[Senate Hearing 107-587]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 107-587
 
 DEPARTMENT OF JUSTICE OVERSIGHT: MANAGEMENT OF THE TOBACCO LITIGATION
=======================================================================

                                HEARING

                               before the

                       COMMITTEE ON THE JUDICIARY
                          UNITED STATES SENATE

                      ONE HUNDRED SEVENTH CONGRESS

                             FIRST SESSION
                               __________

                           SEPTEMBER 5, 2001
                               __________

                          Serial No. J-107-37
                               __________

         Printed for the use of the Committee on the Judiciary









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                       COMMITTEE ON THE JUDICIARY

                  PATRICK J. LEAHY, Vermont, Chairman
EDWARD M. KENNEDY, Massachusetts     ORRIN G. HATCH, Utah
JOSEPH R. BIDEN, Jr., Delaware       STROM THURMOND, South Carolina
HERBERT KOHL, Wisconsin              CHARLES E. GRASSLEY, Iowa
DIANNE FEINSTEIN, California         ARLEN SPECTER, Pennsylvania
RUSSELL D. FEINGOLD, Wisconsin       JON KYL, Arizona
CHARLES E. SCHUMER, New York         MIKE DeWINE, Ohio
RICHARD J. DURBIN, Illinois          JEFF SESSIONS, Alabama
MARIA CANTWELL, Washington           SAM BROWNBACK, Kansas
JOHN EDWARDS, North Carolina         MITCH McCONNELL, Kentucky
       Bruce A. Cohen, Majority Chief Counsel and Staff Director
                  Sharon Prost, Minority Chief Counsel
                Makan Delrahim, Minority Staff Director























                            C O N T E N T S

                              ----------                              

                    STATEMENTS OF COMMITTEE MEMBERS



Durbin, Hon. Richard J., a U.S. Senator from the State of 
  Illinois.......................................................     1
Feinstein, Hon. Dianne, a U.S. Senator from the State of 
  California.....................................................    14
Hatch, Hon. Orrin G., a U.S. Senator from the State of Utah......    70
Kennedy, Hon. Edward M., a U.S. Senator from the State of 
  Massachusetts..................................................    71
McConnell, Hon. Mitch, a U.S. Senator from the State of Kentucky.    72

                               WITNESSES

Adelman, David, Executive Director, Morgan Stanley, New York, New 
  York...........................................................    55
Blakey, G. Robert, Professor of Law, Notre Dame Law School, South 
  Bend, Indiana..................................................    37
Blumenthal, Hon. Richard, Attorney General, State of Connecticut, 
  Hartford, Connecticut..........................................    22
DeNardo, Pamela, American Lung Association, New York, New York...    18
Ogden, David W., Partner, Wilmer, Cutler & Pickering, Washington, 
  D.C., and former Assistant Attorney General, Civil Division, 
  Department of Justice..........................................    59
Schiffer, Stuart E., Acting Assistant Attorney General, Civil 
  Division, Department of Justice; accompanied by Eugene H. 
  Schied, Deputy Assistant Attorney General, Justice Management 
  Division, Department of Justice, Washington, D.C...............     4
Turley, Jonathan, Professor of Law, George Washington University, 
  Washington, D.C................................................    26









 DEPARTMENT OF JUSTICE OVERSIGHT: MANAGEMENT OF THE TOBACCO LITIGATION

                              ----------                              


                      WEDNESDAY, SEPTEMBER 5, 2001

                              United States Senate,
                                Committee on the Judiciary,
                                                   Washington, D.C.
    The committee met, pursuant to notice, at 2:30 p.m., in 
Room SD-226, Dirksen Senate Office Building, Hon. Richard J. 
Durbin, presiding.
    Present: Senators Durbin, Feinstein, and Hatch.

