Reports that Matter

United States v. Philip Morris USA Inc.: Amended Final Opinion

Despite the Overwhelming Evidence to the Contrary, Defendants' Public

Section 77 of 129

Despite the Overwhelming Evidence to the Contrary, Defendants' Public

Statements and Official Corporate Policies Deny that Their Marketing Targets Youth or Affects Youth Smoking Incidence

a. Defendants Claim They Restrict Their Marketing to People Twenty-one and Older

  1. All Defendants have made numerous public statements that they do not market to persons under twenty-one. From 1964 to 1991, all Defendants voluntarily agreed to abide by the industry's Advertising Code which prohibited marketing to persons under twenty-one. After 1991, when the Code was revised, all Defendants, at different times, adopted, and publicized, internal company policies not to market to persons under twenty-one.
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(1) The 1964 Advertising Code 3187. On January 25, 1964, the Federal Trade Commission ("FTC") published a proposed

Trade Regulation Rule for the prevention of unfair or deceptive advertising and labeling of cigarettes in relation to the health hazards of smoking. 03573546-3751 (US 75032).

  1. Because of mounting public pressure to curb their marketing practices, and to avoid regulation by the FTC, Defendants, through the Tobacco Institute, voluntarily adopted the Cigarette Advertising and Promotion Code in April 1964. Key aspects of the Code, as revised in 1991, include provisions prohibiting advertising: (a) that appears in magazines "primarily directed to" persons under twenty-one years of age; (b) that represents cigarette smoking as essential to social prominence, distinction, success, or sexual attraction; (c) that uses models or other characterizations who appear to be under twenty-five years of age; (d) that suggests that healthy looking models derive their attractiveness from smoking or that good health is due to smoking; (e) that depicts a smoker as any person participating in, or obviously having just participated in, a physical activity requiring stamina or athletic conditioning beyond normal recreation; (f) that makes health claims; and (g) that uses sports celebrities who have special appeal to persons under twenty-one years of age. The Code also prohibits sampling of persons under twenty-one or near schools or any other center of youth activity. Defendants have operated under the 1964 Code, as revised in 1991, until the present time. Krugman WD, 163:1-182:23; 2025345360-5362 (US 20414); 2070557699-7702 (US 20519); MNAT00608606-8614 (US 21228); TIMN0102493-2494 (US 21271); TIMN0015615-5617 (US 21265); 2022976326-6335 (US 20370); ATX040294056-4056 (US 58599).

  2. Defendants widely publicized their adoption of the Code. 2025345360-5362 (US 20519); 2070557699-7702 (US 21228); MNAT00608606-8614 (US 78779); TIMN0102493-2494

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(US 21271); TIMN0015615-5617 (US 21265); 2022976326-6335 (US 20370); ATX0402940563190. For example, on April 27, 1964, Philip Morris, B&W, Lorillard, Liggett, RJR, and American Tobacco, through the Tobacco Institute, issued a press release, titled "Cigarette Manufacturers Announce Advertising Code," to announce their adoption of the Cigarette Advertising Code establishing "uniform standards for cigarette advertising." 2065081133-1135 at 1133 (US 20517).

  1. Authority to enforce the Code was vested in a Code Administrator. The Code stated that the Administrator was to be an independent person who would, among other duties, evaluate Defendants' marketing efforts to ensure that they did not target young people. The Code vested in the Administrator the power to reject marketing that inappropriately appealed to youth and to assess damages of up to $100,000 for violations. The first and only Administrator, who served from 1964 to 1970, was former Governor Robert B. Meyner of New Jersey. MNAT00608606-8614 (US 21228).

  2. On March 25, 1966, Manuel Yellen, Lorillard's Chief Executive Officer, wrote to Governor Meyner withdrawing his company's agreement to the Administrator's enforcement authority. Yellen stated:

The Code was essentially the cigarette industry's response to a recognized need for industry self-regulation during a time of uncertainty over the course of future legislative and regulatory action. It is our belief that the circumstances which led to the establishment of the Code administration have now significantly changed. . . . Accordingly, we now wish to advise you of our resignation. . . . We shall also continue to adhere to those principles underlying the provisions of Article IV, Section 1, of the Cigarette Advertising Code dealing with limitations on advertising to youth.

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  1. By 1970, all of the companies had abandoned the office of the Code Administrator. As a result, the Advertising Code had no enforcement mechanism. Langenfeld TT, 3/10/05, 15192:12-15193:17.

  2. Even when the authority of the Code Administrator was recognized, the provisions of the Code were not strictly enforced. As early as 1967, the FTC Report to Congress pointed out loopholes in the Advertising Code, specifically the provision which stated that

Cigarette advertising shall not appear -- (a) in publications directed primarily to persons under 21 years of age. . . . Cigarette advertising shall not depict as a smoker any persons participating in, or obviously just having participated in physical activity requiring stamina or athletic conditioning beyond that of normal recreation.

2070557699-7702 (US 20519). The FTC Report criticized cigarette advertising for exploiting these loopholes by appearing during television shows with audiences where at least 45% of the viewers were under twenty-one; for portraying physical activity as long as the smoker is not a participant; and for implying that smoking contributes to success, even if it is not essential to it. 85872480-2503 at 24-27 (US 22148).

  1. Despite the withdrawal of all cigarette company Defendants from the supervision of the Code Administrator twenty years earlier, the Tobacco Institute issued a multi-page advertisement in 1990 captioned "Cigarette Industry Initiatives Against Youth Smoking" emphasizing the cigarette manufacturers' opposition to youth smoking and stating that cigarette company Defendants continued to obey the marketing provisions in the Code. 6300337-0345 (JE 62448).

  2. For example, a December 1990 pamphlet published by the Tobacco Institute, titled "Cigarette Advertising and Promotion Code," stated: "The cigarette manufacturers advertise and promote their products only to adult smokers . . . [and] have adopted the following Code to emphasize their policy that smoking is solely for adults." Camisa PD, United States v. Philip Morris, 6/28/02, 24-26; 2021183859-3862 at 3859 (US 36717).

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  1. Philip Morris, B&W, Lorillard, and RJR continue to state to the public on their websites and in other public fora that they have adopted the industry's voluntary Code, as revised in 1991, and that they follow this Code in planning and executing cigarette marketing. 2021183859- 3862 (US 36717); TLT0450351-0360 (US 65080); TLT0370590-0592 (US 76628); TLT0770001- 0065 (US 72407); LIGSC2507550-LIGSC2507554 (US 65063).

(2) Official Corporate Policies 3198. In 1992, RJR adopted a policy which proscribed marketing to anyone under twenty-one years of age. CEO Andrew Schindler explained that the policy in fact meant that RJR would not use source data information gathered from research into the smoking preferences of eighteen to twenty-one year olds. Schindler further stated that RJR does not "interact with" or "talk to" eighteen, nineteen, and twenty year olds, but rather "conducts its interactive marketing practices only with those 21 and older." Schindler WD, 170:16-171:18, 208:16-18. Beasley PD, United States v. Philip Morris, 6/25/02, 54:17-55:19, 77:19-78:4, Burrows PD, United States v. Philip Morris, 6/27/01, 14:5-7. Prior to 1992, RJR "marketed to adults 18 and up." Leary PD, United States v. Philip Morris, 5/2/02, 19:13-18, 22:14-16, 30:3-33:12.

