Originally created 05/25/04

Judge rules government can seek tobacco industry profits



WASHINGTON -- A federal judge ruled Monday that the government can seek billions in tobacco industry profits as part of a civil racketeering suit against cigarette manufacturers.

The tobacco industry had argued in a motion that the government should not be allowed to seek the $280 billion that Justice Department lawyers allege was earned by the companies through fraud.

Judge Gladys Kessler said the companies could be ordered to hand over the money if government lawyers prove their case and also prove that the billions surrendered would prevent future wrongdoing.

"This ruling shows this case has the potential to bring about fundamental change in the tobacco industry," said Bill Corr, executive director of the Campaign for Tobacco-Free Kids. "It will allow the government to put on the strongest possible case and to seek the strongest possible remedies."

Tobacco stocks fell sharply on the news.

Shares of Altria Group Inc., parent of Philip Morris USA, fell $2.80, or nearly 6 percent, to $46.52 on the New York Stock Exchange, where RJ Reynolds Tobacco Holdings fell $2.61, or 5 percent, to $54.65. Loews Corp. shares fell $1.04, to $57.27 on the NYSE.

The Justice Department alleges in the suit that the companies deceived the public about the dangers of tobacco and the addictive nature of nicotine. The government also claims the companies targeted children through advertising and then lied about it.

Government lawyers are pursuing the civil case under the Racketeer Influenced and Corrupt Organizations Act, known as RICO. The 1970 law was created to prosecute mobsters.

Six years ago, 46 states settled their suit against the industry for $206 billion, payable over 25 years. Four states settled separately for a total of $40 billion. The states recovered costs for treating sick smokers.