IN THE DISTRICT COURT FOR CLEVELAND COUNTY STATE OF OKLAHOMA


THE STATE OF OKLAHOMA, ex rel., W.A.
DREW EDMONDSON, in his capacity as
ATTORNEY GENERAL OF THE STATE OF
OKLAHOMA, THE OKLAHOMA
DEPARTMENT OF HUMAN SERVICES, THE
OKLAHOMA DEPARTMENT OF VETERANS
AFFAIRS, THE OKLAHOMA HEALTH CARE
AUTHORITY and THE OKLAHOMA
DEPARTMENT OF HEALTH,

Plaintiffs,

v.

R.J. REYNOLDS TOBACCO COMPANY, RJR
NABISCO INC., THE AMERICAN TOBACCO
COMPANY, AMERICAN BRANDS INC.,
BROWN & WILLIAMSON TOBACCO
CORPORATION, B.A.T. INDUSTRIES, PLC,
BATUS HOLDINGS INC., PHILIP MORRIS
INCORPORATED (PHILIP MORRIS U.S.A.),
PHILIP MORRIS COMPANIES INC., LIGGETT
& MYERS INC., THE BROOKE GROUP
LIMITED, LIGGETT GROUP INC., LORILLARD
CORPORATION, LOEWS CORPORATION,
THE COUNCIL FOR TOBACCO
RESEARCH-U.S.A. INC. (successor in interest to the TOBACCO INDUSTRY RESEARCH
COMMITTEE), TOBACCO INSTITUTE INC., HILL & KNOWLTON INC., SHOOK, HARDY & BACON, a professional corporation, JACOB, MEDINGER & FINNEGAN, a
partnership including professional corporations, CHADBOURNE & PARKE, a
limited liability partnership, and JOHN DOE TOBACCO CORPORATIONS "A"
through "Z,"

Defendants.

Case No.CJ96-1499

PETITION

I. Introduction

1. In the name of profits, cigarette manufacturers have chosen to ignore and
suppress the truth about the human hazards of smoking. As a result,
Medicaid and other publicly-funded healthcare recipients in the State of
Oklahoma have contracted smoking-related diseases, including, without
limitation, cancer, emphysema and heart disease. The care of these Medicaid
and other publicly-funded healthcare recipients has placed a significant
burden on the State of Oklahoma. This burden should rightly be borne by the
cigarette manufacturers, which have been able to pocket their profits while
pass on the costs of their misconduct to the taxpayers of the State of
Oklahoma. The State of Oklahoma has determined that it can no longer afford
to allow cigarette manufacturers to reap this profit. Therefore, the State
of Oklahoma has filed this lawsuit to force the cigarette manufacturers to
pay for the healthcare crises their cigarettes have caused.


2. The State of Oklahoma and its agencies, by and through its Attorney General
and consistent with its constitutional, statutory, common law, and
equitable authority, does hereby bring this action for the purpose of
obtaining reimbursement for all monies paid for medical assistance to
Medicaid and other publicly-funded healthcare recipients who suffer, or who
have suffered, from tobacco-related disease as a result of the actions of
defendants, as well as such other relief as will afford a full and complete
remedy. Unless otherwise noted, each and every count alleged applies to
each and every defendant.


3. The allegations contained herein are made on information and belief.



II. Parties


A. Plaintiffs


4. The State of Oklahoma is a sovereign state of the United States. The State
of Oklahoma, by and through its Attorney General W.A. Drew Edmondson,
brings this action on its own behalf, on behalf of its agencies, including
the Oklahoma Department of Human Services, the Oklahoma Department of
Veterans Affairs, the Oklahoma Health Care Authority, and the Oklahoma
Department of Health, and as parens patriae on behalf of the residents of
the State of Oklahoma.


B. Defendants


5. R.J. Reynolds Tobacco Company is a New Jersey corporation whose principal
place of business is located at 4th & Main Street, Winston-Salem, North
Carolina 27102. Defendant R.J. Reynolds Tobacco Company is an agent, alter
ego, subsidiary and/or division of defendant RJR Nabisco, Inc. At times
pertinent to the petition, defendant R.J. Reynolds Tobacco Company
designed, tested, manufactured, marketed and sold cigarettes for use in the
State of Oklahoma or materially participated, conspired, assisted,
encouraged, and/or otherwise aided and abetted one or more of the other
defendants in doing so.


6. RJR Nabisco, Inc. is a Delaware corporation whose principal place of
business is 1301 Avenue of the Americas, New York, New York 10015.
Defendant RJR Nabisco, Inc. is the parent corporation of defendant R.J.
Reynolds Tobacco Company. At times pertinent to the petition, defendant RJR
Nabisco, Inc., individually and/or through its agent, alter ego, subsidiary
and/or division, defendant R.J. Reynolds Tobacco Company, designed, tested,
manufactured, marketed and sold cigarettes for use in the State of Oklahoma
or materially participated, conspired, assisted, encouraged, and otherwise
aided and abetted one or more of the other defendants in doing so


7. The American Tobacco Company is or was a Delaware corporation whose
principal place of business is or was located at 6 Stamford Forum,
Stamford, Connecticut 06904. Defendant The American Tobacco Company is or
was an agent, alter ego, subsidiary and/or division of defendant American
Brands, Inc. At times pertinent to the petition, defendant The American
Tobacco Company designed, tested, manufactured, marketed and sold
cigarettes for use in the State of Oklahoma or materially participated,
conspired, assisted, encouraged, and otherwise aided and abetted one or
more of the other defendants in doing so.


8. American Brands, Inc. is a Delaware corporation whose principal place of
business is located at 1700 East Putnam Avenue, Old Greenwich, Connecticut
06870. Defendant American Brands, Inc. is or was the parent corporation of
or the successor in interest to defendant The American Tobacco Company. At
times pertinent to the petition, defendant American Brands, Inc.,
individually and through its agent, alter ego, subsidiary and/or division,
defendant The American Tobacco Company, designed, tested, manufactured,
marketed and sold cigarettes for use in the State of Oklahoma or materially
participated, conspired, assisted, encouraged, and otherwise aided and
abetted one or more of the other defendants in doing so.


9. Brown & Williamson Tobacco Corporation is a Delaware corporation whose
principal place of business is located at 1500 Brown & Williamson Tower,
Louisville, Kentucky 40202. Defendant Brown & Williamson Tobacco
Corporation is an agent, alter ego, subsidiary and/or division of defendant
Batus Holdings, Inc. and defendant B.A.T. Industries, PLC. At times
pertinent to the petition, defendant Brown & Williamson Tobacco Corporation
designed, tested, manufactured, marketed and sold cigarettes for use in the
State of Oklahoma or materially participated, conspired, assisted,
encouraged, and otherwise aided and abetted one or more of the other
defendants in doing so.


10. B.A.T. Industries, PLC is a British corporation whose registered office is
located at Windsor House, 50 Victoria Street, London, England SWIH ONL.
Defendant B.A.T. Industries, PLC is the parent corporation of defendant
Brown & Williamson Tobacco Corporation and defendant Batus Holdings, Inc.
At times pertinent to the petition, defendant B.A T. Industries, PLC,
individually and through its agents, alter egos, subsidiaries and
divisions, defendant Brown & Williamson Tobacco Corporation and defendant
Batus Holdings, Inc., designed, tested, manufactured, marketed and sold
cigarettes for use in the State of Oklahoma or materially participated,
conspired, assisted, encouraged, and otherwise aided and abetted one or
more of the other defendants in doing so.


11 . Batus Holdings, Inc. is a Delaware corporation with its principal place of
business at 1500 Brown & Williamson Tower, Louisville, Kentucky 40202.
Defendant Batus Holdings, Inc. is an agent, alter ego, subsidiary and
division of defendant B.A.T. Industries, PLC. Defendant Batus Holdings,
Inc. is a parent corporation of defendant Brown & Williamson Tobacco
Corporation. At times pertinent to the petition, defendant Batus Holdings,
Inc., individually and/or through its agent, alter ego, subsidiary and
division, defendant Brown & Williamson Tobacco Corporation, designed,
tested, manufactured, marketed and sold cigarettes for use in the State of
Oklahoma or materially participated, conspired, assisted, encouraged,
and/or otherwise aided and abetted one or more of the other defendants in
doing so.


12. Philip Morris Incorporated (Philip Morris U.S.A.) is a Virginia corporation
whose principal place of business is located at 120 Park Avenue, New York,
New York 10016. Defendant Philip Morris Incorporated (Philip Morris U.S.A.)
is an agent, alter ego, subsidiary and division of defendant Philip Morris
Companies, Inc. At times pertinent to the petition, defendant Philip Morris
Incorporated (Philip Morris U.S.A.) designed, tested, manufactured,
marketed and sold cigarettes for use in the State of Oklahoma or materially
participated, conspired, assisted, encouraged, and otherwise aided and
abetted one or more of the other defendants in doing so.


13. Philip Morris Companies, Inc. is a Virginia corporation whose principal
place of business is located at 120 Park Avenue, New York, New York 10016.
Defendant Philip Morris Companies, Inc. is the parent corporation of
defendant Philip Morris Incorporated (Philip Morris U.S.A.). At times
pertinent to the petition, defendant Philip Morris Companies, Inc.,
individually and through its agent, alter ego, subsidiary and/or division,
defendant Philip Morris Incorporated (Philip Morris U.S.A.), designed,
tested, manufactured, marketed and sold cigarettes for use in the State of
Oklahoma or materially conspired, assisted, encouraged, and otherwise aided
and abetted one or more of the other defendants in doing so.


14. Liggett & Myers, Inc. is a Delaware corporation whose principal place of
business is located at 700 West Main Street, Durham, North Carolina 27701.
Defendant Liggett & Myers, Inc. is an agent, alter ego, subsidiary and
division of defendant Brooke Group, Limited and defendant Liggett Group,
Inc. At times pertinent to the petition, defendant Liggett & Myers, Inc.
designed, tested, manufactured, marketed and sold cigarettes for use in the
State of Oklahoma or materially conspired, assisted, encouraged, and
otherwise aided and abetted one or more of the other defendants in doing
so.


15. The Brooke Group, Limited is a Delaware corporation whose principal place
of business is located at 100 Southeast 2nd Street, Floor 32, Miami, FL
33131. Defendant Brooke Group, Limited is the parent corporation of
defendant Liggett Group, Inc. and defendant Liggett & Myers, Inc. At times
pertinent to the petition, defendant Brooke Group, Limited, individually
and/or through its agents, alter egos, subsidiaries and divisions,
defendant Liggett Group, Inc. and defendant Liggett & Myers, Inc.,
designed, tested, manufactured, marketed and sold cigarettes for use in the
State of Oklahoma or materially conspired, assisted, encouraged, and
otherwise aided and abetted one or more of the other defendants in doing
so.


