The Commonwealth of Pennsylvania, by D. Michael Fisher, in his official capacity as Attorney General of the Commonwealth of Pennsylvania, brings this action to obtain compensatory, punitive and other damages, civil penalties, injunctive and other equitable relief, as more fully set forth below, and upon information and belief, alleges the following:

INTRODUCTION

PARTIES

THE HEALTH CONSEQUENCES OF TOBACCO

THE CONCENTRATION OF THE INDUSTRY

THE DEFENDANTS' WRONGFUL CONDUCT AND CONSPIRACY IN CONCEALING AND MISREPRESENTING THE ADDICTIVE AND HARMFUL NATURE OF TOBACCO/NICOTINE

A. In General

B. The Beginning of the Conspiracy: The Big Scare
C. The Defendants Acknowledge That They Assumed A Special Duty
D. The Defendants Repeatedly Acknowledged Their Special Duty Over Time
E. The Defendants' Knowledge That Tobacco Use Is Harmful and Their Suppression Of The Truth
F. The Defendants' Concerted Suppression, Concealment, and Misrepresentations

1. Control of TIRC and CTR by Tobacco Company Defendants Through Hill and Knowlton

2. CTR "Special Projects" Division and Use of Attorney-Client Privilege to Conceal Research
3. Suppression of In-House Research
4. Suppression of Research Towards a "Safer Cigarette"

 

G. Industry Deception Regarding Environmental Tobacco Smoke

INDUSTRY CONTROL AND MANIPULATION OF NICOTINE TO FOSTER ADDICTION AND THUS PROFITS

A. The Role of Nicotine in Tobacco Products

B. Industry Research on Nicotine and Knowledge of Its Addictiveness

C. Suppression and Concealment of Research on Nicotine Addiction
D. Industry Control and Manipulation of Nicotine

1. Manipulation of Nicotine Content

2. Manipulation of Nicotine Delivery
3. Manipulation of Nicotine Delivery in Smokeless Tobacco

E. The "Light" Cigarette Hoax

INTENTIONALLY ATTRACTING AND ADDICTING CHILDREN TO TOBACCO PRODUCTS

A. Increased Smoking By Minors

B. Tobacco Companies Marketing Efforts To Induce Minors To Smoke
C. Use of Manipulated Nicotine Content to Market Smokeless Tobacco to Minors

D. Use of "Public Service" Advertisements to Induce Minors to Smoke

TARGETING OF AFRICAN AMERICANS

THE DEFENDANTS' CONDUCT WAS INTENTIONAL, WILLFUL AND RECKLESS

NO STATUTE OF LIMITATION IS APPLICABLE

COUNT I - CIVIL CONSPIRACY/CONCERT OF ACTION

COUNT II - UNDERTAKING A SPECIAL DUTY (WILLFUL AND NEGLIGENT BREACH)

COUNT III - FRAUDULENT MISREPRESENTATION

COUNT IV - FRAUDULENT CONCEALMENT

COUNT V - NEGLIGENT DESIGN

COUNT VI - STRICT LIABILITY

COUNT VII - UNFAIR TRADE PRACTICES

COUNT VIII - PUBLIC NUISANCE

COUNT IX - NEGLIGENT AND INTENTIONAL ENTRUSTMENT

COUNT X - UNJUST ENRICHMENT/RESTITUTION

DAMAGES AND INJUNCTIVE RELIEF REQUESTED

 

INTRODUCTION

1. Smoking is the primary cause of premature death in the United States. According to the Centers for Disease Control and Prevention, over 400,000 deaths occur each year -- more than 22,000 of them in the Commonwealth of Pennsylvania -- as a result of tobacco-related illnesses. Millions of Pennsylvanians are now addicted and thousands more become addicted each year to cigarettes and other tobacco products. Defendant/co-conspirator Liggett Group, Inc. for the first time recently expressly conceded that the nicotine in cigarettes is addictive, and that the defendants/co-conspirators named herein have specifically marketed their addictive and disease-causing cigarettes to minors, in violation of the laws and public policy of the Commonwealth. In so doing, the defendants/co-conspirators named herein have targeted the most vulnerable potential victims for this disease-causing and potentially lethal addiction.

2. This action arises out of a combination and conspiracy of willful and intentional wrong-doing by the defendant tobacco companies, their public relations agency and the three trade associations created by them, that began in the early 1950s. During the relevant time period the defendants/co-conspirators together controlled virtually the entire tobacco industry in the Commonwealth of Pennsylvania.

3. The Statutes of the Commonwealth of Pennsylvania have made it unlawful and a criminal offense to sell cigarettes and other tobacco products to minors in Pennsylvania. Yet, in callous disregard and violation of the laws and public policy of Pennsylvania, the defendants/co-conspirators herein target and market their cigarettes and other tobacco products to the children of Pennsylvania and the United States, and the success of this strategy is demonstrated by the tragic fact that more adolescents and teenagers smoke today then at any other time since the 1970's. Teenage smoking increased by 30 percent from 1991 to 1995 alone, and it is estimated that one-third of these new young smokers will eventually die from their addiction to cigarettes and resultant tobacco-related illnesses.

4. Due to the defendants' fraudulent concerted activities over a period of more than forty years, teenagers as well as adults have not been fully apprised of the health threat caused by smoking or the dangerous and addictive nature of nicotine. Defendants have fraudulently manipulated nicotine levels in their cigarette products in order to addict the citizens of Pennsylvania, including their children, knowing that they will become nicotine dependent and thereby expose themselves to known carcinogens to satisfy that addiction.

5. At least as early as 1954, the defendants/co-conspirators tobacco companies, their public relations agency and trade associations publicly, voluntarily, and jointly undertook a special duty to accept an interest in the public's health as a basic and paramount responsibility, to disclose to the public, including the citizens of Pennsylvania, complete and accurate information about the relationship between tobacco use and disease, to conduct research and disclose to the public complete and authenticated information about smoking and health, and to cooperate closely with public officials who safeguard the public health. Yet the defendants have actually known for decades from their own withheld internal studies that their tobacco products are deadly and addictive. Instead of disclosing this knowledge, the defendants intentionally chose to engage in a unified campaign of deceit, misrepresentation and fraudulent concealment. This course of conduct was intended by the defendants to control, maintain and increase their market, to maximize their profits, and to minimize their legal exposure.

6. Despite having undertaken this special duty, the defendants and their agents, for decades and continuing to date, have engaged in a conspiracy to conceal, mislead, deceive and confuse the Commonwealth of Pennsylvania and its citizens regarding existing scientific and other evidence which was in their possession and control that the use of cigarettes and other tobacco products causes debilitating and fatal disease, and that the nicotine in tobacco products is a powerfully addictive substance. Although these defendant manufacturers promised the Commonwealth and the citizens of Pennsylvania over forty years ago that they intended to lead the effort to research, discover, and disclose the effects of tobacco products on health and have continually renewed that promise, in fact, they have systematically and routinely suppressed and concealed material information and waged an aggressive and concerted campaign of disinformation about the health consequences caused by their products and their efforts to market those products.

7. The Commonwealth, through its policy makers in public health and welfare and commercial regulation, relied upon the defendants' undertaking this special duty, in refraining from acting under the Commonwealth's police power to regulate the marketing, sale and use of defendants' tobacco products and in refraining from investigating defendants' unfair and deceptive trade practices, including the intentional inducement of minors to purchase tobacco products.

8. The defendants have also known for decades, on the basis of their own wrongfully-concealed research, that nicotine is addictive. At the same time, the industry has developed sophisticated techniques to manipulate the amount of nicotine delivered by their tobacco products to the users so as to create, enhance and sustain addiction. Yet publicly, and with the concerted intention that their misrepresentations and fraudulent statements be relied upon by the Commonwealth and the citizens of Pennsylvania, they have denied and continued to deny that nicotine is addictive and to deny that they manipulate the nicotine delivery in their tobacco products.

9. On March 21, 1997, in connection with its settlement of the then-pending 22 States' Attorney General's cases against the tobacco industry, defendant/co-conspirator Liggett Group, Inc. admitted for the first time that it had knowledge that cigarette smoking causes lung cancer, heart and vascular disease, and emphysema, and knowledge that nicotine in cigarettes is addictive. Liggett Group, Inc. further admitted that the defendants/co-conspirators herein market their tobacco products to minors, that is, to "those under 18 years of age".

10. The defendants have engaged and continue to be engaged in this course of conduct despite their knowledge that a vast majority of new users of tobacco products are minors. The defendants have knowingly acted with the collective and concerted specific intent to have the cigarettes they manufacture sold to minors throughout the United States, including the children and adolescents of Pennsylvania. Each year, the defendants spend millions of dollars in targeting and attracting these minors to begin smoking and to continue to smoke even though the defendants are aware that the sale of tobacco products to minors is illegal and the procurement of tobacco products by minors violates public policy under the laws of Pennsylvania. Nevertheless, the defendants, as recently admitted by defendant/co-conspirator Liggett Group, Inc., continue to promote, engage in and facilitate illegal conduct by their intentional marketing to minors.

11. The defendants' concerted conduct has resulted in an unprecedented impact on the public health in both human and economic terms. The death toll in the United States in one year alone from tobacco use equals the aggregate number of American lives lost in all battles in all wars this country has fought during the 20th century. Overwhelmingly, the defendants' targeted new recruits in this march to addiction, disease and death are children and adolescents.

12. Tobacco addiction is not only a health menace, but also results in a huge economic burden. The Commonwealth and the residents of Pennsylvania have suffered and incurred enormous expenses as a result of defendants' intentional and illegal misconduct. Pennsylvania residents have become ill and died from tobacco-related diseases such as lung cancer and other cancers, emphysema and heart disease. The Commonwealth spends additional millions of dollars annually in payments for Medicaid and state medical assistance recipients, and premiums for state employee health insurance, as a result of the health care costs of treating tobacco-related disease.