  OPENING STATEMENT OF HON. RICHARD J. DURBIN, A U.S. SENATOR 
                   FROM THE STATE OF ILLINOIS

    Senator Durbin. The hearing will come to order. Good 
afternoon and thank you all for attending. Today's hearing will 
examine the Department of Justice's management of the 
Government lawsuit against the tobacco industry.
    I want to thank Chairman Leahy for scheduling this hearing 
and for his continued interest and vigilance on this topic. I 
also want to thank him for allowing me to preside today.
    On September 22, 1999, the United States Department of 
Justice filed a lawsuit against the major cigarette 
manufacturers in America.
    The current litigation is brought under the Racketeer 
Influenced and Corrupt Organizations Act, known as RICO. The 
Government filed this lawsuit to fulfill its duty to U.S 
taxpayers to enforce the law, protect the public treasury, and 
prevent the tobacco industry from continuing to defraud the 
American public.
    The Federal Government has valid legal claims that are 
supported by extensive evidence, including internal industry 
documents and other evidence disclosed in State lawsuits 
against American tobacco companies. The RICO claims are strong 
and they are appropriate. The district court firmly ruled that 
the Federal lawsuit against the cigarette companies has merit 
and that there is no legal reason that the lawsuit should not 
move forward, stating that the Government has ``clearly and 
overwhelmingly satisfied'' each of the factors required in RICO 
claims.
    I am going to enter into the record the United States' 
initial complaint against tobacco companies with the appendix 
and the memorandum opinion issued by the U.S. District Court 
for the District of Columbia holding that the U.S. had property 
stated claims for relief under RICO.
    Since the case was filed in 1999, the tobacco companies' 
conduct has not changed. The New England Journal of Medicine 
published just 2 weeks ago a study that concluded that the 
Master Settlement Agreement with the tobacco industry appears 
to have had little effect on cigarette advertising in magazines 
and on the exposure of young people to these advertisements. 
The study found that last year magazine advertisements for 
youth brands of cigarettes reached more than 80 percent of the 
young people in the United States of America. According to the 
Federal Trade Commission, tobacco industry marketing 
expenditures increased by 22 percent to a record $8.2 billion a 
year in 1999, the very first year after the State settlement. 
This is the largest increase in dollar terms since the FTC 
began tracking cigarette sales and advertising in 1970, and 
most of the increases are found in marketing categories most 
effectively directed at children. A University of Illinois at 
Chicago study released in July of the year 2000 shows that 
advertising and promotions actually increased in convenience 
stores and other retail stores after a billboard ban mandated 
by the settlement took effect in April of 1999. All of those 
wonderful television ads notwithstanding, this tobacco industry 
is pouring more and more money into luring our children into 
addiction.
    Unfortunately, these facts are borne out in the public 
health statistics. We all know that cigarettes kill more than 
400,000 Americans annually. This figure represents more deaths 
than from AIDS, alcohol, car accidents, murders, suicides, 
drugs, and fires combined. Lung cancer is now the leading cause 
of cancer death among women, killing nearly 68,000 this year 
alone. It surpassed breast cancer years ago.
    But what is even more alarming is how effective tobacco 
advertising is on children. Smoking rates among high school 
students are on the rise. More than 3 million kids between the 
ages of 12 and 17 currently are smokers. Today, almost 5 
percent, more than 1 out of 3, high school students say they 
smoke. Smoking among African American high school boys doubled 
from 1991 to 1997. Smoking among teenage girls rose sharply in 
the 1990s. Smoking rates for pregnant teenagers climbed by 5 
percent between 1994 and 1999.
    Given this context, I am concerned about news reports that 
indicate that the Department of Justice may not be aggressively 
pursuing the case against the tobacco industry. The Attorney 
General, Mr. Ashcroft, was confirmed on February 1st of this 
year. He has had 7 months to review this case. Yet despite 
repeated congressional inquiries, including more than a few 
from me, the administration's official position remains that it 
is still ``reviewing the case.''
    I am going to enter into the record my correspondence with 
the Department of Justice and each one of their responses.
    I am left to assume that the numerous press accounts 
suggesting the Department is abandoning this lawsuit may be 
accurate. No official statement, written or verbal, has refused 
these reports. Further, a number of statements, unofficial and 
official, have indicated publicly the administration thinks 
that this case is weak, thus undermining any potential 
settlement negotiations and reinforcing the perception that the 
Government is not interested in seriously pursuing this case. 
Two weeks ago, White House Counsel Alberto Gonzales was quoted 
by CNN as saying, ``We haven't fared too well in the courts, 
which gives us little leverage.''
    A number of facts raise questions about how this tobacco 
case is being managed at the Department of Justice. The end of 
the fiscal year is now only 25 days away, and the Department 
still has not said how or if it intends to fund this 
litigation.
    I was encouraged by an August 24th Wall Street Journal 
report that the Justice Department wants roughly $50 million to 
continue the tobacco lawsuit. Unfortunately, despite repeated 
requests and ample time and opportunity to respond, the 
Department was unable to confirm the accuracy of this reported 
statement. Instead, it appears to be another in a series of 
unofficial statements documenting the mayhem at the Justice 
Department that surrounds this case. In fact, there have been 
at least two potentially case-damaging press leaks out of the 
Department and, according to the Department's own written 
response to me and Senators Leahy and Kennedy, which I am also 
going to enter into the record, no steps have been taken within 
the Department of Justice to investigate these statements.
    This lack of action is irresponsible given the potential 
magnitude of this case. What is at issue here is not just 
potentially recovering billions of dollars for American 
taxpayers, but equally, if not more important, equitable 
remedies to change the way that tobacco companies do business 
in America. The lack of action is responsible.
    Whether the Department has adequate staff to pursue the 
case is unclear. The decision to pursue settlement was 
announced without any official statement from the Department 
and in the context of comments disparaging the strength of the 
Government's case.
    I do not profess to be an expert at anything, but I do have 
some experience when it comes to lawsuits. I made a living 
filing lawsuits and defending them for years before I was 
elected to Congress. I cannot imagine that you can hope for a 
good outcome in a settlement negotiation if you announce 
publicly before the negotiation begins that your case is 
basically pretty weak and you don't have the lawyers to pursue 
it, you are not going to be ready for trial, you don't have the 
resources to get ready. Imagine walking into a settlement 
conference expecting that you have any leverage to pursue a 
meaningful negotiated settlement under those circumstances. 
What I have just described to you is, frankly, the public image 
of this lawsuit over the last year.
    The Department of Justice's management of this case seems 
unprofessional. At worst, they are killing this lawsuit and 
don't have the political courage to admit it publicly. Under 
ordinary circumstances, most legal clients in this situation 
would either file a complaint with the Bar Association or try 
to find another lawyer. But the American taxpayer has only one 
lawyer--the Attorney General of the United States and his 
Department of Justice.
    It is my hope that we can at long last clarify the current 
administration's commitment to this case which was filed, 
frankly, on behalf of all of us and millions of Americans who 
have been defrauded and harmed by the tobacco industry's 
conduct. It is time to have our questions answered, and it is 
time for the Attorney General to be clear about his resolve. 
The American people deserve their day in court, but even more 
importantly, they deserve competent and committed legal 
representation.
    At this point I would yield to Senator Hatch, who may be 
attending this shortly--I hope he will--and at that point, 
whenever he arrives, he will be allowed to make any opening 
statement which he wishes
    I want to welcome and introduce our first witness, Stuart 
Schiffer. Mr. Schiffer, is the Acting Assistant Attorney 
General for the Civil Division of the United States Department 
of Justice. It is my understanding that Mr. McCallum, who was 
confirmed by the Senate several weeks ago, will actually take 
up his responsibilities in the middle of September.
    Mr. Schiffer is a career official who has served many years 
at the Department of Justice. I would like it to be noted for 
the record that both Senator Leahy, the chairman of this 
committee, and I invited Attorney General Ashcroft to testify 
today. Unfortunately, he declined our invitation, saying that 
he had to testify before the Senate Select Committee on 
Intelligence. So I know that it is unfortunate that the 
Attorney General is not here, but we want to proceed and hope 
that we can come to some understanding of the position of the 
Department of Justice on this case.
    I welcome Mr. Schiffer, am interested in hearing his 
testimony, and I understand he is accompanied by Mr. Eugene 
Schied. Did I pronounce your name correctly?
    Mr. Schied. Schied.
    Senator Durbin. Schied. I am sorry. Mr. Schied, a Deputy 
Assistant Attorney General and Controller at the Department of 
Justice.
    I would like at this point to ask Mr. Schiffer to proceed 
with his testimony.