16. Liggett Group, Inc. is a Delaware corporation whose principal place of
business is located at 700 West Main Street, Durham, North Carolina 27701.
Defendant Liggett Group, Inc. is an agent, alter ego, subsidiary and
division of defendant Brooke Group, Limited. Defendant Liggett Group, Inc.
is a parent corporation of defendant Liggett & Myers, Inc. At times
pertinent to the petition, defendant Liggett Group, Inc., individually
and/or through its agent, alter ego, subsidiary and division, defendant
Liggett & Myers, Inc., designed, tested, manufactured, marketed and sold
cigarettes for use in the State of Oklahoma or materially conspired,
assisted, encouraged, and otherwise aided and abetted one or more of the
other defendants in doing so.


17. Lorillard Corporation is a Delaware corporation whose principal place of
business is located at 1 Park Avenue, New York, New York 10016. Defendant
Lorillard Corporation is an agent, alter ego, subsidiary and division of
defendant Loews Corporation. At times pertinent to the petition, defendant
Lorillard Corporation designed, tested, manufactured, marketed and sold
cigarettes for use in the State of Oklahoma or materially conspired,
assisted, encouraged, and otherwise aided and abetted one or more of the
other defendants in doing so.


18. Loews Corporation is a Delaware corporation whose principal place of
business is located at 1 Park Avenue, New York, New York 10016. Defendant
Loews Corporation is the parent corporation of defendant Lorillard
Corporation. At times pertinent to the petition, defendant Loews
Corporation, individually and/or through its agent, alter ego, subsidiary
and division, defendant Lorillard Corporation, designed, tested,
manufactured, marketed and sold cigarettes for use in the State of Oklahoma
or materially conspired, assisted, encouraged, and/or otherwise aided and
abetted one or more of the other defendants in doing so.


19. The Council for Tobacco Research - U.S.A., Inc. (successor in interest to
the Tobacco Industry Research Committee) is a non-profit corporation
organized under the laws of the State of New York with its principal place
of business located at 900 3rd Avenue, New York, New York 10022. At times
pertinent to the petition, defendant Council for Tobacco Research - U.S.A.,
Inc. acted individually and as the agent and/or co-conspirator of the
tobacco industry.


20. Tobacco Institute, Inc. is a non-profit corporation organized under the
laws of the State of New York with itS principal place of business located
at 1875 "I" Street NW, Suite 800, Washington, D.C. 20006. At times
pertinent to the petition, defendant Tobacco Institute, Inc. acted
individually and as the agent and/or co-conspirator of the tobacco
industry.


21. Hill & Knowlton, Inc., a public relations firm, is a Delaware corporation
with its principal place of business located at 420 Lexington Avenue, New
York, New York 10070. At times pertinent to the petition, defendant Hill &
Knowlton, Inc. acted individually and as the agent and/or co-conspirator of
the tobacco industry.


22. Shook, Hardy & Bacon, P.C., a law firm, is a Missouri professional
corporation with its principal office located at One Kansas City Place,
1200 Main Street, Kansas City, Missouri 64105. At times pertinent to the
petition, defendant Shook, Hardy & Bacon, P.C. acted individually and as
the agent, aider and abettor and co-conspirator of the tobacco industry.



23. Jacob, Medinger & Finnegan, a law firm, is a New York partnership including
professional corporations with its principal office located at 1270 Avenue
of the Americas, Rockefeller Center, New York, New York 10020. At times
pertinent to the petition, defendant Jacob, Medinger & Finnegan acted
individually and as the agent, aider and abettor and coconspirator of the
tobacco industry.


24. Chadbourne & Parke, L.L.P., a law firm, is a New York limited liability
partnership with its principal office located at 30 Rockefeller Plaza, New
York, New York 10112. At times pertinent to the petition, defendant
Chadbourne and Parke acted individually and as the agent, aider and abettor
and co-conspirator of the tobacco industry.


25. John Doe Tobacco Corporations "A" through "Z," business entities, both
domestic and foreign, whose identities are presently unknown to plaintiffs,
but who may be described as certain manufacturers, distributors, and trade
organizations, public relations firms, law firms, and other such entities
which may have designed, tested, manufactured, marketed and sold cigarettes
for use in the State of Oklahoma or materially participated, conspired,
assisted, encouraged, and otherwise aided and abetted one or more of the
other defendants in doing so.



III. Jurisdiction and Venue


26. This court has jurisdiction over the subject matter of this action pursuant
to the Oklahoma Constitution, Article VII, section 7(a). In personam
jurisdiction is properly obtainable over each of defendants pursuant to 12
O.S. 1991 Sec. 2004.


27. The State of Oklahoma brings this action to obtain monetary, declaratory,
injunctive and other equitable relief. The State of Oklahoma seeks to
prevent continued violations of the law and breaches of duties by
defendants, to recoup its tobacco-related healthcare costs, to cause
disgorgement of defendants' tobacco-related profits and gains, and to
recover actual and punitive damages on its own behalf and on behalf of its
residents. These damages include damages for both past and future
expenditures for medical assistance provided under Oklahoma's Medicaid
program and the costs of caring for persons with tobacco-related diseases
who receive services through hospitals, healthcare facilities, residential
facilities and other similar facilities owned, operated, maintained and
funded by the State of Oklahoma. These damages also include the provision
of sick leave and health insurance benefits provided by and through the
State of Oklahoma to its employees and retirees.


28. Under these Medicaid and other publicly-funded healthcare programs, the
State of Oklahoma pays out large sums of money for the provision of
necessary assistance to eligible residents in the State of Oklahoma
("Medicaid and other publicly-funded healthcare recipients"). some of whom
have been and are now being treated in Cleveland County, Oklahoma and
elsewhere throughout the State of Oklahoma for tobacco-related diseases.
Venue is thus proper in this county.



IV. Conduct Allegations


A. General


29. At all pertinent times, defendants acted individually and by and through
their duly authorized agents, servants and employees who were then acting
in the course and scope of their employment and in furtherance of the
businesses of said defendants. At all pertinent times, defendants Tobacco
Institute and Council for Tobacco Research were the agents, servants, and
employees of defendants and acted individually and within the scope of said
agency, servitude and employment. At pertinent times, defendant Hill and
Knowlton was the agent, servant, and employee of defendants and defendants
Tobacco Institute and Council for Tobacco Research and acted individually
and within the scope of said agency, servitude and employment. At pertinent
times, defendants Shook, Hardy & Bacon, P.C., Jacob, Medinger & Finnegan,
and Chadbourne & Parke, L.L.P., were the agents, servants, and employees of
defendants and defendants Tobacco Institute and Council for Tobacco
Research and acted individually and within the scope of said agency,
servitude and employment, but outside the bounds of what constitutes proper
and ethical legal representation.


30. Defendants, and their predecessors and successors in interest, themselves
and through their agents, servants, employees and instrumentalities,
performed such acts as were intended to, and did, result in, assist in and
contribute to the design, testing, manufacture, marketing or sale of
cigarettes for use in the State of Oklahoma. In connection with these acts,
defendants, and their predecessors and successors in interest, transacted
business within the State of Oklahoma, committed the tortious acts
complained of herein within the State of Oklahoma, owned, used or possessed
real estate in the State of Oklahoma, contracted to insure persons,
property or risk located within the State of Oklahoma, entered into express
or implied contracts to be performed in whole or in part in the State of
Oklahoma, and caused to persons or property within the State of Oklahoma
injury.


31. The cigarettes for which these defendants are responsible are substantially
interchangeable.


32. Substantially similar issues, both legal and factual, are involved in
determining liability of each of these defendants.


33. At all pertinent times, defendants purposefully and intentionally engaged
in these activities, and continue to do so, knowing full and well that when
the State of Oklahoma's citizens used those cigarettes as they were
intended to be used, that the State of Oklahoma's citizens would be
substantially certain to suffer injury, disease, and illness, including
cancer, emphysema, heart disease and other illnesses causing disability and
death and that the State of Oklahoma itself would be economically injured
thereby.


34. Also, at all pertinent times, defendants purposefully and intentionally
engaged in these activities, and continue to do so, knowing full and well
that the State of Oklahoma would unofficiously confer a benefit upon
defendants by providing or paying for healthcare and other necessary
medical goods and services for certain of the State of Oklahoma's citizens
thus harmed by the intended use of defendants' cigarettes, and, in the
absence of performance of such duty by defendants, that the State of
Oklahoma itself thereby would be harmed.


35. Cigarette-related disease has killed, and continues to kill, untold
millions of Americans. The Center for Disease Control ("CDC") has estimated
that over 400,000 persons die each year from smoking. Approximately one in
five deaths is attributable to smoking. Thousands of citizens of the State
of Oklahoma die each year as a result of smoking cigarettes. Each day, more
than 3,000 young people begin to smoke-or more than one million each year.
Most of the new smokers who replace the smokers who quit or die prematurely
from smoking-related disease are children or teenagers. About 90% of
smokers born since 1935 started smoking before the age of twenty-one (21)
and almost 50 percent started before the age of eighteen (18).


36. The monetary consequences of smoking cigarettes are equally staggering. In
May of 1993, the Office of Technology Assessment advised the United States
Congress that in 1990 smoking-related illnesses cost United States
taxpayers approximately $68 billion, broken down as follows: $20.8 billion
in direct costs; $6.9 billion in indirect costs for morbidity; $40.3
billion indirect costs for mortality.


37. The State of Oklahoma spends millions of dollars each year to provide or
pay for healthcare and other necessary facilities and services on behalf of
indigents and other eligible residents whose healthcare costs are directly
caused by tobacco-induced cardiovascular disease, lung cancer, emphysema
and other respiratory diseases as well as the complications of pregnancy
and childbirth, including but not limited to low-weight babies.


38. Defendants have known for decades of the lethal dangers of smoking their
cigarettes. By the late 1930's, based on published research, defendants had
notice of the health hazards of smoking cigarettes. In 1946, defendants'
chemists themselves reported concern for the health of smokers. Dr. Ernst
L. Wynder, in 1953, reported to the scientific community, and to
defendants, a definite link between cigarette smoking and cancer.



B. The Composition of the Cigarette Industry in the United States


39. Philip Morris, RJR, Brown & Williamson, B.A.T. Industries, Lorillard,
Liggett and ATC (hereafter sometimes collectively the "cigarette
companies") together control almost all of the cigarette market in the
United States and Oklahoma. Philip Morris and RJR are the largest cigarette
manufacturers, with market shares in the United States of 42 percent and 30
percent, respectively. The national market shares of the other defendant
tobacco companies are approximately as follows: Brown & Williamson - 11
percent; Lorillard - 7 percent; ATC - 7 percent; and Liggett - 2 percent.



40. The cigarette industry is one of the most profitable industries in the
United States, with profit margins estimated to be 30 percent. Industry
profits are in the billions of dollars annually from domestic sales alone.



41. The unusual concentration of the cigarette industry has facilitated the
planning, implementation and funding of a decades-long conspiracy by the
cigarette companies and their trade associations and attorneys relating to
the issues of smoking, health and addiction.


C. 1994 Congressional Testimony by Cigarette Manufacturers


42. The tobacco industry has implemented a strategy of deception. For example,
on April 14, 1994, seven tobacco company chief executive officers testified
under oath before the Subcommittee on Health and the Environment of the
Committee on Energy and Commerce, U.S. House of Representatives, chaired by
Congressman Waxman. ("Waxman Subcommittee"). Each of these executives
knowingly made material misrepresentations and omissions to the Waxman
Subcommittee.