13. The Commonwealth of Pennsylvania, by its Attorney General, brings this action to impose legal responsibility upon defendants for the consequences of their actions. The premise of this action is that the defendants, which together comprise the tobacco industry -- and not the Commonwealth, its citizens or its taxpayers -- should ultimately bear the burden of the staggering health care and insurance costs caused by the defendants' concerted illegal actions and violation of the laws and public policy of Pennsylvania.

14. The Commonwealth brings this action to protect its citizens -- including children and adolescents -- and the public health of the Commonwealth by seeking equitable and injunctive relief as set forth below. The Commonwealth also brings this action for damages for economic injuries to the Commonwealth which were caused by the unlawful and concerted actions of the defendants, including but not limited to reimbursement for past and future expenditures for medical assistance provided under Pennsylvania's Medicaid and General Assistance programs for diagnosis and treatment of tobacco-related diseases and addiction; reimbursement for past and future costs of caring for persons with tobacco-related diseases who receive services through hospitals, health care facilities, residential facilities and other similar facilities owned, operated or maintained by the Commonwealth or facilities under contract to the Commonwealth to render such services; reimbursement for past and future costs of health care benefits for Commonwealth employees and retirees related to tobacco-related diseases and addiction, including provision of health insurance and health care services; and reimbursement for the Commonwealth's past and future increased expenditures to fund and promote wellness and healthy lifestyle programs in order to reduce health care costs, including smoking cessation. Further, the Commonwealth seeks punitive damages, civil penalties and equitable relief as set forth below.

  PARTIES

15. Plaintiff, the Commonwealth of Pennsylvania, by D. Michael Fisher, in his official capacity as Attorney General of the Commonwealth of Pennsylvania, brings this action in its capacity as sovereign, and as parens patriae on behalf of all of its citizens, including its children and adolescents. The violations of Pennsylvania law set forth in this Complaint and the unlawful and concerted action of the defendants have and will cause loss and damage, including the following:

a. To the Commonwealth, by the use of tobacco products. These damages include, inter alia, past and future Medicaid payments, Medical Assistance payments, cost of caring for persons with tobacco-related illnesses and increased cost of health insurance for state employees, pensions, and other health care benefits;

b. To Pennsylvania's children and adolescents, who unlawfully and in violation of the public policy and laws of Pennsylvania have been targeted by the defendants for cigarette consumption and hence addiction with its consequent adverse effects, including disease and death;

c. To consumers and other persons who could purchase or benefit from products not containing nicotine and other safer products that could have competed with tobacco products;

d. To the Commonwealth's general welfare and economy.

16. D. Michael Fisher is the Attorney General of the Commonwealth of Pennsylvania, and is authorized to prosecute in his official capacity any action in which the interests of the Commonwealth of Pennsylvania are at issue. He brings this action pursuant to his authority under 71 Pa. C.S. 732-204, 73 Pa. C.S. 201-4, and 73 Pa. C.S. 201-8, and in parens patriae on behalf of the citizens Pennsylvania, including its children and adolescents, to protect their health and welfare, and to recover damages which the Commonwealth and its citizens have sustained as a result of the unlawful and concerted action of the defendants, as well as injunctive relief.

17. Defendant Philip Morris, Inc. ("Philip Morris") is a Virginia corporation authorized to do business in Pennsylvania and which actually does business in Pennsylvania, and has its principal place of business at 120 Park Avenue, New York, New York 10017. Philip Morris manufactures, distributes, advertises and sells various tobacco products, including tobacco products under the brand names of Marlboro, Virginia Slims, Merit, Benson-Hedges, Dunhill, Parliament, Cambridge, and Saratoga throughout the United States and Pennsylvania.

18. Defendant R.J. Reynolds Tobacco Company ("R.J. Reynolds") is a New Jersey corporation authorized to do business in Pennsylvania and which actually does business in Pennsylvania, and has its principal place of business at Fourth and Main Streets, Winston-Salem, North Carolina 27102. R.J. Reynolds manufactures, distributes, advertises and sells various tobacco products, including tobacco products under the brand names of Camel, Winston, Salem, Vantage, Doral, Now, Century, and Bright Rite throughout the United States and Pennsylvania.

19. Defendant Brown & Williamson Tobacco Corporation ("Brown & Williamson") is a Delaware corporation authorized to do business in Pennsylvania and which actually does business in Pennsylvania, and has its principal place of business at 1500 Brown and Williamson Tower, Louisville, Kentucky 40202. Defendant B.A.T. Industries, P.L.C. is the sole shareholder of the Brown & Williamson Tobacco Corporation. Brown and Williamson manufactures, distributes, advertises and sells various tobacco products, including tobacco products under the brand names of Kool, Raleigh, Barclay, Viceroy, Bel-Air, and Laredo throughout the United States and Pennsylvania.

20. Defendant B.A.T. Industries, P.L.C. ("B.A.T. Industries") is a British corporation with its principal place of business at Windsor House, 50 Victoria Street, London, England SW1H 0NL. Through a succession of intermediary corporations and holding companies, B.A.T. Industries is the sole shareholder of Brown & Williamson. Through Brown & Williamson, B.A.T. Industries has placed cigarettes into the stream of commerce with the expectation that substantial sales of cigarettes would be made in the United States and in Pennsylvania. In addition, B.A.T. Industries, directly or through it agents/or co-defendants, conducted critical research for Brown & Williamson on the issue of tobacco and health. Further, Brown & Williamson sent research conducted in the United States on the issue of tobacco and health to B.A.T. Industries in England in an attempt to remove sensitive and inculpatory documents from the United States jurisdiction, and these documents are subject to the control of B.A.T. Industries. B.A.T. Industries has been involved in actions described herein and its actions have affected and caused harm in and to Pennsylvania.

21. Defendant The American Tobacco Company, Inc. ("American Tobacco") is a Delaware corporation authorized to do business in Pennsylvania and which actually does business in the Pennsylvania, and has its principal place of business at 281 Tresser Boulevard, Forum, Stamford, Connecticut 06904. In December, 1994, American Tobacco was purchased by B.A.T. Industries, P.L.C. and merged into Brown & Williamson which has succeeded to the liabilities of American Tobacco. American Tobacco and Brown & Williamson manufacture, distribute, advertise and sell various tobacco products, including tobacco products under the brand names of Lucky Strike, Pall Mall, Tareyton, Malibu, Montclair, Silva Thins, Bull Durham and Carlton throughout the United States and Pennsylvania.

22. Defendant Lorillard Tobacco Company ("Lorillard") is a Delaware corporation authorized to do business in Pennsylvania and which actually does business in Pennsylvania. Lorillard, a successor to P. Lorillard Company, has its principal place of business at l Park Avenue, New York, New York 10016. Lorillard manufactures, distributes, advertises and sells various tobacco products, including tobacco products under the brand names of Kent, Old Gold, Newport, Triumph, Spring, and True throughout the United States and Pennsylvania.

23. Defendant The Liggett Group, Inc. ("Liggett") is a Delaware corporation authorized to do business in Pennsylvania and which actually does business in Pennsylvania, and has its principal place of business at 700 W. Main Street, Durham, North Carolina 27702. Liggett manufactures, distributes, advertises and sells various tobacco products, including tobacco products under the brand names of Chesterfield, L &M, Eve, Lark, and Dorado throughout the United States and Pennsylvania.

24. Defendant United States Tobacco Company ("US Tobacco") is a Delaware corporation authorized to do business in Pennsylvania and which actually does business in Pennsylvania, and has its principal place of business at 100 West Putnam Avenue, Greenwich, Connecticut 06830. US Tobacco manufactures, distributes, advertises and sells various tobacco products, including smokeless tobacco products under the brand names of Happy Days, Skoal and Copenhagen throughout the United States and Pennsylvania.

25. Defendant The Tobacco Institute, Inc. ("TI") is a non-profit corporation organized under the laws of the State of New York, with its principal place of business at 1875 Eye Street, N.W., Suite 800, Washington, D.C. 20006. TI at all relevant times since its creation in 1958, has been a trade association of the defendant tobacco companies, has been funded and controlled by them, and has operated as their public relations and lobbying arm. At all relevant times TI has been an agent and/or employee and/or alter ego of the defendant tobacco companies and has participated in the promotion of their cigarettes and other tobacco products in Pennsylvania. In doing the things alleged herein, TI has been acting within the course and scope of its agency and/or employment and has been acting with the consent, permission, authorization and direction of each of the defendant tobacco companies. All actions of TI alleged herein were authorized, ratified, and approved by the officers or managing agents of the defendant tobacco companies.

26. Defendant The Council for Tobacco Research-U.S.A., Inc. ("CTR") successor in interest to the Tobacco Industry Research Committee ("TIRC"), is a non-profit corporation organized under the laws of the State of New York with its principal place of business at 900 Third Avenue, New York, New York 10022. At all relevant times CTR and TIRC have been funded and controlled by the defendant tobacco companies. Additionally, at all times relevant hereto, CTR and TIRC participated in the promotion of the tobacco products of the defendant tobacco companies in Pennsylvania.

27. Defendant Smokeless Tobacco Council, Inc. ("STC") is a New York corporation with its principal place of business at 1627 K. Street, N.W., Washington, D.C. 20006. STC, at all times material hereto, has operated as a public relations and lobbying arm of the tobacco companies and as their agent and employee. It also has acted as a facilitating agency in the furtherance of the defendants' combination and conspiracy as described in this Complaint. In doing so, STC acted within the course and scope of its agency and employment, and acted with the consent, permission and authorization of the tobacco companies. STC has been involved continuously in the conspiracy described and its actions have caused harm in Pennsylvania.

28. Defendant Hill and Knowlton, Inc. ("Hill and Knowlton"), is a New Jersey corporation, with its principal place of business located at 466 Lexington Avenue, New York, New York 10070, and at all times relevant hereto served as the public relations agency for the other defendants/co-conspirators. At all times relevant hereto, Hill and Knowlton played an active and knowing part in the conspiracy complained of by assisting in devising the marketing and misrepresentation strategy for the tobacco industry and aiding in the circulation and publication of many false statements on behalf of the tobacco companies.

