The Tobacco Institute

¶The Master Settlement Agreement ("MSA") provided for cessation by TI of operations and for dissolution of TI. Section III (o)(2) of the MSA provides:

The Tobacco Institute, Inc. ("TI") (a not-for-profit corporation formed under the laws of the State of New York) shall, pursuant to a plan of dissolution to be negotiated by the Attorney General of the State of New York and the Original Participating Manufacturers in accordance with Exhibit G hereto, cease all operations and be dissolved in accordance with the laws of the State of New York and under the authority of the Attorney General of the State of New York (and with the preservation of all applicable privileges held by any member company of TI).

¶MSA § III(o)(2) US 64359 (at VXA 104 0635). Following the execution of the MSA, TI immediately began winding down its operations and arranging for severance of its employees. W. Adams, USA Dep., 6/18/02 at 22:19-23:9, 42:10-23. TI ceased its public relations, lobbying and other ongoing trade association functions. Id. at 42:10-43:7.

¶With the execution of the MSA, TI ceased issuing press releases or otherwise making public statements or comments concerning tobacco issues. Id. at 75:7-19. In January 31, 1999, TI discharged its operating employees except for a skeleton staff which was retained to perform administrative, closedown and litigation support functions. Id. at 22:7-23:9, 42:10-43:7.

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¶The limited TI staff retained after January 31, 1999 were engaged solely in closing out TI's affairs in accordance with the MSA. (See id. at 22:7-23:9, 42:10-43:7). Their functions were limited to activities such as vacating TI's former office space, disposing of office furnishings and equipment, making arrangements for TI employees' medical and pension plans to be carried out, and placing TI records in storage. Id.

¶In accordance with Section III(o)(2) of the MSA, a final Plan of Dissolution for TI was prepared by TI and approved by the Attorney General of New York. The Plan of Dissolution was then presented to the Supreme Court of New York for approval. On August 31, 2000, that court entered an Order Approving TI's Plan of Corporate Dissolution and Certificate of Dissolution. See (no bates) (JE 022000) and (no bates) (JD 080768).

¶Under the terms of the Plan as entered and approved by the New York court, TI is obligated to "promptly wind up its non-litigation affairs" and "shall not perform any function or activities not contemplated by this Plan." See TI1491-0989 at 0900-0901 (JE 022000). The only functions or activities permitted by the Plan are winding up TI's affairs and defense of litigations. (Id. at 0901).

¶The only employees or consultants TI is permitted to have are those "reasonably needed for the conduct of litigation activities," Id. at 0902, 0905, which is defined as "the right [of TI] to defend itself against any claims threatened or asserted against it now or in the future." Id. at 0904. Upon the conclusion of litigation against it, TI is required to terminate any remaining employees and consultants and "cease all function." Id. at 0905. Once all litigation against TI has been concluded, TI will cease to exist entirely. W. Adams, United States Dep., 6/18/02, at 14:19-15:2.

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¶TI is also directed by the Plan of Dissolution, after making all payments and distributions referred to in the Plan, to deliver all its remaining assets "to one or more not-for-profit health or child welfare organizations selected by TI and agreed to by the Attorney General." TI14910898-0918 at 0813 (JE 022000).

¶TI's Plan also contains an express blanket prohibition on public statements concerning tobacco. Section 5.6 of the Plan provides:

No Public Statements. Upon entry of an order approving this Plan, neither TI nor any of its employees or agents acting in their official capacity on behalf of TI will issue any statements, press releases, or other public statements concerning tobacco, except as necessary in the course of litigation defense as set forth in section 5 of this Plan.

¶TI14910898-0918 (JE 022000).

¶TI's last employee was released on November 30, 2000. W. Adams, United States Dep., 6/18/02, at 21:16-19. Since then, TI has had no employees and no consultants other than a Senior Vice President-Administration, William Adams, who remains an officer of TI solely to support its litigation defense and handle any remaining administrative matters. Id. at 16:7-23. Once litigation against TI as been concluded, Mr. Adams will cease to have any role at all. Id.

¶TI has no office, no telephone, and no funds or other liquid assets. W. Adams Dep., 6/18/02, at 19:5-23. TI's sole assets consist of an appeal bond posted by TI in connection with the pending appeal of a trial court judgment entered against TI in a Florida case, Engle v. R.J. Reynolds Tobacco Co., et al. Id. at 14:4-7.