43. For example, Chairman Waxman and Andrew Tisch, CEO of Lorillard, had the
following exchange about smoking and cancer:



Mr. Waxman: In a deposition last year you were asked whether cigarette smoking
causes cancer. Your answer was "I don't believe so." Do you stand by that
answer today?


Mr. Tisch: I do, sir.


Mr. Waxman: Do you understand how isolated you are in the belief from the
entire scientific community?


Mr. Tisch: I do, sir.


Mr. Waxman: You're the head of manufacturing of a product that's been accused
by the overwhelming scientific community to cause cancer. You don't know?
Do you have an interest in finding out?


Mr. Tisch: I do, sir, yes.


Mr. Waxman: And what have you done to pursue that interest?


Mr. Tisch: We have looked at the data and the data that we have been able to
see has all been statistical data that has not convinced me that smoking
causes death.



44. Philip Morris President and CEO William I. Campbell gave the following
testimony about nicotine and addiction:



a. "Philip Morris does not manipulate nor independently control-the level of
nicotine in our products."


b. "Cigarette smoking is not addictive."


c. "Philip Morris research does not establish that smoking is addictive."



45. RJR CEO James W. Johnston told the Subcommittee that: "smoking is no more
addictive than coffee, tea, or Twinkies."


46. These assertions are contradicted by overwhelming evidence that smoking
kills, and that nicotine is addictive.


47. These representations were also made despite a substantial body of evidence
developed by the cigarette manufacturers themselves, dating from as early
as 1962, indicating that nicotine is not only addictive, but is the reason
why people smoke.


48. While the tobacco manufacturers continue to deny that nicotine is
addictive, they use various misleading euphemisms to describe the role of
nicotine, such as "satisfaction," "impact," "strength," "rich aroma" and
"pleasure." This is despite the widespread agreement in the medical and
scientific communities that the primary function of tobacco is addictive.



49. Nicotine is recognized as an addictive substance by such major medical
organizations as the Office of the U.S. Surgeon General, the World Health
Organization, the American Medical Association, the American Psychiatric
Association, the American Psychological Association, the American Society
of Addiction Medicine and the Medical Research Council in the United
Kingdom. All of these organizations acknowledge tobacco use as a form of
drug dependence or addiction with severe adverse health consequences.


50. The testimony of the cigarette manufacturers that smoking is not a proven
cause of disease and death, and that nicotine is not addictive, is also
contradicted by their internal documents. Numerous documents, many marked
confidential, describe industry studies that show that the cigarette
companies have known for decades that nicotine is addicting, and that their
products cause cancer, disease, and death. The cigarette manufacturers have
made every effort to hide this research from the public, and to
misrepresent the facts about smoking, health and addiction. The testimony
of the cigarette executives before Congress last year is only a recent
example of an ongoing pattern of deception that began more than 40 years
ago.



D. The 1953 "Big Scare" and the Joint Industry Response


51. In December, 1953, Dr. Ernest L. Wynder of the Sloan-Kettering Institute
published the results of a study where he painted the shaved backs of nice
with cigarette smoke condensate residue. Malignant tumors grew in 44
percent of the mice in Dr. Wynder's study, providing biological evidence
that cigarette smoke causes cancer. The previous year's British researcher,
Dr. Richard Doll, published a statistical analysis showing that lung cancer
was more common among people who smoke and that the risk of lung cancer is
directly proportional to the number of cigarettes smoked. The widespread
reporting of these studies caused what cigarette company officials later
called the "Big Scare."


52. The cigarette industry responded quickly to the mounting adverse publicity
of a link between smoking and cancer. The chief executive officers of the
leading cigarette manufacturers met on December 15, 1953, at the Plaza
Hotel in New York City. Also in attendance was the public relations firm of
Hill & Knowlton, which was to play a central role in formulating and
executing the industry response.


53. According to a Hill & Knowlton memorandum summarizing the meeting,
cigarette industry executives viewed the problem as "extremely serious, and
worthy of drastic action" The document continues, "officials stated that
salesmen in the industry are frantically alarmed and that the decline in
tobacco stocks on the stock exchange market has caused grave concern. . . "



54 The participants in the meeting agreed that a strong public relations
response from the industry was necessary. From the beginning, the emerging
research linking smoking and cancer was viewed by the defendants as a pubic
relations problem, not a public health issue. According to the Hill &
Knowlton memorandum summarizing the meeting:



a. The Chief Executive officers of all the leading companies, except Liggett,
"have agreed to go along with a public relations program on the health
issue." Liggett decided not to participate at this point because it "feels
that the proper procedure is to ignore the whole controversy."


b. "They feel that they should sponsor a public relations campaign which is
positive in nature and is entirely 'pro-cigarettes.'"


c. "They are also emphatic in saying that the entire activity is a long-
term,continuing program, since they feel that the problem is one of
promoting cigarettes and protecting them from these and other attacks that
may be expected in the future. Each of the company presidents attending
emphasized the fact that they consider the program to be a long-term one."



d. The role of Hill & Knowlton in executing the plan was also discussed. "The
current plans are for Hill and Knowlton to serve as the operating agency of
the companies, hiring all the staff and disbursing all funds."



E. Creation of the Tobacco Industry Research Committee


55. Nine days later, Hill & Knowlton presented a detailed recommendation to
the cigarette companies. The recommendation recognized the importance of
gaining the public trust, and avoiding the appearance of bias, if the
"pro-cigarette" industry strategy was to be successful. According to the
memorandum:



[T]he grave nature of a number of recently, highly publicized research reports
on the effects of cigarette smoking .... have confronted the industry with
a serious problem of public relations.


It is important that the industry do nothing to appear in the light of being
callous to considerations of health or of belittling medical research which
goes against cigarettes.


The situation is one of extreme delicacy. There is much at stake and the
industry group, in moving into the field of public relations, needs to
exercise great care not to add fuel to the flames.



56. As a result of the meeting of December 15, 1953, and the recommendations
of Hill & Knowlton, five of the six cigarette companies agreed to create
the Tobacco Industry Research Committee. ("TIRC"). Liggett joined the
industry trade group in 1964, the same year the Surgeon General issued his
first report on smoking which concluded that cigarette smoking was a cause
of lung cancer. Also in 1964, TIRC changed its name to the Council for
Tobacco Research ("CTR"). A second trade group, the Tobacco Institute
("TI"), was formed by cigarette manufacturers in 1958.



F. TIRC Control


57. As had been proposed at the December 15, 1953 meeting, the cigarette
companies (except Liggett), through the tobacco attorneys and Hill &
Knowlton, operated and effectively controlled TIRC.


58. TIRC was physically established in the Empire State building, one floor
below, the Hill & Knowlton offices. Internal documents confirm that Hill &
Knowlton, and not the independent scientists, actually ran.TIRC. A "highly
confidential" internal memo reported:



Since the [TIRC] had no headquarters and no staff, Hill and Knowlton, Inc. was
asked to provide working staff and temporary office space. As a first
organizational step, public relations counsel assigned one of its
experienced executives, W.T. Hoyt, to serve as account executive and handle
as one of his functions the duties of executive secretary for the TIRC.




59. The confidential memorandum also states that Hill & Knowlton "provided
assistance in selecting" the TIRC Scientific Advisory Board; "proposed" the
Scientific Director; and "handled liaison, agendas, organizational plans,
business affairs, reports, and materials for meetings of the Tobacco
Industry Research Committee, and the scientific Advisory Board . . . in
addition to developing operating procedures for the research program...."



60. In 1954, 35 staff members of Hill & Knowlton worked full or part tune for
TIRC. In that year, TIRC spent $477,955 on payments to Hill & Knowlton,
over 50 percent of TIRC's entire budget.



G. The Industry's Response to Smokers


61. Shortly after creating TIRC, defendants made a pledge to the public,
including the people of Oklahoma. Defendants represented that through TIRC,
they would conduct and report objective and unbiased research regarding
smoking and health. When they made this representation, defendants intended
that the public and government regulators believe and rely upon it, and
knew or should have known that Oklahoma consumers would consider the
representation material to their decisions tO purchase and smoke cigarettes
and that government regulators would consider the representation material
to their decisions to regulate cigarettes. At that time, and continuing to
the present, defendants knew or should have known that their failure to
fulfill the duty they undertook would directly increase the health care
costs to Oklahoma.


62. On January 4, 1954, defendants announced the formation and purpose of TIRC,
with a full page newspaper advertisement entitled "A Prank Statement to
Cigarette Smokers." The statement appeared in 448 newspapers across the
nation, reaching a circulation of 43,245,0()0 in 258 cities. The
advertisement ran in daily newspapers in Oklahoma.


63. The "Frank Statement to Cigarette Smokers" stated in part:



a. "Recent reports on experiments with mice have given wide publicity to a
theory that smoking is in some way linked with lung cancer in human beings.



b. "Although conducted by doctors of professional standing, these experiments
are not regarded as conclusive in the field of cancer research."


c. "That there is no proof that cigarette smoking is one of the causes" of
lung cancer]."


d. "We accept an interest in people's health as a basic responsibility,
paramount to every other consideration in our business."


e. "We believe the products we make are not injurious to health."


f. "We have always and always will cooperate closely with those whose task it
is to safeguard the public health."


g. "We are pledging aid and assistance to the research effort into all phases
of tobacco use and health."


h. "For this purpose we are establishing a joint industry group consisting
initially of the undersigned. The group will be known as TOBACCO INDUSTRY
RESEARCH COMMITTEE."


i. "In charge of the research activities of the Committee will be a scientist
of unimpeachable integrity and national repute. In addition there will be
an Advisory Board of scientists disinterested in the cigarette industry. A
group of distinguished men from medicine, science, and education will be
invited to serve on this Board. These scientists will advise the Committee
on its research activities."


j. "This statement is being issued because we believe the people are entitled
to know where we stand on this matter and what we intend to do about it."




64. By the spring of 1955, the self-defense strategy recommended by Hill &
Knowlton and implemented by the industry through the "Frank Statement" was
largely successful. Hill & Knowlton reported to TIRC:



a. "progress has been made" . . . The first 'big scare' continues on the
wane."


b. "The research program of the TIRC has won wide acceptance in the scientific
world as a sincere, valuable and scientific effort."


c. "Positive stories are on the ascendancy."



H. History of Industry Knowledge that Smoking is Harmful


65. Even before defendants represented in the Frank Statement that "[t]here is
no proof that cigarette smoking is one of the causes of lung cancer," an
industry researcher had reported the contrary.


66. As early as 1946, Lorillard chemist H.B. Parmele, who later became Vice
President of Research and a member of Lorillard's Board of Directors, wrote
to his company's manufacturing committee:



Certain scientists and medical authorities have claimed for many years that the
use of tobacco contributes to cancer development in susceptible people.
Just enough evidence has been presented to justify the possibility of such
a presumption.