29. As used in this Complaint, the term "tobacco companies" refers to all defendants except TI, CTR, STC and Hill and Knowlton; and the term "trade association" refers to defendants TI, STC, CTR and its predecessor TIRC. As used in this Complaint, the terms "defendant" and "defendants" include all named defendants and all predecessors and successor entities to the named defendants.

30. Defendants Hill and Knowlton, TIRC/CTR, STC, and TI have at all relevant times acted on behalf of and in furtherance of the interests of the tobacco company defendants. Hill and Knowlton, TIRC/CTR, STC and TI operated at the direction of the tobacco companies and were subject to the tobacco companies' control.

31. Each defendant is sued individually, as the primary violator, and as an aider and abettor and as co-conspirator, one to the other, that rendered substantial assistance in the accomplishment of the acts and/or omissions and in furtherance of the conspiracy alleged herein. In acting to aid and abet, wrongfully conspire, and substantially assist the commission of the wrongful conduct and conspiracy complained of herein, each defendant acted with an awareness of wrongful and concerted conduct and realized that its conduct would substantially assist the accomplishment of that wrongful conduct and conspiracy, and each defendant was aware (1) of its overall contribution to the conspiracy, scheme and common course of wrongful conduct alleged herein; (2) that without its knowing and full participation in the unlawful conspiracy, that the conspiracy, deception, and unlawful conduct resulting therefrom and associated therewith, could not succeed; and (3) of the manipulation of nicotine content in cigarettes and other tobacco products, and the misrepresentation, concealment and suppression of information regarding the addictive properties of nicotine.

32. Each defendant tobacco company and trade association is also sued as a coconspirator, and the liability of each arises from the fact that each defendant entered into an agreement with the other tobacco company and trade association defendants to pursue, and knowingly pursued, the common course of conduct to commit or participate in the commission of all or part of the wrongful and/or unlawful acts, plans, schemes, transactions, and artifices in furtherance of the conspiracy as alleged herein -- including but not limited to the manipulation of nicotine content in cigarettes and other tobacco products, and the misrepresentation, concealment and suppression of information regarding the addictive properties of nicotine and the health effects of smoking, and the targeting of minors -- with each defendant knowing that its full participation in the conspiracy was central and necessary to the conspiracy's success.

33. At all times specified and for many years prior thereto up to the present time, defendants transacted a continuous and substantial business within Pennsylvania, and as a result of the injuries that are alleged herein, defendants have committed intentional and tortious acts under the laws and regulations of the Commonwealth of Pennsylvania.

34. Defendants have also committed intentional and tortious acts outside Pennsylvania causing injuries to the plaintiff within Pennsylvania. Defendants regularly solicit business, do business and are engaged in a permanent course of conduct in the distributing, retailing, transporting and causing to be transported of tobacco products to Pennsylvania and have substantial revenue from goods sold and services rendered in Pennsylvania.

35. Defendants reasonably expected or had substantial reason to believe or expect that the Commonwealth and its citizens could and would be injured in Pennsylvania as a result of using tobacco products and that in addition, defendants would and did derive substantial revenue from interstate and international commerce particularly from Pennsylvania.

36. At all relevant times, the defendant tobacco companies together controlled virtually 100% of the tobacco products market in Pennsylvania and in the United States.

37. The claims against all defendants arise out of contracts to be performed in whole or in part in Pennsylvania; business solicited in Pennsylvania; the production, manufacture and/or distribution of goods by the defendants with the reasonable expectation that the goods would be used or consumed in Pennsylvania and by its citizens; the production, manufacture and/or distribution of goods by the defendants that were used or consumed in Pennsylvania; and tortious and intentional misconduct by defendants in or having an impact or injury in Pennsylvania.

38. All defendants have and continue to do business in Pennsylvania, make contracts to be performed in whole or in part in Pennsylvania, and manufacture, test, sell, offer for sale, supply, or place cigarettes or other tobacco products in the stream of commerce, or in the course of business materially participate with others in so doing; and perform such acts as are intended to, and do, result in the sale and distribution in Pennsylvania of cigarettes or other tobacco products from which the defendants derive substantial revenue. All defendants also caused and continue to cause tortious injury by acts or omissions in Pennsylvania, or caused and continue to cause tortious injury in Pennsylvania by acts or omissions outside Pennsylvania.

39. Venue is proper in Philadelphia County pursuant to Pa. R.C.P. 2179(a) in that the defendants regularly conduct business in Philadelphia County, and transactions or occurrences out of which the cause of action arises took place in Philadelphia County. In addition, some of the defendants have registered offices located in Philadelphia County.

  THE HEALTH CONSEQUENCES OF TOBACCO

40. The human tragedy of smoking-related disease is enormous. Cigarette smoking is the leading cause of premature death in the United States. According to the Centers for Disease Control and Prevention ("CDC"), each year smoking-related illnesses kill more than 400,000 Americans. The number of deaths from tobacco related illnesses exceeds the combined deaths caused by automobile accidents, AIDS, alcohol use, use of illegal drugs, homicide, suicide and fires. Smoking-related illnesses account for one of every five deaths each year in the United States.

41. At least 43 separate chemicals in the smoke inhaled by persons consuming tobacco products have been determined to be carcinogenic. Cigarette smoking causes more than 85% of all lung cancer, which has now surpassed breast cancer as the primary cause of death from cancer among women. Smoking also causes cancers of the mouth, larynx, esophagus, stomach, pancreas, uterus, cervix, kidney, and colon, among others. All told, tobacco use is responsible for at least 30% of all deaths from cancer.

42. Smokeless tobacco, including snuff and chewing tobacco, has been shown to cause oral cancer, gum disease and tooth loss. Long term snuff users are forty-eight times more likely than non-users to develop cancers of the gingiva (gums) and buccal mucosa (cheek) and four times more likely to develop mouth cancer than non-users. Persons using chewing tobacco are six times more likely to develop cancer of the mouth or hypopharynx and three times more likely to develop cancer of the oropharynx than non-users.

43. Smoking is the cause of more than 80% of deaths from pulmonary diseases such as emphysema and bronchitis. These chronic obstructive lung diseases have a profound social impact because of the extended disability of their victims.

44. Smoking is one of three major independent causes of coronary heart disease. Smoking is responsible for thousands of deaths from cardiovascular disease, including stroke, heart attack, peripheral vascular disease and aortic aneurysm. Nicotine itself causes cardiovascular problems, including narrowing of blood vessels, increased blood pressure and changes of lipid metabolism, which contribute to myocardial infarctions. Using tobacco products is also linked to a large number of other serious illnesses.

45. The health consequences of smoking among women are of special concern because of the deleterious effect on reproduction. Smoking reduces fertility, increases the rate of miscarriages and stillbirths, retards uterine fetal growth, and results in lower birth weight in infants.

46. As a result of the defendants' unlawful concerted conduct, cigarette smoking has become the single most preventable cause of death in our society. Cigarettes, as previously and presently constituted, result in devastating illness and often death when used as intended and designed. There is no known level of safe consumption.

47. Nationwide, the Centers for Disease Control estimates health care costs for tobacco-related diseases are $50 billion annually. These costs have been increasing at a precipitous rate, more than doubling in the period from 1987 to 1993. The CDC estimates that over 43% of tobacco-related health care costs are incurred by states and other governmental agencies.

  THE CONCENTRATION OF THE INDUSTRY

48. Cigarette manufacturing has been one of the most concentrated industries in the United States throughout this century. Together, Philip Morris, R.J. Reynolds, Brown & Williamson, American Tobacco, Lorillard, and Liggett comprise the Big Six cigarette manufacturers, which control virtually 100% of the market in the United States. U.S. Tobacco manufactures the vast majority of the smokeless tobacco products sold in the United States.

49. In large part because of its concentration, the tobacco industry has long been one of America's most profitable businesses, with profit margins estimated to be in the 30% range. The industry continues to harvest billions of dollars in profits each year from domestic sales alone.

50. The concentration of the industry has also allowed the defendants to engage in a decades-long conspiracy relating to smoking, health and addiction and to direct their considerable profits to further that conspiracy.

  THE DEFENDANTS' WRONGFUL CONDUCT AND CONSPIRACY IN CONCEALING AND MISREPRESENTING THE ADDICTIVE AND HARMFUL NATURE OF TOBACCO/NICOTINE

A. In General

51. This action arises out of an ongoing course of wrongful conduct by each defendant individually and in concert with each other.

52. Defendants have pursued a course of conduct and conspiracy to deceive and misrepresent to the public and to the Commonwealth the essential facts regarding the serious health hazards of their tobacco products since as early as 1953 in order to promote and maintain sales of tobacco products, and the profits derived therefrom, and to shield themselves from having to pay the health care costs of tobacco-related diseases and to shift those costs to others, such as the Commonwealth.

53. The defendants carried out their conspiracy by agreeing to falsely represent to the public and the Commonwealth that questions about tobacco and health would be answered by a new, unbiased, and trustworthy source. They recognized that the acceptance and reliance by the public and the Commonwealth on their representations would enable them to misrepresent, suppress, distort and confuse the facts about the health dangers of tobacco products, including addiction. The defendants also agreed not to market safer cigarettes.

54. With respect to those activities, each defendant is sued as a violator and co-conspirator who rendered substantial assistance in the accomplishment of the acts and/or omissions alleged herein. In acting in concert and in furtherance of the fraud and other wrongful conduct complained of herein, each defendant acted with an awareness thereof, and with the realization that its conduct would substantially assist and was necessary to the accomplishment of the fraud, and was aware of its contribution, and the necessity of its contribution to the conspiracy, scheme and common course of wrongful conduct alleged herein.

55. The defendant tobacco companies set their plan in motion by creating a joint industry research organization in 1954. Since that time, they have used the credibility gained by claims of funding "disinterested" research to suppress and/or misrepresent the material facts to the public and the Commonwealth. Although knowing of the serious health dangers of their products and their addictive nature, the defendants have utilized the above scheme and conspiracy to further their fallacious claims that there is insufficient research to determine whether tobacco use causes disease and death and that tobacco products are not addictive.

