WASHINGTON - A federal judge ruled Monday the Justice Department can seek $280-billion from the tobacco industry as part of the government's suit against cigarette manufacturers, clearing the way for the biggest civil racketeering case in history.
The ruling by U.S. District Judge Gladys Kessler sent tobacco company stock prices tumbling.
The Justice Department alleges that tobacco 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.
The industry had argued that the government should not be allowed to seek $280-billion, saying prosecutors failed to distinguish between money allegedly earned through fraud and money earned lawfully.
Kessler said in a written ruling that whether the government sought the correct amount should be determined at trial. She also warned that the companies could be ordered to hand over the money if Justice lawyers demonstrate a reasonable likelihood the industry will violate racketeering laws in the future.
Philip Morris USA attorney Bill Ohlemeyer said the government would have trouble proving future wrongdoing. "There is no question that Philip Morris USA and other tobacco companies have dramatically changed the way their products are marketed," Ohlemeyer said.
He said Philip Morris, the largest U.S. cigarette manufacturer, was considering appealing Monday's ruling. R.J. Reynolds Tobacco Corp. also was considering that, company spokesman Seth Moskowitz said.
Antismoking groups applauded the ruling in the case, which the Bush administration inherited from the Clinton administration.
Tobacco stocks fell sharply on the news.
Shares of Altria Group Inc., parent of Philip Morris USA, fell $4.37, or nearly 9 percent, to close at $44.95 on the New York Stock Exchange. RJ Reynolds Tobacco Holdings shares fell $3.53, or 6 percent, to $53.73. Shares of Loews Corp., the parent company of Lorillard, fell $1.91 to $56.40 on the NYSE.
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.
Kessler rejected a bid by the federal government to similarly recoup the costs of treating sick smokers, but she did allow the racketeering case to proceed. It is the largest amount ever sought under the racketeering statute.
In addition to seeking the money, the government wants the judge to impose new restrictions on the industry, including banning vending machines, forbidding certain marketing terms and limiting in-store promotions.
The trial is scheduled to begin Sept. 13 in the U.S. District Court for the District of Columbia.