67. After the 1954 "Frank Statement," the cigarette industry's breach of its
assumed duty to report objective facts on smoking and health was immediate.
As evidence mounted, both through industry research and truly independent
studies, that cigarette smoking causes cancer and other diseases, the
cigarette industry continued publicly to represent that nothing was proven
against smoking. Internal documents show that the truth was very different.
The cigarette companies knew and acknowledged among themselves the truth of
the scientific evidence of the health hazards of smoking, and at the same
time suppressed such evidence where they could, and attacked it when it did
appear.


68. Internal cigarette industry documents reveal, for example:



a. A 1956 memorandum from the Vice President of Philip Morris' Research and
Development Department to top executives at the company regarding the
advantages of "ventilated cigarettes" stated that: "Decreased carbon
monoxide and nicotine are related to decreased harm to the circulatory
system as a result of, smoking. . . . Decreased irritation is desirable . .
. as a partial elimination of a potential cancer hazard."


b. A 1958 memorandum sent to the Vice President of Research at Philip Morris
who later became a member of its Board of Directors from a company
researcher stated "the evidence . . . is building up that heavy cigarette
smoking contributes to lung cancer either alone or in association with
physical and physiological factors . "


c. A 1961 document presented to the Philip Morris Research and Development
Committee by the company's Vice President of Research and Development
included a section entitled-"Reduction of Carcinogens in Smoke." The
document stated, in part: "To achieve this objective will require a major
research effort, because - Carcinogens are found in practically every class
of compounds in smoke.


This fact prohibits complete solution of the problem by eliminating one or two
classes of compounds.


The best we can hope for is to reduce a particularly bad class, i.e., the
polynuclear hydrocarbons, or phenols....


- Flavor substances and carcinogenic substances come from the same classes, in
many instances."


d. A 1963 memorandum to Philip Morris' President and CEO from the company's
Vice President of Research describes a number of classes of compounds in
cigarette smoke which are "known carcinogens." The document goes on to
describe the link between smoking and bronchitis and emphysema. "Irritation
problems are now receiving greater attention because of the general medical
belief that irritation leads to chronic bronchitis and emphysema. These are
serious diseases involving millions of people. Emphysema is often fatal
either directly or through other respiratory complications. A number of
experts have predicted that the cigarette industry ultimately may be in
greater trouble in this area than in the lung cancer field."


e. A 1961 "Confidential" memorandum from the consulting research firm hired by
Liggett to do research for the company states:


"There are biologically active materials present in cigarette tobacco.


These are:


a) cancer causing

b) cancer promoting

c) poisonous

d) stimulating, pleasurable, and flavorful."


f. A 1963 memorandum from the Liggett consulting research firm states:
"Basically, we accept the inference of a causal relationship between the
chemical properties of ingested tobacco smoke and the development of
carcinoma, which is suggested by the statistical association shown in the
studies of Doll and Hill, Horn, and Dorn with some reservations and
qualifications and even estimate by how much the incidence of cancer may
possibly be reduced if the carcinogenic matter can be diminished, by an
appropriate filter, by a-given percentage."



69. These internal Liggett documents sharply contrast with the information
Liggett provided to the Surgeon General in 1963. Liggett withheld from the
Surgeon General the views of its researchers and consultants that the
evidence shows cigarette smoking causes human disease. A "Draft of an
Outline for a Background Paper on the Smoking Problem to be Used in
Connection with a Presentation of Arguments Before the Surgeon General's
Committee" states:



a. "AIl types of Smoking are Associated with Increase Mortality from all causes
combined. . . "


b. "For cigarette smokers who smoke regularly, excess mortality increases with
current number of cigarettes smoked.


c. "Lung cancer extremely rare among nonsmokers . . . "


d. As "reported by Hammond . . . Excess Mortality [is] (1) higher for cigarette
smokers than others, and (2) increases with daily cigarette consumption."



e. "For both sexes, all chronic respiratory diseases. chronic bronchitis.
irreversible obstructive lung diseases. . . increased in prevalence with
increasing amount of smoking" (Emphasis in original).



70. The report Liggett presented to the Surgeon General did not contain any of
these conclusions, but instead focused on alternative causes of disease,
such as air pollution, coffee and alcohol consumption, diet, lack of
exercise, and genetics. Liggett criticized the known statistical
association between smoking and mortality and various diseases as
"unreliably conducted" and "inadequately analyzed." The Liggett report
concluded that the association between smoking and disease was
inconclusive, and was in fact due to other factors coincidentally
associated with smoking.


71. Philip Morris also concealed from the public its actual views of the
research conducted outside the influence of the industry. A 1971 memorandum
written by Dr. H. Wakeham, then Vice President of Research and Development,
discussed a recent study which found cigarette smoke inhalation caused lung
cancer in beagles:



1970 might very properly be called the year of the beagle. Early in the year,
the American Cancer Society announced that they had finally demonstrated
the formation of lung cancer in beagles by smoke inhalation in the now
infamous Auerbach and Hammond study. I am sure all of you have read
extensively about this in the newspapers, how the industry asked to have
independent panel of pathologists review the histological sections showing
cancer, how the Society refused, how generally the ACS was put on the
defensive, how publication was refused by two medical journals and how the
story was changed somewhat by the time it was published. . .



72. The memorandum goes on to describe how the industry publicly dismissed the
mice cancer studies, such as the 1953 Wynder research. Dr. Wakeham explains
that "mouse skin is not human lung tissue," "smoke condensate has different
chemical composition from inhaled smoke," and "painting is not the method
of application practiced (sic) by human smokers."


73. In contrast to the mice studies, however, Dr. Wakeham continued:



The logical extension of these objections is that an inhalation test in which
an animal breathed smoke like a human would be a better model system.
Presumably, in such a test, the formation of lung cancers in the test
animal would be strong evidence for the cigarette causation hypothesis.
That is why the beagle test was a critical one.... So the test was not
conclusive. But it was a lot closer than skin painting.


The strong opposition in the industry to the beagle test is indicative of a new
more aggressive stance on the part of the industry in the smoking and
health controversy. We have gone over from what I have called the "vigorous
denial" approach, the take it on the chin and keep quiet attitude, to the
strongly voiced opposition and criticism. I personally think this
counter-propaganda is a better stance than the former one.



74. Taken together with the internal acknowledgments of cigarette smoking as a
cause of human disease, this memorandum from a senior Philip Morris
researcher demonstrates that the 1954 Frank Statement representations were
deceptions, and that the cigarette industry promptly breached the duties it
had undertaken. Far from "accepting an interest in people's health as a
basic responsibility, paramount to every other consideration in our
business" and "cooperating closely with those whose task it is to safeguard
the public health," the cigarette industry approach was to deny and attack
with "counter-propaganda" the mounting evidence that smoking caused human
disease-evidence that the industry plainly viewed internally as accurate.




I. Health Risks of Nicotine


75. Not only did the cigarette manufacturers know that cigarette smoking caused
cancer and other disease, they knew that nicotine was toxic to the heart.
In a 1963 memorandum Philip Morris's Wakeham stated, "The Cardiovascular
Effects in smoke are believed to be mainly due to nicotine and have been
thoroughly explored in literature and conference. We do not believe this
will be a specific area of attack. If forced to, we could produce a fairly
tasty low nicotine product."


76. As alleged in more detail below, in 1980 Philip Morris hired Dr. Victor
DeNoble with the specific mission of researching and developing nicotine
analogues-compounds that would mimic nicotine's effect on the brain, but
without the cardiovascular effects, such as rapid heartbeat.


77. Brown & Williamson and its parent company, BATCO, researched the health
effects of nicotine and were aware early on, as reported at a B.A.T. Group
Research Conference in November 1970, that "nicotine may be implicated in
the aetiology of cardiovascular disease . . ."


78. A memorandum from Dr. S.R. Evelyn of BATCO, dated May 30, 1974, reported:
"Nicotine: The reported correlation of nicotine with tumorigenicity was
considered to be of the utmost importance to the industry."


79. Again, in February 1979, BATCO held a group research and development
conference to review the activities of its laboratories located throughout
the world. Notes from the conference reveal that research conducted at a
BATCO laboratory found that high nicotine cigarettes are more tumorigenic
and possibly more malignant. The notes also indicated that the laboratory
was continuing work on nicotine analogues.


80. At a 1984 research conference held in the United Kingdom, Brown &
Williamson and BATCO were informed of the harmful effects of nicotine. As a
report from that conference stated: "The role of nicotine and
cardiovascular disease was outlined, in particular the role of smoke in
decreasing prostacyclen and increasing thromboxane levels." Researchers at
the conference also recommended that the company perform additional studies
on the role of nicotine in heart disease, and its effect on developing
fetuses.



J. Repeated False Promises to the Public


81. Despite increasing internal knowledge of the dangers of cigarette smoking
which they did not disclose, the defendants continued, renewed and repeated
the representations and undertakings of the 1954 "Prank Statement to
Cigarette Smokers." The cigarette industry continued to pursue its
two-pronged strategy of falsely construing the research data it presented
to the public while supressing unfavorable information that could not be
distorted.


82. For example, RJR chairman Bowman Gray told Congress in 1964: "If it is
proven that cigarettes are harmful, we want to do something about it
regardless of what somebody else tells us to do. And we would do our level
best. It's only human."


83. Additional representations were made in 1970 when the cigarette industry,
through its lobbying group the Tobacco Institute, placed a number of
advertisements similar to the 1954 "Frank Statement." These advertisements
stated in part:



a. "After millions of dollars and over 20 years of research: The question about
smoking and health is still a question."


b. "[N]o particular ingredient, as it occurs in cigarette smoke, has been
demonstrated as the cause of any particular disease."


c. "[A] major portion of this scientific inquiry has been financed by the
people who know the most about cigarettes and have a great desire to learn
the truth . . . the tobacco industry. And the industry has committed itself
to this task in the most objective and scientific way possible."


d. "A $35,000,000 program"


e. "In the interest of absolute objectivity, the tobacco industry has supported
totally independent research efforts with completely non-restrictive
funding."


f."In 1954, the Industry established what is now known as CTR, the Council for
Tobacco Research-U.S.A., to provide financial support for research by
independent scientists into all phases of tobacco use and health.
Completely autonomous, CTR's research activity is directed by a board of
ten scientists and physicians who retain their affiliations with their
respective universities and institutions. This board has full authority and
responsibility for policy, development and direction of the research
effort."


g. "The findings are not secret."


h. "From the beginning, the tobacco industry has believed that the American
people deserve objective, scientific answers."


i. "the tobacco industry stands ready today to make new commitments for
additional valid scientific research that offers to shed light on new
facets of smoking and health."



84.Another advertisement in 1970 stated that the industry "believes the
American public is entitled to complete, authenticated information about
cigarette smoking and health. . . . The tobacco industry recognizes and
accepts a responsibility to promote the progress of independent scientific
research in the field of tobacco and health."


85. Yet another advertisement co-sponsored by TIRC and the TI called "A
Statement about Tobacco and Health," stated:



We recognize that we have a special responsibility to the public to help
scientists determine the facts about tobacco and health, and about certain
diseases that have been associated with tobacco use. We accepted this
responsibility in 1954 by establishing the TIRC, which provides research
grants to independent scientists. We pledge continued support of this
program of research until the facts are known.


