Bush Budget May End U.S. Tobacco Suit

By Dan Eggen and Marc Kaufman

Washington Post Staff Writers

Wednesday, April 25, 2001; Page A01

Justice Department lawyers have warned that they may soon be forced to abandon the federal government's landmark lawsuit against the tobacco industry because the Bush administration has not proposed enough funding to keep the litigation alive, according to a confidential memo reviewed by The Washington Post.

Justice lawyers have estimated they need $57.6 million in the coming fiscal year to continue the government's lawsuit, which seeks more than $100 billion in damages from tobacco companies for allegedly engaging in a 45-year pattern of racketeering.

But the budget proposed by President Bush holds the budget at $1.8 million for a staff of 31, Justice officials said, and a hiring freeze has hampered the department's ability to keep up with the lawsuit.

A March 12 memo to Attorney General John D. Ashcroft from the Justice Department's Tobacco Litigation Team said that without sufficient funding, "we cannot maintain the action" and "there are no realistic prospects for a settlement" in the case.

"The uncertainties surrounding the future of the case . . . threaten to cripple our litigation efforts and our ability to achieve a successful resolution," the memo said.

The lack of a statement from Ashcroft endorsing the case and efforts to find money to fund the litigation in fiscal 2002 "would, in all likelihood, require us seriously to consider seeking authority to dismiss the case," the memo added.

Taken together, the memo and the limited funding for a case that is entering the crucial, expensive "discovery" phase, are the clearest indications yet of how the Bush administration may proceed on the controversial lawsuit. As a senator, Ashcroft was a staunch foe of the litigation, though he took no position on it during his confirmation hearings. Bush expressed skepticism about the suit during the presidential campaign.

However, Justice Department spokeswoman Mindy Tucker said the agency's budget is "neutral" on whether to continue the lawsuit. She said Ashcroft has not seen the memo or reviewed the issue of whether to proceed with tobacco litigation.

"This is not a budget issue," said one top Justice official. "This is a policy issue."

The government filed its far-reaching lawsuit against Philip Morris Cos. and other tobacco companies in September 1999, alleging fraudulent marketing practices. The suit sought billions of dollars to cover the cost of treating sick smokers through federal health insurance programs.

U.S. District Judge Gladys Kessler last year threw out portions of the lawsuit that covered health care payments, arguing that the government should have acted sooner if it wanted to recoup those costs. But she said the government could pursue claims under the Racketeer Influenced and Corrupt Organizations Act that the companies "have made countless false and deceptive statements" about the addictive properties and health effects of their products.

Advocates on both sides of the issue have long assumed that a Bush White House would seek a way to drop the lawsuit, which was initiated under President Clinton. Bush has not commented publicly on the lawsuit since taking office.

Ashcroft said during confirmation hearings earlier this year that he had "no predisposition to dismiss that suit. I would evaluate that suit, conferring with members of the Department of Justice."

In their memo to Ashcroft, the lawsuit's leading attorneys said a rigid timeline and requests for 73 billion pages of government documents by the tobacco companies threaten to scuttle the case unless more money is dedicated to the lawsuit immediately.

The tobacco lawsuit has been beset with budget troubles since it began, and was nearly derailed last year by GOP congressional leaders and tobacco state lawmakers who opposed it. In a compromise last year, about $12 million from the Veterans Administration, the Defense Department and the Department of Health and Human Services was transferred to the Justice Department to help pay for the suit.

Bush administration officials said it is up to Congress to craft a similar arrangement for the coming year, but the agencies involved are already balking at providing more help.

A dismissal in the federal tobacco lawsuit would be welcome news to the tobacco industry, which has been battered by court challenges in the United States and Europe in recent years. The industry settled lawsuits in 1998 filed by 46 state governments at a cost of $240 billion over 25 years, and last year a Miami jury ordered it to pay $145 billion in punitive damages in a class action covering sick Florida smokers.

Tobacco control advocates and Democratic staffers in Congress said yesterday they have been told that the department's tobacco litigation staff has asked repeatedly for guidance on how to proceed, but has gotten no response. The March 12 memo to Ashcroft was also sent to the acting deputy attorney general and to Stuart E. Schiffer, acting assistant attorney general for the civil division.

Sen. Richard J. Durbin (D-Ill.), who sits on the Senate Judiciary and Appropriations committees, said it is time for the attorney general to decide whether the administration will continue with the lawsuit.

Defendants in the case include Philip Morris; R.J. Reynolds Tobacco Co.; Brown & Williamson Tobacco Corp.; Lorillard Tobacco Co. and American Tobacco Co.