  1. A May 28, 1992 RJR internal memorandum, titled "Advertising Practices," from James C. Schroer, Executive Vice President of Marketing and Sales, to Lynn Beasley and other marketing staff, set forth the actual motivation for this policy change: "it would be in our long-term best interests to join the ranks of our competitors and limit our advertising and marketing efforts to smokers 21 years of age and older." The memorandum recognized that all of RJR's competitors publicly stated that they did not market to anyone under twenty-one: "[n]one of our competitors in their public statements admit that they advertise or promote their products to anyone under 21." 513180912-0913 (US 51672); 511388874-8875 (US 22497); 513385651-5652 (US 20852); 507647460-7461 (US 21680); 522908112-8112 (US 87746). It is clear that policy change was implemented in order to keep up with RJR's competitors.
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  1. Despite RJR's post-1992 policy proscribing marketing to anyone under twenty-one years of age, RJR made no changes in its marketing efforts. For example, RJR did not restrict the locations of cigarette vending machines to only age twenty-one plus venues. Nor did RJR withdraw or change its "Joe Camel" campaign even though the target group of the campaign was eighteen to twenty-four year olds. RJR continued to conduct research among eighteen to twenty-four year old smokers about "every aspect" of Joe Camel "for its appeal and relevancy to the target." Schindler WD, 166:15-20, 174:1-3.

  2. On April 26, 1979, Joseph A. Califano, Jr., Secretary of the Department of Health, Education and Welfare, wrote to Raymond J. Mulligan, then President of Liggett, in response to Califano's April 26, 1979 letter to him, stating that millions of children are regular cigarette smokers and urging Liggett to dedicate a percentage of its advertising budget to youth smoking prevention programs. Mulligan responded on May 18, 1979, stating that:

[T]his Company does not promote or advertise its cigarette products to children or young people under twenty-one years of age, nor are our promotional activities and advertising aimed at encouraging such children and young people to begin smoking or even continue smoking. Cigarette smoking is an adult pleasure and custom, and our promotional activities and advertising are directed at attaining loyalty to our cigarette brands among adult smokers only.

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TI03972545-2546 (US 22358).

  1. Philip Morris has, on numerous occasions, prepared internal memoranda or "talking points" intended for Philip Morris spokespersons to use when speaking to the public. For example, talking points produced from the files of Joshua Slavitt, Director of Policy & Programs for Tobacco,

Philip Morris Management Corporation, dating from or after 1990, stated: "Philip Morris directs its marketing efforts to existing adult smokers 21 years of age and older. " 2078842251-2253 at 2251

(US 25034).

  1. In a website section titled, "Responsible Marketing," Philip Morris states,

At Philip Morris USA, we demonstrate our commitment to responsibly marketing our products to adult smokers by developing and implementing programs that comply with both the letter and the spirit of the laws, rules, policies and agreements that govern our business practices.

In describing its "marketing practices," Philip Morris states, "Philip Morris USA does not direct its advertising to underage smokers or to non-smokers." With regard to its obligations under the MSA,

Philip Morris states, "Although the agreement restricts participation in promotional programs to

'Adults' (defined as 18 years of age and older), PM USA voluntarily restricts such programs to adult smokers age 21 or older." ARU6432619-2620 (US 78280)

  1. According to Martin Orlowsky, CEO of Lorillard:

Lorillard does not and will not design or implement any marketing or promotional program intended to encourage youth to smoke cigarettes, and will continue to utilize only those advertising, promotional and marketing materials that do not, directly or indirectly, target youth. . . . Lorillard does not and will not advertise its products in publications directed primarily to persons under 21 years of age, including school, college or university media (such as athletic, theatrical or other programs), comic books or comic supplements. . . . Lorillard's advertising does not and will not depict

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as a smoker anyone who is or has been well known as an athlete, nor does it or will it show any smoker participating in, or obviously just having participated in, a physical activity requiring stamina or athletic conditioning beyond that of normal recreation . . . and Lorillard does not and will not take any action the primary purpose of which is to initiate, maintain, or increase the incidence of youth smoking.

Orlowsky WD, 8:23-9:11; 82225801-5805 at 5803-5805 (US 55455).

Lorillard does not and will not target its marketing or promotions directly or indirectly to persons under 21 years of age . . . does not and will not conduct market research for its products involving persons under 21 years of age . . . does not and will not use any model in the advertising of its products who is, or appears to be, under 25 years of age. . . . Lorillard advertising does not and will not suggest that smoking is essential to social prominence, distinction, success or sexual attraction[.]

Orlowsky WD, 16:20-18:8. These are the same representations made in the Advertising Code and reiterated by Lorillard over the past forty years. Id.; TLT0370590-0592 (US 76628);

MNAT00608606-8614 (US 21228).

  1. On May 4, 1979, B&W Chairman and Chief Executive Officer Charles I. McCarty sent a letter to Joseph A. Califano, Jr., Secretary of the Department of Health, Education and

Welfare. McCarty stated that B&W had a "policy against advertising or in any way promoting the sale of cigarettes to persons under 21." 521038912-8912 (US 20890).

b. Defendants Deny Their Marketing Influences Youth Smoking Initiation; Defendants' Explanation for Their Marketing Practices Is Not Credible

  1. Despite all of the evidence above, for several decades, Defendants have falsely denied that their marketing efforts target young people. Defendants falsely claim that all of their marketing is aimed only at encouraging the brand loyalty of adult smokers. Defendants also falsely state that marketing has no effect on youth initiation and smoking behavior.
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(1) Tobacco Institute 3207. The Tobacco Institute, since its founding in 1958, has made numerous false public

statements denying that industry marketing targets young people.

  1. On November 20, 1962, Hill & Knowlton, on behalf of Philip Morris, RJR, B&W, Liggett, Lorillard, and American, through the Tobacco Institute, in response to a comment made by LeRoy Collins, President of the National Association of Broadcasters, that "cigarette advertising is designed primarily to influence high school children," issued a press release, titled "Tobacco Institute Head Calls N.A.B. President's Charges Incorrect." In the press release, George V. Allen, President of the Tobacco Institute, stated "the president of the National Association of Broadcasters, in a statement focused on high school age children, is incorrect when he suggests that cigarette advertising is designed primarily to influence them." The press release also stated that "[t]he tobacco industry regards smoking as an adult custom, and the decision to smoke or not to smoke should be made at the age of mature judgment." MNAT00280070-0070 (US 21724).

  2. On or about July 9, 1963, the Tobacco Institute, through its agent Hill & Knowlton, issued a press release stating that it was "the tobacco industry's position that smoking is a custom for adults and that it is not the intent of the industry to promote or encourage smoking among youth." It further stated that "[t]he industry wants to make it demonstrably clear that it does not wish to promote or encourage smoking among youth." TIMN0098597-8598 at 8597 (US 21270); TIFL0522044-2045 at 2045 (US 21313).

  3. On July 22, 1969, Joseph F. Cullman III, Chairman of the Executive Committee of the Tobacco Institute and Chairman of the Board of Philip Morris, testified to the Consumer Subcommittee of the Senate Committee on Commerce that "it is the intention of the cigarette manufacturers to continue to avoid advertising directed at young persons." 680263421-3422 (US

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  1. In September 1975, the Tobacco Institute, through its agent Hill & Knowlton, issued a press release, titled "Cigarette Industry Advertising Standards," communicating that the Tobacco Institute had issued statements denying that the cigarette industry marketed to youth smokers. The press release also repeated Cullman's July 22, 1969 testimony that "it is the intention of the cigarette manufacturers to continue to avoid advertising directed at young persons." 680263421-3422 (US 22345).