  STATEMENT OF STUART E. SCHIFFER, ACTING ASSISTANT ATTORNEY 
GENERAL, CIVIL DIVISION, DEPARTMENT OF JUSTICE; ACCOMPANIED BY 
 EUGENE H. SCHIED, DEPUTY ASSISTANT ATTORNEY GENERAL, JUSTICE 
           MANAGEMENT DIVISION, DEPARTMENT OF JUSTICE

    Mr. Schiffer. Thank you, Senator, and I emphasize we do 
appreciate the opportunity to appear before the committee today 
to discuss the Government suit against the major tobacco 
companies. And I am certainly not here to argue with the 
Senator's views, and I understand your opening statement about 
the management of the tobacco litigation being incompetent and 
unprofessional wasn't directed at me personally. I do take--I 
guess ``umbrage'' is too strong a word. As the Senator 
indicates, I have served in the Department for 38 years. It has 
been my only livelihood. I don't do unprofessional and I don't 
do incompetent. The responsibility for managing the case has 
been mine since January 20th. I think the case has been well 
managed and is continuing.
    I think that the Senator does understand that I am somewhat 
limited in what I can discuss today since it would obviously be 
inappropriate for me to comment on the substance of a pending 
case or to comment on litigation strategy. That is consistent 
with our duties as lawyers and, as the Senator knows, with 
longstanding Department of Justice practice. These issues are 
before the court, and that is the appropriate forum for the 
Justice Department to articulate its views.
    At the same time, I also recognize and appreciate the 
committee's and the Senators' oversight responsibilities. My 
understanding is, as you have suggested, you want to talk about 
management of the case, and particularly you want to talk about 
funding and status of the case. And while I am not sure I can 
always draw a bright line between substance and those issues, I 
am here to be as responsive as I can to your questions, and I 
know that Mr. Schied, who serves as the Department's 
controller, is also here in that capacity.
    The tobacco litigation, which is a suit against the major 
manufacturers of tobacco in this country and two industry 
associations, is being conducted by a team of dedicated career 
attorneys. The team was formed, I think as the Senator knows, 
after President Clinton in his January 1999 State of the Union 
address indicated that he had directed the Department or was 
directing the Department to formulate a plan to take the 
cigarette companies to court. And as the Senator has indicated, 
the suit was filed in Federal district court here in 
Washington, D.C., in late September of 1999.
    There were four counts to the complaint, which I am pleased 
that the Senator is including in the record. Two of them dealt 
directly with statutes designed to address the recovery of 
health care costs: the Medical Care Recovery Act and the 
Medicare secondary payer provisions of the Social Security Act. 
There were additionally two counts that seek equitable relief, 
including monetary disgorgement, under the Racketeer Influenced 
and Corrupt Organizations Act.
    As the Senator has indicated, on September 28, 2000, about 
a year after the case was filed, the district court dismissed 
the counts pertaining to the two health care cost recovery 
statutes and denied the defendants' motion to dismiss the RICO 
counts. Then in orders entered on July 27th of this year, the 
court rejected our attempts to obtain reinstatement of the 
Medicare secondary payer count and portions of the Medical Care 
Recovery Act count. Trial is scheduled to begin in July of 
2003. Intensive discovery is in progress and can only be 
expected to become more intensive as the case progresses.
    As the Senator knows, funding for the current fiscal year 
didn't come into place until the year was well underway. The 
current $23 million-plus budget is made up of $1.8 million in 
our base budget and is supplemented by substantial 
reimbursements from client agencies and an additional amount of 
$12 million from the Health Care Fraud and Abuse Control 
Account, which was put in place by the Health Insurance 
Portability and Accountability Act of 1996. By the end of this 
year, the entire amount budgeted for the case will have been 
expended or obligated. Obviously, a larger amount is going to 
be required for the next fiscal year. The Department is well 
into the process of identifying appropriate sources for this 
funding, and it is no secret that we will be looking to the 
same sources that we looked to this year. We will have the same 
amount in our base budget as was requested by the last 
administration and was put in place, and we will be looking to 
sources of funding similar to what we have used this year.
    I have included in my prepared testimony a staffing chart, 
and I think the Senator has noticed that staffing has increased 
progressively as the demands of the case have increased. I have 
been responsible for making hiring decisions or seeking 
authority in some cases to hire, and I have encountered no 
obstacles whatsoever when I have sought to hire people for the 
case. We project, as the bottom line of the chart indicates, 
having 38 people in place by the beginning of next month, of 
whom 29 are attorneys. And as I also note in my prepared 
statement, these numbers don't include attorneys from other 
components of the Department who have helped out where help is 
needed, FBI agents assigned to the case, and our own experts on 
litigation support since this case has massive documents to 
deal with.
    In summary, the case is proceeding. It is a major 
undertaking. We have a dedicated staff of attorneys assigned to 
it. I want to emphasize, Senator, that I have not received any 
interference in the conduct of the case. While it is not 
unusual for a new administration to come on duty--and certainly 
this is the fifth time, I believe--I have lost track--when I 
have served as the Acting Assistant Attorney General, and it is 
certainly not unusual for a new administration to come in and 
review existing cases and certainly large cases, I have 
received no interference in the conduct of this case.
    At the outset of the administration, I made an effort to 
acquaint new members of the senior management offices with what 
I thought were major steps we contemplated taking, such as the 
filing of an amended complaint or the signing of an expensive 
lease for document control purposes. I have been told from the 