56. The defendants' dual strategies of suppression of material information and misrepresentation of the objectivity of their research to deceive the public and the Commonwealth about tobacco and health have continued for more than four decades. Defendants have engaged in a continuing conspiracy to deceive the public regarding facts material to the decision to purchase cigarettes and other tobacco products.

57. Moreover, as internal industry research confirmed the health dangers and addictiveness of tobacco use, the defendants' deception rose to a new level: although representing to the public that they would make full disclosure of the results of their research, they concealed their own negative health and addiction research results from both the public and public health officials, including those of the Commonwealth. These research results still have not been voluntarily released; but the internal research that has become available directly contradicts what defendants have, for decades, told and continue to tell the public in furtherance of their ongoing conspiracy.

58. Defendants have also concealed the fact that the tobacco companies manipulate and control the content and delivery of nicotine in their products to create and sustain consumers' addiction to tobacco products.

59. The success of the industry's campaign of deceit and misinformation has depended on defendants acting in concert. Without the agreement of each defendant to suppress the truth, the deception that the joint industry research efforts were objective would be revealed, and the substantive claim that "not enough facts are known" to indict tobacco use as the cause of disease would fail. Defendants agreed to come together, act together, and to stay together in order to accomplish what could not have otherwise occurred -- the unified and consistent distortion of public information about the use of tobacco products, health and addiction.

60. The defendant tobacco companies and trade associations also conspired to suppress the development, testing and marketing of safer cigarettes, while fraudulently maintaining that their products are safe or that there are no safer alternatives to their products.

61. The defendants were aware that their joint agreement was necessary to sustain the volume of their sales, to maintain their profits, and to avoid legal responsibility for their products.

62. The non-tobacco company defendants have acted in concert with the defendant tobacco companies by implementing marketing and public relations strategies, facilities and operations to carry out the purpose and effect of the conspiracy and wrongful conduct alleged herein.

63. Despite overwhelming scientific evidence, and the confirmation of this evidence by their own internal research, the tobacco companies, except for Liggett as noted herein, and the other defendants continue their concerted denial that there is any causal connection between the use of tobacco products and human diseases. These misleading, deceptive and untrue denials are at the heart of the industry's ongoing conspiracy to market and profit from products they know are deadly.

64. Since its inception in the mid 1950's, the plan and conspiracy of the defendants to engage in a pattern of misrepresentation, disinformation, suppression, and fraud regarding the adverse health effects caused by tobacco products has been carried out for four main purposes: (1) to prevent, limit or forestall the erosion of demand for tobacco products; (2) to shield tobacco companies from having to pay the health care costs for tobacco-related diseases; (3) to restrain competition within the tobacco products industry; and (4) to prevent, limit and forestall state and federal governmental regulation and/or scrutiny of tobacco products. Reflecting back on this plan, a 1972 internal TI memorandum stated:

For nearly twenty years, this industry has employed a single strategy to defend itself on three major fronts: litigation, politics and public opinion . . . . On the litigation front for which the strategy was designed, it has been successful . . . . [W]e have not lost a liability case.

65. That 1972 TI memorandum recognized the need to continue and intensify the work of the past twenty years:

In the cigarette controversy, the public - especially those who are present and potential supporters (e.g., tobacco State congressman and heavy smokers) -- must perceive, understand and believe in evidence to sustain their opinion that smoking may not be a causal factor.

66. This memorandum goes on to propose the "steps required to start a shift in public opinion" in part by designing a study whose results would be disclosed only "if favorable."

67. There has been no attempt made by defendants to inform consumers of the health benefits to those who choose to try and give up smoking. Defendants knew or should have known about the results of early studies conducted in 1962 by Dr. Cuyler Hammond and Dr. Oscar Auerbach who opined that: "Persons who have smoked cigarettes for many years sometimes express the opinion that the harm has already been done and that they might as well continue to smoke since it will do them no more harm. The evidence is completely contrary to that point of view." Their research showed that the number of atypical cells that might evolve into invasive cancer were significantly reduced in ex-smokers (those who had quit five years or longer before their deaths). Defendants failed to inform the public of these findings.

B. The Beginning of the Conspiracy: The Big Scare

68. In l946, the New Orleans regional medical director of the American Medical Society reported the increased incidence of cigarette smoking was leading to more instances of lung cancer. The following year, Lorillard chemist H. B. Parmele, who later became the company's vice president of research and a member of its board of directors, recognized that scientists and medical authorities were developing evidence that the use of tobacco contributed to cancer development.

69. Thereafter, the industry conspiracy and combination began in the early 1950s, when the tobacco companies were confronted with the publication of several scientific studies which sounded grave warnings on the health hazards of tobacco. One of these studies was published in 1952 by Dr. Richard Doll, a British researcher. Dr. Doll, in a statistical analysis, found that lung cancer was more common among people who smoked and that the risk of lung cancer was directly proportional to the number of cigarettes smoked. A second study was published in December 1953 by Dr. Ernest Wynder of the Sloan-Kettering Institute. Dr. Wynder painted the shaved backs of laboratory mice with a residue of cigarette smoke. Malignant tumors grew in 44% of the mice, providing biological confirmation of the cancer-causing properties of cigarettes.

70. The Doll and Wynder studies generated public concern about the health hazards of cigarettes. The widespread reporting of these studies caused what officials of the tobacco companies called the "Big Scare". Confronted with this evidence, the presidents of the leading tobacco companies, including all of the defendant tobacco companies except Liggett, met at an extraordinary gathering in the Plaza Hotel in New York City on December 15, 1953. Hill and Knowlton, a public relations agency, coordinated the meeting and prepared a memorandum summarizing the discussions of that day.

71. According to the Hill and Knowlton memorandum:

a. The companies had not met together before because two previous antitrust decrees had prohibited "many group activities."

b. An indication of the seriousness of the problem was "that salesmen in the industry are frantically alarmed and that the decline in tobacco stocks on the stock exchange market has caused grave concern...."

c. The problem was viewed entirely in terms of a public relations problem, as opposed to a public health concern. The industry leaders "feel that the problem is one of promoting cigarettes and protecting them from these and other attacks that may be expected in the future" and that the industry "should sponsor a public relations campaign which is positive in nature and is entirely 'pro-cigarettes.'"

d. All of the leading manufacturers, except Liggett, agreed to "go along" with the public relations strategy. Liggett decided not to participate at that time "because that company feels that the proper procedure is to ignore the whole controversy."

e. The group discussed forming an association "specifically charged with the public relations function."

f. Hill and Knowlton was to play a central role in the industry association: "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."

72. Nine days later, Hill and Knowlton recommended in a memorandum that the industry create an organization, initially known as the Tobacco Industry Research Committee ("TIRC"), which would gain the public's trust by appearing to be unbiased on the issue of the health effects of cigarette smoking.

73. As a result of the December 15, 1953 meeting and the recommendations of Hill & Knowlton, Philip Morris, R.J. Reynolds, Brown & Williamson, American Tobacco, Lorillard and U.S. Tobacco agreed to create TIRC, whose role in furtherance of the conspiracy is more fully set forth below.

C. The Defendants Acknowledge That They Assumed A Special Duty

74. On January 4, 1954, Philip Morris, R.J. Reynolds, Brown & Williamson, American Tobacco, Lorillard, US Tobacco and others ran a full page newspaper advertisement entitled "A Frank Statement to Cigarette Smokers", and announcing the formation and purpose of TIRC. The statement appeared in 448 newspapers across the nation, reaching a circulation of 43,245,000 in 258 cities. The advertisement ran in the daily newspapers in Pennsylvania, including newspapers in Allentown, Altoona, Bethlehem, Erie, Harrisburg, Lancaster, Philadelphia, Pittsburgh, Reading, Scranton, Williamsport, Wilkes-Barre, and York. As set forth below, this advertisement included an unambiguous pledge to the public that through TIRC these tobacco companies would conduct objective and unbiased research regarding the use of tobacco products and their effects on health and report those findings to health officials such as those employed by the Commonwealth to educate and protect the public health.

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

• Recent reports on experiments with mice have given wide publicity to a theory that cigarette smoking is in some way linked with lung cancer in human beings.
• Although conducted by doctors of professional standing, these experiments are not regarded as conclusive in the field of cancer research.
• [T]here is no proof that cigarette smoking is one of the causes [of lung cancer].
• We accept an interest in people's health as a basic responsibility, paramount to every other consideration in our business.
• We believe the products we make are not injurious to health.
• We always have and always will cooperate closely with those whose task it is to safeguard the public health
• We are pledging aid and assistance to the research effort into all phases of tobacco use and health
• For this purpose we are establishing a joint industry group consisting initially of the undersigned. This group will be known as [the] TOBACCO INDUSTRY RESEARCH COMMITTEE.
• 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.
• 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.

76. The defendants made these representations for the purpose and with the effect that consumers would rely on them in deciding to purchase and use tobacco products. At that time, and continuing to the present, the defendants knew or should have known that their failure to fulfill the promises they made and the duty they undertook would increase the use of tobacco products. They also knew the Commonwealth would rely upon these representations, and that an increase in health care costs for tobacco products users, including health care costs that would be incurred by the Commonwealth, was the substantially certain consequence of the past and continued use of tobacco products.

77. By the spring of 1955, the self-defense strategy recommended by Hill and Knowlton and implemented by the industry through the "Frank Statement" appeared to be successful. Hill and Knowlton reported to TIRC:

a. [P]rogress 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.

D. The Defendants Repeatedly Acknowledged Their Special Duty Over Time

78. Despite the concerted deception by the industry contained in the 1954 "Frank Statement," the defendants, in furtherance of the conspiracy, consistently renewed and publicly repeated their fraudulent and false commitment to conduct honest research. R.J. Reynolds Chairman Bowman Gray told Congress in 1964:

I stated that we feel, and we are on public record, that more research is needed and a great deal more research is needed. We are doing what we can in our best efforts to encourage and provide for this research . . . 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.

