TOBACCO LITIGATION ISSUES

TOBACCO LITIGATION ISSUES


AUERBACH, POLLAK & RICHARDSON, INC.

Litigation Notes

Calvert D. Crary September 28, 1998

(203) 425-2912

TOBACCO LITIGATION ISSUES

The prospect of impeachment hearings, to be voted on by the House Judiciary Committee on October 5 or 6 and by the House itself on October 8 or 9, should be effective to neutralize any initiatives that President Clinton might wish to pursue on tobacco control. Having neutralized the other meaningful threats to its continued existence and prosperity, including product liability litigation, Medicaid reimbursement litigation, FDA regulation, internal document disclosure and legislative initiatives, the only meaningful threat remaining is that President Clinton will use a criminal RICO indictment as a springboard to nationalization or to the imposition of some other Draconian tobacco control measure.

The pending impeachment proceedings appear to have eliminated President Clinton's ability to launch any new program that requires political stature or courage. As a result, the industry is confronted only with relatively remote threats to its existence, such as the prospect that a future President Al Gore might be able finish off the job that President Clinton began, or the possibility that a rescussitated President Clinton might retaliate against the industry if and when he overcomes his own political problems. It is important to monitor the state of public awareness of Kenneth Starr's tobacco affiliations, however, since widespread perception of the tobacco industry as Starr's undisclosed principal could trigger a backlash that President Clinton might use as a means to restore his anti-tobacco agenda.

Our thesis that President Clinton was contemplating nationalization of the tobacco industry was reinforced when RJR Nabisco's Chairman, Steven Goldstone, conceded in a speech to securities analysts a few months ago that he saw nationalization as a real possibility and that it was something about which the industry was concerned. Cf. Litigation Notes, August 4, 1998. We had previously concluded that the industry had no intention of cooperating with any government programs to phase out cigarettes, even if the phase-out occurred over a period of many years, and that therefore nationalization would probably be perceived as necessary in order to implement the regulatory objectives of the FDA's 1996 tobacco regulations.

Since our August 6 report, additional information has come out reinforcing the thesis that the tobacco industry is Starr's undisclosed principal. In particular, on September 22, the New York Times published a series of letters recently released by the House between President Clinton's personal counsel, David Kendall, and Kenneth Starr. In one letter, dated February 17, 1998, Kendall said to Starr that Richard Porter, one of Starr's law partners at Kirkland & Ellis in Chicago, was reported by the Chicago Tribune to have provided legal advice and services to plaintiff Paula Jones in her lawsuit against President Clinton. In addition, the letter states that there have been reports of Starr's own participation in legal discussions with Ms. Jones' lawyers prior to the time that he was appointed independent counsel, and the letter asks for "accurate and specific information" concerning contacts with and assistance to Ms. Jones and her attorneys by lawyers from Kirkland & Ellis.

The Chicago Tribune article and the letter are significant, in our thinking, because of the fact that Kirkland & Ellis is national counsel for B.A.T.'s Brown & Williamson, and its participation in the Jones case strengthens the thesis that the tobacco industry is behind Starr's efforts to get President Clinton removed from office. Starr himself, on behalf of Kirkland & Ellis, has represented Brown & Williamson in several important cases. With Porter, there are now two major tobacco law firms that have supported the Paula Jones case. The other one, as previously discussed, was Wachtel Lipton Rosen & Katz, whose George Conway assisted in writing the brief that persuaded the U.S. Supreme Court to permit the Jones case to proceed during President Clinton's term in office. Conway was the recipient of Linda Tripp's tapes of her conversations with Monica Lewinsky.

Further evidence that Starr's connection to tobacco is becoming more visible appeared yesterday, September 27, on NBC's Meet the Press, when President Clinton's official attack dog, James Carville, responded to a question from the moderator, Tim Russert. Russert asked: "But don't you think your attacks, your war, may have motivated him [Starr] to do his work and to send that report to Congress which has put the President at peril?" Carville replied:

He was motivated when Judge Sentelle appointed him. He was motivated when he went to Pat Robertson's college in the middle of a campaign. He was motivated when he was representing cigarette companies while he was being paid by the taxpayers. He was motivated when he was speaking to right-wing groups. He was motivated when he was subpoenaing people's mothers. He was motivated when he was trying to overturn the attorney-client privilege. If I motivated him to do anything, I don't care.

Carville also said that Senator Tom Delay "is a bag man for the cigarette companies out there trying to get the FBI in the middle of this thing." As for the identity of Starr's undisclosed principal, Carville said: "You know, I'm so glad to see Newt Gingrich out there, because I've known that this whole thing was a Gingrich-Starr effort from day one." This conclusion, we thought, is more of a "conspiracy theory" than anything else, but it is not necessarily inconsistent with the tobacco thesis, since Gingrich could be providing the political support and the tobacco industry could be providing legal and/or financial support in an effort to undermine the Clinton Administration.