outset to proceed with the case as I would with any case. I 
have had no decisions I have made interfered with.
    The Senator alluded to the formation of a settlement team. 
That was my suggestion. I have never been involved in a large 
case where I didn't think it appropriate to make at least some 
effort to ascertain whether settlement was feasible. The 
members of the team were selected by me with no interference. 
They had a total of about 90 years of Government experience. We 
had one meeting with representatives of the tobacco companies. 
There was not another meeting scheduled since the parties were, 
at least at that initial meeting, quite far apart in their 
appraisal of the case.
    In summary, the case is proceeding. I think the case is 
proceeding well, and I know that it will continue to proceed.
    I would be happy to try and respond to questions.
    Senator Durbin. Thank you, Mr. Schiffer. Thank you very 
much for your testimony.
    I would like to ask Senator Hatch if he would like to make 
an opening statement.
    Senator Hatch. Well, thank you, Mr. Chairman. I appreciate 
that courtesy, and we welcome everybody here today, especially 
our witnesses.
    Let me start by saying that you and I share an antipathy to 
the use of tobacco. You may recall that beginning in 1997, in 
this committee I held 10 hearings on the State tobacco 
litigation settlement which I strongly supported.
    Senator Feinstein and I developed a bipartisan, 
comprehensive tobacco bill that encompassed the major elements 
of the settlement agreed to by the State Attorneys General, 
public health advocates, plaintiffs' attorneys, and the tobacco 
industry itself. Unfortunately, the Senate was unable to come 
to a consensus on any tobacco legislation, and in my view, this 
happened because the Senate floor vehicle became way too 
expansive and extremely expensive because some of our friends 
could not exercise restraint.
    Clearly, I am no friend of tobacco use nor am I an 
apologist for the tobacco industry. Indeed, I have never used 
tobacco products in my life. However, it is no secret that I 
have been extremely skeptical of the Federal lawsuit from its 
inception.
    From a policy and constitutional perspective, no 
administration should be able to circumvent the Constitution 
and Congress' sole authority to raise and spend revenue for the 
general welfare by suing for billions of dollars and then 
spending the money without congressional appropriation. If 
there is no legitimate lawsuit, the action by the Department of 
Justice would violate our necessary principles of separation of 
powers, which is a cornerstone of our Constitution's guarantee 
of liberty. Simply put, litigation should not replace 
legislation as the means to effect public policy in a 
democracy.
    Granting the Federal Government the unfettered ability to 
sue any industry which happens to fall into disfavor in order 
to effectuate a special goal like reduction in tobacco-related 
illnesses is a mistake. It would in essence allow the executive 
branch to bypass Congress and the law and set unilaterally our 
Nation's tobacco policy.
    In 1999, when the Clinton administration decided to file 
its own suit against the tobacco companies, it based the claim 
on a distorted--at least in my opinion--interpretation of three 
Federal statutes: the Medical Care Recovery Act, MCRA; the 
Medicare secondary payer provisions, the MSP; and the civil 
provisions of the Racketeering Influenced and Corrupt 
Organizations Act, RICO. As many will recall, I and others on 
this committee believed that there was no legal basis at all 
for the first two claims. It turns out we were right. In 
September of 2000, Judge Kessler dismissed by the MCRA and MSP 
claims, leaving only the RICO count standing. She resoundingly 
reaffirmed that dismissal in the face of the Government's 
attempt to amend its complaint and re-plead the dismissed 
counts.
    In my opinion, the RICO claim was ill-conceived as well. 
While Judge Kessler did allow the RICO claim to remain, she 
also clearly suggests that the Government, at best, has a long 
way to go to prove its claim. She indicated discomfort with 
this novel application of the theory of disgorgement. As she 
noted, ``whether disgorgement is appropriate in a particular 
case depends on whether there is a `finding that the gains are 
being used to fund or promote the illegal conduct, or 
constitute capital available for that purpose.'''
    That being said, Judge Kessler also clearly indicated that 
she was not making any finding endorsing the substance of the 
Government's RICO claim that ``this Court has not made such a 
finding, nor could it at this stage.'' I think we can make 
better use of the taxpayers' money.
    As we all know, in 1998, 46 States, the District of 
Columbia, and five U.S. territories signed a contractual 
agreement--the Master Settlement Agreement. In addition to 
paying out large monetary statements to the States, the 
agreement imposed restrictions on tobacco advertising, 
marketing, and promotion. It also addresses the allegations 
that tobacco companies had long concealed the dangerous health 
effects of smoking by prohibiting manufacturers from 
suppressing health research and requiring them to fund anti-
tobacco research and education.
    Now, it is my understanding that there is no credible 
evidence that the companies are not in compliance with the 
terms of the Master Agreement. If the agreement is being 
violated, then shouldn't the State Attorneys General be taking 
action to ensure enforcement? If our goal is truly to address 
health issues related to tobacco use, then we should be seeking 
to ensure enforcement of the agreement which already deals with 
those concerns . But if the goal of Federal litigation is to 
effectively take a legislative function and extort a huge 
monetary settlement that we can then spend, then aren't we in 
effect addicting the Federal Government to nicotine?
    Since the executive branch elected to pursue this 
litigation in the Clinton administration--in my opinion, 
without legal foundation--and the legislative branch declined 
to act, we should defer to the executive branch and its 
enforcement arm at the DOJ on how this case is handled absent a 
clear indication of an overuse of taxpayer money. It is my 
understanding that the DOJ's budget request in relation to this 
litigation is identical to its budget request from last year 
and that they have obtained additional funding from other 