  2. On February 15, 1978, Horace Kornegay, President of the Tobacco Institute, testified before the Subcommittee on Health and the Environment of the House of Representatives Energy and Commerce Committee: "I do not believe, as some have suggested, that cigarette advertising induces young people to smoke, and I am supported on that statement by several studies that have been done. I do believe that it is peer influence." (no bates) (JD 011816). In a letter dated March 6, 1978, in response to a congressional request during his testimony to provide documentation of any recent studies targeting young women by the Tobacco Institute's constituent companies, Kornegay stated the following:

I am writing to confirm that I am unaware of any consumer study conducted by any of our member companies with regard to children nor any cigarette advertising campaigns directed at children, whether male or female. I have communicated with each of our cigarette manufacturing members and advised them of the Subcommittee's request for such material, should any exist.

(no bates) (JD 011816).

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  1. A 1979 Tobacco Institute brochure, titled "Fact or Fancy?" declared that cigarette advertisements create new smokers

[n]o more than advertising a specific brand of toothpaste causes more people to use toothpaste. Cigarette advertising is brand advertising, aimed at interesting smokers in switching brands and in creating brand loyalty. . . . The tobacco industry does not try to persuade anyone to smoke. Nor does it discourage anyone who makes up his or her mind to quit.

TIMN0133740-3798 at 3760, 3786 (US 21280).

  1. A May 24, 1979 letter from Kornegay to Joseph A. Califano, Jr., Secretary of the Department of Health, Education and Welfare, was written in response to Califano's statements to the Interagency Council on Smoking and Health on April 26, 1979. Kornegay's letter stated that Califano's "statements . . . reflect the erroneous view that brand advertising has an effect on the decision to begin smoking." TI05031337-1339 (US 21245); (no bates) (US 78792).

  2. On August 31, 1979, the Tobacco Institute issued a press release articulating Defendants' "policy" on youth smoking: "Kids shouldn't smoke! Smoking is an adult custom. Until a person is mature enough to make the decision in light of all the available information and on the basis of individual freedom of choice, that decision should be deferred." TIMN0157538-7538 (US 85136).

  3. On or about May 13, 1981, the Tobacco Institute issued a press release announcing the adoption of a "Code of Cigarette Sampling Practices" that promised the cigarette companies would cease their prior practice of distributing cigarette samples to persons under twenty-one, and limit the distribution of cigarette samples to "persons 21 years of age or older." The press release included a statement that members of the Tobacco Institute had a "long-standing policy of discouraging smoking by children," and that "the thrust of the new code is further to discourage smoking by children." The code stated that sample distribution would not occur within two blocks of any "center of youth activities, such as playgrounds, schools, college campuses, or fraternity or sorority houses." TIOK0000817-0818 (US 22346); TIMN0123794-3795 at 3794 (US 85138); TIMN0123589-3590 at 3589 (US 21279); TIMN0102493-2494 at 2493 (US 21271).

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  1. In a 1983 document, titled "Voluntary Initiatives of a Responsible Industry In Advertising," the Tobacco Institute stated that "smoking is an adult custom to be considered only by those mature enough to make an informed decision." ATX040294056-4056 (US 58599); TIMN333363-3363 (US 62907).

  2. A 1983 Tobacco Institute advertisement stated in bold letters: "We don't think our kids should smoke, either." The advertisement further stated that:

As with many of life's pleasures, smoking, drinking, and driving a car require a knowledge of oneself and a sense of moderation that come only with age. When our children acquire this sense of moderation and this knowledge of themselves -- and are, therefore, no longer children -- they can make their own decisions. Until then, we'll try to help them learn what every human being . . . has always had to learn. When we confuse the pleasures of growing up with the satisfactions of being grown up, we miss a great deal of both.

TIOK0001287-1288 (US 78789).

  1. On the nationally televised ABC program 20/20, broadcast on October 20, 1983, Ann Browder, a Tobacco Institute spokesperson, stated: "We feel very strongly that cigarette smoking is an adult custom that one should not even consider until they've reached the age of maturity" and that the "age of maturity is 21." Browder also stated that

[c]igarette manufacturers are not interested in obtaining new business from teenagers. . . . We've been in business very well, thank you, for

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sometime now without attempting to hook kids. We do everything possible to discourage teenage smoking.

680286673-6686 at 6675-6676 (US 20999); 690149518-9531 at 9520-9521 (US 21046).

  1. On April 1, 1984, the Tobacco Institute initiated a project with the National Association of State Boards of Education ("NASBE") to publish a pamphlet, titled "Helping Youth Decide," which advised parents on how to communicate with their children and how to assist them in making decisions on issues such as tobacco and alcohol use, drug use, and sexual activity. 04210444-0455 at 0445 (US 74879). On September 25, 1984, the Tobacco Institute's Vice President Walker Merryman stated in a speech pertaining to the "Helping Youth Decide" pamphlet:

[w]e do not want youngsters smoking cigarettes. That has been our policy for many years and it is a policy which has guided and will continue to guide our industry's marketing, promotion and advertising practices.

TIMN0053189-3191 at 3189 (US 77043).

  1. On September 21, 1984, Curtis Judge, Lorillard President and Chairman of the Tobacco Institute's Executive Committee, stated in a press release that cigarette manufacturers feel "that smoking is among many behaviors that should be left to adults, like driving, voting, raising a family, and knowing enough to make an informed decision about all sorts of adult activities." He also stated: "The cigarette manufacturers of America do not want youngsters to smoke." TIMN0013806-3806 (US 85140).

  2. In 1989, the Tobacco Institute issued a brochure, titled "Smoking and Young People -- Where the Tobacco Industry Stands," which stated that the "tobacco industry has long taken the position that smoking is an adult practice to be considered solely by mature, informed persons." The Tobacco Institute further stated that "no other industry in America has taken such direct -- and voluntary -- action to steer its product away from young people." The Tobacco Institute denied that advertising encourages people to begin smoking, stating that "[m]any [studies] have concluded that peer pressure and parental influence are the chief factors in an adolescent's decision" to smoke and that "[a]ccording to many behavioral experts, the answer is an unequivocal no -- there is no significant connection between advertising and the decision to start smoking." 2025861325-1334 at 1327, 1330, 1332 (US 23049).

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  1. In a January 11, 1989 interview on CBS This Morning, the host asked Brennan Dawson, Vice President of the Tobacco Institute, whether cigarette brand advertisements, such as ones featuring "Joe Camel," were directed toward teenagers. Dawson responded:

No. In fact, like all tobacco advertisements, they're directed at smokers, people who are already smokers, to give them education about how much and how many different brands there are, and things like that.

TIMN389505-9507 at 9505 (US 85141).

  1. In 1990, the Tobacco Institute issued a series of press releases, titled ". . . On Youth Smoking." The releases pronounced Defendants' public position on various youth smoking issues. A release titled ". . . On Youth Smoking Tobacco Advertising . . . And Why Kids Smoke" stated: "cigarette advertising has no significant effect on the prevalence of smoking by young people." TIFL0303295-3368 at 3305 (JD 080072). Another release, titled ". . . On Youth Smoking Reducing Access" stated:

[i]n the past -- and for the future -- the tobacco industry has maintained responsible positions on the issue of smoking by young people. The longstanding policy of cigarette manufacturers is that the choice to smoke or not to smoke is to be made by informed adults.

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TIFL0303295-3368 at 3308 (JD 080072). A release titled ". . . On Youth Smoking Tobacco Industry Initiatives" stated: "[t]he tobacco industry has long taken the position that smoking is an adult practice to be considered solely by mature, informed persons." TIMN0015624–5625 at 5624 (US 65589). A release titled ". . . On Youth Smoking Tobacco Industry Guidelines" stated:

Long holding the view that smoking is for adults who choose to smoke -- and an activity that should not be engaged in by youth -- the tobacco industry has taken measures to address public concerns about youth smoking.

TIMN0057161-7161 (US 62818).

