SUPERIOR COURT

STATE OF RHODE ISLAND

PROVIDENCE, SC.

STATE OF RHODE ISLAND, by

and through JEFFREY B. PINE,

ATTORNEY GENERAL

Plaintiffs,

 

AMERICAN TOBACCO COMPANY, INC.;

BROWN & WILLIAMSON TOBACCO

CORPORATION; LIGGETT & MYERS, INC.;

LORILLARD TOBACCO COMPANY, INC.;

PHILIP MORRIS INC.;

R.J. REYNOLDS TOBACCO COMPANY;

UNITED STATES TOBACCO COMPANY;

B.A.T. INDUSTRIES P.L.C.;

P.L.C.; HILL & KNOWLTON, INC.;

THE COUNCIL FOR TOBACCO RESEARCH-

U.S.A., INC.; TOBACCO INSTITUTE,

INC.; foreign corporations and

unknown corporations; and JOHN DOE

1-100, and JANE DOE 1-100,

individuals,

Defendants.

C.A. NO. 97-

JURY DEMAND

COMPLAINT

I. INTRODUCTION AND NATURE OF THE ACTION

The State of Rhode Island (referred to hereafter as the "State"), by and through Attorney General Jeffrey B. Pine, brings this action for monetary damages, civil penalties, injunctive relief, and other equitable relief and alleges, upon information and belief, the following:

1. The diseases related to and caused by the smoking of cigarettes have killed millions of Americans over the last several decades; and the deaths continue as of this writing. In order to earn larger profits, tobacco manufacturers and their allied interests have chosen and continue to choose to ignore and actively suppress the truth concerning the hazards of smoking cigarettes. As a direct result, Rhode Island citizens have contracted smoking-related diseases including, without limitation, cancer, emphysema, lung and heart disease. The care and treatment of these Rhode Island citizens has placed a significant financial burden on the State. This burden on all Rhode Island citizens and the State should rightfully be borne by the tobacco manufacturers and their allied interests.

2. Under the Rhode Island Constitution, the laws of the State of Rhode Island, including Rhode Island's common law and Rhode Island General Laws, the State is responsible for the health, safety and welfare of its citizens, and the Attorney General has the duty to protect the interests of the general public. The State of Rhode Island, by Attorney General Jeffrey B. Pine, brings this action under State law for money damages, civil penalties, declaratory and injunctive relief, indemnity and restitution. As set forth more particularly below, the various Defendants, over a long period of time and continuing into the present day, conspired to deceive the State and its citizens about the addictive properties of nicotine and the full extent of the health risks of smoking. Every year in Rhode Island, close to 2000 addicted smokers die from using Defendants' products precisely as Defendants have designed and intended for those products to be used. Through a well-organized campaign of fraud, lies, intimidation and deception, Defendants have avoided legal responsibility for engineering, manufacturing and selling the most deadly and harmful consumer product in history, while reaping billions of dollars in profits.

3. This case challenges a massive unlawful course of conduct and conspiracy perpetrated by the Defendants. The Defendants' unlawful conduct includes a host of unfair, deceptive, anti-competitive, and unlawful acts, including, but not limited to, the following:

a. Publicly undertaking, as a "paramount" special responsibility, the duty of researching and disclosing to public health authorities and the public at large, including the State of Rhode Island, the full extent of the health risks of cigarette smoking, but then suppressing, concealing, distorting, and lying about the state and extent of their true knowledge of those risks;

b. Creating and/or funding fraudulent "rump" or "front" organizations, such as the Tobacco Industry Research Council (later known as The Council for Tobacco Research-U.S.A., Inc.), which was held out to the public as an independent research organization, but which was in fact controlled by lawyers and public relations firms, to prevent the public from learning what Defendants knew about the health risks of smoking and to create a false controversy about health risks of smoking;

c. Destroying, concealing, and/or otherwise spoliating and/or shipping overseas incriminating evidence of industry testing and research on the health risks of cigarette smoking and the addictive nature of nicotine, shutting down laboratories on short notice and making threats against scientists who tried to publish research revealing what the

industry actually knew about smoking, and asserting improper claims of attorney/client privilege and work product privilege to suppress and/or to conceal the results of adverse scientific research;

d. Engaging in unfair and deceptive trade practices by, among other things, jointly sponsoring false, deceptive, and misleading advertising, promotional and public relations campaigns intended to confuse and create doubt among governmental entities, including the State of Rhode Island, and the public about the health risks of cigarette smoking;

e. Jointly and collectively making false, misleading, and sham representations to Congress, other governmental entities, including the State of Rhode Island, and the public regarding the health risks of cigarette smoking, the addictive nature of nicotine, and the manipulation of nicotine levels in cigarettes, in order to inundate Congress and other federal and State entities with false and misleading information on the true risks of cigarette smoking, and with the intent to defraud, knowing that the State and others would reasonably rely on their representations;

f. Conspiring to eliminate and restrain competition and/or to use monopoly power, to suppress research into the health effects of smoking, to halt research, development of so-called "safer" cigarettes that caused less biological activity in smokers and agreeing not to market "safer cigarettes"; and

g. Engaging in unfair trade practices by targeting, marketing and advertising efforts to promote illegal sales of cigarettes to minors, and developing products and deceptive advertising campaigns designed to appeal specifically to young women; and

h. Conspiring to conceal and concealing the addictive nature of tobacco products and the Defendants' manipulation of nicotine levels in tobacco products.

4. As a direct and foreseeable result of these and other wrongful actions by Defendants, the State of Rhode Island has suffered substantial damages, and minors in Rhode Island continue to be lured into the illegal use of tobacco products. The Attorney General seeks to recover damages and penalties on behalf of the State of Rhode Island and to enjoin the continuing deceptive and unlawful practices described below.

The Defendants' Unlawful Conduct

5. The tobacco industry in the United States is a highly profitable oligopoly dominated by R.J. Reynolds Tobacco Company; Brown & Williamson Tobacco Corporation; Liggett & Myers, Inc.; Lorillard Tobacco Company, Inc.; Philip Morris Inc.; the American Tobacco Company, Inc.; B.A.T. Industries P.L.C.; and United States Tobacco Company (collectively referred to as the "Tobacco Companies" or "Tobacco Industry"). For decades, the Tobacco Companies have profited from the sale of tobacco products to millions of consumers. To build and sustain the market for their products, the Tobacco Companies concealed and/or misrepresented the addictive nature of tobacco products, created confusion concerning the damage to human health caused by tobacco products, manipulated the levels of nicotine in tobacco products in order to maintain and boost addiction, agreed not to compete for the sale of a "safer cigarette" and other innovative products, and focused their marketing efforts on minors.

6. Defendants are a cartel that controls nearly 100% of the market for cigarettes in the United States. Their longstanding conspiracy to mislead the public about the harmful and addictive effects of cigarette smoking has placed Defendants among the most profitable industries in the world. The breadth and boldness of the conspiracy recently was displayed before Congress when, in April of 1994, the chief executive officers of the leading tobacco manufacturers testified under oath that they do not believe that smoking causes death or that smoking is addictive. In truth, Defendants themselves have known for much longer than the scientific community and public health authorities, that cigarettes are both addictive and deadly.

7. The Tobacco Companies, as well as their public relations agents, lawyers and industry trade associations, have known for more than forty years that their tobacco products contained nicotine -- which they knew was a highly addictive substance -- as well as numerous carcinogens and other harmful elements.

8. Despite representations to the contrary, Defendants carefully calibrate, control and manipulate nicotine in cigarettes so that beginning smokers and others will become addicted to nicotine and develop a physical and psychological dependency that can be satisfied only by cigarette smoking. As a direct result of Defendants' knowledge of and methods chosen for the manufacture of cigarettes, long-term smokers find it extremely difficult and painful, and in many cases impossible, to withdraw from their physical dependency on nicotine.

9. Nicotine is addictive. The Tobacco Industry has known of the addictive nature of nicotine, as evidenced by internal industry documents.

10. Tobacco products are not only addictive, they are dangerous for human use. Tobacco products kill and injure those who use them. The Tobacco Companies know this, but continue to deny the existence of adverse health effects in their public statements.

11. The Tobacco Industry has manipulated the level of nicotine in tobacco products, and/or added other chemicals to tobacco in order to enhance nicotine's effect, in order to increase addiction and sell more product. The Industry has denied this practice, but the Food and Drug Administration has reported that nicotine manipulation does occur.

12. In 1953, the Tobacco Industry entered into a multifaceted unlawful conspiracy which continues to this day. One essential element of the conspiracy was an agreement to suppress harmful information concerning tobacco products which was accomplished as follows. First, the Tobacco Companies agreed to falsely represent that there is no proof that smoking is harmful. Second, they agreed to falsely represent that smoking is not addictive. And finally, the Tobacco Companies represented to the public and governmental regulators that they would undertake a special duty and responsibility to determine and to report the scientific truth about the health effects of tobacco, both by conducting internal research and by funding "independent" external research.

13. The industry's public special undertaking to pursue and report the truth about smoking was immediately breached. The industry's purported undertaking was part of a conspiracy to refute, undermine and neutralize information coming from the objective scientific and medical community and, at the same time, to confuse and mislead the public in an effort to avoid state or federal regulation, to encourage existing smokers to continue and to induce additional persons to commence smoking.

14. The industry's representations about the health and safety of smoking were and continue to be false. Despite the Tobacco Companies' denials, the Tobacco Industry knew its products were addictive and harmful. Further, the industry's publicly-proclaimed special undertaking to pursue and to report the truth about smoking was false, and deliberately misleading to the public in an effort to avoid state or federal regulation, to encourage existing smokers to continue smoking and to induce others to commence smoking.

15. An additional important element of the conspiracy was an agreement by the Tobacco Companies to restrain competition for development and sales of innovative "safer" cigarettes. The purpose and effect of this aspect of the conspiracy was to suppress and to restrain competition based on claims of health because such competition would have exposed the ill effects and addictive nature of smoking, thereby substantially increasing the Tobacco Companies' exposure to legal liability for the harm caused by cigarettes and tobacco products, and thereby threatening their shares of the tobacco market.