agencies to support the case. There is no lack of funding here. 
In fact, is everyone aware of just how expensive it has been 
for the Federal Government to pursue this case? The budget for 
this year was approximately $23 million. If you ask me, that is 
a lot of money to pursue a case that has a questionable return 
value given that the majority of its legal claims have been 
dismissed. Moreover, the Civil Division continues to add staff 
attorneys as needed to handle the litigation. Staffing needs 
are being met and funding request levels maintained. I do not 
see any clear indication of mismanagement here. I sincerely 
hope that we are not ere today to cross-examine the Department 
on the particulars of the ongoing litigation.
    So, Mr. Chairman, I want to thank you for allowing me to 
make this set of remarks, and I look forward to hearing from 
our witnesses here today, and I hope that we can resolve this 
matter in a way that is within the law, that makes sense, and 
saves the taxpayers' money in the long run, while at the same 
time making the points on tobacco.
    Senator Durbin. Thank you, Senator Hatch.
    Mr. Schiffer, as Acting Attorney General for the Civil 
Division, how would you characterize this case? Is this one of 
the more important cases that you are responsible for?
    Mr. Schiffer. It is certainly a very substantial case, as 
witness the funding that we have put in place for the case and 
the staffing of the case. However one approaches it, if one 
looks simply at the documents involved, the resources that the 
defendants have in place, it is a case of large magnitude.
    Senator Durbin. Is it a case of some complexity in terms of 
preparing it for trial?
    Mr. Schiffer. I think, again, I don't want to get into the 
merits about how difficult the case is or isn't, but certainly 
we wouldn't have this many people assigned to the case if we 
didn't think it was a case of some complexity.
    Senator Durbin. Particularly in the area of discovery, is 
it not likely that you will be dealing with hundreds of 
thousands, if not millions, of documents that have to be 
reviewed and prepared for trial?
    Mr. Schiffer. That is very much the case.
    Senator Durbin. And also the same when it comes to 
depositions and motions to produce and that order, it is also a 
case that is going to demand quite a bit of the Department of 
Justice. Is that also true?
    Mr. Schiffer. I don't ultimately know how many depositions 
there will be. I assume there will be a large amount before the 
date that has been set for cutting off discovery. So far I 
think we have taken something like 10 depositions and formally 
noticed 12 more, and the companies have taken only two. But 
obviously many more are going to follow.
    Senator Durbin. What is the date that has been set by the 
court for cutting off discovery?
    Mr. Schiffer. It is essentially next summer, July and 
August. The first cut-off is for fact witnesses, and then I 
think a month later for expert witnesses.
    Senator Durbin. So is it fair to say that you have less 
than 12 months to do the basic discovery under the current 
court order for the trial that is scheduled in July of 2003?
    Mr. Schiffer. That is correct.
    Senator Durbin. Have you personally reviewed the pleadings 
in this case?
    Mr. Schiffer. I have looked at most of them. The intensity 
with which I reviewed--I have unfortunately been--while this is 
certainly a large case, there are about 20,000 other cases on 
our docket. And so I won't sit here and tell you I have read 
every word, but I have asked that any filing of any magnitude 
or anything other than a routine discovery matter be sent to 
me.
    Senator Durbin. And have you reviewed any of the documents 
or depositions that have been produced?
    Mr. Schiffer. I have not seen any deposition transcripts to 
date. I am familiar with some of the documents.
    Senator Durbin. And what do you rely on, then, to reach a 
judgment as to the progress of the case and how well the 
Department is preparing for trial?
    Mr. Schiffer. My own views, as someone who has been in this 
business for longer than many people would say was a good idea, 
and my conversations with members of the tobacco team.
    Senator Durbin. And let me ask you if you have had a chance 
to review any of the specific documents that have been produced 
by the tobacco companies relating to their potential liability 
in this lawsuit.
    Mr. Schiffer. I have seen summaries of such documents. I 
have not reviewed individual documents.
    Senator Durbin. Do you have any doubt in your mind that the 
allegation of the complaint relative to the tobacco companies' 
lying about their knowledge of the dangerous health effect of 
their product is true?
    Mr. Schiffer. Well, again, I am not going to comment on the 
merits of the case other than to say that, as you indicated and 
as I stated, the district court denied the motion to dismiss, 
found the RICO counts certainly viable for the purpose of 
proceeding, and we are proceeding.
    Senator Durbin. But as you sit here today, you have no 
reason to believe that the allegations of the Government's 
complaint against the tobacco companies are inaccurate or 
wrong?
    Mr. Schiffer. I wouldn't be a part of the case if I thought 
that they contained false allegations, certainly.
    Senator Durbin. I am going to show you some statements that 
have been made by Attorney General Ashcroft on this case, and 
they are too small to read, I am sure, but I will tell you--
    Mr. Schiffer. I need new glasses, anyway.
    Senator Durbin. Yes, I suffer from the same problem.
    Suffice it to say that during the course of his hearings to 
become Attorney General and since, we have received statements 
from Attorney General Ashcroft about this case, starting on 
January 26th of this year when he said, ``I will have to review 
the details of the case before I can make a more informed 
judgment.'' This was during his confirmation hearing.
    Then later, in March of this year, Justice Department 
spokeswoman Mindy Tucker said the agency's budget is 
``neutral'' on whether to continue with the tobacco litigation. 
She said Attorney General Ashcroft has not seen the memo or 
reviewed the issue whether to proceed with the tobacco 
litigation.
    And then on March 26th, the statement made by President 
Bush: ``I do worry about a litigious society. I remember as 
