New at Reason

Tim Cavanaugh | September 17, 2004

Jacob Sullum on the upcoming RICO trial against tobacco companies.

Comments

|9.17.04 @ 12:45PM|#

>sigh<<br />
It's articles like this that make me ashamed to be a part of the US political process.

|9.17.04 @ 1:04PM|#

This is the new face of Philip Morris. The company hopes it will help fend off a potentially ruinous federal lawsuit that portrays the leading cigarette manufacturers as participants in a five-decade conspiracy to defraud the public. As the trial, scheduled to begin on Tuesday, gets under way, the tobacco companies want everyone to know that 1) they didn't really do anything wrong and 2) they've changed their ways.

Some in the tobacco industry also state that PM is trying to screw over its competitors in the process; that this is the reason why they favor regulation of their industry by the FDA.

|9.17.04 @ 2:01PM|#

Thank God George W. Bush is president! Imagine what those nanny-state Democrats would do if they were running the country. I'll be sure to vote for him this November so we can keep Big Government out of our lives.

|9.17.04 @ 2:03PM|#

SR,

Ha ha ha. :)

|9.17.04 @ 2:24PM|#

SR,

Just wait until you see what the Bush administration has to say about second-hand smoke; he'll Bloomberg us with more junk science I am sure.

|9.17.04 @ 2:28PM|#

I'll be sure to vote for him this November so we can keep Big Government out of our lives.

Very nice now that Big Government has given away to Huge Government and soon to be followed by Astronomical Government regardless of which party controls the White House.

Imagine what those nanny-state Democrats would do if they were running the country.

About the same as we have now, maybe with smaller deficits, though.

|9.17.04 @ 2:51PM|#

SR,
Sorry, I am a little slow on the sarcasm this morning.

Freddy Krueger|9.17.04 @ 3:52PM|#

What PM and RJR ought to do, right now, is just flat out declare bankruptcy. Declare a big dividend to shareholders, divest of any other interests, and go to the banks and say, sorry, we're going down.

Doing so would eliminate any remaining payments on that settlement, end all future lawsuits... and get governments and everyone else behind smoking to recoup lost tax dollars.

Enough of this shit.

|9.17.04 @ 4:06PM|#

Freddy Krueger,

Not quite. Under Chapter 7 and 11, the last folks to get any money out of a bankruptcy are the shareholders. Indeed, if some of the settlements, etc., have led to liens being placed against RJR, etc. property, those folks are GUARANTEED via under the Constitution to a piece of the pie.

As to the issue of future lawsuits, that is also not as clear cut as you imply that it is.

|9.17.04 @ 4:08PM|#

Freddy Krueger,

BTW, if they were to follow your legal advice and disburse said funds, they would be in violation of the automatic stay, and be liable for contempt (amongst other things). I sure the fuck hope you aren't a bankruptcy attorney.

Freddy Krueger|9.18.04 @ 2:19AM|#

Gary, babe, I hope you're not invested in anything aside from index funds.

I wasn't talking about a piece of the pie. I'm saying a beforehand disperal of cash, like Ford did.

Then bamn. Oops. Too many suits. We're broke. Everyone can go divvy up the pieces. The states, to date, are claming $300-something billion out of MO and RAI through settlement. The two firms, combined, have market caps of roughly $110 billion, something I'd assume to be less whenever the Kraft divestment is complete (MO also got out of beer).

If the execs play it right, they can still get paid. And states can look at tax revenue floating down the toilet.

Have any chapter you'd like, the states that have already done things (like sell tobacco-backed bonds in expectation of future revenues), would be fucked.

I can dream, can't I?

(and MO's divestments, given *declining* revenues in their core business, is a fascinating maneuver... but then I don't suppose you know how RJR bought Nabisco Group Holdings in an all-stock transaction of a shell company that gave the tobacco maker some $3 billion in cash...)

|9.18.04 @ 2:53AM|#

Freddy Krueger,

I wasn't talking about a piece of the pie. I'm saying a beforehand disperal of cash, like Ford did.

Depending on the nature of such disbursements, they will be drawn back into the bankruptcy estate if they were made between 90 days and a year before the bankruptcy is declared. Sorry, there are plenty of provisions in the Bankruptcy Code to deal specifically with such an act; furthermore, creditors and other parties that are owed significant sums aren't stupid (remember, your plan would have these companies cheat other private entities who have supplied these companies with with goods and services out of money as well) - they constantly check for the very thing that you argue for.

Freddy Krueger|9.18.04 @ 4:05AM|#

Gary, anyone so... involved as to be posting this late when not waiting on word from the ISP that it's OK to go home is likely to be, if not an actual attorney, at least of the genetic pre-disposition where such is a likely career.

That said, MO is giving out a big dividend to its shareholders, a company by the name of "Kraft," whose best products are sold under the logo "Nabisco." The firm is currently marjority-owned and shares the same CEO as MO, but won't forever.

RJR (or rather NGH, one-time parent company of RJR and Nabisco), did a similar thing a few years ago after the settlement, and after selling off key, lucrative assets (RJR Asia to Japan Tobacco, and Nabisco to Philip Morris).

I'm pretty sure, with the possible exception of biotech, that NGH/RJR (up approximately 1000% since 01 when Carl Icahn bought in... two days after me ^_^) was the best-performing stock of the last 3 years, even before you include the ridiculous yield (still at 5% on the dividend... guess I sold too early).

However, if you think either MO or RJR (sorry, RAI now) will even be in business in a couple of years, whether or not the latest case goes through, you're whacked.

The execs have made their money, and neither the states nor the trial lawyers will be getting all the dough they've *earned*.

Governments will, at that point, have to consider bailing out the companies whose products they demonize, or else deal with the generics, which while pumping money into coffers, don't have the excess liability required to fund pet projects (let alone the dough to keep promising young students from the better colleges employed telling me smoking is "bad.")

It's an Ayn Rand scenario.

PS: Vis-a-vis bankruptcy. There are already weird supply issues with tobacco products... some stores just ain't carrying RAI inventory near me (DCish). How come?

|9.19.04 @ 6:08PM|#

The states have misdirected all the money from backy suits into general revenue, borrowed against future revenue to do the same and now are in partnership with the companies they sued. Meanwhile, my pack of squares is costing almost as much as my beer.

Can I dust off my old hydroponics set and grow my own tobacco? Any agronimists out there?

|9.20.04 @ 11:24AM|#

Gadfly,

The states not only misdirected "backy suit" money but the taxes that were originally imposed on tobacco because of its health risks. Those taxes were more than enough to cover the Medicare and Medicaid costs associated with tobacco related illness.

I don't know much about growing tobacco, but I understand it requires a lot of attention. It also requires specialized treatment after harvest, drying, blending etc. It takes several varieties of tobacco, often from different places, to make a cigarette. I would think that all this militates against "growing your own".