79. In 1970, TI and TIRC co-sponsored an advertisement captioned, "A Statement About Tobacco and Health" which stated:

a. "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."

b. "We accepted this responsibility in 1954 by establishing the Tobacco Industry Research Committee, which provides research grants to independent scientists. We pledge continued support of this program of research until all the facts are known."

c. "Scientific advisors inform us that until much more is known about such diseases as lung cancer, medical science probably will not 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."

d. "We shall continue all possible efforts to bring the facts to light."

80. Additional representations, also in 1970, were made when the tobacco companies, acting through TI, placed a number of advertisements similar to the 1954 "Frank Statement." One advertisement 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. "In the interest of absolute objectivity, the tobacco industry has supported totally independent research efforts with completely non-restrictive funding."

c. "In 1954, the Industry established what is now known as CTR, the Council for Tobacco Research-USA, 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."

d. "The findings are not secret."

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

81. Again in 1970, TI stated:

a. "The Tobacco Institute believes that the American public is entitled to complete, authenticated information about cigarette smoking and health."

b. "The tobacco industry recognizes and accepts a responsibility to promote the progress of independent scientific research in the field of tobacco and health."

82. In 1972, TI President Horace Kornegay testified before Congress that "the cigarette industry is as vitally concerned or more so than any other group in determining whether cigarette smoking causes human disease . . . . 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."

83. These continuing and concerted representations by defendants to the public about sponsoring independent objective research and bringing the truth to light were false and deceptive and in furtherance of the defendants' conspiracy described herein. In repeatedly making and reaffirming their undertaking to sponsor independent unbiased and objective research on the health effects of tobacco, the defendants assumed a special duty to the Commonwealth and the people of the Commonwealth.

E. The Defendants' Knowledge That Tobacco Use Is Harmful and Their Suppression Of The Truth

84. Even before the sponsors of the "Frank Statement" represented that there is no proof that cigarette smoking is one of the causes of lung cancer, an industry researcher had reported the contrary. As early as 1946, Lorillard's H.B. Parmele, 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.

85. Brown & Williamson, like the other manufacturers, was aware early on of the dangers of tobacco products. Its documents include a review of published statistical research, including the 1952 report by Dr. Doll, and the review notes that the studies offered "frightening testimony from epidemiological studies."

86. In the years following the 1954 "Frank Statement," and continuing to the present, the defendants have repeatedly acted fraudulently and failed to carry out their assumed duty to provide objective reports on tobacco use and health. As evidence mounted, both through industry research and truly independent studies, that tobacco use causes cancer and other diseases, defendants continued publicly, fraudulently, and in concert to represent that no health problems were proven against tobacco use.

87. Internal documents show that the defendants knew that the truth was very different. Defendants knew and acknowledged internally the veracity of scientific evidence demonstrating the health hazards of tobacco use. They suppressed that evidence -- and attacked it when it did appear.

88. Internal documents of the defendants 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 a "ventilated cigarette" states 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 states: "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 Philip Morris memorandum included a section entitled "Reduction of Carcinogens in Smoke." The document states, in part:

"To achieve this objective will require a major research effort, because carcinogens are found in practically every class of compounds in smoke."

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." (Emphasis added).

e. Brown & Williamson and its parent company, B.A.T. Industries, 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 etiology of cardiovascular disease....."

f. In March 1957, one of Brown & Williamson's British affiliates, which conducted much of the health research for the U.S. company stated, "As a result of several statistical surveys, the idea has arisen that there is causal relation between zephyr [its code name for cancer] and tobacco smoking, particularly cigarette smoking."

g. 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."

h. 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. . .

89. In 1962, at a meeting of worldwide subsidiaries of Brown and Williamson, the following remarks were made:

a. One research executive "thought we should adopt the attitude that the causal link between smoking and lung cancer was proven because then at least we could not be any worse off."

b. Another researcher stated that "no industry was going to accept that its product was toxic, or even believe it to be so, and naturally when the health question was first raised we had to start denying it at the P.R. level. But by continuing that policy, we had got ourselves into a corner and left no room to maneuver. In other words, if we did get a breakthrough and were able to improve our product, we should have to about-face, and this was practically impossible at the P.R. level."

c. The chairman of Brown & Williamson's British affiliate stated that it "was very difficult when you were asked as chairman of a tobacco company to discuss the health question on television. You had not only your own business to consider but the employees throughout the industry, retailers, consumers, farmers growing the leaf, and so on. And you were in much too responsible a position to get up and say, 'I accept that the product which we and all our competitors are putting on the market gives you cancer,' whatever you might think privately."

d. The chairman also stated that, if the company manufactured safer brands, "how to justify continuing the sale of other brands?.... It would be admitting that some of its products already on the market might be harmful. This would create a very difficult public relations situation."

90. In 1963, Addison Yeaman, who was then general counsel at Brown & Williamson and who subsequently became a director of CTR, wrote that:

a. "[N]icotine is addictive."

b. "We are, then, in the business of selling nicotine, an addictive drug. . ."

c. Cigarettes "cause, or predispose, lung cancer. . ."

d. "They contribute to certain cardiovascular disorders. . . "

e. "They may well be truly causative in emphysema, etc. etc."

Yeaman suggested that Brown & Williamson "accept its responsibility" and disclose the hazards of tobacco products to the Surgeon General and noted that this would allow the company openly to research and develop a safer cigarette.

91. Liggett suppressed the opinions of its own scientists and researchers when it provided information to the Surgeon General in 1963. Instead of disclosing that the research showed that the use of tobacco products caused human disease, Liggett's report to the Surgeon General focused on alternative causes of disease such as air pollution, coffee, 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" and concluded that the diseases generally associated with tobacco products were, in fact, caused by other factors.

92. Philip Morris also concealed from the public its actual knowledge and views of the research conducted outside the influence of the industry. While conceding in an internal 1971 memorandum that a recent study that found cigarette smoke inhalation caused lung cancer in beagles was a "critical one. . . for the cigarette causation hypothesis" and of grave importance to the industry, its Vice President of Research and Development disparaged the study in the internal memorandum and demonstrated Philip Morris' approval of the industry's public dismissals of these independent studies:

The strong opposition of 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.

93. Similarly, B.A.T. Industries' internal view of the validity of mouse skin painting experiments differed markedly from the view expressed in public statements. The minutes from a 1969 B.A.T. Industries' research conference stated:

[H]istorically, bioassay experiments were undertaken by the industry with the object of clarifying the role of smoke constituents in pulmonary carcinogenesis. The most widely used of these methods [was] mouse-skin painting . . . [I]n the foreseeable future, say five years, mouse-skin painting w[ill] remain as the ultimate court of appeal on carcinogenic effects.

Yet, two years later a Brown & Williamson public relations document stated that:

[T]he results obtained on the skin of mice should not be extrapolated to the lung tissue of the mouse, or to any other animal species. Certainly such skin results should not be extrapolated to the human lung.

94. Subsequently, Brown & Williamson continued to conduct -- and conceal -biological research on the connection between tobacco use and disease. Some of these research projects confirmed causation between tobacco use and disease.

95. Brown & Williamson's extensive biological research and research on a safer cigarette was kept from the public, and was eventually silenced. In order to protect it from disclosure in this country, the more sensitive research was often undertaken by Brown & Williamson's British affiliates, acting on behalf of both companies. Much of the research work was performed for a number of tobacco companies at a British laboratory called Harrogate. Some of this research was shared with these other companies and TI.

96. In March of 1983, Shelton Sommers, M.D., scientific director of CTR, testified before Congress that "Cigarette smoking has not been scientifically established to be a cause of chronic diseases, such as cancer, cardiovascular disease, or emphysema. Nor has it been shown to affect pregnancy outcome adversely."

97. In 1984, R.J. Reynolds placed an editorial type advertisement in The New York Times stating that "[s]tudies which conclude that smoking causes disease have regularly ignored significant evidence to the contrary."

98. In 1994, the chief executives of the defendant tobacco companies testified under oath before the Subcommittee on Health and the Environment of the U.S. House Committee on Energy and Commerce, chaired by Congressman Waxman ("Waxman Subcommittee"). These executives knowingly made material misrepresentations and/or omissions to the Subcommittee about tobacco products, health and addiction. In particular, they testified that nicotine is not addictive. These statements, as with the other deceptive statements and misrepresentations cited herein, were consistent with defendants' practice of providing disinformation to the public, and were made with the knowledge and intention that they would be widely disseminated to the public and communicated to Pennsylvania consumers and those in the Commonwealth who advance and protect the public health. The defendants' testimony included the following:

a. Philip Morris President and CEO William I. Campbell stated that:

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

ii. Cigarette smoking is not addictive.

iii. Philip Morris research does not establish that smoking is addictive.

b. Andrew Tisch, then CEO of Lorillard, asserted that smoking does not cause cancer. "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."

c. R.J. Reynolds CEO James W. Johnston said that "smoking is no more 'addictive' than coffee, tea or Twinkies."

d. US Tobacco President Joseph Taddeo stated:

i. The assertion that smokeless tobacco use can be addictive is without merit.

ii. US Tobacco does not in any way manipulate the nicotine level in its tobacco products.

iii. Oral tobacco has not been established as a cause of oral cancer.

99. These continuing representations by defendants to the public about sponsoring independent objective research and bringing the truth to light were false and deceptive.

100. Defendants' representations that their products are not addictive were made despite a substantial body of evidence, including evidence developed by the tobacco companies themselves, indicating that nicotine is not only addictive, but is the reason people smoke, and that the primary, if not sole, function of nicotine is to provide a pharmacological effect on the smoker that leads to addiction.

101. In March 1997 defendant/co-conspirator Liggett admitted the adverse health affects of cigarette smoking and that the nicotine contained in defendants' cigarettes is addictive. In effect, Liggett acknowledged the deliberately false and deceptive testimony of the defendants.

F. The Defendants' Concerted Suppression, Concealment, and Misrepresentations

102. Despite overwhelming scientific evidence, and the confirmation of the evidence by the tobacco companies' and trade associations' own internal research, defendants, except for Liggett as noted herein, continue to this day to repeat -- over and over, in a unified stance -- that there is no causal connection between tobacco use and adverse health effects, and that nicotine is not addictive. These representations -- which are fraudulent, misleading, deceptive, and untrue -- are the core of the defendants' ongoing conspiracy to market and profit from a product it knows is deadly and addictive.