Governor of Texas we had all kinds of major lawsuits against 
tobacco, as in every other State. At some point enough is 
enough.'' That is President Bush's interview with Fox News on 
March 26th.
    Attorney General Ashcroft speaking before the 
Appropriations Subcommittee was asked about this lawsuit on 
April 26th of this year and said, ``I have not made a decision 
about the case.'' And then on April 27th, in further testimony, 
the Attorney General said, ``The Department of Justice is 
proceeding with the case. I support the Department's 
position.''
    May 23rd, a statement by Daniel Bryant, Assistant Attorney 
General, ``We have every expectation that confirmation of the 
new Assistant Attorney General for the Civil Division and the 
appointment of his remaining Deputies will enable to Attorney 
General to expedite his review of the case.''
    And then, finally, the statement I referred to earlier by 
White House Counsel Alberto Gonzales to CNN on August 15th, 
just a few weeks go: ``We haven't fared too well in the courts, 
which gives us little leverage.''
    Have you had any conversations or meetings with Attorney 
General Ashcroft about this case?
    Mr. Schiffer. I have. Although I haven't had extensive 
conversations, I have certainly had a number of conversations 
with senior members of his staff.
    Senator Durbin. And based on those, do you consider them to 
be part of a review by the Attorney General as to whether to go 
forward with this case or how to proceed with it?
    Mr. Schiffer. I don't want to go through the entire listing 
there, but, I mean, I see certainly a statement that the 
Department is proceeding with the case and I support the 
Department's position. That is the only message I have 
received. It is probably good for the sake of the Republic that 
I am not typically given unfettered discretion over cases. In 
this one, as far as I am concerned, I have been given such 
discretion, and the case is proceeding, and I have never been 
told to do or not to do something in connection with the case.
    Senator Durbin. There have been some concerns about 
statements that have been--unattributed statements that have 
been leaked to the press from the Department of Justice 
concerning this case. Could I have Chart 3? And I want to ask 
you if you are familiar with any of these statements or know 
who might have made these statements.
    April 26th, Wall Street Journal reported that a senior 
official employed in the Department of Justice commented that 
the tobacco litigation team ``had done a poor job,'' may be 
replaced ``due to their performance.''
    June 20th, Wall Street Journal reported settlement talks 
regarding tobacco litigation reflected concerns by the 
administration about the strength of the case. The article 
quoted a senior official as saying, ``If we're going to lose, 
then we should settle this.''
    August 24th, Wall Street Journal reported Justice 
Department lawyers want roughly $50 million to continue the 
Government's lawsuit inherited from the Clinton administration. 
The Bush administration had wanted to end the fight. This is 
from the Wall Street Journal. The article said, ``Justice 
officials hope the new funds will show they're serious about 
the case and goad the industry to settle.''
    Do you have any idea who the sources were for those 
statements?
    Mr. Schiffer. I do not, and I consider actually all those 
statements unfortunate. They don't reflect the position of the 
Department. I don't know who or anyone--if anyone said those 
things. I have found in the past that when I say something that 
people care to dignify, they refer to me as a senior official. 
If they take a different view of it, I am described as mid-
level and very often something much worse. And so I really have 
no knowledge what the source of those statements was.
    Senator Durbin. I have a number of other questions, but my 
time on the first round is complete, and I want to defer to 
Senator Hatch for any questions that he might have.
    Senator Hatch. Let me just ask one question. Mr. Schiffer, 
it is my understanding that the costs of pursuing this lawsuit 
in 2002 will be significantly higher than in 2001. Could you 
give me an estimate of the anticipated costs?
    Mr. Schiffer. Senator, you are certainly correct. It is 
going to be more expensive because the pace of the litigation, 
particularly document discovery, is going to increase. We are 
still in the process of examining a specific amount. The most 
recent estimate from the tobacco litigation team themselves is 
that they think something on the order of $44 million would be 
required in the next fiscal year.
    Senator Hatch. That is the only question I have.
    Senator Durbin. Mr. Schiffer, are you familiar with how 
much money was spent by the State Attorneys General in their 
action against the tobacco companies?
    Mr. Schiffer. No, sir, I am not.
    Senator Durbin. Do you know what their ultimate recovery 
was in their lawsuit?
    Mr. Schiffer. In rough numbers. I know there was a very 
substantial recovery.
    Senator Durbin. My notes reflect some $240 billion over 25 
years and some rather substantial changes in the policies of 
tobacco companies were recovered by the State Attorneys 
General.
    Let me ask you about the settlement issue. I think you 
indicated in your early testimony that the issue of proceeding 
with at least settlement exploration was your decision.
    Mr. Schiffer. Yes, it was.
    Senator Durbin. Did you make that decision in consultation 
with Attorney General Ashcroft or anyone else in the 
Department?
    Mr. Schiffer. No, I did not. I informed people in senior 
management offices that it was my intention, as I think I am 
obligated to do in any case, to ascertain whether settlement 
appeared feasible and that was what I planned to do, and I was 
told, as I have been with everything else in the case, to go 
ahead and do so.
    Senator Durbin. Would you agree with the basic premise that 
your likelihood of a successful settlement conference depends 
on your apparent strength in the case?
    Mr. Schiffer. The outcome of settlement negotiations 
certainly depends on the perceptions that parties have about 
the strength of their position, or the lack thereof, yes.
    Senator Durbin. Did you feel that you were walking into 
that settlement conference showing a strong case on the 
Government side?
    Mr. Schiffer. I indeed felt that we were. If you are 
