Liggett Withdrew from the Conspiracy

Liggett Withdrew from the Conspiracy

¶Where an alleged conspirator communicates his abandonment in a manner reasonably calculated to reach co-conspirators, the conspirator is deemed to have withdrawn from the conspiracy. United States v. Thomas, 114 F.3d 228, 267-9 (D.C. Cir.), cert. denied, 522 U.S. 1033 (1997) (collecting cases); see also United States v. United States Gypsum Co., 438 U.S. 422, 463-64 (1978); In re Brand Name Prescription Drugs Antitrust Litig., 123 F.3d 599, 616 (7th Cir. 1978); In re Corrugated Container Antitrust Litig., 662 F.2d 875, 886 (D.C. Cir. 1981). Although there is clear and convincing evidence that Liggett participated in the RICO Enterprise and conspiracy during its formative years, the Court finds that it withdrew from the conspiracy in 1997.

¶In 1996, Liggett broke ranks with the tobacco industry when it cooperated with states' Attorneys General in the prosecution of certain claims against itself and other tobacco company Defendants, and made historic statements concerning the health and addiction risks of smoking. See Findings of Fact Section VIII(C). Liggett's invaluable cooperation with government authorities and public health officials was well-publicized. Id. The states' Attorneys General, as well as numerous other government and public health officials, publicly acknowledged that Liggett's conduct and cooperation was a key element in achieving important settlements with other major tobacco companies, including the Master Settlement Agreement.

¶There were several ways in which Liggett provided cooperation and assistance to the states' Attorneys General in their continuing lawsuits against the major tobacco companies. Liggett agreed

¶(...continued) 875 F.2d at 1281 (citations omitted). Accordingly, because Altria conspired to violate 18 U.S.C. §1962(c), it is liable under RICO conspiracy, even though one of the Defendants with which Altria conspired was Philip Morris USA, Altria's subsidiary.

¶to waive attorney-client privilege and work product protection with respect to internal Liggett-only privileged documents relevant to smoking and health issues and produced such documents to the states. As to joint defense privileged documents in Liggett's possession, Liggett produced many of those documents to courts around the country for in camera reviews and Liggett's outside counsel participated in efforts to have such documents de-privileged. These productions resulted in the first judicial decisions compelling the major tobacco companies to release privileged documents. Liggett also agreed to make its scientists and executives available for informational interviews by the Attorneys General and their outside counsel and conducted informational tours of Liggett's manufacturing facilities for counsel for the states and others in the public health community. Finally, Bennet LeBow, CEO of Liggett at the time, and others affiliated with Liggett testified on behalf of the states' Attorneys General in those cases where trials occurred. Id. at 5:6-19. As a result of these and other actions in 1996 and 1997, Liggett has isolated itself, and been isolated from, the other cigarette company Defendants. In this case, Liggett was represented by its own individual counsel and conducted its own defense.

¶Liggett communicated its withdrawal from the Enterprise and the conspiracy by, among other things, its public statements and open cooperation with the state and federal governments in the prosecution of their claims against the other tobacco company Defendants. See Findings of Fact Section VIII(C). Given Liggett's conduct, the evidence shows Liggett is not continuing to "conspire" with other tobacco company defendants.⁴²⁴² Withdrawal does not preclude liability even in criminal prosecutions involving substantive mail and wire fraud offenses. For example, in United States v. Read, 658 F.2d 1225 (7th Cir. 1981), the Seventh Circuit explained the differences between the application of the withdrawal defense to substantive, as opposed to conspiracy, offenses. In holding that withdrawal was not a (continued...) -1598-

ALTRIA IS LIABLE FOR ITS VIOLATIONS OF 18 U.S.C. §1962(c) and (d)

¶Defendants claim that Altria Group Inc., as a holding company, can not be liable for violations of 18 U.S.C. 1962 (c) and (d) simply by virtue of its parental relationship to Philip Morris USA. Their argument misses the point, since that is not the basis on which its liability rests. Since its creation in 1985, Altria, formerly Philip Morris Companies Inc., has participated directly in the conduct of the Enterprise and conspired to violate 1962(c). Even though there is overwhelming evidence that Altria effectively controlled Philip Morris USA and therefore "caused" some of its predicate Racketeering Acts, Altria's liability in this case stands on its own.