1. Control of TIRC and CTR by Tobacco Company Defendants Through Hill and Knowlton

103. Despite defendants' claims to the contrary, TIRC never operated independently, but rather at all relevant times has been dominated and controlled by the defendants, and was created for and continues to operate for the primary purpose of suppressing unfavorable information regarding research on the health effects of using tobacco products, in order to ensure the commercial success of the tobacco companies. The tobacco companies, through their public relations agent Hill & Knowlton, operated and effectively controlled TIRC.

104. TIRC's offices were located in the Empire State Building in New York City, one floor below the Hill & Knowlton offices. Internal documents confirm that Hill & Knowlton, and not independent scientists, actually ran TIRC. A "highly confidential" internal memo reported:

"Since the [TIRC] had no headquarters and no staff, Hill & Knowlton, Inc. was asked to provide a 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]."

105. There has been substantial staff overlap between Hill & Knowlton and TIRC (and later CTR). In 1954, 35 staff members of Hill & Knowlton worked full or part time for TIRC. In that year, TIRC, a purported research firm, paid $477,955 to Hill & Knowlton, the public relations arm of the tobacco companies. This amount constituted over 50% of TIRC's entire operating budget.

106. Liggett joined TIRC in 1964, the same year the Surgeon General issued his first report linking cigarette smoking to lung cancer. Also in 1964, the TIRC changed its name to the Council for Tobacco Research-USA, Inc. ("CTR").

107. On or about January 8, 1971, CTR was formed as a not-for-profit Type B corporation purportedly created for the purpose of aiding and assisting research into tobacco use and health and to make available to the public and to health officials the results of this research. However, CTR functioned as did its predecessor, TIRC as a vehicle for the unlawful conspiracy and solely for the commercial benefit of the tobacco companies to increase tobacco sales.

108. In addition, a trade association, the Tobacco Institute ("TI"), was formed by the tobacco companies in 1958. As with TIRC, Hill & Knowlton has continuously had substantial involvement in TI. Hill & Knowlton's role in these organizations has been described by industry participants as: "Straddling both and acting as a buffer for each...Hill & Knowlton decides whether questions from outside individuals or organizations are to be directed to the Tobacco Institute or the T.I.R.C."

109. Hill & Knowlton coordinated the public relations activities of both TIRC and TI. In this role, Hill & Knowlton helped forge a multi-prong industry propaganda strategy to counter the growing evidence that tobacco use causes adverse health consequences and the growing call for governmental regulation of tobacco products. At a 1963 strategy meeting of TIRC, TI, Hill & Knowlton, and representatives of the tobacco companies, Hill & Knowlton's role in responding to the anticipated Report of the Surgeon General was described:

"Because Phase I [of the Surgeon General's Report] is expected to be scientific in nature, T.I.R.C. expressed the belief that it will logically be the responsive agency, with Dr. Little or Mr. Hartnett as spokesman and with Hill & Knowlton providing public relations guidance. By the same token, the Tobacco Institute believes that Phase II [dealing with regulator action] will probably be its primary concern, again with Hill & Knowlton's counseling."

110. Over time, the intentional failure of TIRC/CTR and TI to publicly disseminate the purported information and research regarding tobacco use and health violated the purposes for which they were established. Instead of the full disclosure and objective research promised and publicly undertaken, the defendant research committees and trade associations -- dominated by public relations officials and attorneys, as opposed to independent scientists -- have served as industry fronts in a campaign of deceit and misinformation aimed at undermining the public perception of the health risks of tobacco use. Internal documents demonstrate that the tobacco companies' joint 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 when possible, and to attack negative research where it could not be suppressed, all in order to convince the public and health officials that the case against smoking and other uses of tobacco is not closed.

111. A 1974 report to the CEO of Lorillard from a research executive described CTR's scientific projects as

"hav[ing] not been selected against specific scientific goals, but rather for various purposes such as public relations, political relations, positions for litigation, etc. Thus, it seems obvious that review 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 [sic] strategy."

112. A 1972 Tobacco Institute memorandum described the importance of using joint industry research to maintain public doubt about the link between 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 congressman and heavy smokers) -- must perceive, understand and believe in evidence to sustain their opinions that smoking may not be a causal factor. As things stand, we supply them with too little in the way of ready-made credible alternatives.

The memorandum goes on to propose the "steps required to start a shift in public opinion" in part by designing a study whose results would be disclosed only "if favorable."

113. A 1978 memo addressed to the CTR file from a Philip Morris official characterized CTR as "an industry 'shield.'" The memorandum goes on to state:

the "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 for "PR" purposes .

114. In 1993, a former employee of CTR who had worked there for 24 years confirmed publicly that the industry's claim that it was funding objective research was a sham: "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."

115. One of the roles and purposes of TIRC and CTR in the tobacco companies' strategy was to seek to use the public's trust to propagate "pro-tobacco" propaganda. The personal notes of an industry official attending a meeting with high level officials from various tobacco companies state that "CTR is best & cheapest insurance the tobacco industry can buy and without it the industry would have to invent CTR or would be dead."

116. The industry maintained its charade in testimony before the Waxman subcommittee, wherein Dr. James F. Glenn, CEO of CTR, stated that:

a. "The Council . . . sponsors research into questions of tobacco use and health and makes the results available to the public."

b. "[G]rantees are assured complete scientific freedom in conducting their studies . . . [P]ublication [of research results] is encouraged in every instance."

117. In fact, CTR-sponsored research projects were directed away from research that might add to the evidence against the use of tobacco products. When CTR-sponsored research did produce unfavorable results, the information was distorted or simply suppressed. For example, Dr. Freddy Homburger's CTR grant to study smoke exposure on hamsters was changed half-way through the study to a contract "so they could control publication -- they were quite open about that." Dr. Homburger has testified that when the study was completed, the Scientific Director of CTR and a CTR lawyer "didn't want us to call anything cancer" and that they threatened he would "never get a penny more" if his paper was published without deleting the word cancer.

118. An internal CTR document describes how Dr. Homburger attempted to call a press conference about the incident 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 canceled. 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.

2. CTR "Special Projects" Division and Use of Attorney-Client Privilege to Conceal Research

119. Another mechanism CTR used to suppress research results was to involve lawyers selectively, and then invoke the attorney/client or work product privilege to prevent the disclosure of harmful information. CTR used the term "special projects" to refer to its projects that did not get approved through CTR's traditional peer review process but that were desirable for the industry's public relations and propaganda purposes. "Special projects" were selected and monitored by industry lawyers to prevent disclosure if the results were adverse to the industry position. One Philip Morris official characterized CTR as a "front" for performing "special projects."

120. Notes prepared at a 1981 meeting of the tobacco companies' Committee of General Counsel state:

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.

121. One or more law firms played a critical role in furthering the defendants' conspiracy to suppress and conceal information about the adverse health effects caused by the use of tobacco products. The lawyers' strategy was to attempt to protect damaging tobacco-related documents from disclosure under the attorney-client or work product privileges regardless of whether such privileges applied. Lawyers routinely provided a number of non-legal services to the defendants such as deciding which CTR "special projects" should receive funding, dispensing funding to the "scientists" involved in such projects, and designing the scope and approach of the special project. An outside law firm also undertook to coordinate the tobacco companies' CTR "special projects" subterfuge.

122. For example, in 1972, one tobacco lawyer wrote to tobacco company officials that a potentially favorable study should be secretly funded by the tobacco companies as a "non-CTR special project" in order to make the study appear independent of the industry and thus heighten its perception as unbiased and reliable.

123. In 1976, another tobacco lawyer wrote to in-house lawyers at the various tobacco companies that a study to measure environmental tobacco smoke should be modified so that the study would yield more favorable results. The study was subsequently modified to de-emphasize the role of second-hand smoke relating to indoor environmental quality.

124. By becoming intimately involved in the funding and design of these scientific studies, these lawyers intended to further the conspiracy and fraud of the tobacco companies and CTR by (1) cloaking such studies in the attorney-client or work product privilege in order to protect them from disclosure if their results were unfavorable, and (2) by creating the perception that CTR and the tobacco companies were fairly and appropriately fulfilling their obligations and promises to the public that they would in a vigorous and unbiased manner investigate and report to the public and to health officials the link between their products and human disease.

125. The industry's misuse of claims of attorney/client privilege insulated CTR-funded research projects and internal documents from disclosure to the public and to government officials. In acting in this manner, the tobacco companies failed to fulfill their representations that they would report the results of their research to the public.

3. Suppression of In-House Research

126. In 1985, at a time when the company was resisting discovery in a number of personal injury lawsuits, Brown & Williamson's general counsel recommended that much of the company's biological research be declared "deadwood" and shipped to England and that no notes, memos or lists be made about these documents. The attorney stated, "I have marked with an X documents which I suggested were deadwood in the behavioral and biological studies," and further suggested that the research, development, and engineering department also "should undertake to remove the deadwood from its files."

127. In the 1960's, R.J. Reynolds established a facility in Winston-Salem, North Carolina, where its scientists conducted research in a number of specific areas, including studies of the actual mechanism whereby smoking causes emphysema in the lungs. The laboratory was nicknamed the "Mouse House" because mice were used in the research.

128. An internal R.J. Reynolds-commissioned report favorably described the Mouse House work as "the more important of the smoking and health research effort because it comes close to determining what was thought to be the underlying pathobiology of emphysema."

129. None of the work done at the "Mouse House" was ever disclosed to the public by R.J. Reynolds. Although the R.J. Reynolds lab made significant progress in understanding the disease mechanism, R.J. Reynolds disbanded the entire research division in one day, and fired all 26 scientists without notice.

130. Several months before the 1970 closure and firings, R.J. Reynolds attorneys collected dozens of research notebooks from the scientists. One of the researchers later stated about R.J. Reynolds' executives and lawyers that "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."

