The sensitive documents released by Liggett Group as part of its tobacco litigation settlement could have the most far-reaching impact for prosecutors pursuing fraud and racketeering charges, legal specialists say.
If, as expected, the documents show an industrywide conspiracy to deceive the public about the harmful effects of smoking, prosecutors using state versions of the Racketeer Influenced and Corrupt Organizations statute could seek massive damages and the forfeiture of assets.
The documents will undoubtedly be a potent weapon in other kinds of lawsuits, including those brought by 22 attorneys general, as well as class action suits and private actions. They could also fuel a Justice Department investigation into perjury and other criminal charges.
But where the documents can be used to buttress claims under RICO statutes, the result could be the most crippling blow to tobacco companies - hitting them hardest and deepest in the pocketbook.
The federal RICO law dates back to 1970 and was designed primarily to help prosecutors undercut mobsters and drug dealers and has seized assets from defendants. Since then its use has been expanded to include fraud and racketeering in the business world and beyond, and it has been used widely in civil and not just criminal procedures. In addition, several states have created “junior” RICO laws so it is not just limited to use by federal prosecutors.
Using civil RICO laws, prosecutors could obtain injunctions to halt some business strategies, seek treble damages and possibly even confiscate profits, said Harvard Law professor Laurence H. Tribe, who is assisting several attorneys general in their lawsuits against the tobacco industry.
“If one really applied the theory in full, there are an awful lot of corporate assets that could be traced to the racketeering enterprise. It could be very interesting,” Tribe said.
Tribe is scheduled to argue in a Texas court soon to allow the use of the federal RICO statute in the attorney general’s lawsuit there. Prosecutors already have the green light to use the state’s RICO laws in Florida, said Dexter Douglas, general counsel to the governor there.
“If we can prove allegations that they deliberately misled the public … that could be the equivalent of mail and wire fraud,” Douglas said. “If we can show a conspiracy, we can get a racketeering claim. If these documents show joint agreements to suppress information, we’re going to the jury on a criminal conspiracy.”
Douglas said that if those efforts are successful, the state would attempt to “require the companies to disgorge their profits, going back through the years, that they made in Florida.” That could mean billions of dollars more than any non-RICO claim could produce, he said.
Prosecutors in Massachusetts are not using RICO as they go after tobacco companies. But George K. Weber, head of Massachusetts Attorney General Scott Harshbarger’s legal team, said that if a conspiracy can be proved, it will be a powerful and damaging weapon even without a racketeering claim.
A conspiracy would bolster claims that tobacco companies violated consumer protection laws, for example. “If you have a law that says you can’t deceive people in the sale of a product, and you have documents that show they knew the product was dangerous and addictive and publicly they were saying they didn’t, that’s powerful evidence,” Weber said.
Liggett agreed to release both internal documents and industry-wide ones that prosecutors allege will show that tobacco companies and their lawyers knew of the harmful and addictive effects of smoking, but put strategies in place to keep that knowledge from the public.
Liggett also admitted that the industry targets young people, agreed to cough up 25 percent of pretax profits to the 22 states in the settlement, and promised to put warning labels on their products saying smoking is addictive and causes cancer.
The settlement was an extraordinary breaking of ranks with the rest of the tobacco industry. Liggett is the smallest of the five major tobacco companies in the US.
The impact of the information that Liggett has released has been widely debated. Some critics say that in court cases the tobacco companies will be able to defend against the new allegations and question the credibility of sources.
The documents have already been filed in a few courts where tobacco lawsuits are underway. Judges in those states are expected to determine which documents can be released to the public.
The four big tobacco companies claim that the documents cannot be released because doing so would violate attorney-client privilege. But judges can release the papers if they see evidence of fraud and wrongdoing in them.