16. The conspiracy described above originated in response to medical and scientific studies in the early 1950's publicizing the adverse health impact of smoking. In response to what the industry internally called the "big scare," in late 1953 and early 1954, the Tobacco Companies and their public relations agent, Hill & Knowlton, jointly created a purportedly independent entity initially known as the Tobacco Industry Research Council (the "TIRC"). In 1964, the TIRC was renamed the Council for Tobacco Research (the "CTR"). As part of their unlawful conspiracy, the Tobacco Companies publicly represented that the TIRC would undertake, on behalf of the public, to perform objective research and to gather data concerning the relationship between cigarette smoking and health, and to publicize truthfully the results of this "independent" research. From 1954 forward, the industry has been using the TIRC and its successor, the CTR, to engage in a deceptive public relations campaign designed to mislead and confuse the American public regarding the relationship between smoking and health.

17. In the words of U.S. District Court Judge H. Lee Sarokin in Haines v. Liggett Group, Inc., Civ. Action 84-678, U.S. Dist. Court for the District of New Jersey, a "jury could reasonably conclude that the creation of ... [the TIRC] was nothing but a whore created for public relations purposes with no intention of seeking the truth or publishing it."

18. The Tobacco Companies, their lawyers and Hill & Knowlton controlled the affairs of TIRC/CTR by, among other things, causing it to publicize information, regardless of its merit, tending to obscure any relationship between cigarette smoking and disease. This course of conduct was designed to create the notion that there was a legitimate and good faith medical/scientific controversy over whether smoking is harmful to human health or whether nicotine is addictive.

19. Also in the 1950s, the Tobacco Companies began and continue thereafter, to tailor their cigarette advertisements, promotional activities and public statements to conceal and/or to misrepresent the addictive nature and the adverse health impact of cigarette smoking and tobacco use, while at the same time presenting cigarette smoking in a glamorous, youthful, exciting, relaxing posture by associating it with professional and economic success, intelligence, athletic ability and sexual attraction. This course of conduct accomplished the purpose of suppressing or misstating the addictive nature and the adverse health impact of smoking, so that new smokers, mainly young teenagers, could be "hooked," and existing smokers would continue smoking.

20. With full knowledge that they are selling an addictive and deadly product, Defendants deliberately advertise, promote and market cigarettes in such a way as to target promising markets of new smokers, such as minors. Every day, according to reputable studies, 3,000 American youths are seduced by Defendants' unfair and misleading advertising and marketing ploys and start smoking, each then becoming a potential addict and life-long profit center for Defendants.

21. Despite the particularly harmful health consequences of smoking for women, Defendants target advertising to this segment of the population. For women, smoking reduces fertility, increases the rate of miscarriages and stillbirths, retards uterine fetal growth and results in lower birth weights in infants. Yet Defendants have targeted and continue to target young women with advertising campaigns designed to appeal psychologically to this group of potential smokers.

22. These outrageous marketing strategies further the conspiracy to distort the truth about cigarette smoking. The net effect of Defendants' unlawful, deceptive, and unconscionable conduct, over the past several decades, has been to convey the message that intensive and thorough scientific and medical research has uncovered no reliable evidence about the real health effects of smoking. As described by one industry representative, Defendants' campaign of deception has been a "brilliantly conceived and executed" strategy to "creat[e] doubt about the health charge without actually denying it." Defendants knew that if smokers fully appreciated the risks of addiction and death, many would never have started smoking or would have quit, and Defendants would have lost the enormous profits they accumulated by shifting the costs of their conduct onto the State of Rhode Island and others.

23. Armed with coffers full from the highly profitable sale of an addictive drug, Defendants have successfully fended off legal attacks with a litigation strategy of expense, attrition and delay. According to information and belief, an attorney for Defendant R. J. Reynolds Tobacco Company asserted, "[t]he aggressive posture we (Reynolds) have taken regarding depositions and discovery in general continues to make these cases extremely burdensome and expensive for plaintiffs' lawyers, particularly sole practitioners. To paraphrase General Patton, the way we won these cases was not by spending all of [Reynolds's] money, but by making that other son of a bitch spend all his."

Damages Caused by the Tobacco Companies' Unlawful Conduct

24. The effects of the conspiracy are several and far-reaching, including, but not limited to, increased medical costs to the State of Rhode Island, the increased purchase of tobacco products by minors in violation of state law, and the failure of the industry to develop and to market "safer" innovative products.

Health Care Costs

25. One of the consequences of the Tobacco Companies' conduct has been to unjustly enrich the Tobacco Companies at the expense of Rhode Island's health care system and, ultimately, all Rhode Island residents and taxpayers.

(a) Defendants' conduct has generated a terrible human tragedy. Cigarette smoking is the leading cause of premature death in the United States. Approximately 50 million residents of the United States smoke cigarettes and another 6 million use smokeless tobacco products. According to the Federal Centers for Disease Control and Prevention, each year cigarette smoking kills more than 400,000 Americans, exceeding the combined deaths caused by automobile accidents, AIDS, alcohol abuse, use of illegal drugs, homicide, suicide, and fires. Smoking-related illnesses account for one of every five deaths each year in the United States.

(b) Cigarette smoking causes, among other serious illnesses, cancer, pulmonary diseases, and coronary heart disease:

Cancer -- Many chemicals in cigarette smoke have been determined to be carcinogenic. Cigarette smoking is responsible for at least 30% of all deaths from cancer. 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 is linked to cancers of the mouth, larynx, esophagus, stomach, pancreas, uterus, cervix, kidney and colon, among others.

Pulmonary Disease -- Smoking is the cause of more than 80% of deaths from pulmonary diseases such as emphysema and bronchitis. These diseases have a

particularly profound social impact because of the prolonged and extended suffering and disability of their victims.

Heart Disease -- Cigarette smoking is one of the major independent causes of coronary heart disease. Smoking is also responsible for thousands of deaths from cardiovascular disease, including stroke, heart attack, peripheral vascular disease and aortic aneurysm.

(c) In Rhode Island, approximately 20% of high school seniors who smoke today will be addicted adult smokers of the future. Moreover, adults also use smokeless tobacco.

(d) Health care costs in the United States

are hundreds of billions of dollars each year. Tobacco-related health care costs are estimated to be more than seven percent of total United States health care costs, and for 1993, tobacco-related health care costs were approximately $50 billion.

(e) The Tobacco Companies' unlawful conduct described herein has wrongfully increased medical costs to the State of Rhode Island, including, but not limited to, increased Medicaid payments and increased health care insurance for public employees.

(f) Rhode Island's increased health care costs caused by the Tobacco Companies' conduct is in the millions of dollars. These costs would have been avoided if the Tobacco Companies had not engaged in the course of conduct described in this Complaint. Rhode Island's share of those costs are sought as damages in this case.

Targeting Minors in Violation of State Law

26. A further effect of the Tobacco Companies' course of unlawful conduct and continuing conspiracy is the targeting and eventual addiction of minors and young people. Recognizing the addictive nature of their products, the Tobacco Industry seeks new customers among the youth of the nation. Because of the deaths or smoking cessation of so many of the industry's adult customers, the Tobacco Companies must constantly add new customers in order to maintain their profits.

(a) According to a 1994 U.S. Surgeon General's Report, every day another 3,000 children become regular smokers. Eighty-two percent of adults who have ever smoked had their first cigarette before age 18 and more than half of them had already become regular smokers by that age. Reports published by the U.S. Centers for Disease Control and Prevention indicate that anyone who does not begin smoking in childhood is unlikely to begin as an adult. For those 3,000 children who do become regular users of tobacco products every day, projections of current trends indicate that 1,000 will die prematurely as a result of their tobacco use.

(b) It is against the law of Rhode Island for minors to purchase tobacco products, and efforts to encourage them to do so contravene public policy. Nonetheless, to lure minors into smoking, the Tobacco Companies have deceptively designed special marketing

campaigns particularly appealing to minors. This targeting of minors is accomplished by extensive marketing research, polling and surveys to determine the most effective means of advertising to minors. An integral part of this campaign is the use of images and advertising themes particularly appealing to minors, and the placement of promotional materials in locations likely to be accessed primarily by minors.

(c) Further, knowing that products such as

smokeless tobacco with too much nicotine can be harsh and thus deter new users from becoming new addicts, the Tobacco Companies seek to graduate new users, often minors, from "milder" products to those with more "kick" in order to attract and addict more customers.

(d) As a result of the Tobacco Companies' unlawful acts, each day minors in Rhode Island purchase tobacco products in violation of state law. The Attorney General seeks to halt this practice.

Public Interest

27. Through their continuous unlawful, deceptive and fraudulent business practices described herein, the Tobacco Companies have and will continue to deceive, mislead and financially injure the State of Rhode Island and its citizens. Therefore, the Attorney General believes these legal proceedings to be in the public interest: (a) to secure for the residents of the State of Rhode Island a fair and open market, free from deception and illegal restraints of trade; (b) to recover civil penalties, restitution and damages; (c) to require fair and full disclosure by the Tobacco Companies of the nature and effects of their products; (d) to obtain the return of the increased cost of health care caused by Defendants' wrongful conduct; (e) to halt the marketing of tobacco products to minors and to disgorge the Tobacco Companies' illegal proceeds from their sales of tobacco products accomplished through the violation of state law; (f) to require Defendants to fund a remedial public education campaign on the true health consequences of smoking; and (g) to require Defendants to fund smoking cessation programs for nicotine dependent smokers.

II. JURISDICTION AND VENUE

28. This Complaint is filed and these proceedings are instituted under the provisions of the Rhode Island Deceptive Trade Practices Act §§ 6-13.1-1 through 19; the Rhode Island Antitrust Act §§ 6-36-1 through 26; the Rhode Island Abatement of Public Nuisance Statute, §§ 10-1-1 through 10; and the Rhode Island Organized Crime Control Act, §§ 7-15-1 through 11.

29. Authority for the Attorney General to commence this action for injunctions, mandatory injunctions, damages, restitution, disgorgement, civil penalties, attorney fees, and such other relief as the Court deems proper, is conferred by the Constitution of Rhode Island, common law, and R.I. Gen. Laws §§ 6-36-12, inter alia §§ 6-13.1-8, §§ 6-13.1-9, §§ 7-15-4, §§ 42-9-6, and §§ 10-1-1.

