Before the Senate Committee on the Judiciary

Hearing on

"Department of Justice Oversight:
Management of the Tobacco Litigation"

Mr. Chairman, let me start by saying that you and I share an antipathy to the use of tobacco. You may recall that beginning in 1997, in this Committee, I held 10 hearings on the state tobacco litigation settlement which I strongly supported.

Senator Feinstein and I developed a bipartisan, comprehensive tobacco bill that encompassed the major elements of the settlement agreed upon the by the state attorneys’ general, public health advocates, plaintiffs’ attorneys and the tobacco industry. Unfortunately, the Senate was unable to come to consensus on any tobacco legislation. In my view, this happened because the Senate floor vehicle became way too expansive and extremely expensive because some of our friends could not exercise restraint.

Clearly, I am no friend of tobacco use nor an apologist for the tobacco industry. Indeed, I have never used tobacco products in my life. However, it is also no secret that I have been extremely skeptical of the federal lawsuit from its inception.

From a policy and Constitutional perspective, no administration should be able to circumvent the Constitution and Congress’ sole authority to raise and spend revenue for the general welfare by suing for billions of dollars and then spending the money without congressional appropriation. If there is no legitimate lawsuit, the action by the Department of Justice would violate our necessary principles of separation of powers, a cornerstone of our Constitution’s guarantee of liberty. Simply put, litigation should not replace legislation as the means to effect public policy in a democracy.

Granting the federal government the unfettered ability to sue any industry, which happens to fall into disfavor, in order to effectuate a social goal like reduction in tobacco-related illnesses, is a mistake. It would in essence allow the executive branch to bypass Congress and the law, and set unilaterally our nation’s tobacco policy.

In 1999, when the Clinton Administration decided to file its own suit against the tobacco companies it based the claim on a distorted – at least in my opinion – interpretation of three federal statutes: the Medical Care Recovery Act (MCRA); the Medicare Secondary Payer (MSP) provisions; and the civil provisions of the Racketeering Influenced and Corrupt Organizations Act (RICO). As many will recall, I and others on this committee believed that there was no legal basis for the first two claims. Turns out we were right. In September of 2000, Judge Kessler dismissed both the MCRA and MSP claims, leaving only the RICO count standing. She resoundingly reaffirmed that dismissal in the face of the government’s attempt to amend its complaint and re-plead the dismissed counts.

In my opinion the RICO claim was ill conceived as well. While Judge Kessler did allow the RICO claim to remain, she also clearly suggests that the government, at best, has a long way to go to prove its claim. She indicated discomfort with this novel application of the theory of disgorgement. As she noted, "whether disgorgement is appropriate in a particular case depends on whether there is a ‘finding that the gains are being used to fund or promote the illegal conduct, or constitute capital available for that purpose’." That being said, Judge Kessler also clearly indicated that she was not making any finding endorsing the substance of the government’s RICO claim, that "this Court has not made such a finding, nor could it at this stage." I think we can make better use of the tax-payers’ money.

As we all know, in 1998, 46 states, the District of Columbia and five U.S. territories signed a contractual agreement - the Master Settlement Agreement. In addition to paying out large monetary settlements to the states, the Agreement imposed restrictions on tobacco advertising, marketing and promotion. It also addresses the allegations that tobacco companies had long concealed the dangerous health effects of smoking by prohibiting manufacturers from suppressing health research and requiring them to fund anti tobacco research and education. It is my understanding there is no credible evidence that the companies are not in compliance with the terms of the Master Agreement. If the Agreement is being violated - then shouldn’t the state attorneys’ general be taking action to ensure enforcement? If our goal is truly to address health issues related to tobacco use, then we should be seeking to ensure enforcement of the Agreement which already deals with those concerns. But, if the goal of federal litigation is to effectively take a legislative function and extort a huge monetary settlement that we can spend, then aren’t we in effect addicting the federal government to nicotine?

Since the Executive Branch elected to pursue this litigation in the Clinton Administration (in my opinion without legal foundation), and the Legislative Branch declined to act, we should defer to the Executive Branch and its enforcement arm at the DOJ on how the case is handled absent a clear indication of an overuse of tax-payer money. It is my understanding that the DOJ’s budget request in relation to this litigation is identical to its budget request from last year and that they have obtained additional funding from other agencies to support the case. There is no lack of funding here. In fact, is everyone aware of just how expensive it has been for the federal government to pursue this case? The budget for this year was approximately $23 million. If you ask me that is a lot of money to pursue a case that has a questionable return value given that the majority of its legal claims have been dismissed. Moreover, the Civil Division continues to add staff attorneys as needed to handle the litigation. Staffing needs are being met and funding request levels maintained - I do not see any clear indication of mismanagement here. I sincerely hope that we are not here today to cross examine the Department on the particulars of ongoing litigation.

I hope that we can resolve this in a way that is within the law, makes sense and saves taxpayer money.

# # # #