  1. On February 20, 1990, the Tobacco Institute issued a press release stating that Charles Whitley, Tobacco Institute Legislative Consultant, had appeared before the Senate Committee on Labor and Human Resources on behalf of the Tobacco Institute and had testified that "the cigarette industry does not want young people to smoke." TIMN341503-1504 (US 85377).

  2. In a February 22, 1990 interview on Larry King Live, Brennan Dawson stated: "[T]he industry does not target kids. In fact, you'll only find tobacco ads in publications that are primarily geared towards older people; adults, in fact." TIMN341405-1422 (US 21363).

  3. On CBS News Nightwatch, broadcast on February 27, 1990, Brennan Dawson stated: "[A]dvertising doesn't cause smokers. . . . And advertising in that mature market doesn't create the urge to run out and buy a pack of cigarettes." Dawson further stated: "The industry does not target children. We don't want kids smoking. We have taken a number of very proactive steps over a long period of time to make that demonstration very clear." CORTI1731-1738 at 1734, 1737 (US 87735).

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  1. In March 1990, the Tobacco Institute issued a report on youth smoking stating, "Tobacco manufacturers have always believed that the decision to smoke or not is a choice to be made by informed adults." TIMN215242-2425 (US 85149).

  2. On the CNN program Crossfire broadcast on April 11, 1990, Brennan Dawson, stated: "There is no one in the tobacco industry that wants children and underaged youth to smoke. That has been a longstanding policy of the tobacco industry." CORTI1828 -1841 at 1837 (US 85150).

  3. On May 24, 1990, the Tobacco Institute issued a press release titled "Discouraging Youth Smoking, Tax Burden On Smokers And Other Issues Discussed in Testimony" concerning the testimony offered by the Tobacco Institute's Charles O. Whitley before the Senate Finance Committee. The press release quoted Whitley as testifying: "I know of no other industry in America that has taken such direct, voluntary action to steer its products away from young people." The press release also stated that Whitley "outlined many of the steps that the tobacco industry has taken to help discourage youth smoking." The press release further stated that "Whitley also disputed claims that raising cigarette taxes would discourage youth smoking." MNAT00600156-0157 (US 22349).

  4. In a July 1990 Tobacco Institute document, titled "Youth Guidelines," the Tobacco Institute stated:

The cigarette industry has long held the view that smoking is for adults who choose to smoke -- an activity that should not be engaged in by youth. In fact, the industry already has taken measures to address public concerns about youth smoking. To date cigarette manufacturers: do not advertise in publications directed primarily to persons under 21; do not use models in ads who are or appear to be under 25; do not distribute cigarette samples to persons under age 21; do not distribute cigarette samples within two blocks of any centers of youth activities, such as playgrounds and schools.

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  1. On October 11, 1990, the Tobacco Institute issued a press release, titled "Major New Initiatives to Discourage Youth Smoking Announced," which stated that Defendants had a "longstanding commitment" of discouraging and preventing smoking by youth and announced "five new initiatives that expand and reaffirm the industry's longstanding commitment and positive actions against youth smoking." The press release included a quote from Brennan Dawson stating that "[w]e also were determined to address substantively concerns about cigarette marketing. And so we reviewed our practices to find what more we could do." The press release further quoted Dawson as saying: "since it is widely recognized that young people smoke primarily because of peer pressure, we are addressing this directly with a major program to assist parents in reducing that peer pressure." TIOK0000978-0980 (US 21714).

  2. On December 12, 1990, Dawson told news reporters: "If a child never picks up another cigarette it would be fine with the tobacco industry." TIMN0131524-1525 (US 85153).

  3. On the nationally televised ABC program Good Morning America, broadcast on December 12, 1990, Dawson, speaking on behalf of Philip Morris, RJR, B&W, Liggett, and Lorillard, stated that the tobacco "industry has a long-standing history going back for decades of positive actions to discourage youth smoking." TIMN0041988-1911 at 1989 (US 62806).

  4. In 1991, the Tobacco Institute distributed to the public a booklet, titled "Smoking and Young People -- Where the Tobacco Industry Stands," which stated that, in 1990, the industry "launched a set of bold, new initiatives designed to ensure that smoking remains an adult custom." In the booklet, the Tobacco Institute also stated that "[a]ccording to many behavioral experts, the answer is an unequivocal no -- there is no significant connection between advertising and the decision to start smoking." TIMN0133916-3922 at 3917, 3919 (US 22206).

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  1. In a 1991 statement to the New York State Association of Tobacco and Candy Distributors, Samuel Chilcote Jr., President of the Tobacco Institute, said: "the tobacco industry has long believed that smoking is an adult choice. Over the years we have taken many voluntary steps to make that clear." TIMN0031560-1560 (US 85161).

  2. On December 11, 1991, the Tobacco Institute issued a press release criticizing a study published in the Journal of the American Medical Association ("JAMA") on youth smoking and accusing the authors of "glaring omissions and distortions." The press release stated:

Youth smoking is not on the rise in the U.S., contrary to the impression given in a study in today's Journal of the American Medical Association. . . . Contrary to the assertion of [the study's] authors, studies suggest that the majority of U.S. smokers are of legal age when they begin to smoke.

The press release further stated: "cigarette ads have no significant effect on the prevalence of smoking by young people." The press release also contained the statement: "The tobacco industry has long taken steps to discourage youth smoking and to address concerns about tobacco marketing." TIMN0024039-4040 (US 21266) (emphasis in original).

(2) Philip Morris 3238. Philip Morris has also made numerous false and misleading statements about youth

smoking and marketing. Philip Morris prepared a brochure intended to publicly promote its "thirty years of responsible marketing practices" dating from 1963 to 1993. The brochure stated: "Philip Morris Cigarette Ads are Directed to Adults Only. . . . Philip Morris advertises to promote brand loyalty among adults who already smoke." 2078842782-2814 at 2809 (US 25040).

  1. In 1989, Philip Morris initiated a program called "It's The Law" as part of its publicly-declared intention to reduce underage smoking. In a document regarding this program,
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Philip Morris denied that advertising leads children to smoke, stating: "All that cigarette advertising does is help smokers select a brand; it does not encourage nonsmokers or kids to smoke." 2046573757-3759 at 3757 (US 20472).

  1. Doreen Baker, Manager of Marlboro Accounts at Philip Morris, sent a letter dated November 22, 1989 to Don Miller, Vice President and General Manager, Motorsports International, which stated that Philip Morris's "policy [is] to market to the 21 and above aged consumer." 2048513994-3994 (US 20483).

  2. In 1991, Philip Morris placed advertisements which stated that "Philip Morris U.S.A. does not market cigarettes to children because smoking is an adult choice," and that "smoking is an adult decision." 2022881505-1505 (US 20366); 2022881503-1503 (US 20365).

  3. Responding to a letter from school children at Fairmont Public School in Fairmont, North Dakota, in a February 24, 1995 letter, Ellen Merlo, Senior Vice President at Philip Morris, wrote:

Let me start by assuring you that Philip Morris agrees with your students, in that we do not want minors to smoke. We believe that while smoking is a legitimate life-style choice for adults, it is completely inappropriate for children. For more than three decades we have taken great care to ensure that our cigarette products are marketed to adults only. We never advertise in publications geared toward youth and have not done so since the early 1960s.

2070038936-8938 at 8936 (US 24506); see also 2077070349-0354 (US 22091); 2048370622-0641 (US 22094).

  1. At a 1999 Philip Morris shareholders meeting, in response to a shareholder inquiry regarding youth smoking, the Altria Board of Directors stated that
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[b]oth Philip Morris U.S.A. . . . and Philip Morris International . . . have programs in place, and are subject to legal restrictions, that require that marketing and advertising activities be directed only to adults who choose to smoke.