30. The violations alleged herein have been and are being committed in whole or in part, and affect commerce in, and the Tobacco Companies do business in Providence County and elsewhere throughout the State of Rhode Island.

III. THE PARTIES

PLAINTIFFS

31. The Attorney General is the chief law enforcement officer and attorney for the State of Rhode Island and brings this action on behalf of the State and all political subdivisions of the State.

DEFENDANTS

32. Defendant American Tobacco Company, Inc. ("American Tobacco") is a Delaware corporation whose principal place of business is Six Stamford Forum, Stamford, Connecticut 06904. American Tobacco manufactured, advertised and sold Lucky Strike, Pall Mall, Tareyton, American, Malibu, Montclair, Newport, Misty, Iceberg, Silk Cut, Silva Thins, Sobrania, Bull Durham, and Carlton cigarettes and other tobacco products throughout the United States. American Tobacco advertised, promoted and sold its tobacco products throughout the State of Rhode Island. In 1994, American Tobacco was sold to British-American Tobacco Co., parent of Defendant Brown & Williamson.

33. Defendant Brown & Williamson Tobacco Corporation ("Brown & Williamson") is a Delaware corporation whose principal place of business is 1500 Brown & Williamson Tower, Louisville, Kentucky 40202. Brown & Williamson manufactures, advertises, and sells Kool, Raleigh, Barclay, BelAir, Capri, Richland, Laredo, Eli Cutter and Viceroy cigarettes and other tobacco products throughout the United States. Brown & Williamson advertises, promotes and sells its tobacco products throughout the State of Rhode Island.

34. Defendant Liggett & Myers, Inc. ("Liggett") is a Delaware corporation whose principal place of business is Main and Fuller, Durham, North Carolina. Liggett manufactures, advertises and sells Chesterfield, Decade, L&M, Pyramid, Dorado, Eve, Stride, Generic and Lark cigarettes and other tobacco products throughout the United States. Liggett advertises, promotes and sells its tobacco products throughout the State of Rhode Island.

35. Defendant Lorillard Tobacco Company, Inc. ("Lorillard"), is a Delaware corporation whose principal place of business is 1 Park Avenue, New York, New York 10016. Lorillard manufactures, advertises and sells Old Gold, Kent, Triumph, Satin, Max, Spring, Newport, and True cigarettes and other tobacco products throughout the United States. Lorillard advertises, promotes and sells its tobacco products throughout the State of Rhode Island.

36. Defendant Philip Morris Inc. ("Philip Morris"), is a Virginia corporation whose principal place of business is 120 Park Avenue, New York, New York 10017. Philip Morris manufactures, advertises and sells Philip Morris, Merit, Cambridge, Marlboro, Benson & Hedges, Virginia Slims, Alpine, Dunhill, English Ovals, Galaxy, Players, Saratoga, and Parliament cigarettes and other tobacco products throughout the United States. Philip Morris advertises, promotes and sells its tobacco products throughout the State of Rhode Island.

37. Defendant R. J. Reynolds Tobacco Company ("R.J. Reynolds") is a New Jersey corporation whose principal place of business is Fourth & Main Street, Winston-Salem, North Carolina 27102. Reynolds manufactures, advertises and sells Camel, Vantage, Now, Doral, Winston, Sterling, Magna, More, Century, Bright Rite and Salem cigarettes and other tobacco products throughout the United States. Reynolds advertises, promotes and sells its tobacco products throughout the State of Rhode Island.

38. Defendant United States Tobacco Company ("U.S. Tobacco"), is a Delaware corporation whose principal place of business is 100 West Putnam Avenue, Greenwich, Connecticut. U.S. Tobacco manufactures, advertises and sells Sano cigarettes. U.S. Tobacco also manufactures, advertises and sells approximately 88% of the smokeless tobacco (snuff and chewing tobacco) sold in the United States, under various brand names including Happy Days, Skoll and Copenhagen. U.S. Tobacco advertises, promotes and sells its tobacco products throughout the State of Rhode Island.

39. Defendant B.A.T. Industries P.L.C. ("B.A.T. Industries") is a British corporation whose principal place of business is Windsor House, 50 Victoria Street, London. 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 the State of Rhode Island. B.A.T. Industries has also conducted, or through its agents, subsidiaries, associated companies, and/or co-conspirators, conducted significant research for Brown & Williamson on the topics of smoking, disease and addiction. On information and belief, Brown & Williamson also sent to England research conducted in the United States on the topics of smoking, disease and addiction, in order to remove sensitive and inculpatory documents from United States jurisdiction, and such documents were subject to B.A.T. Industries' control. B.A.T. Industries is a participant in the conspiracy described herein and has caused harm and affected commerce in the State of Rhode Island.

40. The Defendants named in Paragraph 32-39 are sometimes herein collectively referred to as "Defendants", "Defendant Tobacco Manufacturers", "Tobacco Industry," "Tobacco Companies" or "Tobacco Cartel."

41. Defendant Hill & Knowlton, Inc. ("Hill & Knowlton") is an international public relations firm and New York corporation with offices located in major United States cities and whose principal place of business is 420 Lexington Avenue, New York, New York. Defendant Hill & Knowlton played an active and knowing role in the conspiracy complained of, aiding the circulation and/or publication of many of the false statements of the tobacco industry attributable to the Tobacco Industry Research Committee (now known as the Council for Tobacco Research-U.S.A., Inc.). Hill & Knowlton has been the primary advertising agency responsible for dissemination of the false and misleading information in question, in its capacity as the advertising and public relations agency for the Tobacco Institute, CTR and several members of the tobacco industry, including Liggett, Philip Morris, Reynolds, American Tobacco and Lorillard. In the course of such representation, Hill & Knowlton aided these Defendants in creating and issuing false information and covering up the truth concerning the tobacco industry, the link between smoking and cancer or other health hazards, the addictive nature of smoking and the true nature of the activities of the TIRC/CTR and its relationship to the industry. Hill & Knowlton has been involved in the wrongful conduct and conspiracy since its creation. Hill & Knowlton is referred to hereinafter as "The Tobacco Consultant".

42. Defendant The Council for Tobacco Research-U.S.A., Inc. ("CTR"), successor in interest to the Tobacco Industry Research Committee ("TIRC"), is a New York nonprofit corporation whose principal place of business is 900 Third Avenue, New York, New York 10022. At all relevant times, CTR and TIRC operated as public relations and lobbying arms of the Tobacco Companies and as agents and employees of the Tobacco Companies. They also acted as facilitating agencies in furtherance of Defendants' combination and conspiracy as described in this Complaint. In doing the things alleged, CTR and TIRC acted within the course and scope of their agency and employment, and acted with the consent, permission, and authorization of each of the Tobacco Companies. All actions of the CTR and TIRC alleged were ratified and approved by the officers or managing agents of the Tobacco Companies. CTR and TIRC have been involved continuously in the conspiracy

described and the actions of CTR and TIRC have affected commerce and caused harm in Rhode Island.

43. Defendant Tobacco Institute, Inc. ("Tobacco Institute") is a New York nonprofit corporation whose principal place of business is 1875 I Street Northwest, Suite 800, Washington, DC 20006. At all relevant times, Tobacco Institute operated as a public relations and lobbying arm of the Tobacco Companies and was an agent and employee of the Tobacco Companies. It also acted as a facilitating agency in furtherance of the combination and conspiracy of Defendants described in this Complaint. In doing the things alleged, Tobacco Institute acted within the course and scope of its agency and employment, and acted with the consent, permission, and authorization of each of the Tobacco Companies. All actions of the Tobacco Institute alleged were ratified and approved by the officers or managing agents of the Tobacco Companies. Tobacco Institute has been involved in the conspiracy described in this Complaint and the actions of Tobacco Institute have affected commerce and caused harm in Rhode Island.

44. The Council for Tobacco Research-U.S.A., Inc., (successor to the Tobacco Industry Research Committee) and Tobacco Institute, Inc., collectively are referred to as "The Tobacco Trade Associations."

45. Various other persons, firms, and corporations, who have been named as Unknown Corporations and John Doe 1-100 and Jane Doe 1-100 participated as co-conspirators in the illegal acts alleged and performed acts and made statements in furtherance of the combination and conspiracy alleged in this Complaint.

46. Defendants listed above, and/or their predecessors and successors in interest, did business in the State of Rhode Island; made contracts to be performed in whole or in part in Rhode Island and/or manufactured, tested, sold, offered for sale, supplied or placed in the stream of commerce, or in the course of business materially participated with others in so doing, cigarettes which Defendants knew to be defective, unreasonably dangerous and hazardous, and which Defendants knew would be substantially certain to cause injury to the State and to persons within the State thereby negligently and intentionally causing injury to persons within Rhode Island and to the State, and as described herein, committed and continue to commit tortious and other unlawful acts in and with consequences in the State of Rhode Island.

47. Each Defendant is sued individually as a primary violator and as a co-conspirator and aider and abettor, and the liability of each arises from the fact that each Defendant entered into an agreement with the other Defendants and third parties to pursue, and knowingly pursued, the common course of conduct to commit or participate in the commission of all or part of the unlawful acts, tortious acts, plans, schemes, transactions, and artifices to defraud alleged herein.

48. Such acts of conspiracy and aiding and abetting included, among other things, falsely advertising, marketing, promoting and selling cigarettes as safe, non-addictive, and not containing levels of nicotine manipulated by Defendants to cause and maintain addiction.

49. The liability of each Defendent arises from the fact that each committed and/or engaged in a conspiracy to accomplish the commission of all or part of the unlawful and/or tortious conduct alleged herein, and/or intentionally, knowingly, with evil motive, intent to injure, ill will and/or fraud and without legal justification or excuse, engaged in the conduct herein alleged.

50. Defendants, and/or their predecessors and successors in interest, performed such acts as were intended to, and did, result in the sale of cigarettes in the State of Rhode Island and the use and consumption of cigarettes by residents of the State of Rhode Island.

51. The term "addictive" used in this Complaint is synonymous and interchangeable with the term "dependence-producing"; both terms refer to the persistent and repetitive intake of psychoactive substances despite evidence of harm and a desire to quit. Some scientific organizations have replaced the term "addictive" with "dependence-producing" to shift the focus to dependent patterns of behavior and away from the moral and social issues associated with addiction. Both terms are equally relevant for purposes of understanding the drug effects of nicotine.