Scientific advisors inform us that until much more is known about such diseases
as lung cancer, medical science probably will hot be able to determine
whether tobacco or any other single factor plays a causative role or
whether such a role might be direct or indirect, incidental or important.
We shall continue all possible efforts to bring the facts to light. In that
spirit we are cooperating with the Public Health Service in its plan to
have a special study group review all presently available research.



86. In 1972 Tobacco Institute President Horace Kornegay testified before
Congress:



Let me state at the outset that the cigarette industry is as vitally concerned
or more so than any other group in determining whether cigarette smoking
causes human disease, whether there is some ingredient as found in
cigarette smoke that is shown to be responsible and if so what it is. That
is why the entire tobacco industry . . . since 1954 has committed a total
of $40 million for smoking and health research through grants to
independent scientists and institutions.



87. In 1984, RJR placed an editorial style advertisement in the "New York
Times" stating:



Studies which conclude that smoking causes disease have regularly ignored
significant evidence to the contrary. These scientific findings come from
research completely independent of the tobacco industry.



88. Each of the representations to the public that defendant tobacco companies
were sponsoring independent objective research, that they were endeavoring
to bring the truth to light, and that the public could therefore rely upon
the statements made, were false and deceptive. These misrepresentations
were designed to gain the trust of the public in order to better distort
and suppress substantive information about smoking and health.



K. The Gentlemen's Agreement


89. This industry strategy depended for its success on joint and concerted
action by the defendants. Upon information and belief, each of defendants
agreed not to reveal to the public the true nature of TIRC, and later CTR,
and not to disclose adverse information on smoking and health, in order to
protect continued cigarette sales.


90. Each company also agreed not tO perform research on smoking and health on
their own. This agreement was referred to as the "Gentlemen's Agreement." A
1968 internal Philip Morris draft memorandum entitled "Need for biological
research by Philip Morris research and development," and prepared by the
company's Vice President of Research and Development, states:



We have reason to believe that in spite of the gentlemans [sic] agreement for
the tobacco industry in previous years that at least some of the major
companies have been increasing biological studies with their own
facilities.



91. Also in 1968, a memo addressed to the CEO of Liggett regarding a meeting of
the, research directors of the six cigarette companies stated on the topic
of smoking and health "a general feeling that an industry approach as
opposed to an individual company approach was highly desirable."


92. As indicated by the 1968 "Gentlemens' Agreement" memo, it was believed
within the industry that individual companies were performing certain
research on their own, in addition to the joint industry research. But the
fundamental understanding and agreement remained intact: that harmful
information and activities would be restrained, suppressed, and concealed.
This included restraining, suppressing, and concealing research on the
health effects of smoking, including the addictive qualities of-cigarettes,
and restraining, concealing, and suppressing the research and marketing of
safer cigarettes.



L. Role of CTR as a "Front"


93. Internal documents demonstrate that the joint industry research efforts
undertaken through TIRC, and later, through CTR, were not disinterested or
objective. Rather, they were designed and used to promote favorable
research, to suppress negative research where possible, and to attack
negative research where it could not be suppressed, all in order to
convince the public that the "case against smoking is not closed."


94. A 1974 report to the CEO of Lorillard provides a retrospective look at some
of the true purposes of the joint industry research effort. Contrary to the
public representations of joint industry research as designed to examine
and resolve smoking and health questions, the author, a Lorillard research
executive, described the actual criteria for CTR's selection of scientific
projects:



Historically, the joint industry funded smoking and health research programs
have not been selected against specific scientific goals, but rather for
various purposes such as public relations, political relations, position
for litigation, etc. Thus, it seems obvious that reviews of such programs
for scientific relevance and merit in the smoking and health field are not
likely to produce high ratings. In general, these programs have provided
some buffer to public and political attack of the industry, as well as
background for litigious strategy....



95. Another internal document from a Tobacco Institute official to the group's
president described the importance of using joint industry research to
maintain public doubt about evidence of smoking and disease:



For nearly twenty years, this industry has employed a single strategy to defend
itself on three major fronts -- litigation, politics, and public opinion.



While the strategy was brilliantly conceived and executed over the years
helping us win important battles, it is only fair to say that it is not -
nor was it ever intended to be - a vehicle for victory. On the contrary, it
has always been a holding strategy, consisting of


-- creating doubt about the health charge without actually denying it


-- advocating the public's right to smoke, without actually urging them to take
up the practice


-- encouraging objective scientific research as the only way to resolve the
question of the health hazard


* * *


As an industry, therefore, we are committed to an ill-defined middle ground
which is articulated by variations on the theme that, "the case is not
proved. . . "


In the cigarette controversy, the public


-- especially those who are present and potential supporters (e.g. tobacco
state congressmen and heavy smokers) - must perceive, understand, and
believe in evidence to sustain their opinions that smoking may not be the
causal factor.


As things stand, we supply them with too little in the way of ready-made
credible alternatives.



96. A 1978 memo addressed to the CTR file from a Philip Morris official
provides another description of the history and role of the joint industry
research effort, a role very different from that represented to the public.




CTR began as an organization called Tobacco Industry Research Council (TIRC).
It was set up as an industry "shield" in 1954. That was the year
statistical accusations relating smoking to disease were leveled at the
industry; litigation began; and the Wynder/Graham reports were issued. CTR
has helped our legal counsel by giving advice and technical information,
which was needed at court trials. CTR has provided spokesmen for the
industry at Congressional hearings. The monies spent on CTR provides a base
for introduction of witnesses.


-- . . . [T]he "public relations" value of CTR must be considered and
continued.... It is extremely important that the industry continue to spend
their dollars on research to show that we don't agree that the case against
smoking is closed.... There is a "CTR basket" which must be maintained for
"PR" purposes....



97. A former 24-year employee of CTR confirmed in public statements that the
joint industry research efforts were never objective. A woman who wrote
summaries of grantee research for CTR until 1989 stated: "When CTR
researchers found out that cigarettes were bad and it was better not to
smoke, we didn't publicize that." "The CTR is just a lobbying thing. We
were lobbying for cigarettes." She continued "In the '60s, there was so
much bad news about smoking that there really wasn't much the CTR could put
out, but anything they could find they would use."


98. This evidence demonstrates that the role and purpose of TIRC and CTR in the
cigarette company's strategy was to gain the public's trust, and then to
use that trust to propagate pro-cigarette propaganda. A cigarette industry
official wrote in his personal notes describing a meeting which included
high level officials from the various cigarette companies that:



CTR is best & cheapest insurance the tobacco industry could buy and without
(it) the Industry would have to invent CTR or would be dead."



M. The Example of Dr. Freddy Homburger


99. Most CTR sponsored projects were directed away from research that might add
to the evidence against smoking. Nonetheless, when the occasional CTR
sponsored research on smoking reached negative results, the information was
distorted or simply suppressed. For example, Dr. Freddy Homburger, a
researcher in Cambridge, Massachusetts, received a grant from CTR to study
smoke exposure on hamsters. Half-way through the study, CTR changed his
funding from a grant to a contract. Dr. Homburger states that the CTR
changed his funding "so they could control publication-they were very open
about that." As a consequence, Dr. Homburger was required to send CTR a
draft of his proposed publication of the research results. Dr. Homburger
had found that when Syrian hamsters were exposed to inhaled smoke twice a
day for 59 to 80 weeks, 40 percent of those of a cancer-susceptible strain
and 4 percent of a resistant strain developed malignant tumors.


100. The Scientific Director of CTR, and a CTR lawyer, Edwin Jacob of defendant
Jacob, Medinger & Finnegan, then visited Dr. Homburger. Dr. Homburger has
testified that "[t]hey didn't want us to call anything cancer." "They
wanted it to be pseudo-epitheliomatous hyperplasia, and that is a euphemism
for lesions preceding cancer. And we said no, this isn't right. It is a
cancer." Dr. Homburger also stated that the lawyer told him that he would
"never get a penny more" if the paper was published without making the
demanded changes. Dr. Homburger compromised, and changed the paper to read
"microinvasive" cancer.


101. Dr. Homburger apparently then considered making public the events leading
to the change in his paper. Internal CTR documents describe how Dr.
Homburger attempted to call a press conference, and how CTR stopped it. "He
was to tell the press that the tobacco industry was attempting to suppress
important scientific information about the harmful effects of smoking. He
was going to point specifically at CTR." "I arranged later that evening for
it to be cancelled." "Homburger was given a cordial welcome and nicely
hastened out the door." "P.S. I doubt if you or Tom will want to retain
this note."



N. Special Projects


102. Another mechanism that CTR used to suppress research results that
implicated smoking in disease was to selectively involve lawyers, and then
invoke the attorney/client privilege to prevent the disclosure of harmful
information. CTR used the term "special projects" to mean a project that
carried a risk of a negative result that might have to be suppressed.
"Special Projects" were selected and monitored by industry lawyers to
prevent disclosure.


103. Notes prepared at a 1981 meeting of the cigarette industry's Committee of
General Counsel state:



a. When we started the CTR Special Projects, the idea was that the scientific
director of CTR would review a project. If he liked it, it was a CTR
special project. If he did not like it, then it became a lawyers' special
project. . . . [W]e were afraid of discovery for FTC and Aviado, we wanted
to protect it under the lawyers. We did not want it out in the open.


b. Difference between CTR and Special Four (lawyers, projects). Director of CTR
reviews special projects if project was problem for CTR, use Special Four.
Also, if there are work-product claims, need the lawyers' protection, . . .
e.g. motivational research that was done during the FTC investigation was
done through Special Four because of possibility that CTR would be
subpoenaed.



104. The memorandum addressed to CTR from a Philip Morris official
characterizes CTR as a "front" for performing "special projects."



"[S]pecial projects" are the best way that monies are spent. On these projects,
CTR has acted as a "front"; however, there are times when CTR has been
reluctant to serve in that capacity....



105. The industry's use of lawyers and the claim of attorney/client privilege
to insulate CTR funded research projects from disclosure to the public, and
to government officials, demonstrates that each of the industry
representations to jointly fund objective research, and to report the
results of that research to the public, was utterly false.



O. Clearing the "Deadwood"


106. Brown & Williamson went to even greater lengths to suppress and avoid
disclosure of its internal research on smoking and disease. A memorandum
from Brown & Williamson's general counsel, J. Kendrick Wells, recommended
that much of the company's biological research be declared "deadwood" and
shipped to England. He recommended that no notes, memos or lists be made
about them. Wells stated, "I have marked with an X documents which I
suggested were deadwood in the behavioral and biological studies area. I
said that the B series are Janus series studies and should also be
considered deadwood." ("Janus" was a name of a project which attempted to
isolate and remove the harmful elements of tobacco.) Wells further
recommended that the research, development and engineering department also
"should undertake to remove the deadwood from its files."