Claiming that Philip Morris goes "above and beyond" legal requirements, the Board further stated that "Philip Morris U.S.A. has a long-standing commitment to direct its advertising only to adults who choose to smoke. . . ." (no bates) (US 87738).

  1. Philip Morris's internet website www.philipmorrisusa.com, launched on October 13,

1999, stated in part: "Our goal is to be the most responsible, effective, and respected developer, manufacturer and marketer of consumer products made for adults." The website further stated that

Philip Morris is committed to acting responsibly in marketing its tobacco products to adults who choose to smoke. We demonstrate this commitment by implementing all of our marketing programs in compliance with both the letter and the spirit of the laws, rules, policies and restrictions that govern our business practices.

TLT0450351-0360 (US 65080).

  1. At a 2000 Philip Morris shareholders meeting, in response to a shareholder inquiry regarding youth smoking, the Altria Board of Directors stated:

[b]oth Philip Morris U.S.A. . . . and Philip Morris International . . . have programs and policies in place, and are subject to legal restrictions, that help ensure that marketing and advertising activities be directed only to adults that choose to smoke. . . . Philip Morris U.S.A. has a long-standing commitment to direct its advertising only at adults who choose to smoke [and] complies with an industry code and company policy that help ensure that its marketing efforts are directed only to adults who choose to smoke.

(no bates) (US 87739).

  1. At a 2001 shareholders meeting, in response to a shareholder inquiry regarding youth smoking, the Philip Morris Board of Directors asserted that "Philip Morris U.S.A. has a longstanding commitment to help ensure that its marketing efforts are directed only at adults who choose to smoke . . . ." (no bates) (US 87740).
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  1. In June of 2001, Philip Morris posted on its internet website a document, titled "U.S.A. Marketing Policies," which represented that "All of our brand advertising and promotions are intended for adults who choose to smoke. They serve to enhance brand awareness, recognition and loyalty among adult smokers." 2078296160-6161 (US 20534).

  2. As of January 13, 2002, a section of Philip Morris's internet website www.philipmorrisusa.com titled "Responsible Marketing" stated in part that

we demonstrate our commitment to responsibly marketing our products to adult smokers by developing and implementing programs that comply with both the letter and the spirit of the laws, rules, policies and agreements that govern our business practices. . . . [including] PM USA's Marketing Practices. . . . Our marketing programs are designed to enhance brand awareness, recognition and loyalty among adult smokers, while honoring the Company's commitment to responsible marketing.

ARU6432619-2620 (US 78280).

  1. In describing its "marketing practices," Philip Morris states, "Philip Morris USA does not direct its advertising to underage smokers or to non-smokers." With regard to its obligations under the MSA, Philip Morris states, "Although the agreement restricts participation in promotional programs to 'Adults' (defined as eighteen years of age and older), PM USA voluntarily restricts such programs to adult smokers age 21 or older." ARU6432619-2620 (US 78280); ARU6432621-2624 (US 78281).

  2. According to "Message Points" intended for public dissemination dating to or after 1992, produced from the files of Norma Suter, currently the Vice President of Marketing, Discount

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Brands: "Philip Morris does not market its products to minors and we do not want minors to smoke because smoking in [sic] an adult custom. . . . Minors do not start smoking because of cigarette advertising, promotions or sponsorship." 2048826863-6864 at 6863 (US 23992).

  1. In 1994, Philip Morris created message points intended to publicly respond to the 1994 Surgeon General Report's conclusion that cigarette advertisements contributed to youth smoking. The Philip Morris message points stated:

No study has ever been able to draw the conclusion that advertising can cause anyone -- particularly kids -- to smoke. All that cigarette advertising does is help smokers select a brand; it does not encourage nonsmokers or kids to smoke. Brand recognition does not equate to smoking.

2062341135-1136 (US 20511).

  1. Similarly, a draft article intended to appear in an issue of PMGLOBE published close in time to the publication of the 1994 Surgeon General's Report stated that: "Philip Morris U.S.A. does not market its cigarette products to children and underage teenagers." 2078842765-2766 at 2766 (US 25039); 2078842371-2376 at 2371 (US 25037).

  2. On March 4, 1998, Geoffrey Bible, then Chairman and CEO of Philip Morris Companies, testified in the Minnesota litigation that "[w]e do not market cigarettes to teen-agers." Bible TT, Minnesota v. Philip Morris, 3/4/98, 6167: 9-10.

  3. According to Suzanne LeVan, Vice President of Marlboro and former Vice President of Philip Morris Premium Brands, who has been a Philip Morris employee since December 1991, "Philip Morris markets its brand to adults who choose to smoke" and "Philip Morris doesn't direct any of its marketing efforts to non-smokers." In response to the question: "Does Philip Morris do anything to recruit non-smokers to begin smoking?" LeVan stated, "No, sir, they do not." And in response to the question "What percentage of Philip Morris' marketing efforts are spent trying to convince minors to smoke Philip Morris brands?" She answered, "None. Philip Morris doesn't market to minors" and testified that that was "a true statement for all of [her] years at Philip Morris." LeVan PD, United States v. Philip Morris, 6/25/02, 268-270; 2063683072-3077 (US 21870).

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(3) Liggett 3255. Liggett has also made false and misleading statements about youth smoking and

marketing.

  1. On July 13, 1999, Ronald S. Fulford, Chief Executive Officer of Liggett, sent an internal memorandum to all employees stating that "[i]t is Liggett's policy to scrupulously avoid any and all advertising or marketing which would appeal to children or adolescents." LDOJ2233261- 3261 (US 21184).

(4) Lorillard 3257. Lorillard has also made numerous false and misleading statements about youth

smoking and marketing. In a January 6, 1970 letter to Michael Pertschuk, General Counsel for the United States Senate Commerce Committee, Arthur Stevens, Lorillard General Counsel, stated: "It is Lorillard's policy and practice to avoid directing its advertising or promotions toward young people." 00486108-6109 (US 20026).

  1. In response to a shareholder inquiry regarding youth smoking at a shareholder meeting in 1996, the Lorillard Board of Directors stated that

[f]or over 30 years, Lorillard and other cigarette manufacturers have opposed smoking by minors. The voluntary code of the cigarette industry, to which Lorillard fully subscribes, contains a variety of provisions designed to discourage youth smoking . . . and a variety of

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restrictions strictly limiting the distribution of product samples. These efforts have been supplemented and enhanced over the years.

91762567-2592 at 2585-2586 (US 22080).

  1. In response to a shareholder proposal regarding youth smoking at a shareholder meeting in 1997, the Lorillard Board of Directors stated that:

Lorillard and other cigarette manufacturers have opposed smoking by children and underage adults for over thirty years. In an effort to deal with this and other matters, the cigarette industry has adopted a voluntary code, to which Lorillard has always fully subscribed, containing a variety of provisions designed to discourage youth smoking.

TLT1022214-2235 at 2231 (US 87742); ARU6432609-2612 (US 78277).

  1. Lorillard CEO Martin Orlowsky wrote a statement dated June 30, 1999 titled "Corporate Principles of Marketing, Promotion and Youth Smoking" saying that:

[f]or many years, Lorillard, as a matter of corporate policy, has voluntarily and scrupulously followed the tobacco industry Cigarette Advertising and Promotion Code. . . . This Code was and is consistent with Lorillard's long-standing policy and practice that smoking is an adult custom and that children should not smoke.