alluding, again, to the statement that was put up on the board, 
I felt that was an unfortunate statement, if, in fact, it was 
made.
    Senator Durbin. What would you say, then, were the reasons 
for your belief that you were in a strong position going into 
that settlement conference?
    Mr. Schiffer. Well, again, you know, it wasn't a question 
even of--if I thought I was in a weak position, I would have 
also felt the obligation to the taxpayers and to ourselves to 
ascertain whether settlement was feasible.
    As I said before, if I didn't think we had a strong case, I 
wouldn't be proceeding with the case.
    Senator Durbin. Would some of the elements involving the 
strength of your case be, for example, the determination by the 
Attorney General to go forward with the case rather than to 
still have it under review?
    Mr. Schiffer. As I said, the case is going forward, and the 
Attorney General and his staff has made clear that the case is 
to go forward.
    Senator Durbin. So let me clarify that. Has there been an 
official review by the Attorney General as he has stated before 
Congress?
    Mr. Schiffer. I don't know what constitutes an official 
review. I do know, as I have said before, that I have been told 
to proceed with the case, and I have been given what I regard 
as unfettered discretion to do so.
    Senator Durbin. Could you tell us, in terms of your 
budgetary requirements for next year--Senator Hatch has noted 
that they will be more substantial than they have been in the 
past because of the discovery and closing days moving to trial. 
Have you been able to the cost of your preparation for trial in 
the next fiscal year?
    Mr. Schiffer. Well, as I told you, the tobacco team itself 
has given us an estimate of something on the order of $44 
million. Obviously, as the case proceeds, we are going to have 
a better idea of exactly how much money is needed.
    Senator Durbin. And has there been any discretion within 
the Department about where the $44 million will come from?
    Mr. Schiffer. There has indeed.
    Senator Durbin. And where will it come from?
    Mr. Schiffer. As I indicated in my opening remarks, we 
anticipate looking to the same sources as we did this year. As 
Senator Hatch indicated, the amount from our base budget is the 
same as the amount from our base budget last year, and we will 
certainly be looking to and we are in the process of beginning 
negotiations with the Department of Health and Human Services, 
funding from the health care fraud and abuse control account.
    Senator Durbin. Has the Department consulted with any 
Appropriations Committees on Capitol Hill about this $44 
million budget for preparing for trial?
    Mr. Schiffer. I think I will defer to my colleague, Mr. 
Schied, who has been sitting too quietly here and escaping 
notice. I don't know the answer.
    Senator Durbin. Mr. Schied?
    Mr. Schied. No, to this point, we have not provided any 
specific estimate to the committees of appropriations. We have 
told them--they have asked what the--as was reflected in the 
Attorney General's statement that was posted up there, which 
came from, I believe, the Appropriations Committee hearing, 
that we are intended to employ the same--look to the same 
funding sources in 2002 that we have used in 2001.
    Senator Durbin. Is the Department going to use the health 
care fraud and abuse account at Department of Health and Human 
Services for this lawsuit?
    Mr. Schied. We have used that account. We did get $12 
million in the current fiscal year, and we have begun the 
process of working with HHS to discuss the amounts that we 
might be able to get from the account in 2002.
    Senator Durbin. Is it kind of unusual that we are almost 
near October 1st, 25 days away, and these things are still 
unresolved as to how you are going to fund this action?
    Mr. Schiffer. It is certainly not unusual in my experience. 
I have always envied my colleagues in private practice, who, I 
guess while they have to worry about--we have too many clients, 
often. They have to worry about clients, but at least they have 
more continuity in the budget process than we do. Our budget is 
rarely enacted for anything at this time of year. It hasn't 
been enacted. And, of course, last year, funding didn't come 
into play until well into the new fiscal year, some 2 months 
into the fiscal year.
    Senator Durbin. Let me just for the record indicate that 
there is a little difference in approach. This time last year, 
we had specific estimates from the Justice Department about 
their needs for this lawsuit. In fact, as early as March of 
2000, the Attorney General indicated in testimony before the 
House Appropriations Committee that she planned to utilize 
reimbursements to client agencies in DOJ accounts to fund the 
case in fiscal year 2001.
    By July 2000, we had an estimate of need from the 
Department of $26 million. By August, we had it in writing from 
OMB. Throughout the spring and summer, the Clinton 
administration reiterated time and again their support for 
utilizing Section 109 to help fund the case despite some 
attempts on Capitol Hill to block that.
    Let me ask you about the Section 109 authority. Do you plan 
on using that to come up with the $44 million for the next 
fiscal year?
    Mr. Schiffer. Well, as I indicated, we are looking to the 
same sources as we looked to last year, and this would at some 
point, I presume, include agency reimbursements. We have used 
Section 109 in a number of cases, including this one.
    Senator Durbin. Have the other agencies been consulted 
about Section 109 contributions?
    Mr. Schiffer. My understanding is we are still at a fairly 
early stage. We are just beginning--obviously, what we would 
need is dependent on a lot of factors, not just what happens in 
the case itself but, as Mr. Schied indicated, the way the 
health care fraud and abuse control account works is ultimately 
there is a negotiation between the Secretary of Health and 
Human Services and the Attorney General. I think the outcome of 
those negotiations of how much money we are expecting to draw 
or are able to draw from that account will determine what our 
remaining needs are.
    Senator Durbin. My round of questioning is over at this 
point. I would like to welcome Senator Feinstein and ask if she 
would like to make an opening statement. And, Mr. Schiffer, if 
you would continue in your position there, I have some more 
questions after that.