IV. RELEVANT TIMES

52. The relevant times for these claims for relief contained in this Complaint have not been determined specifically, but are believed to cover a period of time from at least December 1953 to the present date.

V. CONSPIRACY ALLEGATIONS

53. In committing the wrongful acts alleged, all of the Defendants and the other entities and persons identified, with the assistance and knowledge of their counsel, have pursued a common course of conduct, acted in concert with, aided and abetted and conspired with one another, in furtherance of their common plan and scheme outlined herein.

VI. NATURE OF TRADE AND COMMERCE

54. Cigarette manufacturing has been one of the most concentrated industries in the United States throughout this century. Together, Philip Morris, Reynolds, Brown & Williamson, Lorillard, American Tobacco, and Liggett comprise the "Big Six" cigarette manufacturers, who control virtually 100% of the market in the United States and in Rhode Island. Philip Morris and Reynolds are the industry leaders, with national market shares of approximately 46% and 25%, respectively. The approximate cigarette market shares of the remaining Big Six manufacturers are: Brown & Williamson, 12% (19% if American Tobacco is included); Lorillard, 8%; American Tobacco, 7%; and Liggett 2%. The smokeless tobacco market, dominated by U.S. Tobacco, is even more concentrated.

55. In part because of its concentration, the tobacco industry has long been one of America's most profitable businesses, with profit margins estimated to be at least 30%. The industry earns billions of dollars in profits each year from domestic sales alone. In 1995, Philip Morris Companies, Inc., parent of Defendant Philip Morris, reported record earnings, largely due to significantly increased tobacco sales abroad, especially in Eastern Europe. However, even its U.S. sales strengthened in 1995, and the domestic tobacco business shipped a record 422 billion cigarettes, earning $3.7 billion.

VII. RELEVANT MARKET

56. For the purposes of this action, the sale of cigarettes is the relevant product market. The relevant geographic markets are the United States and the State of Rhode Island.

VIII. COMMON FACTUAL ALLEGATIONS

Based upon information and belief, Plaintiff asserts the following common facts:

57. Senior tobacco industry executives have been quoted as acknowledging the addictive nature of cigarettes. F. Ross Johnson, former CEO of R.J. Reynolds was quoted in the October 6, 1994 edition of The Wall Street Journal as saying: "Of course it's addictive. That's why you smoke the stuff." In a 1963 document which was revealed in Congressional hearings in 1994, Addison Yeaman, Brown & Williamson's General Counsel, wrote: "We are, then, in the business of selling nicotine, an addictive drug...."

58. On April 14, 1994, each of the chief executives of the Tobacco Companies swore under oath that he believed nicotine is not addictive. Testifying before the House Subcommittee on Health and the Environment of the Committee on Energy and Commerce, chaired by Congressman Henry Waxman, these executives misrepresented their companies' knowledge about the health risks of smoking, nicotine addiction, and nicotine manipulation in the cigarette manufacturing process. William I. Campbell, then President and CEO of Philip Morris stated that "Philip Morris does not manipulate nor independently control the level of nicotine in our products."; that "Cigarette smoking is not addictive."; and "Philip Morris research does not establish that smoking is addictive." James W. Johnston, R.J. Reynolds' CEO said that "Smoking is no more addictive than coffee, tea or Twinkies." Andrew Tisch, then CEO of Lorillard, asserted that smoking does not cause death: "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."

59. In fact, research conducted by Philip Morris scientists -- which Philip Morris and other Defendants attempted to suppress -- has demonstrated, in the scientists' own words, that nicotine is addictive "on a level comparable to cocaine." High-ranking executives in the tobacco industry have privately acknowledged, since the early 1960s, that nicotine is an addictive drug. For example, Addison Yeaman, General Counsel at Brown & Williamson, wrote in an internal memorandum in 1963: "Moreover, nicotine is addictive. We are, then, in the business of selling nicotine, an addictive drug effective in the release of stress mechanisms." And in 1962, the Scientific Advisor to the Board of Directors of British American Tobacco Company ("BATCO"), Brown & Williamson's parent company, 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."

60. The Tobacco Company executives' false Congressional testimony about nicotine is but the most recent episode in the industry's campaign, spanning 50 years, to sow confusion and misinformation about the true health effects of smoking. As described in various internal memoranda of Tobacco Industry executives, the scheme has been "a brilliantly conceived and executed" strategy to "creat[e] doubt about the health charge without actually denying it."

The Tobacco Industry Conspiracy to Deceive the

Public About Disease and Death

61. Although tobacco in various forms has been consumed by Americans for many, many years, it was not until the 19th century that an easily inhalable tobacco product, the cigarette, became widely popular. Cigarette smoking increased dramatically in the first half of the 20th century. As early as 1946, tobacco company chemists themselves reported concern for the health of smokers. A 1946 letter from a Lorillard chemist to its manufacturing committee states: "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." Neither this letter nor the information it contained was ever voluntarily released to the public.

Claiming Cigarettes Are Healthful

62. Industry spokesmen referred to these and similar reports as "the health scare," and throughout the 1930s through the 1950s, countered with express advertising claims and warranties as to the healthfulness of their products. These claims were knowingly and/or recklessly false, misleading, deceptive, unconscionable, and/or fraudulent. Examples of these health warranties appear in the following paragraphs 63 through 70.

63. Old Gold reacted to early medical studies with the slogan: "If pleasure's your aim, not medical claims..." and made claims such as "Old Gold -- Not a cough in a Carload."

64. R.J. Reynolds claimed that there was "Not a single case of throat irritation due to smoking Camels."

65. Philip Morris brand was held out as "The Throat-tested cigarette" on the basis of supposed studies showing that Philip Morris brand cigarettes were less irritating. An ad by the company in a 1943 issue of the National Medical Journal read: "'Don't smoke' is advice hard for patients to swallow. May we suggest instead 'Smoke Philip Morris?' Tests showed three out of every four cases of smokers' cough cleared on changing to Philip Morris. Why not observe the results yourself?"

66. In 1942, Brown & Williamson claimed that Kools would keep the head clear and/or give extra protection against colds.

67. In 1952, Liggett & Myers widely publicized the "results" of tests showing that "smoking Chesterfields would have no adverse effects on the throat, sinuses or affected organs." The tests were conducted by Arthur D. Little, Inc. for advertising purposes and were designed to have no real scientific value. These ads ran, among other places, on the nationally popular Arthur Godfrey radio and television show. Arthur Godfrey subsequently contracted lung cancer caused by smoking cigarettes.

68. Ads from the 1930s and 1940s often carried wide-ranging medical claims that placed cigarette-touting physicians in the company of endorsers such as Santa Claus ("Luckies are easy on my throat"), movie stars, sports heroes, and circus stars. Some companies hired attractive women to deliver cigarette samples to physicians and the patients in their waiting rooms.

69. In the New York State Journal of Medicine, Chesterfield ads began running in 1933 and often carried claims such as "Just as pure as the water you drink...and practically untouched by human hands."

70. During the 1950s, Defendants attempted to counter the "health scare" with campaigns like "The Filter Derby" and "Tar Wars," making false and fraudulent warranties of health claims based on tar and nicotine content.

71. Defendants sponsored cigarette ads in medical journals such as the Journal of the American Medical Association ("JAMA") from the 1930s through the 1950s. After the appearance of landmark studies such as the 1952 JAMA article on smoking and bronchial carcinoma by Alton Ocshner, M.D., JAMA ceased running cigarette ads.

The Conspiracy is Born to Counter "The Big Scare" and the

Beginning of the Industry Conspiracy to Suppress the Truth and

To Curtail Competition

72. Cigarette smoking increased dramatically in the first half of the 20th century. With the increase of cigarette smoking came an increase in lung cancer. Despite growing evidence showing their cigarettes caused lung disease and cancer, the Tobacco Companies chose sales over public health and safety. Starting in the 1930s, and continuing until the mid-1950s, the Tobacco Companies made express claims as to the healthfulness of their products without regard to the truth of their claims and the consequential adverse impact on consumers.

73. One of the key themes used to promote cigarette smoking during this period was a promise that individual cigarette brands were either "less irritating" or that "harmful irritants" had been removed. At some point during this period, every major cigarette brand made a false claim regarding health and/or irritation. These pre-1954 advertisements and representations demonstrate the Tobacco Companies' understanding prior to December 1953 that consumers wanted safer products, and, as a result, the Tobacco Companies engaged in vigorous competition on the basis of claims of health and safety.

74. In the early 1950s, scientists published two significant scientific studies warning of the health hazards of cigarettes. The first was published in 1952 by Dr. Richard Doll, a British researcher, who 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 and others of the Sloan-Kettering Institute, whose experiments with mice confirmed the cancer-causing properties of cigarettes. The widespread reporting of these studies caused what cigarette company officials called the "Big Scare."

75. The Tobacco Companies and their co-conspirators knew that published information about health risks would (a) increase consumer demand for safer tobacco products, (b) induce some competitors to promote their own brands or disparage competing brands on the basis of relative health risk, (c) materially reduce their profits and market shares, and (d) increase the likelihood of government regulation and decrease the likelihood that they could shift to the public the health costs caused by use of tobacco products. Armed with this knowledge, and as set forth below, the Tobacco Companies ultimately agreed not to compete in the market based on health claims, or in the market for "safer" or alternative products, and agreed to suppress adverse information concerning health risks and addiction.

76. The Tobacco Industry responded quickly to the Big Scare, which by late 1953 had caused a decrease in consumption of tobacco products and in the stock prices of many of the Tobacco Companies. Thus, on December 14, 1953, in the direct aftermath of the Wynder study and the public concern over it, Brown & Williamson President Timothy V. Hartnett circulated a memorandum to his counterparts at other tobacco companies and set out his proposals on how the industry should collectively deal with the "health issue."

77. Hartnett's actions were an invitation to Brown & Williamson's competitors to agree to restrain independent economic best interest in favor of collusion.

