Politics & Policy

Losing Case

Overreach and hypocrisy.

Uncle Sam has a breathtaking ability to be all things to all people at everyone’s expense. Look no further than U.S. District Judge Gladys Kessler’s Washington, D.C. courtroom. That’s where Uncle Sam is busy suing the cigarette industry despite the hot tub full of tobacco-related hypocrisy in which he soaks.

Leading the Justice Department’s civil RICO lawsuit is Attorney General Alberto Gonzalez, reputedly a sneaky right-winger who serves the even further-right G. W. Bush administration. Gonzalez and Bush, when not plotting to torture innocent Muslims, conspire to help their overfed buddies in corporate America, or so administration critics claim. That’s what makes this lawsuit so puzzling.

This litigation commenced under Attorney General Janet Reno, a crafty liberal lawyer with little love for big business. So why are Gonzalez and Bush, putative pawns of the Fortune 500, continuing Reno’s inquisition against Brown & Williamson, Liggett, Lorrillard, Philip Morris, and R. J. Reynolds? This chameleonism is one of Washington’s charms.

Reno herself changed colors regarding Big Tobacco. On April 30, 1997, she told the Senate Judiciary Committee: “The federal government does not have an independent cause of action” against this industry. Sunshine yellow that day, Reno added: “We needed to work with the states,” 46 of which squeezed the smokes sector for $206 billion in the 1998 Master Settlement Agreement (MSA).

But Reno then turned beet red and told reporters on September 22, 1999: “This morning, the United States filed a lawsuit in federal court in Washington, D.C. against the major cigarette companies. In the complaint, the United States alleges that for the past 45 years, the companies that manufacture and sell tobacco have waged an intentional, coordinated campaign of fraud and deceit.”

Prosecuting these tobacco kingpins has cost taxpayers at least $135 million so far. While that money trickles from the Treasury, over $10 billion pours through Uncle Sam’s fingers in an industry-funded, government-managed, 10-year buy-out of farmers’ tobacco quotas. This bonanza to those who cultivate the crop that inspires Surgeon Generals’ warnings comes with few conditions. Farmers may keep planting tobacco. Thus, Uncle Sam simultaneously handles tobacco with litigation, regulation, and subsidies. Ringling Brothers should have such a juggler.

Adding to this circus, Uncle Sam castigates Big Tobacco while thriving on its product. In fiscal 2004, the 39 cents-per-pack cigarette tax yielded $7,778,569,117 in federal revenues, according to Orzechowski and Walker, an Arlington, Virginia-based tobacco consultancy. Moreover, federally owned stores from Capitol Hill to Camp Pendleton sell cigarettes, often at discounted prices. In its most recent study on this topic, “Economic Impact of the Use of Tobacco in DoD,” the Pentagon’s Office of the Inspector General reported on December 31, 1996 that “in FY 1995, DoD retail system tobacco product sales of $747 million generated gross profits and surcharge revenues of about $103 million.” Thus, Uncle Sam hooks up nicotine addicts while tasting the action that Big Tobacco relishes on a grander scale.

This lawsuit originally sought to “disgorge” $280 billion of Big Tobacco’s “ill-gotten gains” earned between 1971 and 2000. This included $75 billion in cigarette “proceeds” from the “youth-addicted population,” those who smoked as few as five cigarettes daily before age 21. Never mind that 18-year-olds legally could purchase cigarettes in most states and, as a February 22 tobacco-company brief observes, “selling tobacco products is not illegal under RICO.” The “additional gain” of $205 billion in hypothetical interest payments reflects a 273 percent return on investment, or a 9.4 percent annual average across 29 years. Let’s free Americans to open personal retirement accounts managed by Big Tobacco’s stock brokers!

The D.C. Appellate Court chopped disgorgement from the lawsuit. Now Justice fishes for other penalties including money for smoking prevention and cessation programs, which the MSA already funds. Justice also is weighing the highly socialistic “remedy” of telling tobacco companies which senior managers to fire. Bureaucrats in Beijing would love such public control of private assets.

The MSA also dissolved the industry-funded Tobacco Institute and Council on Tobacco Research. Nonetheless, Justice is suing them even though government drove them out of existence. Uncle Sam is frisking a pair of dead bodies for their wallets.

As an asthmatic who hates coming home from pub crawls reeking like an ashtray, I would be thrilled to see America’s tobacco farms devoured by something like Dutch Elm Disease. Still, the tobacco sector is a legal industry, not a vacuum for collecting tax dollars through courtrooms rather than through the Internal Revenue Service.

Washington’s self-entangling, tobacco-related hyperactivity is beyond tiresome. The feds should drop this foolish lawsuit and their perennial payments to the very industry they sue and regulate. And the 40 federal prosecutors assigned to this case should be given worthier duties, such as smoking out terrorists.

Deroy Murdock is a New York–based columnist with the Scripps Howard News Service and a senior fellow with the Atlas Economic Research Foundation in Arlington, Virginia.

Deroy Murdock is a Manhattan-based Fox News contributor, a contributor to National Review Online, and a senior fellow with the London Center for Policy Research.


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