131. A Philip Morris researcher was ordered to destroy research on cancerous agents in cigarette smoke in the late 1980's. During tests for possible carcinogens in second hand smoke, Philip Morris used "fake cigarettes" or cigarettes without the flavorings and additives in cigarettes put on the market by the company. During this testing, one researcher used a Virginia Slims cigarette instead of a "fake cigarette" and found carcinogen levels forty times greater than the cigarettes normally tested. Documents on this test were destroyed on orders from the researcher's supervisor.

4. Suppression of Research Towards a "Safer Cigarette"

132. Several tobacco companies' biological research appears to have been directed toward developing a cigarette with reduced health risks. Several companies were successful in discovering which constituents in tobacco smoke were carcinogens, or were otherwise linked to diseases. This research was kept secret and never reported to the public.

133. Had this research been disclosed, alternative health care strategies could have been developed. By their failure to disclose this research, and their active efforts to suppress the research and threaten retaliation to assure the success of that suppression as set forth herein, defendants also failed to mitigate the damages sustained by the Commonwealth.

134. Some tobacco companies also successfully removed certain harmful constituents from cigarette smoke or treated the products to decrease the harmful effects of such constituents, and developed prototype cigarettes with reduced adverse health effects. These products were never marketed.

135. A memorandum from a law firm representing tobacco companies articulated the industry-wide position regarding the issue of a so-called "safer cigarette." The 1987 memorandum, prompted by R.J. Reynolds' smokeless cigarette, Premier, stated 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 the industry's defense."

136. Years earlier, a Philip Morris researcher had 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 . . . ." Although Philip Morris did undertake research and development of such a product, the company never released the research, and never informed the public that existing cigarettes were not safe or that cigarettes could be made safer.

137. The research and development department at Philip Morris nonetheless viewed continued research into "safer cigarettes" as necessary to compete in the event that another cigarette company marketed a "safer cigarette." In a presentation to the company's Board of Directors, the department stated:

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 war comes, we aim to fight well and to win.

138. Liggett also developed a cigarette with reduced adverse health effects. Liggett initiated its safer cigarette project, called the "XA," in 1968, and was able, internally, to proclaim the project a success in 1979. Company researchers believed that they had discovered which cigarette smoke constituents were carcinogens, and found a way to remove them. James Mold, who was assistant director of research at Liggett during the development of the safer cigarette, has stated that in connection with the XA project "We produced a cigarette. . .which eliminated carcinogenic activity... ." Despite Liggett's belief that the product was commercially marketable, the company never marketed the cigarette and suppressed the research that led to its development.

139. The XA project was abandoned for two reasons. First was the fear that the marketing of a "safer" cigarette would be, in essence, a confession that all other cigarettes were not safe. One Liggett executive wrote that, "Any domestic activity will increase risk of cancer litigation on existing products." In addition, there was a threat of retaliation from industry leader Philip Morris if Liggett broke ranks.

140. Liggett attempted to insulate the research on the XA project by the use of company lawyers. According to Dr. Mold, after 1975, "all meetings that we had regarding this project were to be attended by a lawyer . . . . All paper that was generated . . . [was] to be directed to the Law Department." Dr. Mold stated that lawyers even collected all the notes after each meeting.

141. Dr. Mold stated that despite its significance, Liggett's lawyers not only succeeded in stopping the project, but ordered him not to publish the results of the research that led to the "safer cigarette." Only an abstract of the paper, modified by the legal department, was published by its consulting firm, without Dr. Mold's name.

142. When asked why the XA cigarette was not marketed, Dr. Mold explained that:

[Management circles] 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.

143. Liggett had also obtained a patent for the process used to produce its "safer cigarette." The patent application described the reduction in cancer in mouse studies, prompting media reports that Liggett was the first cigarette company to admit that smoking caused cancer. Liggett responded by issuing a press release which stated:

Liggett and the cigarette industry continue to deny, as they have consistently, that any conclusions can be drawn relating 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.

144. Dr. Mold has estimated that Liggett had spent a total of $10 million on research involving mice, in part to develop the XA cigarette, at the time this statement was issued. Liggett's internal reports on the benefit of the XA and the absence of increased risk of harm from its additives specifically used animal studies as reliable indicators of the health effect of the product on humans.

145. R.J. Reynolds also undertook efforts to develop a "safer cigarette." Its project, which focused on delivering nicotine to the consumer without the harmful constituents of tobacco smoke, resulted in the development and test marketing of Premier, a smokeless and virtually tobacco-free cigarette which was, in essence, a nicotine delivery system. R.J. Reynolds ultimately abandoned development of Premier or other "safer" cigarette products.

146. Brown & Williamson also attempted to develop a safer cigarette or, in the words of an internal document, "a device for the controlled administration of nicotine." There were at least two safer cigarette projects: Project Ariel, which focused on heating rather than burning tobacco, and Project Janus, which focused on isolating and removing the harmful elements of tobacco. At least some of the work was performed by Battelle Memorial Institute in Geneva. By the end of the 1970s, however, in a pattern that was repeated throughout the industry, Brown & Williamson closed its research labs and halted work on a safer cigarette.

G. Industry Deception Regarding Environmental Tobacco Smoke

147. The tobacco companies have also attempted to mislead the public regarding the health risks of environmental tobacco smoke. Environmental tobacco smoke, also called "second hand smoke," primarily consists of sidestream smoke (SSS) and mainstream smoke (MSS). SSS is the smoke that issues from the end of a burning cigarette, cigar, or pipe in-between puffs. MSS is the smoke that smokers draw into and expel from their lungs. Approximately 85 percent of environmental tobacco smoke is SSS.

148. The United States Environmental Protection Agency has listed environmental tobacco smoke as a Class A (known human) carcinogen and a major source of respiratory problems in children. It is estimated that in excess of 2500 non-smoking Pennsylvanians die each year due to the effects of environmental tobacco smoke.

149. The tobacco companies have long known that environmental tobacco smoke is dangerous to human health but, despite their repeated promises to investigate the health risks of their products, have not disclosed this knowledge to the public. For example, internal documents of Brown & Williamson and B.A.T. Industries demonstrate that, as early as the mid-1970's, the industry began the work of identifying "sidestream constituents which may be considered harmful to non smokers." Internal documents show that B.A.T. Industries was actively engaged in measuring the levels of nitrosamine, a potent human carcinogen, in second hand smoke:

It is clear that in many countries there is a concern over the level of nitrosamine in foodstuffs. This explains in part the sensitivity to the presence of nitrosamine in tobacco smoke, and perhaps particularly, the levels of nitrosamine is sidestream smoke. The latter is a potential threat to the currently held view by many authorities that passive smoking does not constitute a direct hazard.

150. In recognition of the dangers of environmental tobacco smoke, Brown & Williamson and B.A.T. Industries secretly attempted to reduce the amount of sidestream smoke from cigarettes. In conjunction with this attempt, Brown & Williamson and B.A.T. Industries -- in violation of their promise to investigate in an unbiased manner the health effects of smoking -- also conducted defensive scientific research designed "to anticipate and refute claims about the health effects of passive smoking."

151. The attempt to mislead the public about the dangers of environmental tobacco smoke and to conceal and distort the true facts was not limited to Brown & Williamson and B.A.T. Industries. Through CTR and the TI, the tobacco industry as a whole also participated in the deception and wrongful conduct. For example, CTR sponsored a research project on sick building syndrome to be conducted in homes by an allegedly independent firm, yet the TI chose the homes. The industry also trumpeted another industry-funded study which was later found, following a congressional inquiry, to be rife with falsified data and to grossly underestimate the impacts of environmental tobacco smoke on indoor air quality.

152. Despite internally recognizing their validity, the tobacco companies have also attacked independent studies that demonstrate the link between environmental tobacco smoke and adverse health effects. After a Japanese study found that non-smoking women married to smokers have a greater chance of dying of lung cancer than non-smoking women married to non-smokers, the TI immediately ran large advertisements denouncing the study even though industry scientists privately recognized its validity.

  INDUSTRY CONTROL AND MANIPULATION OF NICOTINE TO "FOSTER ADDICTION AND THUS PROFITS "

A. The Role of Nicotine in Tobacco Products

153. The nicotine in tobacco products is addictive. Although defendants conspired to conceal the truth, nicotine is now 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.

154. It is estimated that between 74 to 90 percent of tobacco products users are addicted. Eight out of ten smokers polled say they wish they had never started smoking. 74 percent of young people regularly using smokeless tobacco find quitting extremely difficult. Over 90 percent experience withdrawal symptoms when they try to quit.

155. Two-thirds of the adults who smoke say they wish they could quit. Seventeen million smokers try to quit each year, but fewer than one out of ten succeeds. A high percentage of the smokers who have surgery for lung cancer or heart attacks return to smoking, as do 40 percent of smokers who have had their larynxes removed.

156. The tobacco companies understood early on that reducing or eliminating nicotine from their products would hurt sales and profits. As one company researcher wrote in a 1978 report 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."

157. While fully aware of the addictive nature of the nicotine in their products, each of the tobacco companies has denied that nicotine is addictive. This public deception and the industry's secret manipulation of nicotine is critically important to the tobacco companies. As objective researchers increased their warnings about the health dangers of tobacco products, nicotine addiction kept people using those products despite those warnings. This aspect of their deception allows the tobacco companies to continue to sell their dangerous products -- even to those who doubt the industry's health claims and want to quit smoking.

B. Industry Research on Nicotine and Knowledge of Its Addictiveness

158. Tobacco companies have known since at least the early 1960s of the addictive properties of the nicotine contained in the tobacco products they manufacture and sell. B.A.T. Industries was actively studying the physiological and pharmacological effects of nicotine in 1961 to understand "why cigarette smokers are so fond of their habit." Its reports were circulated to other tobacco companies in the United States and to TIRC.

159. In 1962, Sir Charles Ellis, scientific advisor to the board of directors of B.A.T. Industries, stated 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 . . . ." He subsequently described Brown & Williamson as being "in the nicotine rather than the tobacco industry."

160. In 1963, Brown & Williamson's general counsel wrote: "Moreover, nicotine is addictive. We are, then, in the business of selling nicotine, an addictive drug effective in the release of stress mechanisms."