78. Confronted with the studies, the presidents of the leading Tobacco Companies met at an extraordinary gathering in the Plaza Hotel in New York City on December 15, 1953. Defendant Hill & Knowlton, a public relations agency, coordinated the meeting and later prepared a memorandum summarizing the discussions of that day. According to the Hill & Knowlton memorandum:

a. The companies had not met together since two previous antitrust decrees had prohibited "many group activities." However, the companies viewed the current problem "as being extremely serious and worth of drastic action."

b. Another 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 situation 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 & Knowlton was to play a central role in the industry association. "The current plans are for

Hill & Knowlton to serve as the operating agency of the companies, hiring all the staff and disbursing all funds."

79. At the Plaza Hotel meeting, these Tobacco Companies entered into a contract, combination and conspiracy to restrain competition on the basis of relative health risks. This conspiracy, which continues today, is a per se violation of the Rhode Island Antitrust Act, § 6-36-1 through 12.

80. The agreement reached at the Plaza Hotel to conceal adverse information and not to compete on the basis of health, was to be a permanent fixture of the Tobacco Companies' future relationship. According to the Hill & Knowlton memorandum, each of the company presidents attending emphasized the fact that they considered the program to be a long-term one.

81. Thus, at the December 15, 1953 meeting, the Tobacco Companies in attendance agreed to a public relations program on

the issue; formed an informal committee to control the public relations function; and charged Hill & Knowlton, a public relations firm, with the operation, hiring of staff and disbursement of funds. However, Liggett decided not to participate at that time, choosing to ignore the whole controversy.

82. Thus, the Tobacco Industry Research Committee ("TIRC"), eventually renamed as The Council for Tobacco Research ("CTR"), was conceived and born with five of the largest six cigarette manufacturers as original members. Liggett finally joined in 1964, in response to the Surgeon General's first report on smoking and health.

83. Nine days after the December 15, 1953 meeting, Hill & Knowlton presented a detailed recommendation to the cigarette manufacturers and others. The recommendation recognized the importance of gaining the public trust, and avoiding the appearance of bias, if the "pro-cigarette" industry strategy was to be successful. According to the memorandum:

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

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

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

84. Evidence of the tobacco cartel's agreement not to develop a "safer cigarette," and to restrain competition based on health, is the uniform shift in the nature of tobacco advertising starting in 1954 and continuing through the present. Prior to 1954, as set forth above, the tobacco industry responded to consumer demand by advertising and robustly competing based on claims related to health. After 1954, although the companies competed on issues such as filters, tar and nicotine, no further health claims were made nor was there any advertising on less harmful products.

The "Frank Statement to Cigarette Smokers"

-- a Scheme to Defraud Consumers

85. The cigarette industry announced the formation of TIRC on January 4, 1954, with newspaper advertisements placed in virtually every city with a population of 50,000 or more, reaching a circulation of more than 43 million Americans. The advertisement was captioned "A Frank Statement to Cigarette Smokers" and was run under the auspices of TIRC with, among others, five of the largest six manufacturers -- American Tobacco, R.J. Reynolds, Philip Morris, U.S. Tobacco, Lorillard, and Brown & Willamson Tobacco -- listed by name. The advertisement promised that Defendants would undertake the responsibility of learning and disclosing the facts about smoking:

RECENT REPORTS on experiments with mice having 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. However, we do not believe that any serious medical research, even though its results are inconclusive, should be disregarded or lightly dismissed.

At the same time, we feel it is in the public interest to call attention to the fact that eminent doctors and research scientists have publicly questioned the claimed significance of these experiments.

Distinguished authorities point out:

1. That medical research of recent years indicates many possible causes of lung cancer.

2. That there is no agreement among the authorities regarding what the cause is.

3. That there is no proof that cigarette smoking is one of the causes.

4. That statistics purporting to link cigarette smoking with the disease could apply with equal force to any one of many other aspects of modern life. Indeed the validity of the statistics themselves is questioned by numerous scientists.

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.

For more than 300 years tobacco has given solace, relaxation, and enjoyment to mankind. At one time or another during those years critics have held it responsible for practically every disease of the human body. One by one these charges have been abandoned for lack of evidence.

Regardless of the record of the past, the fact that cigarette smoking today should even be suspected as a cause of a serious disease is a matter of deep concern to us.

Many people have asked us what we are doing to meet the public's concern aroused by the recent reports. Here is the answer:

1. We are pledging aid and assistance to the research effort into all phases of tobacco use and health. This joint financial aid will of course be in addition to what is already being contributed by individual companies.

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

3. 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.

86. In this advertisement, the participating Defendant Tobacco Companies recognized their "special responsibility" to the public, and promised to learn the facts about smoking and health. The participating Defendant Tobacco Companies promised to sponsor independent research on the subject, claiming they would make health a basic responsibility, paramount to any other consideration in their business. The participating Defendant Tobacco Companies also promised to cooperate closely with public health officials. At the time these promises were made, Defendants had no intent to honor their promises. They have repeatedly breached their promises thus made to the public, including their promises made to the public health officials and citizens of Rhode Island.

"Scientific Research" as a Public Relations Front:

Control of TIRC by Hill & Knowlton

87. As had been proposed at the December 15, 1953 meeting, Defendant Tobacco Companies (without Liggett) through their agent Defendant Hill & Knowlton, operated and effectively controlled TIRC.

88. TIRC was physically established in the Empire State Building, 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]"

89. In 1954, 35 staff members of Hill & Knowlton worked full or part time for TIRC. In that year, TIRC spent $477,955.00 on payments to Hill & Knowlton, over 50% of TIRC's entire budget.

90. After lulling the public into a false sense of security concerning smoking and health, the TIRC continued to act as a front for tobacco industry interests. Despite the initial public statements and posturing, and the repeated assertions that they were committed to full disclosure and vitally concerned, the TIRC secretly failed to make the public health a primary concern. The Tobacco Trade Associations acted at the direction of the Tobacco Companies and the Tobacco Consultants to protect tobacco industry profits, and did not act to protect the public health. In fact, there was a coordinated, industry-wide strategy designed actively to mislead and confuse the public about the true dangers associated with smoking cigarettes. Rather than work for the good of the public health as it had promised, and sponsor independent research, the Tobacco Companies and Tobacco Consultants, acting through the Tobacco Trade Associations, refuted, undermined, distorted, concealed and neutralized information coming from the scientific and medical community.

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

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

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

c. "Positive stories are on the ascendancy."

The True Nature of the CTR

92. Since its inception, the CTR has functioned as a remarkably effective vehicle to perpetuate the deception that the health risks of smoking and nicotine addiction have never been proven. The industry has congratulated itself on a brilliantly conceived and executed strategy to create doubt about the charge that cigarette smoking is deleterious to health without actually denying it. A 1962 memo stated that the industry had handled the "Big Scare" effectively, by treating the public health threat as a public relations problem that was solved for the self-preservation of the industry's image and profit. One Defendant's executive called the CTR the best, cheapest insurance the tobacco industry can buy, noting that with it, Defendants would have to invent CTR or would be dead.

93. In 1993, a former 24-year employee of CTR confirmed publicly that the joint industry research efforts were not objective: "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."

The Lawyers' Control of Scientific Research

94. The Defendants have used lawyers and fraudulent, deceptive, unconscionable, and false claims of Attorney/Client privilege and Work Product to insulate CTR-funded research projects from disclosure to the public and to government officials. This conduct demonstrates the falsity of the industry representations jointly to fund objective research and to report the results of that research to the public.

95. CTR used the term "Special Projects" to mean a project that carried a risk of a negative result that might have to be suppressed. "Special Projects" were selected and monitored by Tobacco Attorneys to prevent disclosure. One Philip Morris official characterized CTR as a "front" for performing "special projects."

96. Notes prepared at a 1981 meeting of the cigarette industry's 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. ... We were afraid of discovery for FTC and [Dr. Domingo] Aviado, we wanted to protect it under the lawyers. We did not want it out in the open."

97. The sole purpose of this "Special Projects" division within CTR was to conceal research that was harmful to the tobacco industry and to promote and develop research and expert witnesses needed for the defense of tort litigation. Incriminating reports and documents contained within this division were passed through the Tobacco Attorneys and are now claimed by Defendants to be privileged.

98. CTR-sponsored research projects were directed away from research that might add to the evidence against smoking. When CTR-sponsored research did produce unfavorable results, however, the information was distorted or simply suppressed. For example, Dr. Freddy Homburger, a researcher in Cambridge, Massachusetts, undertook a study of smoke exposure on hamsters. According to Dr. Homburger, he received a grant from CTR which 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 in 1974, the Scientific Director of CTR and a CTR lawyer "didn't want us to call anything cancer" and that they threatened Dr. Homburger with "never get[ting] a penny more" if his paper was published without deleting the word cancer.

99. 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 cancelled. Homburger was given a cordial welcome and nicely hastened out the door. P.S. I doubt if you or Tom will want to retain this note."

100. Not content with the holding strategy employed by the TIRC and the CTR, Defendants advocated a more offensive role through their lobbying arm, the Tobacco Institute. This tobacco industry-supported group actively seeks to increase doubt about the negative health effects of smoking by suggesting that there are alternative explanations to the data. One "theory" detailed how individual genetic makeups predisposed individuals to illnesses. Another, the "multi-factorial hypothesis," asserted that multiple factors, i.e., food additives, viruses, occupational hazards, air pollution or stress, should be blamed for causing cancer. The tobacco industry financed, supported and encouraged the manufacture of fraudulent science.

Tobacco Industry Concealment and Disinformation

101. On February 6, 1992, United States District Court Judge H. Lee Sarokin for the District of New Jersey issued an opinion in Haines v. Liggett Group, Inc., Civ. Action 84-678. After reviewing 1500 documents in camera, Judge Sarokin noted that "In 1954, the tobacco industry promised to disseminate the results of industry-sponsored, independent scientific research for the purpose of answering the question: 'Does cigarette smoking cause illness?' To fulfill its promise, the tobacco industry proffered the allegedly 'independent' research organization, the Council for Tobacco Research (the "CTR"), which purportedly would examine the risks of smoking and report its findings to the public." After his review of the withheld documents, Judge Sarokin concluded that Defendants had intentionally breached their promises to the public:

"Despite the industry's promise to engage independent researchers to explore the dangers of cigarette smoking and to publicize their findings the evidence clearly suggests the research was not independent; that potentially adverse results were shielded under the caption of 'special projects'; that the attorney-client privilege was intentionally employed to guard against such unwanted disclosure; and that the promise of full disclosure was never meant to be honored, and never was."

