Health Groups Urge Illinois General Assembly To Reject Bill To Cap Appeal Bond for Philip Morris

A Statement By Illinois Coalition Against Tobacco, American Heart Association Midwest Affiliate, American Lung Association of Illinois, American Lung Association of Metropolitan Chicago, Academy of Family Physicians and Campaign for Tobacco Free Kids

Apr. 2 2003

Washington, D.C. — Our organizations strongly urge the Illinois General Assembly to reject pending legislation (SB0102 and HB0276) that would single out Philip Morris and other large tobacco companies for special protection and limit the amount of bond money they have to post to appeal legal verdicts against them. This is the worst kind of special interest legislation. It would change the rules in the middle of a court proceeding to benefit a single industry that has done more harm to the health of the residents of Illinois and this country than any other. Despite its efforts to change the subject, we must remember that Philip Morris is facing a severe penalty and a large appeal bond because an Illinois court found that it has defrauded more than a million people in Illinois through its deceptive marketing and sale of light cigarettes. Many have paid with their health and lives. Illinois legislators should not be protecting Philip Morris – or any tobacco company – from the legal consequences of such wrongdoing. Philip Morris should not be treated any differently than any other defendant under Illinois law.

Now Philip Morris has threatened to withhold tobacco settlement payments from the states in its efforts to get special treatment from the courts and the Illinois General Assembly. This is a transparent effort to bully and blackmail the states into supporting special protection for Philip Morris. Philip Morris wants the states and taxpayers to pay the price for its wrongdoing so that its well-paid executives and shareholders do not have to pay. In addition to calling on Illinois legislators to reject this special-interest legislation, today we call on Philip Morris to do the following:

  • First, rather than threatening to cut off tobacco settlement payments to the states, Philip Morris should immediately curtail its multi-billion dollar annual cigarette marketing budget, suspend dividend payments to its shareholders and buybacks of its own stock, cut executive compensation, and stop spending tens of millions of dollars on political campaign contributions and lobbying. These steps would save billions of dollars that could be applied to an appeal bond.
  • Second, Philip Morris should immediately release to the public all privileged financial documents from the pending case so that the people of Illinois and their legislators can determine for themselves whether Philip Morris' plea of poverty is real.

The public record provides plenty of evidence for the courts and Illinois legislators to treat Philip Morris' threats with skepticism and review the record with the utmost care. Philip Morris USA and its parent company, Altria Group Inc. (formerly Philip Morris Companies Inc.), are among the wealthiest, most cash-rich companies in the world. They have many options for quickly raising funds other than cutting off settlement payments to the states. According to their 2002 annual report to the Securities and Exchange Commission, filed on March 27, 2003, Philip Morris and its parent company reported that they had unused credit available of $14.6 billion as of December 31, 2002, paid dividends of $5.1 billion in 2002, and spent $6.3 billion in 2002 to buy back shares of their own stock. The parent company reported annual operating income of $16.6 billion, while Philip Morris USA reported annual operating income of more than $5 billion.

In addition, Philip Morris spends at least $4.5 billion a year marketing its cigarettes, based on the company's market share and reports on marketing expenditures that the tobacco companies submit annually to the Federal Trade Commission (FTC). This is a conservative estimate based on 2000 marketing reports to the FTC, and Philip Morris is likely spending even more today on marketing. Philip Morris also spends tens of millions of dollars a year on political contributions and lobbying to thwart government action to reduce tobacco use and its harms. At the federal level, Philip Morris is the largest corporate campaign contributor over the past decade, and it gave $4.1 million in the 2001-02 election cycle alone. In Illinois, Philip Morris has given at least $1.6 million to political candidates and organizations since 1994, according to the state Board of Elections. Finally, Altria is in the midst of a multi-million dollar advertising campaign to brand its new name and convince the American public that it is a responsible corporate citizen.

While it is threatening to withhold settlement payments to the states, there is no evidence that Philip Morris has taken any action to reduce these other expenditures. In essence, Philip Morris is trying to hold the states hostage even as it conducts business as usual. We hope that Illinois legislators and the courts will take all of these factors into account as they consider Philip Morris' claims.

The real issue in this case is not whether Philip Morris faces a threat of bankruptcy, but whether it will be held accountable for its wrongdoing. As the court found, and as a November 2001 report by the National Cancer Institute documented, Philip Morris for decades has deceptively marketed light cigarettes as reducing smokers' health risks despite knowing from its own research that this was not the case. The court also found that Philip Morris intentionally designed its light cigarettes to produce less tar when smoked by government testing machines, but not when smoked by actual smokers who changed their smoking habits to maintain nicotine levels. In addition, the Court found that Philip Morris' Marlboro Lights and Cambridge Lights cigarettes are actually more hazardous than their regular counterparts because of changes in the chemistry of the smoke, and that Philip Morris knew this. The judge concluded, "Philip Morris' motive was evil and the acts showed a reckless disregard for the consumers' rights."

Philip Morris has been ordered to pay a penalty that reflects the magnitude of its wrongdoing and the harm it has caused. It would be highly inappropriate for the Illinois General Assembly to protect Philip Morris from the legal consequences of its actions. Big Tobacco should not be allowed to rewrite Illinois' judicial system for its own benefit.

 

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