161. From 1940 to 1970, American Tobacco conducted its own nicotine research, funding, in whole or in part, over 90 studies on the pharmacological and other effects of nicotine on the body. This research constituted 80 percent of all biological studies funded by American Tobacco over this period.

162. In a 1972 document entitled "R.J. Reynolds confidential research planning memorandum on the nature of the tobacco business and the crucial role of nicotine therein," an R.J. Reynolds executive wrote:

In a sense, the tobacco industry may be thought of as being a specialized, highly ritualized, and stylized segment of the pharmaceutical industry. Tobacco products uniquely contain and deliver nicotine, a potent drug with a variety of physiological effects.

More recently, R.J. Reynolds CEO F. Ross Johnson was quoted in the October 6, 1994 issue of the Wall Street Journal as follows: "Of course it's addictive. That's why you smoke the stuff."

163. The industry's recognition of the extent to which nicotine defines its product is illustrated in a 1972 Philip Morris report on a CTR conference, which stated:

As with eating and copulating so it is with smoking. The physiological effect serves as the primary incentive, all other incentives are secondary. . . . 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 the dose unit of nicotine.

164. A 1983 industry report also concluded that the primary reason people use tobacco products "is probably the physiological satisfaction provided by the nicotine level of the product."

165. Instead of reducing or eliminating nicotine from their products, the industry developed ways to create and sustain addiction in the user. Recognizing that nicotine causes dangerous cardiovascular effects which can accelerate the accumulation of fatty deposits in the arteries and contribute to myocardial infarctions, some tobacco companies studied artificial nicotine or nicotine analogues that would have the addictive and psycho-pharmacological properties of nicotine without its dangerous effects on the heart.

166. Dr. Victor DeNoble, a Philip Morris scientist, discovered such an analogue, but Philip Morris chose to halt its effort to determine whether that product could be used in a "safer cigarette." Philip Morris decided not to pursue nicotine analogues to avoid the risk of adverse publicity and of compromising the industry's consistent position that there was no alternative design for cigarettes.

167. In addition to concealing their knowledge, the tobacco companies have affirmatively misrepresented the role of nicotine in tobacco use. Even today, defendants continue to claim that nicotine is important in cigarettes for taste and "mouth-feel."

168. A recent example of the defendants' acts in furtherance of their conspiracy to conceal the addictiveness of nicotine is the combined response of Brown and Williamson, Liggett, Lorillard, Philip Morris, and the Tobacco Institute to the FDA's 1995 proposed regulations of cigarettes and nicotine. In their January 1996 joint submission, the defendants perpetuate their disinformation campaign by denying that nicotine is a drug, by denying that cigarettes or smokeless tobacco are drug delivery devices, and by denying that the nicotine in tobacco products is addictive.

C. Suppression and Concealment of Research on Nicotine Addiction

169. Rather than fulfill their promise to the public to disclose material information about the use of tobacco products and health, the tobacco industry chose a course of suppression, concealment, and disinformation about the true properties of nicotine and the addictiveness of using tobacco products. To this day, the defendants/co-conspirators, except for Liggett as noted herein, deny the addictive properties of nicotine -- despite their contrary knowledge -- in furtherance of their conspiracy.

170. The tobacco companies engaged in an extensive scheme to prevent the consuming public and the Commonwealth from discovering the true nature of nicotine. The industry (1) secretly shipped incriminating evidence overseas, (2) directed that damaging research be quashed or destroyed, (3) shut down laboratories overnight, (4) threatened scientists who tried to publish research revealing the industry's knowledge, and (5) asserted and continues to assert meritless claims of attorney-client privilege and work product -- all in an effort to conceal scientific research on nicotine's addictiveness.

171. Philip Morris scientists studying rat behavior 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). These scientists were later told by the company that the data they were generating could be damaging. 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.

172. In August 1983, Philip Morris ordered one of these researchers, Victor DeNoble, to withdraw from publication a research paper on nicotine that had already been accepted for publication after peer review by the journal Psychopharmacology. According to DeNoble, the company acted because it did not want its own research to compromise the company's litigation defense. Philip Morris officials had interpreted the suppressed nicotine studies as showing that, in terms of addictiveness, "nicotine looked like heroin."

173. In April 1984, Philip Morris closed DeNoble's nicotine research lab, abruptly halting its work. Philip Morris subsequently threatened DeNoble and another researcher with legal action if they published or talked about their nicotine research.

174. 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, including the president of Philip Morris, were specifically told that nicotine had addictive qualities.

175. Recently disclosed documents have revealed that the tobacco industry utilized foreign laboratories to further ensure the success of their fraudulent scheme to conceal the most damaging research on nicotine addiction from domestic scrutiny.

176. In April of 1970, Helmut Wakeham, Philip Morris' vice president of research and development, authored a memorandum in which he urged Philip Morris to purchase a German laboratory called the Institute for Biological Research, or "INBIFO." Wakeham referred to that facility as " a locale where we might do some of the things which we are reluctant to do in this country." Soon thereafter, a Philip Morris subsidiary, Fabrique Tabac Reunies, purchased the German lab, which quickly became utilized as an institute not for objective research, but rather as another conduit for Philip Morris' fraudulent activities.

177. A former Philip Morris scientist, Ian Uydess, recently told the Food and Drug Administration ("FDA") that in the early 1980s Philip Morris' research director, Thomas S. Osdene, suggested to him that some nicotine studies "could be conducted in Germany at INBIFO if they proved to be 'too sensitive' to conduct in Richmond," where Uydess was working.

178. Other tobacco companies also actively suppressed and concealed their research on nicotine addiction. For example, Brown & Williamson undertook its potentially sensitive research on nicotine through a contractor in Geneva, Switzerland, and through British affiliates at an English lab called Harrogate.

179. In addition to shipping incriminating evidence overseas, the tobacco companies also instituted an explicit policy for the destruction of harmful research. One 1977 memorandum from a Philip Morris scientist, William Dunn, states that if studies on nicotine's properties established it was addictive, "we will want to bury it." Another Philip Morris document, which appears to be in research director Osdene's handwriting, directs that "if important letters or documents have to be sent, please send them home, where I will act on them and destroy."

180. In 1963, Brown & Williamson debated internally whether to disclose to the U.S. Surgeon General, then preparing his first official report on smoking and health, what the company knew about the addictiveness of nicotine and the adverse health effects of the use of tobacco products. The company's general counsel advised Brown & Williamson to "accept its responsibility" and disclose its findings, but this advice was rejected. Some of the withheld research was later characterized in a report in the Journal of the American Medical Association as "at the cutting edge of nicotine pharmacology."

181. Defendants' representations that their products are not addictive were knowingly false, were made in furtherance of the defendants' conspiracy and were made despite a substantial body of evidence, including evidence developed by the tobacco companies themselves, indicating that nicotine is not only addictive, but is the reason why people smoke, and that the primary, if not sole, function of nicotine is to provide a pharmacological effect on the smoker that leads to addiction. The tobacco companies, except for Liggett as noted herein, continue to deny that nicotine is addictive, and instead use various misleading euphemisms to describe the role of nicotine, such as "satisfaction," "impact," "strength," "rich aroma" and "pleasure."

D. Industry Control and Manipulation of Nicotine

182. The tobacco companies have developed and used highly sophisticated technologies designed to deliver nicotine in precisely calculated quantities -- quantities that create and sustain addiction in the vast majority of individuals who use tobacco products regularly. Nicotine content is controlled through selective breeding and cultivation of plants and careful tobacco leaf purchasing plans. The tobacco companies also control nicotine delivery (i.e., the amount made available to the tobacco products user) with various design and manufacturing techniques.

1. Manipulation of Nicotine Content

183. American tobaccos of all types have undergone cumulative increases in total nicotine levels since the 1950s. Nicotine levels in the most widely grown American tobaccos increased between 10 and 50 percent between 1955 and 1980. This increase is the result of the industry's active and controlling participation in efforts to breed and cultivate tobacco for high nicotine levels.

184. Brown & Williamson's development of a tobacco plant dubbed "Y-1" is an example of the industry's concealment of its control and manipulation of the nicotine levels in its products. In a decade-long project, Brown & Williamson secretly developed a genetically-engineered tobacco plant, with a nicotine content more than twice the average found naturally in flue-cured tobacco. The Y-1 plant was grown in Brazil and shipped to the United States where it was used in five of Brown & Williamson's cigarette brands, including three labeled "light."

185. When investigators from the FDA visited a Brown & Williamson plant, company officials denied that the company was involved in "any breeding of tobacco for high or low nicotine levels." In an attempt to cover-up its project, Brown & Williamson instructed the DNA Plant Technology Corporation, which had developed Y-1, to tell FDA investigators that Y-1 had "never [been] commercialized."

186. Only after the FDA discovered two United States Customs Service invoices indicating that more than one-half million pounds of Y-1 tobacco had been shipped to Brown & Williamson on September 21, 1992, did the company admit that it had developed the high-nicotine tobacco and that close to four million pounds of Y-1 were stored in company warehouses in the United States.

187. Philip Morris also undertook development of methods to boost or manipulate the nicotine content of tobaccos. According to former Philip Morris scientist Ian Uydess:

In the 1980's, Philip Morris conducted field experiments on the growth of tobacco with elevated nicotine levels for possible use in their products. Philip Morris examined a technique called "ratooning" which involved cutting down of the tobacco plant early in the harvest cycle before the plant had fully matured. As the cut plant resumed its growth, the roots deposited elevated levels of nicotine in the leaves of the plant . . . . This technique produced tobacco leaves that had higher nicotine levels than the leaves of non-ratooned plants.

2. Manipulation of Nicotine Delivery

188. Modern tobacco products are designed and manufactured to control nicotine delivery to the consumer. Forms of nicotine manipulation practiced by the tobacco industry include manipulating the rate at which nicotine is delivered in the cigarette; transferring nicotine from one material to another; increasing the amount of nicotine in cigarettes; and adding nicotine to any part of a cigarette.

189. Nicotine is not an inevitable or unavoidable component of tobacco produc