102. As a result of this finding, Judge Sarokin went on to note that Defendants' actions constituted a fraud:

"A jury might reasonably conclude that the industry's announcement of proposed independent research into the dangers of smoking and its promise to disclose its findings was nothing but a public relations ploy -- a fraud -- to deflect the growing evidence against the industry, to encourage smokers to continue and non-smokers to begin, and to reassure the public that adverse information would be disclosed."

Continued False Promises to the Public

103. Using CTR as a "front," Defendants pursued a public disinformation strategy to confuse and mislead public health authorities and the public about the true health risks of cigarette smoking.

104. Defendants created a publication called Tobacco and Health (later, Tobacco and Health Research), distributed it to the press, doctors, and health officials, to disseminate false information and generate confusion over the causal connection between cigarette smoking and disease. The "Criteria For Selection" of articles for publication included an example of "a report in which smoking-associated diseases are questioned."

105. The deceptions of the 1954 "Frank Statement to Cigarette Smokers" were renewed and repeated by the industry. R.J. Reynolds Chairman Bowman Gray told Congress in 1964: "If it is proven that cigarettes are harmful, we want to do something about it regardless of what somebody else tells us to do. And we should do our level best. It's only human."

106. The January 15, 1968 issue of True Magazine contained an article written by Stanley Frank called, "To Smoke or Not to Smoke -- That is Still the Question." The article dismissed the evidence against smoking as "inconclusive and inaccurate" and claimed that "[s]tatistics alone link cigarettes with lung cancer ... it is not accepted as scientific proof of the cause and effect." A few months later, a similar but shorter article appeared in the National Enquirer entitled "Cigarette Cancer Link is Bunk" written by "Charles Golden" (a fictitious name commonly used by the Enquirer). The real author was Stanley Frank. Two million reprints of the True Magazine article were distributed to physicians, scientists, journalists, government officials, and other opinion leaders with a small card which stated, "As a leader in your profession and community, you will be interested in reading this story from the January issue of True Magazine about one of today's controversial issues." The cost for this was paid by Brown & Williamson, Philip Morris and R.J. Reynolds. It was subsequently disclosed that author Frank had been paid $500 to write the article by Joseph Field, a public relations professor working for Brown & Williamson. Brown & Williamson reimbursed Field for that amount.

107. In 1970, the Tobacco Institute ran 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."

108. Also, in 1970, the Tobacco Institute ran an advertisement captioned, "The question about smoking and health is still a question." In this advertisement, the Tobacco Institute stated:

a. "[A] major portion of this scientific inquiry has been financed by the people who know the most about

cigarettes and have a great desire to learn the truth ... the tobacco industry."

b. "[T]he industry has committed itself to this task in the most objective and scientific way possible."

c. "In the interest of absolute objectivity, the tobacco industry has supported totally independent research efforts with completely nonrestrictive funding."

d. "Completely autonomous, CTR's research is directed by a board of ten scientists and physicians. ... This board has full authority and responsibility for policy, development and direction of the research effort."

e. "The findings are not secret."

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

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

The Tobacco Industry's Knowledge That Smoking Kills

110. In the years following the 1954 "Frank Statement" and continuing to the present, Defendants have repeatedly acted in breach of their assumed duty to report objective facts on smoking and health. As evidence mounted, both through industry research and truly independent studies, that cigarette smoking causes cancer and other diseases, Defendants continued publicly to represent that nothing was proven against smoking. Internal documents show that the truth was very different. Defendants knew and acknowledged internally the veracity of scientific evidence of the health hazards of smoking, and at the same time suppressed such evidence where they could, and attacked it when it did appear publicly.

111. As early as 1946, Lorillard chemist H.E. Parmele, who later became Vice President of Research and a member of Lorillard's Board of Directors, wrote to his company's manufacturing committee: "Certain scientists and medical authorities have claimed for many years that the use of tobacco contributes to cancer development in susceptible people. Just enough evidence has been presented to justify the possibility of such a presumption."

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

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

114. A 1961 document presented to the Philip Morris Research and Development Committee by the company's Vice President of Research and Development included a section entitled: "Reduction of Carcinogens in Smoke." The document stated, in part: "To achieve this objective will require a major research effort, because carcinogens are found in practically every class of compounds in smoke. This fact prohibits complete solution of the problem by eliminating one or two classes of compounds. The best we hope for is to reduce a particularly bad class, i.e., the polynuclear hydrocarbons, or phenols. ... Flavor substances and carcinogenic substances come from the same classes, in many instances."

115. 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."

116. Brown & Williamson and its parent company, British American Tobacco Company, Ltd., researched the health effects of nicotine and were aware early on, as reported at a B.A.T. Group Research Conference in November 1970, that "nicotine may be implicated in the aetiology [cause] of cardiovascular disease. ..."

117. 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."

118. 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 or carcinoma, which is suggested by the statistical association shown in the studies of Doll and Hill, Horn and Dorn with some reservations and qualifications and even estimate by how much the incidence of cancer may possibly be reduced if the carcinogenic matter can be diminished, by a appropriate filter, by a given percentage."

Suppressing the Truth About Cigarettes and Nicotine

119. Not only have Defendants failed to disclose the information they repeatedly pledged to make public, they have, or the contrary, actively conspired to suppress research and publication concerning the health risks of cigarette smoking, and to misstate and distort published research linking smoking to disease, even going so far as to make personal threats against the researchers themselves. A CTR director's claim that tobacco industry scientists could "freely publish what they find as they choose" was a hollow deception.

The Gentlemen's Agreement and the Lawyers'

Role in the Conspiracy

120. The actions of Defendants in suppressing and misleading the public as to the harmful effects of cigarettes stands in sharp contrast to Defendant Lorillard's 1994 assertion to Congress that the data had still not convinced its CEO that smoking causes death. The tobacco industry long ago entered into a "gentlemen's agreement" to suppress independent research on smoking and health. A 1968 internal Philip Morris draft memo refers to this conspiratorial agreement: "We have reason to believe that in spite of gentlemen's agreement from the tobacco industry in previous years that at least some of the major companies have been increasing biological studies within their own facilities." This memo also acknowledged that cigarettes are inextricably intertwined with the health field, stating "Most Philip Morris products, both tobacco and non-tobacco, are directly related to the health field."

121. The industry believed that individual Tobacco Companies were performing certain research on their own in addition to the joint industry research. But the fundamental understanding and agreement remained intact: any harmful information and activities would be restrained, suppressed, and/or concealed. This secret agreement included restraining, suppressing, and concealing research on the health effects of smoking, including the addictive qualities of nicotine, and restraining, concealing, and suppressing the research and marketing of safer cigarettes.

122. The General Counsel of the major cigarette manufacturers, through joint meetings to review and direct proposals for scientific research for the entire industry, furthered the conspiracy of the tobacco industry, including the Tobacco Attorneys and Tobacco Consultants, to intentionally mislead and defraud the public about smoking and health. For example, Defendants have attempted wrongfully to create a privilege for various documents reflecting scientific research that they wish to conceal by routing such documents to their legal departments and law firms to support claims that such materials are protected from disclosure by the Attorney/Client or Attorney Work Product privileges.

123. The Tobacco Attorneys have played a critical role in furthering the conspiracy to suppress and conceal information about the adverse health effects caused by the use of tobacco products. The Tobacco Attorney's strategy was to attempt to protect damaging tobacco-related documents from disclosure under the Attorney/Client or Work Product privileges regardless of whether such documents were prepared in anticipation of litigation or represented confidential communications made between lawyer and client for the purpose of rendering legal advice. Lawyers routinely provided a number of non-legal services to Defendants such as deciding which CTR "special projects" should receive funding, dispensing funding to the "scientist" involved in such projects, and designing the scope and approach of the special project. The Tobacco Attorneys also undertook to coordinate the Tobacco Companies' CTR "special projects" subterfuge.

124. The Council for Tobacco Research holds itself out, and has been held out by the Tobacco Companies and the Tobacco Attorneys, as a research body sponsoring independent research. Tobacco Attorneys used the TIRC, predecessor to the CTR, as an industry "shield." The CTR has acted as a "front" for the Tobacco Companies' litigation and public relations goals. The Tobacco Attorneys have been instrumental in this deception.

125. In orchestrating the CTR deception, the Tobacco Attorneys became deeply involved in the screening, selection, funding, supervision and ultimate disposition of research projects, channeling sensitive research into "special projects" and "special accounts."

126. As to research which was progressing "satisfactorily" -- that is turning up no negative results -- the Tobacco Attorneys recommended it receive additional funding. Research which was troubling, either in its direction or in its results, was redirected by the Tobacco Attorneys or terminated.

127. For example, in 1976, a Tobacco Attorney wrote to in-house lawyers at the various Tobacco Companies that a study to measure environmental tobacco smoke should be modified in such a way so that the study would yield more favorable results for the Tobacco Companies' position. The study was subsequently modified to de-emphasize the role of second-hand tobacco smoke relating to indoor environmental quality.

128. A 1980 letter from a Tobacco Attorney to the various General Counsel of the tobacco industry, recommends a grant to Dr. Domingo Aviado. Although the author states that "[t]his would be a no-strings attached grant and Dr. Aviado would be free to publish," the role of Tobacco Attorneys in supervising and ultimately controlling Dr. Aviado's research is clear. "We would anticipate a brief report toward the end of this year concerning the project. Providing the project is progressing satisfactorily, I anticipate recommending a renewal for a second year and, thereafter, with the same proviso, for a third year."

129. Indeed, "satisfactory" progress in research is always the touchstone for the Tobacco Attorneys. A telling 1981 memorandum between General Counsel J. Kendrick Wells and executive Ernest Pepples of Defendant Brown & Williamson tells of a visit by a Tobacco Attorney to a researcher: "It was a cordial meeting and Tim believes he has persuaded them to take a new thrust with their research. The new thrust will have questionable value but no negative."