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¶Accordingly, even though TI is liable for past violations of 18 U.S.C. § 1962 (c) and (d), there is no reasonable likelihood of future violations, and therefore no remedies will be entered against TI.

Liggett Liggett does not have a reasonable likelihood of future RICO violations as part of the

¶Enterprise. As discussed in detail in the Findings of Fact, in the mid-1990s, Liggett took historic steps when it became the first domestic tobacco company to admit that smoking causes cancer and is addictive, and to include product warnings on its packages beyond those required by law. Liggett is the only company to disclose the ingredients of its cigarettes on its cartons and was the first to expand voluntarily advertising restrictions and agree to submit to FDA jurisdiction. Of the greatest significance, however, is the fact that Liggett provided cooperation and assistance to the dozens of States Attorneys General as well as the United States Department of Justice in the prosecution of their claims against other tobacco companies. By doing so, Liggett changed the face of tobacco litigation in this country and, not surprisingly, distanced itself from the other Defendants.

¶As a result of these actions, the Court has already found that Liggett withdrew from Defendants' RICO conspiracy. See Section VIII(C), supra. While it remains liable for its substantive violations of 1962(c) from the past, Liggett poses no reasonable likelihood of future RICO violations.

¶Liggett today continues to act independently of the other Defendants, even beyond what is required of it by the law or the MSA. LeBow WD, 8-10. For example, Liggett continues to take the public position that cigarettes are a cause of lung cancer and other serious diseases, and that smoking is addictive. Liggett continues to state publicly that it agrees with the positions on these issues as stated by the United States Surgeon General and the public health authorities. (Albino WD, 8). Liggett continues to include an additional, voluntary product warning on its packages beyond those required by law, and Liggett is the only domestic tobacco company that prints a list of ingredients of its cigarettes on its cartons. LeBow WD, 8-9

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¶In addition, Liggett continues to cooperate with public health authorities on a variety of smoking and health issues. Beginning in 1997, Liggett has been providing on an annual basis, both to the Centers for Disease Control and the Massachusetts Department of Public Health, a complete listing of all additives and ingredients in all of Liggett's cigarettes on a brand-by-brand, style-by-style basis. LeBow WD, 9-10. The ingredients of Liggett's cigarettes are listed in weight order as they appear in Liggett's cigarettes, exactly in the manner requested by the public health authorities. Id.

¶Moreover, Liggett today is a small player in the domestic tobacco market, with a market share of 2.4% of the cigarettes sold in the United States. LeBow WD, 10.48 Liggett today employs between 300-400 persons, and manufactures and sells predominately discount, nonbranded cigarettes that compete generally on price alone. LeBow WD, 10. Unlike the other Defendant tobacco companies, Liggett does not have brand equity, and competes for its small percentage of the domestic market with tobacco companies that are not defendants in this action. Dennis W. Carlton, Ph.D. WD, 6, 32. Accordingly, Liggett does not rely on traditional consumer advertising and engages in virtually no print or billboard advertising.

¶Finally, the Government's own witnesses have stated that Liggett made important contributions to the public health community, and distinguishes Liggett's current conduct from other

¶Liggett today is the fifth largest producer of cigarettes in the United States. LeBow WD, 11.

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¶tobacco company Defendants. Govt Findings of Fact, Section IV.C., paras. 607, 1059-1070. The

¶Government nevertheless asserts that Liggett has ongoing RICO violations because it continues to market low tar cigarettes and does not admit that they are no less hazardous than their full-flavor counterparts.

¶Despite the fact that Liggett continues to sell low tar cigarettes, the Court finds that, based on Liggett's behavior in every other component of the Enterprise's scheme to defraud and Liggett's withdrawal from the RICO conspiracy, the totality of the circumstances demonstrates that Liggett is not reasonably likely to commit future RICO violations.49

¶Accordingly, even though Liggett is liable for past violations of 18 U.S.C. § 1962 (c) and (d), there is no reasonable likelihood of future violations, and therefore no remedies will be entered against Liggett.

The Tobacco Institute

REMEDIES