P. "Mouse House" Massacre


107. As indicated in the "Gentlemens' Agreement" memorandum, many of the
defendants began to perform biologic research through their own facilities.
In sharp contrast to the pro-cigarette research usually sponsored by CTR,
some of this research was directed at examination of the link between
smoking and disease. When this research revealed or suggested that
cigarette smoking is harmful, rather than reporting it to the public as
they had undertaken and represented, the cigarette companies suppressed it.



108. One example of this practice occurred at RJR. In the 1960s, RJR
established a facility in Winston-Salem, North Carolina, to perform
research on the health effects of smoking using mice. Nicknamed the "Mouse
House," RJR scientists conducted research in a number of specific areas,
including studies of the actual mechanism whereby smoking causes emphysema
in the lungs.


109. The RJR lab made significant progress in understanding the role of
substances known as pulmonary surfactants in air sacks in the lungs. RJR
Researchers learned that smoking damages the pulmonary surfactants, meaning
the lung air sacks were damaged at the cellular level, and had made
progress in learning how that led to emphysema. Despite this progress, RJR
disbanded the entire research division in one day, and fired all 26
scientists without notice.


110. Several months before the 1970 closure and firings, RJR attorneys had
collected dozens of research notebooks from the scientists. The notebooks
have still not been disclosed.


111. One of the researchers later stated about RJR's executives and lawyers,
"They like to take the position that you can't prove harm because you don't
know mechanism .... And sitting right under their noses is evidence of
mechanism. What are they going to do with this stuff? They decided to kill
it."


112. RJR later conducted a confidential report in which the Mouse House
emphysema work was favorably described. The 1985 report states that the
work is "the more important of the smoking and health research effort
because it comes close to determining what was thought to be the underlying
pathology of emphysema." None of the work done at the "Mouse House" was
disclosed to the public.



Q. "Safer" Cigarettes


113. One of the reasons RJR and other cigarette companies began to do internal
biological research appears to have been to attempt to develop a cigarette
with reduced health risks. In order to reduce the health risk, studies were
needed to discover how cigarette smoking causes disease. Once this was
known, attempts could be made to remove or modify the harmful agents.
Several companies performed research of this kind by dividing cigarette
smoke into its different chemical constituents, or "fractions," to discover
which part of the cigarette smoke caused disease. Several companies were
successful in discovering which specific constituents in tobacco smoke were
carcinogens, or were linked to other diseases. This research was kept
secret and never reported to the public.


114. Even more shocking, industry documents reveal that a number of companies
successfully removed certain harmful constituents from cigarette smoke, and
developed prototype cigarettes with reduced health effects, but that these
products were never marketed. The reason was the industry conspiracy not to
reveal harmful research results that would undermine the unified position
that there is no proof that smoking causes disease.


115. A memorandum written by an attorney at the firm of Shook, Hardy long-time
lawyers for the cigarette industry, confirmed that there was an
industry-wide position regarding the issue of a safer cigarette. The 1987
memorandum referred to the marketing by R.J. Reynolds of a smokeless
cigarette, Premier, which heated rather than burned tobacco. The Shook,
Hardy attorney wrote that the smokeless cigarette could "have significant
effects on the tobacco industry's joint defense efforts" and that "[t]he
industry position has always been that there is no alternative design for a
cigarette as we know them." The attorney also noted that, "Unfortunately,
the Reynolds announcement . . .seriously undercuts this component of
industry's defense."


116. As early as 1958, a memorandum from a Philip Morris researcher to the
company's Vice President of Research and Development proposed that the
company attempt to make a safer cigarette that could enable it to "jump on
the other side of the fence . . . on the issue of tobacco smoking and
health. . . "


117. Philip Morris did perform the research and development of such a product.
However, the company never released the research, and never informed the
public that existing cigarettes were not safe or that a safer cigarette was
possible. A 1964 Philip Morris research and development presentation to its
Board of Directors stated:



Two years ago, in anticipation of a health crisis to be precipitated by the
Smoking and Health Report of the Surgeon General's Committee, we undertook
to develop a physiologically superior cigarette.


[W]e put together a charcoal filter product with performance superior to
anything in the market place. That product was known as Saratoga.
Physiologically it was an outstanding cigarette. Unfortunately then after
much discussion we decided not to tell the physiological story which might
have appealed to a health conscious segment of the market. The product as
test marketed didn't have good 'taste' and consequently was unacceptable to
the public ignorant of its physiological superiority.



118. The research and development department at Philip Morris nonetheless
continued to perform research on smoking and health, including research
into safer cigarettes. The company viewed this as necessary in order to
compete if another cigarette company marketed a safer cigarette. This was
viewed as less likely, because work was being done through joint industry
sponsored research abroad. The presentation to the Philip Morris Board of
Directors continued:



In England a research laboratory sponsored by the industry has been established
at Harrogate to do biomechanical research. On the Continent individual
companies and monopolies have agreed to pool research on the health
question, thereby reducing it as a basis for competition. Technical
researchers meet to share information and to plan future work. All these
efforts underscore the broad and serious attempts to eliminate what are
generally believed to be harmful aspects of cigarette smoke.


In short, the Research and Development Department is working to establish a
strong technological base with both defensive and offensive capabilities in
the smoking and health situation. our philosophy is not to start a war, but
if a war comes, we aim to fight well and to win.



R. Liggett Safer Cigarette: XA


119. Liggett also developed a safer cigarette. Company researchers believed
that they had discovered which cigarette smoke constituents were
carcinogens, and found a way to remove them. And unlike the Philip Morris
product, Liggett officials believed the Liggett product was commercially
marketable. Nonetheless, in violation of the company's representations and
duty to the public, Liggett never marketed the cigarette, and suppressed
the research that led to itS development.


120. Liggett began its research by repeating the smoke condensate painting
studies of mice performed by Dr. Wynder. Through a contract with Arthur D.
Little, Inc., Liggett sought, "to determine the validity of Wynder's
results when the appropriate smoking conditions were used, and to determine
the effect of different types of tobacco on the response level. An
extensive program was also directed toward defining the nature of the
material responsible for the tumorigenic effect."


121. This work began soon after Dr. Wynder's study was published in 1953, and
was successful. A Liggett document discussing the history of the project
states:



Wynder's findings were confirmed and all commercial cigarette types produced
virtually identical mouse skin tumor incidences. The tumorigenic initiating
effect was found to reside in a relatively small smoke fraction containing
polycyclic aromatic hydrocarbons."



122. As a result of these discoveries, in 1968, Liggett began "a tobacco
additive program designed to reduce or eliminate the tumorigenic activity
of cigarette smoke." Company researchers discovered that palladium metal
and magnesium nitrate, when added to cigarette tobacco, acted as catalysts
in the burning process that removed carcinogenic compounds from the
cigarette smoke. Liggett performed animal studies which indicated that
"[c]igarette tar has been neutralized" and that there was no evidence for
"new or increased hazard to the smoker."


123. By 1979, Liggett had declared the work a success. Company documents state:




a. Briefly, as a result of 20 years effort in cooperation with Arthur D.
Little, we have developed a cigarette system which produces smoke of
reduced biological activity.... tumorigenicity of smoke on the skin of the
mouse.


b. Cigarette smoke contains a number of promoters which act in concert with
other true carcinogens to enhance the production of mouse skin tumors....
[T]here can be no argument that the use of the additives has resulted in a
product with lower carcinogenic effects. . .



124. Liggett concluded that it had isolated carcinogens in cigarette smoke and
found a way to reduce them in cigarettes of commercial quality. Despite
these findings, the product called "XA" was never marketed.


125. Liggett decided not to market and to abandon the XA project. On
information and belief, Liggett did so for two reasons. One was the danger
that the disclosure that a safer cigarette was possible would require the
admission that all existing cigarettes were not safe. One Liggett executive
wrote that, "[a]ny domestic activity will increase the risk of cancer
litigation on existing products. US manufacture for export will be less
risky."


126. The other reason was the apparent threat of retaliation by the largest
cigarette company, Philip Morris, if Liggett violated the industry
agreement not to disclose negative information on smoking and health. Dr.
James Mold, the Assistant Research Director at Liggett during the
development of the XA safer cigarette, has testified that: "Mr. Dey who was
the . . . who at that time, and I guess still is the president of Liggett
Tobacco, made the statement that he was told by someone in the Philip
Morris Company that if we tried to market such a product that they would
clobber us."



S. Liggett, James Mold and the XA Research


127. The testimony of Dr. Mold, a central Liggett researcher on the safer
cigarette project, provides additional insight into what Liggett
discovered, and how the company suppressed that information from the public
they had pledged to inform, and why it did not market the XA cigarette. Dr.
Mold stated:



[W]e'd been able to find specific materials or groups of materials which did
produce carcinogenic effect on mouse skin. This is what we'd started out to
try to do. And, in addition to that, we had found things which promoted
activity . . . carcinogen activity on the mouse skins. We produced a
cigarette which was, we felt, was commercially acceptable as established by
some consumer tests, which eliminated the carcinogenic activity on the
mouse skin as carried out by various workers in the field, and decreased
the level of a number of gaseous components which had been pointed to as
problems in . . . possible problems, lets say, in cigarette smoking. We
felt that the cigarette was certainly in the direction of one containing
less hazardous materials.



128. During the XA project, Liggett attempted to insulate the research by the
use of company lawyers. Dr. Mold stated after 1975,



all meetings that we had regarding this project were to be attended by a lawyer
All paper that was generated, reports, research progress reports,
memoranda, were to be directed to the Law Department, someone in the Law
Department.



Dr. Mold stated that lawyers even collected all the notes after each meeting.




In other words, the Law Department was maintaining a confidential client/lawyer
privilege state on all action on the project from that point forward.



129. Dr. Mold stated that the company lawyers not only ultimately succeeded in
stopping the project, but ordered him not to publish the results of the
research that led to the safer cigarette. Dr. Mold stated:



Whenever any problem came up in the project, the Legal Department would pounce
upon that in an attempt to kill the project, and this happened time and
time again. So at this point in time when they say, "Well, you can't
publish a paper," we didn't ask why. We knew why. . . . That they had no
intention of making this any more public than they had to.



130. Thus, despite the significance of the research, and Dr. Mold's requests to
publish a scientific paper on the results, Liggett suppressed the work, and
ordered Dr. Mold not to publish and not to present the findings to a
scientific forum. Dr. Mold got as far as preparing a paper for publication
and presentation. Dr. Mold explained that



Before the paper was presented, I got a frantic call from Mr. Greer, our ... at
that time, the legal counsel of Liggett, not . . . to not distribute the
press release and not hold a press conference, that they had changed their
mind.


It was my understanding that Liggett did not want to be associated in public
with this development.



131. Dr. Mold stated that he had requested permission to publish the paper in
"Science" or in the "Journal of Preventative Medicine." He stated that the
Liggett legal department had ordered him not to submit the paper. Dr. Mold
also stated that the legal department had instructed him not !to attend a
conference on smoking and health.


132. Ultimately, only an abstract of the paper was published, and Dr. Mold was
not allowed to have his name on the publication. Rather, after changes by
the legal department, the abstract was published by the consulting firm
Arthur D. Little.


