EMBARGOED FOR RELEASE AT 11:30 a.m. EST
WEDNESDAY, SEPTEMBER 22, 1999(202) 616-2777
WWW.USDOJ.GOVTDD (202) 514-1888
UNITED STATES SUES CIGARETTE COMPANIES TO RECOVER FEDERAL HEALTH CARE COSTS
WASHINGTON, D.C. -- The Department of Justice today filed a civil lawsuit against the largest cigarette companies to recover the billions of dollars the federal government spends each year on smoking-related health care costs.
"Each year, American taxpayers spend billions of dollars due to the actions of the cigarette companies. Today's suit seeks to recover those expenses," said Attorney General Janet Reno. "Smoking is the nation's largest preventable cause of death and disease, and American taxpayers should not have to bear the responsibility for the staggering costs."
The complaint, filed today in U.S. District Court in Washington, D.C., alleges that the cigarette companies have conspired since the 1950's to defraud and mislead the American public and to conceal information about the effects of smoking.
The defendants include Philip Morris Inc.; Philip Morris Companies; R.J. Reynolds Tobacco Co.; American Tobacco Co.; Brown & Williamson Tobacco Corp.; British-American Tobacco P.L.C.; British-American Tobacco (Investments) Ltd.; Lorillard Tobacco Co. Inc.; Liggett and Myers Inc.; The Council for Tobacco Research U.S.A. Inc.; and, the Tobacco Institute Inc.
"For more than 45 years, the cigarette companies conducted their business without regard to the truth, the law, or the health of the American people," added Reno. Today's suit relies on three statutes, including the Medical Care Recovery Act, the Medicare Secondary Payer Act, and the civil provisions of the Racketeer Influenced and Corrupt Organizations (RICO) statute. It focuses on the concerted efforts of the defendants to defraud the public, and alleges, among other things, that the defendants:
- made false and misleading statements to create a false controversy about whether smoking causes disease, even though they knew that smoking did cause disease;
- made false promises that they would undertake or sponsor research to determine whether smoking causes disease;
- sponsored research that was designed not to answer the question of whether smoking caused disease, promoted biased research that would assist in defending lawsuits brought by injured smokers, and suppressed research that suggested that smoking causes disease;
- denied that nicotine was addictive, despite the fact that they knew nicotine was addictive;
- failed to warn consumers about the effects of smoking, including that cigarettes are addictive;
- refrained from developing, testing, and marketing potentially less hazardous products; and,
- denied that they marketed and/or targeted products to children, although they actively sought to capture the youth market.
"Based on internal documents that have been revealed in the last few years, we allege that the cigarette companies knew exactly what they were doing at all times -- that their false and misleading statements would keep people smoking," said David W. Ogden, Acting Assistant Attorney General for the Civil Division. "As we allege in our complaint, even when the truth began coming out, the cigarette companies responded with more fraud and deception."
Today's lawsuit is similar to those filed, and settled, by the states for more than $200 billion. While the state suits recovered funds paid out under the Medicaid program -- a joint state and federal program -- it did not recover funds paid out under solely federal programs such as Medicare. The federal government spends more than $20 billion per year to treat smoking-related diseases.
Two of the three statutes cited in the complaint give the U.S. a right to recover costs borne by the federal government from those third parties responsible for the costs in the first place.
Under the Medical Care Recovery Act, the United States has an "independent" right to recover medical costs "[i]n any case in which the United States is authorized or required by law to furnish or pay for hospital, medical, surgical, or dental care and treatment . . . to a person who is injured or suffers a disease, . . . under circumstances creating a tort liability upon some third person."
Under the Medicare Secondary Payer Act, the United States has an independent right to recover Medicare payments from third parties who are required or responsible to pay, including insurers and those who self-insure.
The federal complaint also employs the special authority of the Attorney General to bring civil actions under the RICO statute, to obtain equitable relief, including disgorgement of ill-gotten gains, and to prevent and restrain certain unlawful conduct. The complaint includes more than 100 allegations of mail and wire fraud, including making false and misleading statements to the public and using the mails and wire transmissions to further the defendants' scheme to defraud.
"This lawsuit seeks to remedy the ongoing effects of this conduct and to recover the billions of dollars in health care costs that the federal government has paid because of the unlawful conduct," said Ogden.
The factual and legal basis for the lawsuit filed today was developed by the Justice Department's Tobacco Litigation Team, currently consisting of 16 career Justice Department attorneys. The Litigation Team has been working since early 1999 to develop a plan to recover federal health care costs. The Attorney General determined in December 1998 that the U.S. had viable grounds to pursue recovery from the cigarette companies for health care costs caused by smoking.
There are no pending Criminal Division investigations of the tobacco industry.
Complaint (PDF File) Complaint Appendix (PDF File)
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