130. In addition, a May 19, 1981 letter from Ernest Pepples, Vice President and General Counsel of Brown & Williamson, to a Tobacco Attorney requests that the attorney evaluate the qualifications of various scientists seeking to conduct scientific studies for Brown & Williamson. The attorney responded by providing biographical sketches of potential consultants, including whether they previously had taken scientific position(s) favorable to the industry's position. He also cooperated with Pepples' request in 1984 to transfer the funding of some helpful research by a cooperative scientist from a CTR account to a law firm project: "I do not think ... that we should continue burdening CTR with such programs, and instead suggest that they be handled as law firm projects."

131. In 1972, a Tobacco Attorney wrote to Tobacco Company officials that a potentially favorable study should be funded secretly 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.

132. Similarly, a Tobacco Attorney wrote a letter to the General Counsel of the tobacco industry, urging them to approve a grant to Dr. Henry Rothschild, who was doing a study of genetic links to lung cancer. Although CTR had rejected Dr. Rothschild's request to renew his grant, the attorney urged funding on the ground that "[h]is research has evolved to a point where his primary focus was on a possible genetic factor rather than environmental or occupational factors."

133. The breadth of the involvement of the Tobacco Attorneys in the selection of research projects to be funded, including those funded by and through CTR, is reflected in the excerpts from the following letter:

The Research Liaison Committee has not had a meeting since July 1976. I have had discussion with individual members of the committee about calling a meeting. It has been suggested that the views of the companies with respect to the future activities of this committee should first be explored through the Committee of Counsel. . . . We may want to discuss research in a larger context, i.e., what are the industry's present needs? This, of course, involves consideration of the role of institutional type projects (tobacco, e.g., Harvard, and non-tobacco, e.g., Washington University); the role of CTR; and the need for specific areas of research with due regard for the politics of science, the importance of developing witnesses and the need for a responsive mechanism to meet unfounded claims made about tobacco.

134. In fact, a Tobacco Attorney chaired the Research Liaison Committee, a committee comprised of representatives of the major manufacturers "to study the research programs funded by our industry, both through CTR and independent projects that are brought to us from time to time." This committee "directed its primary attention to the question of how industry research should be recommended, decided upon, and supervised in order to accomplish the objective of an efficient and coordinated program which would best serve the needs and objectives of the industry." In addition to Tobacco Attorneys' involvement in the Research Liaison Committee, Tobacco Attorneys also sat on the CTR Committee of Counsel and the CTR Ad Hoc Committee.

135. In addition, the Tobacco Attorneys abused the Attorney/Client privilege and Work Product protections in order to shield Special Projects and special accounts documents and toconceal the CTR fraud from the public and government regulators. For example, in notes of a 1981 CTR Committee of Counsel meeting, transmitted by Tobacco Attorneys, an attorney is quoted as stating:

"With Speilberger, we 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."

136. The Tobacco Attorneys also participated in the suppression of development of a "safer" cigarette. Attempts by the tobacco industry to develop a "safer" cigarette inevitably required its researchers to engage in discussions regarding which constituents of tobacco smoke cause disease and how they might be eliminated. These discussions greatly concerned the Tobacco Attorneys because they would lead to statements constituting admissions that could be used against the Tobacco industry.

137. A 1970 letter from a Tobacco Attorney to DeBaun Bryant, General Counsel for Defendant Brown & Williamson, citing to the minutes of two research conferences, stated that:

A plaintiff would be greatly benefited by evidence which tended to establish actual knowledge on the part of a defendant that smoking is generally dangerous and should be removed, or that smoking causes a particular disease. This would not only be evidence that would substantially prove a case against the defendant company for compensatory damages, but could be considered as evidence of willfulness or recklessness sufficient to support a claim for punitive damages.

The author concludes that "employees in both companies should be informed of the possible consequences of careless statements on this subject." In short, the Tobacco Attorneys were arguing that the necessary discussions for the development of a "safer" cigarette must stop.

138. Likewise, in 1987, a Tobacco Attorney wrote a lengthy memorandum in which he expressed his concern that Defendant R.J. Reynolds' announcement of a non-burning "clean" cigarette "could immediately and significantly increase [tobacco companies'] exposure to liability for sales of conventional cigarettes." In introducing the product, particularly right before the start of two key trials, the attorney also questioned Defendant R.J. Reynolds' commitment to "joint defense efforts."

139. By becoming intimately involved in the funding and design of these scientific studies, these Tobacco Attorneys conspired with the Tobacco Companies and CTR by (a) clothing such studies in the Attorney/Client or Work Product privilege in order to protect them from disclosure if their results were unfavorable, and (b) 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 the link between their products and human disease.

140. In addition, Tobacco Attorneys have destroyed evidence of their internal research into smoking and health. For example, at a time when the company was resisting discovery in a number of personal injury lawsuits, Brown & Williamson's General Counsel, J. Kendrick Wells, recommended in a memorandum dated January 17, 1985, that much of the company's biological research be declared "deadwood" and shipped to England. He recommended that no notes, memos or lists be made about these documents. Wells stated, "I had marked certain of the document references with an X ... which I suggested were deadwood in the behavioral and biological studies area. I said that the 'B' series are 'Janus' series studies and should also be considered as deadwood." ("Janus" was a name of a project that attempted to isolate and remove the harmful effects of tobacco.) Wells further recommended that the research, development, and engineering departments also should undertake "to remove the deadwood from the files."

141. Thus, the Tobacco Companies and the Tobacco Attorneys have misused claims of Attorney/Client privilege to insulate CTR-funded research projects and internal documents from disclosure to the public and to government officials. This conduct demonstrates the falsity of the Tobacco Companies' representations that they would jointly fund objective research and report the results of that research to the public.

The "Mouse House" Disappears

142. In the 1960s, R.J. Reynolds established a facility in Winston-Salem, North Carolina, to perform research on the health effects of smoking using mice. Nicknamed the "Mouse House," R.J. Reynolds' scientists conducted research in a number of specific areas, including studies of the actual mechanism whereby smoking causes emphysema in the lungs.

143. The R.J. Reynolds lab made significant progress in understanding this mechamism. Despite this progress, R.J. Reynolds disbanded the entire research division in one day, and fired all 26 scientists without notice.

144. Several months before the 1970 closure and firings, R.J. Reynolds' attorneys collected dozens of research notebooks from the scientists. The notebooks have still not been disclosed. 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 the stuff? They decided to kill it."

145. Internally, an 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." None of the work done at the "Mouse House" was disclosed to the public.

146. In a similar incident, Philip Morris hired Victor DeNoble in 1980 to study nicotine's effects on the behavior of rats and to research and test potential nicotine analogues. DeNoble, in turn, recruited Paul C. Mele, a behavioral pharmacologist.

147. DeNoble and Mele discovered that nicotine met two of the hallmarks of potential addiction -- self administration (rats would press levers to inject themselves with a nicotine solution) and tolerance (a given dose of nicotine over time had a reduced effect).

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

149. DeNoble was later told by lawyers for the company that the data he and Mele were generating could be dangerous. Philip Morris executives began talking of killing the research or moving it outside of the company so Philip Morris would have more freedom to disavow the results.

150. In April 1984, Philip Morris closed DeNoble's nicotine research lab. DeNoble and Mele were forced abruptly to halt their studies, turn off all their instruments and turn in their security badges by morning. Philip Morris executives threatened them with legal action if they published or talked about their nicotine research. According to DeNoble, the lab literally vanished overnight. The animals were killed, the equipment was removed, and all traces of the former lab were eliminated.

151. DeNoble has testified "senior research management in Richmond, VA., as well as top officials at the Philip Morris Company in New York, continually reviewed our research and approved our research." DeNoble also stated that these officials were specifically told that nicotine was a drug of abuse.

152. In August 1983, Philip Morris ordered DeNoble to withdraw from publishing a research paper on nicotine that had already been accepted for publication after full peer review by the journal Psychopharmacology. According to DeNoble, the company changed its mind because it did not want its own research showing nicotine was addictive or harmful to compromise the company's defense in litigation recently filed against it. He said that Philip Morris officials had rightly interpreted the suppressed nicotine studies as showing that, in terms of addictiveness, "nicotine looked like heroin."

153. Liggett & Myers also refused to disclose research by Dr. Ernest Wynder showing the cancer-causing propensity of cigarettes.

154. 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.

155. In 1963, Brown & Williamson debated internally whether to disclose to the U.S. Surgeon General, who was preparing his first official report on smoking and health, what the company knew about the addictiveness of nicotine and the adverse effects of smoking on health. Addison Yeaman, General Counsel, advised Brown & Williamson to "accept its responsibility" and disclose its findings to the Surgeon General. He said that such disclosure would then allow the company openly to research and develop a safer cigarette.

156. Brown & Williamson rejected Yeaman's advice to make full disclosure to the Surgeon General. A series of six letters and telexes exchanged by Yeaman and senior British American Tobacco Company official A. D. McCormick between June 28 and August 8, 1963, document the company's decision not to disclose its research findings to the Surgeon General. The research, some of which was later characterized in a report in the Journal of the American Medical Association as "at the cutting edge of nicotine pharmacology," preceded the main published reports from the general scientific community by several years.

"Safer Cigarettes" Suppressed

157. Defendants could have designed and manufactured a safer cigarette, but refused to do so. The need for a "safer" tobacco product results from the harmful chemical compounds occurring in tobacco products and/or formed as a result of burning. These compounds include carbon monoxide, nicotine, nickel carbon dioxide, benzene, hydrazine, formaldehyde, Polonium-210, ammonia, nicotine sulfate, Freon II, hydrogen cyanide and certain liver toxins known collectively as furans. More than forty (40) known carcinogens are found in cigarette tobacco. Defendants artificially add chemicals and flavorings to their products that increase toxicity and/or carcinogenicity.

158. Defendants have long understood that reducing or eliminating nicotine from their products would hurt sales. 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."

159. Instead, the industry attempted to develop ostensibly safer ways of delivering adequate doses of nicotine to create and sustain addiction in the smoker.

160. Some members of the industry studied artificial nicotine or nicotine analogues that would have the addictive and psychopharmacological properties of nicotine without its dangerous effects on the heart. Dr. Victor DeNoble was hired by Philip Morris, in part, to research and develop a nicotine analogue.

