1235 53 10

Now, you will see, Your Honor, a lot of evidence about
these various tobacco companies looking at ways to alter the
ratio between tar and nicotine .

11

izss .n 10

And, finally, counterintuitively that even though free

11

nlcotinc is ahsorbed morc quickly in thc body, it's absorbed in

And thc rcason for that is that in thc 197os and in thc

12

1980s the public health community thought that it would be a

12

your mouth, like a cigar smoke or pipe smoke, It's absorbed in

13

good idea if there could be a low tar cigarette but it had

13

your mouth in your upper respiratory system, And because of

14

medium nicotine,

14

that counterintuitiveN, it takes free nicotine longer to get to

,zs :,z 15

As an cxamplc, hcrc is an articlc by Dr . h1AH Russcll,

insac 15

your bmin . It docsn't sound right, but that's right . In

16

absolutely renown in low tar . He was the principal adviser to

16

regular bound nicotine smoke which is absorbed in your lung, it

17

the United Kingdom on low tar cigarettes, and he had an idea .

17

gets there quicker .

18

And the idea was to manufaciure a low tar medium nicotine

18

19

cigarette and that would be a new approach to safer smoking .

i2ss-3v 20

19

Why is it safer?

21

1239 54 20

It's safer because the theory was is that one of the

So what happens then if you create free nicotine, more

free nicotine in the cigarette by adding ammonia, since it gets
to the brain more slowly, it reduces its addictive potential .

21

And, as a matter of fact, Dr. I3enowltz, who wlll

22

reasons that people smoked is for nicotine, but the bad stuff in

22

testify in this case for the government, has testified in his

23

a cigarette is tar . That's what causes the disease, So the

23

deposition that there is insufficient evidence to support a

24

idea was pull down the tar but keep the nicotine up . That's not

24

conclusion that adding ammonia to the cigarette increase the

i .xsse 25

as simple as it sounds .

iewis 25

amount of nicotine to the brain,

316

Next slide, please.

1

2

And it's not simple, and you've seen this slide now

2

the allegations that we committed fraud in the way that we

four times . As the tobacco companies reduced the tar, the

3

advertised our low tar cigarettes is simply wrong, and the

4

nicotine went down with it.

4

allegations that we manipulate nicotine in our cigarettes in

So the trick was as you were reducing tar, to get the

ia,va, 5

order to addict smokers is also wrong .

6

nicotine up . And there are two ways the public health community

6

Thank you, Your Honoc

7

said you could do this . One, add nicotine to cigarettes and the

7

THE COURT : Okay . Mr, Newbold, I'm certainly going to

8

other would be to add ammonia to the cigarettes, and by adding

8

need from your experts, though, on that whole Issue of ammonia

9

ammonia you would adjust the pH of cigarette smoke and by

9

and how adding it increases the speed with which nicotine is

ivzeaz 10

absorbed In ihe brain and the rest of the system . But that's

10

adjusting the pH of the clgarette smoke you would create what is

11

known as a greater proportion of free nicotine .

11

what we've got a trial for, everybody . So thank you.

12

Your Honor, with our own self-prescribed time limits 1

12

13

really only have two minutes left, so Pm not going tn show ynu

13

evidence about nicotine and how it's absorbed in the hndy and

14

any

14

how it Ihen gets to Ihe hram nf a smoker,

i2ansn 15
16
17

more slides

that I have, but I wlll

simply

fell

you

that the

two ideas of the public health community was endorsing didn't

THE CUURT : I want to ask a question ot the audience .

16
When you try to add nicotine to an existing cigarette,

it makes it taste terrible, and if it tastes terrible, nobody

19

will smoke them . And as Dr . Wynder has said, if people don't

21

MR. NEWBOLD : Your Honor, there will be a plethora of

ie4eie 15

work .

18

teaaiz 20

1231

Therefore, Your Honor, I will conclude by saying that

3

nr, e2 5

1237 33

318

1

smoke them, they are not safer .

me state it better -think that they will not be here tomorrow?

18

Okay, well, thank you, And the reason I ask it is that

19

iznc0 20

It also turns out that adding ammonia to clgarette

adequately .

22

23

Now, there are some tobacco companies that add ammonia to their

23

24

cigarettes, but they do not do it in order to create free

25

nicotine . Ammonia is added to cigarettes to improve the quality
Page

315

24

to

and I was just concerned about the size of the crowd for
tomorrow, but I think you all have answered that question

smoke to create free nicotine was also an idea that didn't work .

PM

when we can we certainly do our best to accommodate everybody,

21

22

09/22/2004 07 :26 :56

How many people in the audience now do not think- let

17

4Ve are going to take a lunch recess, everyone . 2 :00
o'clock, please, everyone. I'II see you all then .

i2azas 25
318

(Recess began at 12:42 p .m .)
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