¶Defendant Altria effectively and actively controls the activities of all of its subsidiaries, including Defendant Philip Morris USA Inc. and Philip Morris International, Inc. Altria management sets overall policy on all major components of the companies' operations, and senior Altria executives, employees, and agents participate in and/or control decisions about how the operating companies should implement those policies, through both formal and informal reporting relationships. Berlind PD, U.S. v. Philip Morris, 5/23/02, 8:4-10:13; US 23061*. It is disingenuous to argue, as Altria does, that its control, through the reporting relationship, of decisions taken by Altria Corporate Services ("ACS") employees on behalf of its subsidiaries does not constitute "control" of those decisions. Altria's relationship with its subsidiaries was structured to maintain

¶(...continued) defense to substantive mail and securities fraud offenses, the court explained, "A party's 'withdrawal' from a scheme is [] no defense to the crime because membership in the scheme is not an element of the offense. [The defendant] is liable for mail fraud as a principal or as an aider and abettor, not a conspirator." Id. at 1240; accord United States v. Waldrop, 786 F.Supp. 1194, 1201 (E.D. Pa. 1991) ("withdrawal is no defense to mail fraud"), aff'd, 983 F.2d 1054 (3d Cir. 1992) (Table). Accordingly, Liggett's withdrawal from the RICO conspiracy does not preclude its liability under 18 U.S.C. §1962(c) for the substantive mail and wire fraud offenses that underlie the civil RICO lawsuit for equitable relief brought by the United States.

¶consistency among its companies on sensitive issues such as smoking and health, addiction, and passive smoking. For example, the CEO and Chairman of Philip Morris Companies, Geoffrey Bible, was the ultimate authority on content of public statements on smoking and health made by Philip Morris Companies subsidiaries, including Philip Morris USA. Bible PD, U.S. v. Philip Morris, 8/22/02, 83:9-84:9, 85:22-86:25. Moreover, the Court has already found that the document retention procedures and policies that led to the destruction of email by and to senior executives at Philip Morris while this lawsuit was pending were created with and approved by Altria. United States v. Philip Morris USA, 327 F. Supp. 2d 21, 24 (D.D.C. 2004).

¶Steven Parrish, Altria's Senior Vice President of Corporate Affairs, testified that officers and members of the Board of Directors of Altria were involved in activities of CTR and TI. Parrish TT, 1/27/05, 11349:8-11. Altria's General Counsel Murray Bring and William Murray, who served as President and COO of Altria and, later, Chairman of its Board of Directors, were members of the Board of Directors of CTR and attended its meetings. Id. at 11350:6-12; (no bates) (US 32606); (no bates) (US 32608); (no bates) (US 32610). Alexander Holtzman, an attorney in the legal department at Altria, was also active in CTR leadership.

¶Altria's active participation extended to the Tobacco Institute. Parrish continued to attend meetings of the TI Executive Committee after leaving PM USA and joining the corporate affairs department at Altria. Parrish TT, 1/27/05, 11352:24-11353:24; US 62461. Moreover, Altria's Vice- President of Government Affairs served as a Class A Director of TI, because "the head of Government Affairs always sat on the TI Executive Committee." Parrish TT, 1/27/05, 11353:25- 11354:25; (no bates) (US 88252); (no bates) (US 88308).

¶In addition, Parrish noted that Altria had approval authority for CTR Special Projects in the late 1980s and early 1990s. Parrish TT, 1/27/05, 11351:20-11352:2. Altria (operating as Philip Morris Companies) issued checks to fund CTR Special Projects. Id. at 11352:3-23.

¶Accordingly, because Altria has participated in the Enterprise and conspiracy, both directly and indirectly, it cannot escape liability simply by virtue of being a holding company.

THERE IS A LIKELIHOOD OF PRESENT AND FUTURE VIOLATIONS OF RICO