161. Dr. DeNoble did discover such an analogue, but Philip Morris chose to halt its effort to determine whether the nicotine analogue could be used to make a safer cigarette.

162. Philip Morris also explored research to develop a safer cigarette, or, in the words of one memorandum to the Board of Directors, cigarettes with "superior physiological performance." This memorandum noted competitive pressures to produce "less harmful" cigarettes. However, the memorandum was careful to state that, "[o]ur philosophy is not to start a war, but if war comes, we aim to fight well and to win." Philip Morris never broadly marketed such a "safer" cigarette. Its documents state that "after much discussion we decided not to tell the physiological story which might have appealed to a health conscious segment of the market. The product as test marketed didn't have good 'taste' and consequently was unacceptable to the public ignorant of its physiological superiority." Subsequently, taste was improved and Philip Morris attempted to promote the product. However, "[t]he imposition of FTC rules and the industry advertising code took the starch out of the program. . . ."

163. Brown & Williamson also understood that nicotine was the essential ingredient in maintaining tobacco sales. The company attempted to develop a "safer" cigarette which internal documents described as "a nicotine delivery device," but did not market such a cigarette in spite of promising test results. Brown & Williamson's Project "Ariel" used a heating, as opposed to burning, system. Its Project "Janus" was intended to identify hazardous components of cigarette smoke so they could be removed.

164. By the end of the 1970s, however, Brown & Williamson, in a pattern that was repeated throughout the industry, closed its research labs and halted all work on a safer cigarette, and agreed not to market safer cigarettes.

165. Nonetheless, R.J. Reynolds conducted "secret" efforts to develop a safer cigarette focused upon delivering nicotine to the consumer without the harmful constituents of tobacco smoke. In the late 1980s, R.J. Reynolds developed "Premier," a smokeless and virtually tobacco-free cigarette which was, in essence, a nicotine delivery system.

166. At Liggett & Myers, Dr. James Mold, the assistant director of research at Liggett during the development of a safer cigarette, conducted tests to divide the components of cigarette smoke into separate entities and to interrupt the process that produces carcinogens by using a catalyst. Liggett & Myers researchers were able to produce a so-called "safer" cigarette, designed as the "XA Project," that eliminated the carcinogenic activity on mouse skin. However, Liggett & Myers did not want to be identified publicly as the source of the research behind this non-carcinogenic "safer" cigarette.

167. Dr. Mold has provided the following overview of the XA Project and its abandonment:

a. Dr. Mold stated that the XA Project produced a safer cigarette. He stated, "[w]e produced a cigarette which was, we felt, commercially acceptable as established by some consumer tests, which eliminated carcinogenic activity..."

b. Dr. Mold stated that after 1975, all meetings on the project were attended by lawyers. Lawyers collected notes after all meetings. All documents were directed to the law department to cloak the documents with the Attorney/Client privilege. He stated, "Whenever any problem came up on the project, the Legal Department would pounce upon that in an attempt to kill the project, and this happened time and time again."

c. Dr. Mold was asked why Liggett did not market a safer cigarette. He stated, "Well, I can't give you, you know, a positive statement because I wasn't in the management circles that made the decision, but I certainly had a pretty fair idea why ... [T]hey 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 ... [a]t a meeting we held in ... New Jersey at the Grand Met headquarters ... at which the various legal people involved and the management people involved and myself were present. At one point, Mr. Dey ... who at that time, and I guess still is the president of Liggett Tobacco, made the statement that he was told by someone in the Philip Morris Company that if we tried to market such a product that they would clobber us."

d. Dr. Mold testified that he was at a conference of scientists in Buenos Aires prepared to present his research regarding a less harmful cigarette when he received a "frantic call" from legal counsel and was told not to present the paper or issue the press release. He was instructed not to publish his results in the Journal of Preventive Medicine.

168. Liggett had also obtained a patent for the process it had discovered to produce its safer cigarette. The patent application described the reduction in cancer in mice studies, prompting stories in the media that Liggett was the first cigarette company to admit that smoking caused cancer. Liggett responded by issuing a press release it called a "Liggettgram" which stated: "Liggett and the cigarette industry continue to deny, as they have consistently, that any conclusions can be drawn relating 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."

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

170. Liggett abandoned the project in furtherance of the conspiracy. Liggett feared that the marketing of a "safer cigarette" would be, in essence, a confession that its, and the industry's other cigarettes, were not safe. Thus, one Liggett executive wrote that, "[a]ny 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.

171. The industry was aware that consumer demand would support "safer" products. Prior to adoption of the "Advertising Code," companies made claims of reduced tar and nicotine content for their products, which the public perceived as offering reduced health risks. However, "the smoker of a filter cigarette [claiming reduced tar] was getting as much or more nicotine and tar as he would have gotten from a regular cigarette. He had abandoned the regular cigarette, however, on the ground of reduced risk to health." The industry recognized a difference between "health-oriented" cigarettes, which were never marketed on a wide basis, and "health-image" cigarettes, such as low-tar, low-nicotine products. The latter were a marketing tool, intended to give the illusion of a safer product.

172. The Federal Trade Commission Cigarette Advertising Guides, adopted September 22, 1955, and modified March 25, 1966 (the "Guides"), did not allow claims based on unsubstantiated health effects. However, it was clear in the industry that the Guides could be modified if justification was shown. Indeed, the 1966 modification of the Guides was based on development of a method, albeit not without difficulties of its own, of measuring tar and nicotine content. In the context of development of a potentially less hazardous product, a Brown & Williamson document by General Counsel Addison Yeaman states, "I would submit that the FTC in the face of 1) the industry's research effort, 2) the truth of our claims, and 3) the "public interest" in our filter, cannot successfully deny us the right to inform the public." In truth, the Defendants used the Guides as a shield behind which it concealed its agreement not to complete. The voluntary agreement with the FTC was characterized by the Consumers Union as being "to the industry's advantage and to the public's disadvantage...."

173. The Cigarette Advertising Code, adopted by Defendants, was another mechanism used to enforce the illegal agreement not to compete on the basis of safety or health characteristics of tobacco products. Among other provisions, it prohibits health claims in industry advertisements unless the "Code Administrator," to whom all cigarette advertisements are required to be submitted, approves of the advertisement. The Code provided a mechanism to monitor and police Defendants' illegal agreement.

174. R.J. Reynolds also developed a "safer cigarette." Except for a brief test in several cities, R.J. Reynolds did not market its safer product, "Premier."

175. A memorandum authored by a Tobacco Attorney confirmed that there was an industry-wide position regarding the manufacture and sale of a safer cigarette.

176. The 1987 memorandum was written in the context of the marketing by R.J. Reynolds of its smokeless cigarette, Premier, which heated rather than burned tobacco. The attorney wrote that the smokeless cigarette could "have significant effects on the tobacco industry's joint defense efforts" and that "[t]he industry position has always been that there is no alternative design for a cigarette as we know them." The attorney also noted that, "Unfortunately, the Reynolds announcement ... seriously undercuts this component of industry's defense."

177. This fundamental position of the "industry" defense had been identified much earlier. In 1970, a Tobacco Attorney wrote to DeBaun Bryant, General Counsel at Brown & Williamson, expressing concerns about some of the industry research into alternative products. In critiquing the minutes of a conference, he stated: "It is our opinion that statements such as [references to research into safer products, products which are less biologically active, and to 'healthy cigarettes'] constitute a real threat to the continued success in the defense of smoking and health litigation. Of course, we would make every effort to 'explain' such statements if we were confronted with them during a trial, but I seriously doubt that the average juror would follow or accept the subtle distinctions and explanations we would be forced to urge ... [E]mployees in both companies [Brown & Williamson and British American Tobacco] should be informed of the possible consequences of careless statements on this subject."

178. All Defendants were keenly aware of the risk to the industry if any of them sought a competitive advantage by developing and marketing a safer product. The risk was avoided by agreeing to not compete on that basis. As one industry representative testified: "...as a company, we cannot position our products as being healthy. We've already agreed that they are a risk factor [the 'agreement' referenced is the industry's acceptance of the warning labels on cigarette packages] ... we wouldn't run any advertising that positions any of our products as being healthier than others."

The Tobacco Industry's Knowledge of Nicotine's

Addictiveness

179. An advertisement placed by Philip Morris in newspapers across the country in April 1994, affirmatively represented that Philip Morris does not "manipulate" nicotine levels in its cigarettes, and that "Philip Morris does not believe that cigarette smoking is addictive."

180. R.J. Reynolds placed a similar advertisement in newspapers across the United States in 1994 stating that "we do not increase the level of nicotine in any of our products in order to addict smokers. Instead of increasing the nicotine levels in our products, we have in fact worked hard to decrease tar, and nicotine..." R.J. Reynolds' advertisement then touted its use of "various techniques that help us reduce the tar, (and consequently the nicotine) yields of our products."

181. In fact, Defendants have known of the difficulties smokers experience in quitting smoking and of the tendency of addicted individuals to focus on any rationalization to justify their continued smoking. Defendants exploit this weakness and capitalize upon the known addictive nature of nicotine. Nicotine addiction guarantees a market for cigarettes. The addictive nature of the nicotine in cigarettes substantially impairs personal choice in those who become addicted. Modern cigarettes as sold in Rhode Island are painstakingly designed and manufactured to control nicotine delivery to the smoker.

182. Defendants have secretly known, since at least the early 1960s, of the addictive properties of the nicotine contained in the cigarettes they manufacture and sell. Sworn statements of former Philip Morris scientists, Jerome Rivers, Dr. Ian L. Uydess and Dr. William Farone belie the industry's denials, and industry documents are replete with evidence of Defendants' historical knowledge of nicotine's addictiveness.

183. In 1962, Sir Charles Ellis, scientific advisor to the Board of Directors of British American Tobacco Company ("BATCO"), Brown & Williamson's parent company, stated at a meeting of BATCO's worldwide subsidiaries, 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."

184. A research report from 1963 commissioned by Brown & Williamson, states that when a chronic smoker is denied nicotine: "[a] body left in this unbalanced state craves for renewed drug intake in order to restore the physiological equilibrium. This unconscious desire explains the addiction of the individual to nicotine." No information from that research has ever been voluntarily disclosed t