Orlowsky WD, 8:23-9:11; 82225801-5805 at 5803-5805 (US 55455). Orlowsky also confirmed that he made this statement after the effective date of the MSA. Orlowsky WD, 9:12-14.

  1. In a May 6, 1999 speech at the Tobacco Merchants Association 84th Annual Meeting and Dinner in New York City, Alexander Spears, then CEO of Lorillard, stated: "We are committed to reducing underage access and consumption of cigarettes. . . ." 98427298-7301 at 7301 (US 25830).

  2. In June 2001, Lorillard posted on its internet website a statement titled "Marketing and Promotion" which promised that

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Lorillard does not and will not design or implement any marketing or promotional program intended to encourage youth to smoke cigarettes, and will continue to utilize only those advertising, promotional and marketing materials that do not, directly or indirectly, target youth.

VXA0104165-4166 (US 72746).

  1. Lorillard states on its current website:

As clearly set forth in the Tobacco industry's Cigarette Advertising and Promotion Code (the "Code"), to which Lorillard has adhered for many years, Lorillard believes that cigarette smoking is an adult custom and that children should not smoke. Accordingly, Lorillard advertises and promotes its cigarettes only to adult smokers. . . . Lorillard does not and will not take any action the primary purpose of which is to initiate, maintain, or increase the incidence of youth smoking.

TLT0370590-0592 (US 76628); ARU6432609-2612 (US 78277).

  1. Steven C. Watson, Lorillard Vice President, External Affairs, was responsible for issuing a press release in 2001, stating "Lorillard Tobacco Company has never marketed or sold its products to youth." The release was transmitted electronically by e-mail from North Carolina to P.R. Newswire in New York, and distributed from there by wire to various news agencies, to be published in newspapers, magazines or similar publications. Watson PD, United States v. Philip Morris,

4/2/02, 190:5-191:6.

  1. According to George Telford, Vice President of Brand Marketing for Lorillard since

1990, with responsibility for developing Lorillard's annual strategic marketing plans, that the purpose of Lorillard's marketing and promotion efforts was to retain current smokers of Lorillard products and to convince competitive smokers to switch to Lorillard products. Telford also testified that

Lorillard has set the target market for Newport as twenty-one to thirty-four year-olds since 1994.

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Telford PD, United States v. Philip Morris, 6/26/02, 39:17-42:10, 61:9-62:2, 62:9-17, 62:22-63:14,

(5) BATCo and Brown &Williamson 3266. BATCo and Brown & Williamson have both made numerous false and misleading

statements about youth smoking and marketing.

  1. On May 4, 1979, B&W Chairman and Chief Executive Officer Charles I. McCarty wrote to Joseph A. Califano, Jr., Secretary of the Department of Health, Education and Welfare, stating that B&W had a "policy against advertising or in any way promoting the sale of cigarettes to persons under 21," and that B&W "does not have at hand the research data and other information necessary to a responsible analysis of the suggestion made in [Califano's April 26 letter]." 521038912-8912 (US 20890).

  2. On June 1, 1979, McCarty sent a second letter to Califano further responding to Califano's April 26, 1979 letter. In this letter, McCarty stated: "We maintain a strict policy against promoting cigarettes to persons under 21 years of age." McCarty further stated:

We do not want children to smoke not because we agree with your oft-repeated slogan that smoking is "slow-motion suicide" but because the decision whether to smoke, we think, is a decision which should be made by adults, not children. . . .

660008960-8961 (US 21524).

  1. In a document, titled "Statement of Business Conduct," dated December 21, 1993, BATCo stated that "[t]obacco advertising and marketing programmes are used to cause existing adult consumers to switch from one brand to another and are not used to encourage young people to start smoking." This "Statement" indicated that it applied to "all directors, officers, and employees" at
1229

BATCo and at "every company within the B.A.T. Industries Group of companies." 503074962-4985 at 4965, 4978 (US 21869).

  1. On August 25, 1997, the B&W Board of Directors (N.G. Brookes, R.L. Bexon, J.N. Jewell, M.J. McGraw, and C.L. Schoenbachler, Jr.) adopted a resolution stating that B&W does not market to youth and that advertising and promotion were not major determinants of tobacco use by youths:

B&W does not agree that its actions encourage young people to use tobacco products. B&W believes that minors should not use or have access to tobacco products, and B&W does not market or advertise its products to minors. B&W does not believe that tobacco advertising or promotion are major determinants of tobacco use by minors. B&W therefore does not agree that "sweeping new restrictions" on the marketing and sale of tobacco products are necessary. Enforcement of existing laws prohibiting youth access to tobacco would be the single most effective means of reducing youth tobacco use.

321963884-3886 at 3884 (US 85173).

  1. On February 24, 1998, Nicholas G. Brookes, Chairman and CEO of B&W, testified to the United States Senate Commerce Committee that B&W had

a policy that we do not promote our products to kids or underage smokers, and that would be a terminable offense. We would terminate somebody who clearly evaded that policy and, indeed, I think we have historically terminated contractors who have done so.

178200001-0132 at 0095 (US 35023).

  1. In 1998, B&W's internet website included a statement, titled "Marketing & Consumer

Principles and Practices," which promised that:

we conduct our business in a principled manner to assure that our cigarettes are marketed responsibly, and that our advertising, promotion and sponsorship programs are not directed toward youth.

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Although state law permits individuals under the age of twenty-one to purchase tobacco products, the intended audience for all B&W marketing programs is adults twenty-one and over. Hence, the purpose of B&W's marketing programs is to encourage smokers twenty-one and over to select B&W brands rather than competitive brands.

TLT0160001-0007 (US 65077).

  1. During 1999 and through June 2001, B&W's website included a document, titled "Hot Topics: Corporate Responsibility." The section of the document, titled "Marketing Principles and Practices: Advertising," stated: "All elements of marketing programs, including content, theme, imagery and choice of medium are to be directed at adults 21 years of age or older, not at youth." 106004419-4422 (US 76629).

  2. In a July 7, 2000 interview with Charles Gibson of ABC News, Claudia Newton, B&W Vice President of Corporate Responsibility and Youth Smoking Prevention until 2001, stated that B&W was "making very sure that our marketing programs are aimed at the audience that we want to smoke our products, and that's people who are 21 years of age and up." 520526702-6705 at 6703 (US 22111); 106004533-4534 at 4533 (US 87751).

  3. The "British American Tobacco Social Report 2001/2002," available on the British American Tobacco website, stated:

Our companies take care to ensure that their advertising does not encourage people to start smoking, to smoke more or not to quit. Our companies' advertising aims to inform adult smokers about British American Tobacco brands so that they will switch from competitor brands to ours, or if they are already a smoker of our brands will remain so.

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  1. B&W's most recent website contained a section titled "Marketing & Consumer

Communication Principles and Practices." On it, B&W asserts,

B&W has long taken the position that mass media advertising should be directed to adults 21 and over, despite the fact that 18 is the age at which most states permit the purchase of tobacco products. . . . Although we carefully screen our publications to ensure they are directed toward adults, we recognize that some readers may not be adults. Thus, when we do not know the age of a publication recipient, we restrict the content of our advertising as well as the publications in which we place advertising, using the age of 21 as our threshold rather than legal age.

B&W further stated, "[t]oday, our primary focus is on consumer relationship marketing, that is, marketing to specific individuals who have confirmed that they are both adults and smokers."

VXB3840037-0041 (US 78678) (emphasis in original).

  1. In discussing "Corporate Responsibility" on its most recent website, B&W asserts:

Brown &Williamson invests in advertising to generate interest in our brands among competitive brand smokers and to discourage smokers of our brands from switching to other cigarette brands. . . . In addition, we do not target children or teenagers in our advertising or other marketing programs.