We also learned that the chronology of events in 1994 supports the thesis that the tobacco industry is behind the Starr investigation. The FDA's David Kessler revealed his interest in using the FDA against the tobacco industry in February 1994, and Starr's appointment as the special prosecutor took place in August 1994. It was April of 1994 that the seven tobacco company executives testified to Congress under oath that nicotine was not addictive, which was followed later in 1994 by testimony from Kessler that tobacco companies manipulated nicotine levels by altering the acidity of tobacco smoke and by breeding high-nicotine tobacco.

Starr's Brown & Williamson must have been particularly concerned about Kessler's testimony because the high nicotine tobacco plant in question, Y-1, was Brown & Williamson's proprietary project. As previously discussed, the previous special prosecutor, Robert Fiske, was edged out of his position as a result of efforts by North Carolina Senator Lauch Faircloth, a staunch tobacco ally, and was replaced in August 1994, two days after a private meeting between Senator Faircloth, Senator Jesse Helms of North Carolina, another strong tobacco supporter, and Judge David Sentelle, a former county chairman of the Republican Party in North Carolina and head of the judicial panel on the Fourth Circuit Court of Appeals that appointed Starr.

Other evidence of the tobacco industry's involvement in the Starr investigation was presented in our August 6 report, in which we suggested that the industry was seeking to weaken President Clinton so as to impair his ability to nationalize the industry. It appears at present that its efforts have been successful. However, we think widespread recognition that the tobacco industry was the undisclosed principal would probably have adverse consequences both for the tobacco industry and for the entire impeachment effort.

Assuming that our tobacco-Starr thesis turns out to be correct, then we would expect the tobacco industry to argue that it has a right to petition the government under the Noerr-Pennington doctrine, and we think it would say that this right is just as strong for business entities as it is for individuals, even though businesses are motivated almost exclusively by commercial interests rather than personal or subjective interests. Also, it would say that petitioning the government for the impeachment of a public official is conceptually no different from petitioning for any other remedy provided by law. In fact, calls by individual citizens for the impeachment of public officials are fairly commonplace in the U.S., and such calls have led to actual impeachments in three recent cases.

In the present case, however, supporters of President Clinton would probably respond by saying that normal petitioning behavior is not done in secret by agents working for an undisclosed principal, particularly when impeachment of a public official is the relief sought. The industry would probably answer this point by saying that some types of petitioning, particularly lobbying, are usually done outside of the public eye, and so long as the disclosure statutes applicable to lobbying are complied with, no further disclosure obligations exist. Further, it would probably say that Starr's legal work on behalf of the tobacco industry is well-known, as is the fact that Wachtel Lipton also represents the industry, that Judge Sentelle is from North Carolina and that the industry regards the FDA's assertion of jurisdiction over tobacco as illegal.

In our analysis, the consequences of public recognition of tobacco's involvement in the Starr investigation would probably be political in nature rather than legal. We think that some observers would conclude that the crass commercial interests of a powerful U.S. industry are not sufficiently important to justify the impeachment of a U.S. president, and the political support for impeachment, not particularly strong even now, could conceivably disappear. The fact that Brown & Williamson's parent is a foreign company could exacerbate the public's reaction. Additionally, the fact that President Clinton actually had the nerve to take on the industry in the first place and suffered the consequences could possibly be perceived as exculpatory and might reinvigorate his Administration.

In our analysis, the worst case scenario for the industry would be if public recognition of a tobacco connection accompanied the issuance of a major RICO indictment of the industry participants. In this circumstance, the industry's effort to insulate itself from a Clinton initiative could appear to be nefarious acts of a criminal enterprise seeking to avoid the consequences of its illegal conduct rather than conventional commercial activity. If Procter & Gamble were to seek impeachment of the President because of excessive toothpaste regulation, it would be interesting but not particularly significant, but conversely, if the Mafia were to seek impeachment of the President because of excessive regulation of its otherwise illegal narcotics activities, the public would probably react strongly in the President's favor, even if the Mafia's agents uncovered a crime committed by the President. In fact, the public might sense that the President was being blackmailed.

We understand that the Office of Legal Counsel of the Department of Justice, charged with issues that affect the institution of the Presidency, plans to issue a report to Attorney General Janet Reno within the next few days concerning its possible role in the impeachment proceedings against President Clinton. The involvement of outside interests in pursuing the impeachment inquiry could conceivably be one aspect of the OLC's role.


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