133. When asked why Liggett never marketed the safer XA cigarette, Dr. Mold
explained that:



Well, I can't give you, you know, a positive statement because I wasn't in the
management circles that made the decision, but I certainly had a pretty
fair idea why.


Well, my feeling was that they, as was stated in terms of our appearing on
publications and our presenting the information to the Cold Springs Harbor
symposium and other public pronouncements, that they felt that such a
cigarette if put on the market would seriously indict them for having sold
other types of cigarettes that didn't contain this, for example. Or that
they were carrying on this biological research at the same time saying it
meant nothing.



T. Liggett Safer Cigarette Patent


134. Before deciding not to market the XA cigarette, Liggett obtained a patent
for the process it had discovered to produce the safer cigarette. The
patent application describes the reauction in cancer in mouse studies.
Stories in the media then appeared stating that Liggett was the first
cigarette company to admit that smoking caused cancer. In 1978 Liggett
reacted by placing a advertisement it called a "Liggettgram" which stated:




Liggett and the cigarette industry continue to deny, as they have consistently,
that any conclusions can be drawn relating to such test results on mice in
laboratories to cancer in human beings. It has never been established that
smoking is a cause of human cancer. The laboratory experiments reported in
the patent were conducted for Liggett by an independent researcher, The
Life Sciences Division of Arthur D. Little, Inc.



135. At the time Liggett made these statements, including the statement that no
conclusions regarding human cancer can be drawn from mouse studies, Dr.
Mold estimates that Liggett, directly and through its consultant Arthur D.
Little, had spent a total of $10 million on smoking and health research
involving mice, in part to develop the safer XA cigarette. Liggett's
internal reports on the benefit of the XA, and the absence of increased
risk of harm from the additives used, specifically used animal studies as
reliable indicators of the health effect of the product on humans.


136. Despite overwhelming scientific evidence, and the confirmation of this
evidence by their own internal research, the cigarette manufacturers and
their trade associations continue to this day to repeat again and again, in
a unified stance, that there is no causal connection between cigarette
smoking and adverse health effects. These representations are fraudulent,
misleading, deceptive and untrue. They rest at the heart of the industry's
ongoing conspiracy to market and profit from a product it knows is deadly.




U. The Role of Nicotine in Smoking


137. The other truth which the cigarette industry has made every effort to
suppress, deny and misrepresent is that nicotine is a powerfully addictive
substance. While carefully studying its addictive character and acting upon
that knowledge to maintain cigarette sales, the cigarette manufacturers
have uniformly denied that nicotine is addictive.


138. This public deception and the cigarette industry's secret manipulations of
nicotine were and are critically important to the cigarette manufacturers.
As truly objective researchers increased their warnings of the health
dangers of cigarettes, nicotine addiction kept people smoking. This second
front in the war against the public health allows the cigarette
manufacturers to continue to sell their dangerous products-even to those
who eventually come to doubt the industry's health claims. And if a new
consumer is fooled for a time by "procigarette" disinformation on health,
and takes up the habit, it may well be too late. Instead of a simple
decision not to purchase a product, the consumer must grapple with an
addiction.



V. Industry Knowledge of the Addictiveness of Nicotine


139. The cigarette companies have long known of the addictive properties of the
nicotine contained in the cigarettes they manufacture and sell. The
following illustrates such knowledge:



a. In 1962, Brown & Williamson's parent company, British American Tobacco
Company ("BATCO"), held a meeting of its worldwide subsidiaries in
Southampton, England. During the course of that meeting, Brown & Williamson
and BATCO executives were told by Sir Charles Ellis, scientific advisor to
the board of directors of BATCO, that "smoking is a habit of addiction" and
that "[n]icotine is not only a very fine drug, but the technique of
administration by smoking has considerable psychological advantages." Sir
Charles Ellis declared again in 1967 in a document from Brown & Williamson
that the company "is in the nicotine rather than the tobacco industry."



b. A research report dated May 30, 1963, prepared under contract by researchers
in Switzerland for BATCO and Brown & Williamson and deliberately withheld
by Brown & Williamson from the U.S. Surgeon General, explained the
physiological basis of nicotine addiction. The Brown &
Williamson-commissioned report shows that tobacco industry research on the
addictive properties of nicotine was years ahead of the research on the
subject conducted outside of the industry. Brown Williamson and other
tobacco companies have never disclosed any information from such research.



c. A 1972 "confidential" company memo written by William L. Dunn, Jr. Of the
Philip Morris Research Center, concludes: "Without nicotine, the argument
goes, there would be no smoking. Some strong evidence can be marshalled to
support this argument.... No one has ever become a cigarette smoker by
smoking cigarettes without nicotine. "


d. Additional internal reports prepared by Dunn in 1972 and the Philip Morris
U.S.A. Research Center in March 1978, demonstrate Philip Morris's
understanding of the role of nicotine in tobacco use:


"We think that most smokers can be considered nicotine seekers, for the
pharmacological effect of nicotine is one of the rewards that come from
smoking. When the smoker quits, he foregoes (sic) his accustomed nicotine.
The change is very noticeable, he misses the reward, and so-he returns to
smoking."


"The cigarette should be conceived not as a product but as a package The
product is nicotine.... Think of the cigarette pack as a storage container
for a day's supply of nicotine.... Think of the cigarette as a dispenser
for a dose unit of nicotine."


e. Philip Morris scientists confirmed their early research findings with direct
anecdotal evidence. In 1971, they interviewed people from the town of
Greenfield, Iowa eight months after they had quit smoking "cold turkey." A
report of the interviews, called "Bird-I A Study of the Quit-Smoking
Campaign in Greenfield, Iowa in Conjunction with the Movie Cold Turkey,"
and distributed to top Philip Morris executives concluded: "This is not the
happy picture painted by the Cancer Society's anti-smoking commercial which
shows an exuberant couple leaping in the air and kicking their heels with
joy because they've kicked the habit. A more appropriate commercial would
show a restless, nervous, constipated husband bickering viciously with his
bitchy wife, who is nagging him about his slothful behavior and growing
waistline."


f. ATC also conducted its own research on nicotine. From 1940 to 1970. ATC
funded over 90 studies on the pharmacological and other effects of nicotine
on the body. Of the 111 biologic studies funded by ATC over this period,
over 80 percent were related to the effects of nicotine. ATC even test
marketed a nicotine-enriched cigarette in Seattle, Washington in 1969.



W. Suppression and Concealment of Research on Nicotine Addiction


140. Defendants, rather than fulfilling their promise to the public to disclose
material information about smoking and health, chose a course of
suppression, concealment, and disinformation about the true properties of
nicotine and the addictiveness of smoking.


141. Philip Morris' professed interest in discovering and disclosing the truth
to the public was proved to be a lie early on. Philip Morris hired Victor
DeNoble in 1980 to study nicotine's effects on the behavior of rats and to
research and test potential nicotine analogues. DeNoble, in turn, recruited
Paul C. Mele, a behavioral pharmacologist. DeNoble and Mele discovered that
nicotine met two of the hallmarks of potential addiction --
self-administration (rats would press levers to inject themselves with a
nicotine solution) and tolerance (a given dose of nicotine over time had a
reduced effect).


142. However, Philip Morris instructed DeNoble and Mele to keep their work
secret, even from fellow Philip Morris scientists. Test animals were
delivered at dawn and brought from the loading dock to the laboratory under
cover.


143. DeNoble was later told by lawyers for the company that the data he and
Mele were generating could be dangerous. Philip Morris executives began
talking of killing the research or moving it outside of the company so
Philip Morris would have more freedom to disavow the results. DeNoble
recalled that Philip Morris discussed several possible scenarios, including
having DeNoble and Mele leaving the company payroll and continuing as
contractors, and shifting their work to a lab in Switzerland.


144. In August 1983, Philip Morris ordered DeNoble to withdraw from publication
a research paper on nicotine that had already been accepted for publication
after full peer review by the journal Psychopharmacology. According to
DeNoble, the company changed its mind because-it did not want its own
research showing nicotine was addictive or harmful to compromise the
company's defense in litigation recently filed against it. DeNoble
subsequently told Jack Heningfield, Ph.D., Chief of the Clinical
Pharmacology Branch of the National Institute on Drug Abuse's Addiction
Research Center, that Philip Morris officials had rightly interpreted the
suppressed nicotine studies as showing that, in terms of addictiveness,
"nicotine looked like heroin."


145. In April 1984, Philip Morris, apparently to ensure that DeNoble and Mele's
nicotine research remained suppressed and concealed, told DeNoble and Mele
that the lab was being closed. DeNoble and Mele were forced abruptly to
halt their studies, turn off all their instruments and turn in their
security badges by morning. Philip Morris executives threatened them with
legal action if they published or talked about their nicotine research.
According to DeNoble, the lab literally vanished overnight. The animals
were killed, the equipment was removed and all traces of the former lab
were eliminated. DeNoble recalled, "Everything was gone. The cages were
gone, the animals were all gone, all the data was gone. It was empty
rooms."


146. DeNoble testified to the Waxman Subcommittee that "senior research
management in Richmond, Virginia, as well as top officials at the Philip
Morris Company in New York continually reviewed our research and approved
our research." DeNoble also stated that these officials were specifically
told about nicotine's addictiveness.


147. Brown & Williamson also chose to suppress and conceal its own substantial
body of research on nicotine. Potentially damaging and sensitive research
was undertaken to a large degree by Brown & Williamson's British affiliates
at a lab called Harrogate. Harrogate performed research for a number of
cigarette manufacturers, and some of this research was shared with these
other companies and with the Tobacco Institute.


148. By 1963, Brown & Williamson had also chosen to conceal material
information from the Surgeon General. The company debated internally
whether to disclose to the U.S. Surgeon General, who was preparing his
first official report on smoking and health, what the company knew about
the addictiveness of nicotine and the adverse effects of smoking on health.



149. Addison Yeaman, general counsel at Brown & Williamson, stated in a 1963
report that "[w]e are, then, in the business of selling nicotine, an
addictive drug . . " Yeaman advised Brown & Williamson to "accept its
responsibility" and disclose its findings to the Surgeon General. He said
that such disclosure would then allow the company openly to research and
develop a safer cigarette.


150. Brown & Williamson rejected Yeaman's advice to make full disclosure to the
Surgeon General. A series of six letters and telexes exchanged by Yeaman
and senior BATCO official A.D. McCormick between June 28 and August 8,
1963, document the company's decision not to disclose to the Surgeon
General the company's research findings on the addictive and other harmful
effects of nicotine and the disease-causing properties of cigarettes.



X. The Industry's Interest in Nicotine


151. The cigarette companies also understood early on that nicotine played a
pivotal role in the success of the tobacco industry. A chronology of the
industry's research and development activities leaves no doubt about the
cigarette companies' conviction that nicotine was the key to their
industry's success.


152. The results of research undertaken by Brown Williamson more than 30 years
ago for a study called Project Hippo were finally disclosed by the company
in May 1994. Documents from this study show that as far back as 1961, the
tobacco industry was actively studying the physiological and
pharmacological effects of nicotine.