TLT0770001-0065 at 0024 (US 72407).

  1. A March 18, 2004 B&W press release appearing on the company's website included the following statement by Ludo Cremers, Divisional Vice President, Brand Marketing: "B&W is a responsible company that only markets its products to adults who chose to smoke and strongly believes that anyone underage should not smoke cigarettes under any circumstances." TLT09620052006 (US 87745).

  2. According to Claudia Newton, advertising and marketing influence brand choice, not smoking initiation. Newton reached that conclusion based on the results of surveys in which smokers were asked the open-ended question, "Why did you start smoking?" Newton PD, United States v. Philip Morris, 4/17/02, 150:15-20, 157:7-22, 158:17-159:4, 160:11-16.

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  1. Susan Ivey, former President and Chief Executive Officer of B&W and now head of Reynolds American, stated that "B&W's policy . . . with respect to mass media advertising and market research" has been and remains "against advertising or in any way promoting the sale of cigarettes to persons under 21." Ivey WD, 4:7-16.

(6) R.J. Reynolds 3281. RJR has also made numerous false and misleading statements about marketing and

youth smoking. An April 7, 1972 letter written by T. K. Cahill, an employee in RJR's Public Relations Department, responded to a letter from Santa Monica, California fifth-grade teacher Kenneth Bersinger's class regarding a Winston ad in the Los Angeles Times. Cahill's response stated that "[n]one of our cigarette advertising, either in its content or in the media used, is directed to youth." 500671015-1015 (US 66308).

  1. In a May 29, 1979 letter to Joseph A. Califano, Jr., Secretary of the Department of Health, Education and Welfare, William D. Hobbs, then Chairman and Chief Executive Officer of RJR, stated on behalf of RJR that, "we sincerely believe cigarette advertising plays no part in the process which causes teenagers to take up smoking and feel your suggestion that our Company participate in a massive campaign aimed at teenagers is misplaced." TI03972552-2554 at 2554 (US 21242).
  1. A January 17, 1984 RJR document, titled "Questions and Answers," stated: We do not target our advertising to minors. . . . We do not develop marketing plans against young people, we do not advertise to young people, we do not conduct consumer surveys among young people,
1233

and we have no intention of ever making any efforts to bring them into our market.

502276627-6637 at 6633 (US 20698).

  1. In April 1984, RJR placed an advertisement, titled "We don't advertise to children," in numerous publications nationwide, including the April 19, 1984 edition of the weekly magazine U.S. News and World Report. It stated that "we're running ads aimed specifically at young people advising them that we think smoking is strictly for adults." It further stated that

research shows that among all the factors that can influence a young person to start smoking, advertising is insignificant. Kids just don't pay attention to cigarette ads . . . . [A]ll of our cigarette ads are what we call "brand advertising." Its purpose is to get smokers of competitive products to switch to one of our brands, and to build the loyalty of those who already smoke one of our brands. . . . Getting smokers to switch is virtually the only way a cigarette brand can meaningfully increase its business.

500638176-8176 (US 20644).

  1. James W. Johnston, then Chairman and Chief Executive Officer of RJR, sent a letter dated March 5, 1990, to Mark Green, New York City Commissioner of Consumer Affairs, in response to a letter sent by Green to Louis V. Gerstner, President of RJR. In his letter, Green had raised questions concerning the "Joe Camel" advertising campaign. Johnston stated that it "has long been an RJR policy not to induce youth to smoke . . . we have published full-page statements in national publications urging youths not to smoke." Johnston further stated that, as CEO of RJR, "I have reinforced this policy," and "I see no basis to conclude that R.J. Reynolds has conducted itself in an unethical, illegal or misleading manner." 507603767-3767 (US 20780); 507721148-1153 (US
1234
  1. On September 18, 1990, Joan F. Cockerham of RJR's Public Relations Department, sent a letter to private citizen Joanna Brown in response to a letter from Brown expressing concern that the Joe Camel "Camel Smooth Character" appealed to youth. Cockerham stated:

Our intention with this campaign, as with all of our advertising, is to appeal only to adult smokers. We would not have launched the current Camel campaign if we thought its appeal was to anyone other than this group. . . . [O]ur advertising is directed to adult smokers and not younger people.

Cockerham also stated that "research shows that among all the factors that might influence a young person to start smoking, advertising is insignificant." 507706384-6384 (US 20782).

  1. On January 28, 1992, Yancey W. Ford, Jr., Executive Vice President for Sales of RJR, sent a letter to James Harrison, President of the Vermont Retail Grocers Association, regarding the request by certain public health groups that the Association's members remove Camel advertising from their stores. Ford stated that "R.J. Reynolds Tobacco Co. does not want youth to smoke. We do not believe that smoking should be a part of growing up." Ford further stated that "R.J. Reynolds Tobacco Co. and the tobacco industry have long been on record against youth smoking" and that the Joe Camel advertising campaign was directed at adult smokers. Ford also criticized a study on youth smoking that had recently been published in the JAMA, that found that Camel had 33% of smokers twelve to eighteen years old, and cited Joe Camel as being widely recognized by this group of adolescents. TIMN0165921-5923 (US 22354).

  2. RJR sent an August 28, 1992 letter addressed to Dr. Francis A. Neelon, Editor of the North Carolina Medical Journal, signed by Dr. Robert G. Fletcher, Medical Director of RJR. The letter bore a handwritten notation on the copy retained by RJR stating that it was "written by SWM for Dr. Fletcher." SWM are the initials for Seth W. Moskowitz, an RJR employee responsible for media relations. The letter criticized Dr. Adam Goldstein's "Health Watch" article titled "Youth and

1235

Tobacco: Addiction and Death" that appeared in the August 1992 volume of the North Carolina

Medical Journal. The letter stated:

[Dr. Goldstein] claims the tobacco industry spends huge sums of money promoting its products to youth. This is blatantly false. None of Reynolds Tobacco's product advertising or promotions are directed toward anyone under the legal age to smoke. . . . I strongly share Dr. Goldstein's belief that children should not smoke, as does my company.

The letter further stated that "peer pressure is the main influence prompting children to start smoking." 512024008-4011 at 4008-4009 (US 22994); (no bates) (US 76095).

  1. In a press release issued on April 21, 1998, RJR claimed, "[w]e do not want children to smoke, nor do we market this adult product to minors." ARU6432634-2635 (US 78284).

  2. An RJR Media Contact Record indicated that on May 6, 1998, Cliff Pennell, head of

RJR Sports Marketing Enterprises, was interviewed by Liz Clark, a sportswriter for the Washington

Post. The Contact Record revealed that Pennell stated in his introductory comments, "We don't want youth to smoke. . . . RJR brands are only interested in communicating with adult smokers 21 and over." 700033868-3869 at 3868 (US 54421).

  1. At a 1999 RJR shareholder meeting, in response to a shareholder inquiry regarding youth smoking, the RJR Board of Directors claimed that

Reynolds has policies and practices in place to assure that its advertising is responsible, and directed to adult and not underage smokers. Reynolds's policy prohibits any advertising research involving subjects under the age of 21. In their research about proposed new advertising, consistent with good qualitative research practices, Reynolds's researchers ask study participants whether the proposed ads are perceived as being for persons younger or older than

1236

or about the same age as the study participants. If an ad is thought to have particular interest to persons younger than 21, it is not used.

519439239-9268 at 9262 (US 87748).

  1. As of June 2001, the RJR internet website contained a document titled "Marketing Philosophy," stating that "Reynolds Tobacco is not interested in, and does nothing aimed at, trying to persuade any nonsmokers to begin smoking." LIGS-C2507550-7554 at 7550 (US 65063).

  2. As of March 18, 2005, the RJR website stated: "We don't want children to smoke. . . . As a responsible manufacturer and marketer of adult products, we make every effort to ensure that all of our actions are guided by this basic belief." (no bates) (JD 068012). RJR also asserts on its website that RJR, "[does] not encourage nonsmokers to start smoking." ARU6432639-2640 (US 78286).

  3. According to RJR President and Chief Executive Officer Andrew Schindler, RJR adopted a policy in 1992 regarding "marketing plans or campaigns," that RJR does not "interact with" or "talk to" eighteen, nineteen, and twenty year olds, but rather "conducts its interactive marketing practices only with those 21 and older." Schindler stated that when he assumed his position as RJR President and CEO in 1994, he continued RJR' policy to "limit [RJR'] advertising and marketing efforts to smokers 21 years of age and older" in part "to create a buffer between adult smokers and minor smokers" as a defense against charges that RJR "market[s] to teenagers." Schindler also said that RJR "absolutely does not want to develop a cigarette that appeals to children," and that "Reynolds Tobacco is not interested in trying to persuade any nonsmokers to begin smoking or in persuading any smokers not to quit." Schindler WD, 76:17-77:1, 170:16-171:18, 208:16-18.

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  1. According to Lynn Beasley, President and Chief Operating Officer at RJR, prior to its merger with B&W, "Reynolds only permitted those 21 and older to participate in many of our marketing programs." After the merger with B&W, "now we allow legal age adult smokers [i.e., those over eighteen] to participate in our direct mail, sampling and promotional program." Beasley WD, 118:7-17. Beasley confirmed that Reynolds has publicly stated that the company does not market to youth for her entire tenure there. Beasley TT, 17351:19-23.
  1. Conclusions 3296. The evidence is clear and convincing -- and beyond any reasonable doubt -- that

Defendants have marketed to young people twenty-one and under while consistently, publicly, and falsely, denying they do so. Dolan WD, 24:3-16; Krugman WD, 17:2-19:1; Chaloupka WD, 30:8- 32:20; Biglan WD, 100-379.

  1. In response to the mountain of evidence to the contrary, Defendants claim that all the billions of dollars they have spent on cigarette marketing serves the primary purpose of retaining loyal customers ("brand loyalty"), and the secondary purpose of encouraging smokers to switch brands. They deny that any of their marketing efforts are aimed at encouraging young people to initiate smoking or to continue smoking. Dolan WD, 61:6-16.

  2. In fact, the overwhelming evidence set forth in this Section -- both Defendants' internal documents, testimony from extraordinarily qualified and experienced experts called by the United States, and the many pictorial and demonstrative exhibits used by the Government -- prove that, historically, as well as currently, Defendants do market to young people, including those under twenty-one, as well as those under eighteen. Defendants' marketing activities are intended to bring new, young, and hopefully long-lived smokers into the market in order to replace those who die

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(largely from tobacco-caused illnesses) or quit. Defendants intensively researched and tracked young people's attitudes, preferences, and habits. As a result of those investigations, Defendants knew that youth were highly susceptible to marketing and advertising appeals, would underestimate the health risks and effects of smoking, would overestimate their ability to stop smoking, and were price sensitive. Defendants used their knowledge of young people to create highly sophisticated and appealing marketing campaigns targeted to lure them into starting smoking and later becoming nicotine addicts. Dolan WD, 24:3-16; Krugman WD, 84:1-99:23; Chaloupka WD, 30:8-32:20; Biglan WD, 100-379.

  1. As a result, 88% of youth smokers buy the three most heavily advertised brands -- Marlboro, Camel, and Newport. Fewer than half of smokers over the age of twenty-five purchase these three brands. For example, in 2003, Marlboro, the most heavily marketed brand, held 49.2% of the twelve to seventeen year old market but only 38% of smokers over age twenty-five. Eriksen WD, 52:17-54:10; (no bates) (US 17684A).

  2. Independent scientific studies published in prestigious peer-reviewed scientific journals and in official government reports have confirmed Defendants' knowledge, as demonstrated in their internal documents, that their marketing contributes substantially to the initial demand for and continuing use of cigarettes by young people. Over the past ten years, there have been a number of comprehensive reviews of the scientific evidence concerning the effects of cigarette marketing, including advertising and promotion, on smoking decisions by young people. The weight of all available evidence, including survey data, scientific studies and experiments, reports of public health and governmental bodies, and the testimony of experts in this case, supports the conclusion that cigarette marketing is a substantial contributing factor to youth smoking initiation and continuation. Eriksen WD, 55:4-20.

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  1. Defendants spent billions of dollars every year on their marketing activities in order to encourage young people to try and then continue purchasing their cigarette products in order to provide the replacement smokers they need to survive. Defendants' expenditures on cigarette advertising and promotion have increased dramatically over the past decades, and in particular since the signing of the MSA. Krugman WD, 23:10-24:4. Over the decades, Defendants have used the full range of marketing tools available to them at any particular time, including: advertising on television, radio, and billboards, and in magazines and newspapers; sponsoring events, such as sporting events, bar promotions, festivals, concerts, and contests; providing coupons, price reductions, and free packs with purchases; providing gifts with purchases (known as "continuity items") such as t-shirts, mugs, and sporting goods; direct-mail marketing by sending magazines and other materials directly to individuals' homes; distributing free cigarette samples at retail stores, public events, bars, or other locations; and strategically locating "point of sale" advertising and promotions at retail outlets young people are most likely to frequent, such as convenience stores. Krugman WD, 43:14-2; Dolan WD, 48:6-3.

  2. In the face of this evidence, Defendants have denied, over and over, with great self-righteousness, that they have marketed to youth.

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Defendants Have Publicly Denied What They Internally Acknowledged: that

ETS Is Hazardous to Nonsmokers 1. Introduction 3303. Defendants' collective effort to maintain an open question as to the health effects of

cigarette smoking was not limited to whether cigarettes caused disease in smokers themselves. During the 1970s, scientific evidence suggesting that exposure to cigarette smoke was hazardous to nonsmokers began to grow, and public health authorities began to warn of a potential health risk to both adults and children. Fearing government regulation to restrict smoking in public places and sensing a decrease in the social acceptability of smoking, Defendants were faced with a major threat to their profits.

  1. In 1974, Tobacco Institute chairman Horace Kornegay warned that smoking restrictions not only impacted sales but also "could lead to the virtual elimination of cigarette smoking." TIMN0067732-7755 at 7734 (US 22047). Reynolds CEO Ed Horrigan wrote Lorillard executives in 1982: "We all know that probably the biggest threat to our industry is the issue of passive smoking." 93443843-3843 (US 32289). A 1986 BATCo document stated: "The world tobacco industry sees the ETS issue as the most serious threat to our whole business." 100993158- 3165 at 3158 (US 89556). Philip Morris Companies Vice Chairman Bill Murray was advised at a presentation by Project Downunder Conference attendees, in 1987: "The situation can't get any worse. Sales are down, can't be attributed to taxes or price increases. ETS is the link between smokers and non-smokers and is, thus, the anti's [anti-smoking activists] silver bullet." 20215026713305. In response, Defendants crafted and implemented a broad strategy to undermine and distort the evidence indicting passive smoke as a health hazard. Defendants' initiatives and public statements with respect to passive smoking attempted to deceive the public, distort the scientific record, avoid adverse findings by government agencies, and forestall indoor air restrictions. Defendants' conduct with respect to passive smoking continues to this day, when currently no Defendant publicly admits that passive exposure to cigarette smoke causes disease or other adverse health effects.
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