153. In a 1968 internal report, BATCO noted that "[i]n view of its pre-eminent
importance, the pharmacology of nicotine should continue to be kept under
review...."


154. Again, in 1972, a BATCO report noted:



It has been suggested that a considerable proportion of smokers depend on the
pharmacological action of nicotine for their motivation to continue
smoking. If this view is correct, the present scale of the tobacco industry
is largely dependent on the intensity and nature of the pharmacological
action of nicotine.



155. To this day, the cigarette manufacturers have deliberately determined not
to disclose to the public or to public health officials their extensive
knowledge of the addictive properties of nicotine and its critical role in
smoking and not to use that knowledge to reduce or eliminate nicotine from
their products. Instead, the cigarette companies have chosen to focus their
energies and research on developing new and more sophisticated methods of
hooking smokers and keeping them hooked, all to boost cigarette sales.


156. The cigarette industry's intense interest in the pharmacology of nicotine
led to industry efforts to find an artificial nicotine that would have the
addictive and psychopharmacological properties of nicotine without
nicotine's dangerous effects on the heart.


157. For example, one of Dr. DeNoble's primary functions at Philip Morris was
to research and develop a nicotine analogue. DeNoble testified to the
Waxman Subcommittee that he did, in fact, discover a nicotine analogue that
caused animals to behave as if they were getting a nicotine high but
without signs of the heart distress that comes with nicotine.


158. Philip Morris, however, chose to halt its effort to determine whether the
nicotine analogue could be used to make a safer cigarette. On information
and belief, Philip Morris decided not to pursue nicotine analogues in order
to avoid the risk of adverse publicity and of compromising the industry's
consistent position that there was no alternative design for cigarettes.



159. Brown & Williamson also understood that for purposes of maintaining its
sales, nicotine was the essential ingredient in tobacco. The company
attempted to develop a "safer" cigarette which internal documents described
as "a device for the controlled administration of nicotine." Project Ariel
focused on heating-rather than burning tobacco, and according to company
documents, was "a nicotine delivery device."


160. RJR's efforts to develop a safer cigarette also focused on delivering
nicotine to the consumer without the harmful constituents of tobacco smoke.
In the late 1980's, RJR developed and test marketed Premier, a smokeless
and virtually tobacco-free cigarette which was, in essence, a nicotine
delivery system. RJR conducted human studies to determine whether the
nicotine from Premier was absorbed, metabolized and excreted from blood at
the same rate as a standard cigarette.


161. Former head of RJR Nabisco, F. Ross Johnson, a driving force behind the
development of Premier, said about tobacco, "Of course, it's addictive.
That's why you smoke the stuff."


162. RJR, like the other cigarette manufacturers, concealed and suppressed its
findings on the addictiveness of smoking and continued to misrepresent to
the public its commitment to determining whether smoking was harmful.


163. The cigarette companies have affirmatively misrepresented to consumers and
to Congress the role of nicotine in tobacco use. Even today, the cigarette
industry continues to claim that nicotine is important in cigarettes solely
for flavor.


164. A substantial body of evidence refutes that claim. Tobacco industry
patents specifically distinguish nicotine from flavoring agent. An RJR book
on flavoring tobacco, while listing approximately a thousand flavoring
agents, fails to include nicotine as a flavoring agent.


165. In fact, the cigarette industry has concentrated on developing
technologies to mask the flavor of increased levels of nicotine in
cigarettes. According to the Merck Index, an internationally recognized
listing of drugs, nicotine has "an acrid, burning taste." U.S. Patent
4,620,554 describes the taste of nicotine as "hazardous." The role of
nicotine in the tobacco industry's business is pure and simple-to hook
smokers on their deadly products and to keep them hooked in the face of
mounting evidence that smoking causes human disease. The cigarette industry
has focused tremendous energy and resources on developing the technology to
ensure that smokers become and remain addicted to the industry's
cigarettes.



Y. Light Cigarettes: a Marketing Hoax


166. The cigarette industry's conspiracy to deceive the public about the
dangers of smoking was not confined to suppressing and concealing their own
findings and discrediting or dismissing the findings of outside
researchers. The conspiracy also extended to efforts to retain that segment
of the smoking market that was becoming increasingly concerned about
health. The cigarette industry was well aware that low-nicotine
products-while better for the heart -- were worse for business. As one
company researcher reported to Philip Morris executives:



If the industry's introduction of acceptable low-nicotine products does make it
easier for dedicated smokers to quit, then the wisdom of the introduction
is open to debate.



167. The cigarette industry's research indicated that low-tar cigarettes with
correspondingly low levels of nicotine were likely to be rejected by
consumers and therefore, attempted to determine to what extent the craving
for nicotine overrode other considerations, including health.


168. Brown & Williamson's parent company, BATCO, for example, commissioned a
study called "Project Wheat." More than 1,000 British male smokers were
questioned about their smoking habits, about nicotine, and about their
attitudes toward smoking and health. Among Project Wheat's findings were
that: (1) reductions in nicotine delivery caused progressive rejection of
the cigarette by consumers; (2) a large group of smokers had both a high
"inner need" for nicotine and a high concern for health; and (3) concern
for the possible health risks of smoking "influenced smokers' willingness
to try low tar brands, but there is evidence of a conflict between their
concern for health and their desire for a satisfying cigarette."


169. On information and belief, a restricted report on Project Wheat by Group
Research & Development Centre, a subsidiary of BATCO, shows that the
cigarette industry's promotion and marketing of low-tar cigarettes was a
deliberate attempt to deceive health-conscious smokers with high nicotine
needs into believing that "light" cigarettes were less addictive:


Concern for the possible health risks of smoking was shown in the earlier
report to have an important influence on consumers in the direction of
trying low tar brands, and to be independent of Inner Need. It was also
shown that, in many instances, smokers' concern for health evidently
conflicted with their desire for a satisfying cigarette.


170. The report pointed out the substantial market potential of a cigarette
with lower tar and higher nicotine delivery to those smokers with an "inner
need" for nicotine but a concern for health. Brown & Williamson's
introduction of Barclay-a low tar, high nicotine cigarette - was a result
of the findings from Project Wheat.


171. The cigarette industry has cultivated that health-conscious segment of the
smoking market by promoting and selling "light" cigarettes with reduced tar
and added nicotine. National Gallup polls have found that smokers believe
that cigarette brands labeled "light" are less hazardous to their health
and less addictive because they deliver less tar and less nicotine.
However, this widely-held belief-although false-has been promoted by the
cigarette companies through severe misleading strategies.


172. First, the cigarette industry has consistently told the public and the FDA
that -- in the words of Dr. Alexander Spears, Vice Chairman of Lorillard,
in his 1994 testimony before the Waxman Subcommittee -- "[n]icotine [level]
follows the tar level," and that the correlation between the two "is
essentially perfect."



a. For example, ATC told the Waxman Subcommittee in an October 14, 1994 letter
that "nicotine follows 'tar' delivery, i.e. high 'tar' -- high nicotine,
low 'tar'-low nicotine .... Nicotine is neither adjusted nor altered to
compensate for losses inherent in the manufacturing process."


b. Internal company documents reviewed by the Waxman Subcommittee. however,
show that ATC's experimentation with adding nicotine to its tobacco was
extensive -- extensive enough for ATC executive John T. Ashworth to
instruct employees in a confidential memorandum: "In the future, our use of
nicotine should be referred to as 'Compound W' in our experimental work,
reports, and memorandums, either for distribution within the Department or
for outside distribution."


c. Moreover, recent tests conducted at the direction of the FDA show that the
low-tar brands actually have more nicotine than the non-"light" brands.
Because even the cigarette industry concedes that nicotine levels follow
tar levels, the unexpectedly high level found in lower tar cigarettes
seriously misleads consumers and renders the industry's claim of "an
essentially perfect correlation" completely false.



173. Second, the nicotine deliveries, as measured by the Federal Trade
Commission ("FTC") method, published by the cigarette industry, seriously
mislead consumers. The cigarette manufacturers know that the significant
changes they have made in cigarette design make the FTC method of measuring
nicotine and tar deliveries highly inaccurate. Cigarette manufacturers know
that the machine-measured deliveries understate the amounts of nicotine and
tar actually ingested by human smokers. As Philip Morris senior scientist
William L. Dunn, Jr., noted in a 1972 internal report:



The smoker has wide latitude in further calibration: puff volume, puff
interval, depth and duration of inhalation. We have recorded wide
variability in intake among smokers. Among a group of pack-a-day smokers,
some will take in less than the average half-pack smoker, some will take in
more than the average two-pack-a-day smoker.



174. Third, cigarette manufacturers add various ammonia compounds during the
manufacturing process which increase the efficiency of nicotine delivery to
the smoker and thereby increase the smoker's absorption of the drug. In
April 1994, the industry disclosed the 599 ingredients added to tobacco.
Among them were several ammonia compounds which, according to Dr. David A.
Kessler and confirmed by the industry's own internal documents, increase
the delivery of nicotine and almost double the nicotine transfer efficiency
of cigarettes.


175. Fourth, on information and belief, the cigarette industry also misleads
consumers by fortifying the tobacco used for its "light" brands with
additional nicotine in order to ensure that the nicotine content of the
low-tar cigarettes remains at addictive levels. The cigarette industry
thereby maintains a continuing market for what consumers are misled to
believe is a lower tar, lower nicotine and thus, less addictive product.
For example, a 1981 study by "essentially perfect correlation" author, Dr.
Spears, states explicitly that low-tar cigarettes use special blends of
tobacco to keep the level of nicotine up while tar is reduced: "The lowest
tar segment [of product categories) is composed of cigarettes utilizing a
tobacco blend which is significantly higher in nicotine."


176. In March 1994, Dr. David Kessler summarized for the Waxman Subcommittee
the Federal Trade Commission data on nicotine levels. He testified that the
nicotine/tar ratio was higher in the ultra low tar group of cigarettes,
even though low tar has usually been associated with low nicotine. Dr.
Kessler posed to Congress the obvious question:



It has often been said that tar and nicotine travel together in the cigarette
smoke. The disparities in the nicotine/tar ratios among these varieties
raise the question as to how this can occur.



177. Dr. Kessler's question appears to have been answered by the compelling
evidence recently made public by the Waxman Subcommittee of nicotine
manipulation and control by the cigarette industry.



Z. Industry Control and Manipulation of Nicotine


178. The cigarette industry's control and manipulation of nicotine levels in
their cigarettes goes well beyond fortifying low-tar or "light" style
cigarettes with nicotine. Recent evidence shows that the cigarette
manufacturers are capable of and do, in fact, manipulate the amount and
even the presence of nicotine in cigarettes.


179. The cigarette companies have developed and use highly sophisticated
technologies designed to deliver nicotine in precisely calculated
quantities -- quantities that are more than sufficient to create and
sustain addiction in the vast majority of individuals who smoke regularly.




AA. "Y-1"


180. The story of Brown & Williamson's development of a new tobacco plant
dubbed "Y-1" is one of the more egregious examples of the cigarette
industry's outright lies about its control and manipulation of the nicotine
levels in its products.


181. On June 21, 1994, D