  STATEMENT OF HON. DIANNE FEINSTEIN, A U.S. SENATOR FROM THE 
                      STATE OF CALIFORNIA

    Senator Feinstein. I would, Mr. Chairman, and I thank you 
very much for the opportunity. I would like to thank you for 
your leadership in this and also for conducting these oversight 
hearings.
    I think some might ask, Why should the Federal Government 
be pursuing a case against the tobacco companies? After all, 
the State Attorneys General from across the country reached a 
nationwide settlement with the tobacco companies in 1998. What 
new ground needs to be tilled?
    In the 3 years since the settlement, I believe very 
strongly that the tobacco industry still has not learned its 
lesson. The tobacco companies still engage in double talk. They 
say one thing but they do another.
    For example, many of you may have seen a recent ad campaign 
by Philip Morris, the purveyor of such brands are Marlboro and 
Virginia Slims. The ads, which began in April, tout the 
company's humanitarian efforts in airlifting 43 tons of food to 
Kosovar refugees in Albania. This donation was meritorious, 
although I do find it interesting that the Wall Street Journal 
reports the company spent far more on shooting the commercial, 
$1 million, than on donating food, approximately $125,000 worth 
of food.
    But what I find most disturbing and most reflects, in my 
view, the double talk of the industry, while the company touts 
its humanitarian efforts in Kosovo, its Czech subsidiary is 
pushing a scandalous study on smoking to the Czech Republic, 
arguing that deaths for cigarettes will actually save the Czech 
Government money.
    According to a July Wall Street Journal article, Philip 
Morris circulated an economic analysis that concludes that 
cigarette consumption, and I quote, ``isn't a drag on the Czech 
Republic's budget, in part because smokers' early deaths help 
offset medical expenses.''
    The study found that premature deaths of smokers saved the 
Czech Government between $23.8 million and $30.1 million on 
health care, pensions, and housing for the elderly in 1999. 
This is outrageous. And it illustrates the extent to which at 
least one company is willing to put economic concerns over the 
health and safety of the people who smoke its cigarettes.
    To suggest that a country derives greater benefit from the 
``savings due to early mortality'' than from a healthy 
population is cynical and, indeed, borders on the criminal. It 
is Orwellian in nature and equivalent to morally questionable 
notions such as destroying a village to save it.
    Appalled, I wrote a letter to Jeffrey Bible, chairman and 
CEO of Philip Morris. I expressed my deep dismay. Mr. Bible, 
much to his credit, promptly wrote back and took responsibility 
for the study. He wrote, and I quote, ``The funding and release 
of this study exhibited terrible judgment, as well as a 
complete and unacceptable disregard of basic human values. This 
study was not just a terrible mistake. It was wrong.'' And I 
thank you, Mr. Bible, for being up front.
    But the point is it was done, and the point is that is some 
of the industry's, at least, point of view. And it is horrible.
    At the same time, a company spokesman noted that Philip 
Morris would be cancelling similar studies in Slovakia and 
other countries in Eastern Europe. While admitting an error in 
judgment is commendable, this study for me is just one more 
piece of evidence that the tobacco industry still doesn't get 
it, and they still haven't been held accountable.
    Now, let me be clear. I don't have a vendetta against 
tobacco companies or people who use tobacco products. But I was 
here on this committee, Senator Hatch, and you were as well, 
Senator Simon of Illinois had brought all of the tobacco 
executives, lined them up in this room in front of this 
committee, asked each one of them to raise their right hand, 
and they all pledged that their products were not addicting. It 
was something that happened my first year on this committee. I 
think it was 1993 or 1994. And I never forgot it. I never 
forgot it because the CEO becomes the person responsible. And 
these CEOs were willing to stand here with what we subsequently 
know were bald-faced lies, and the head of the company, and say 
that.
    So I really believe that this hearing is important. I 
believe the industry hasn't learned its lesson, and for that 
reasons, I am very grateful that you are holding this hearing 
because they must be held accountable.
    I recognize that Slovakia isn't the United States of 
America, but can you imagine an American company doing a study 
like this, aimed to show that it is economically judicious to 
sell cigarettes because people die earlier and, therefore, the 
country saves money?
    Thanks, The Chairman.
    Senator Durbin. Thank you, Senator Feinstein.
    I have a few closing questions, but, Senator Hatch, do you 
have any further questions of the witness?
    Senator Hatch. No.
    Senator Durbin. Senator Feinstein, do you have any 
questions of the witness before I ask mine?
    Senator Feinstein. No, I do not.
    Senator Durbin. Mr. Schiffer, let me try then, to draw this 
to a conclusion. The Attorney General has stated repeatedly the 
case is under review. Do you believe this case is under review 
by the Attorney General?
    Mr. Schiffer. What I believe is that I have been told the 
case is proceeding and should continue to proceed, and as far 
as I am concerned--as far as I am concerned, the case is going 
forward. It is going to go forward with substantially more 
funding, and I am very pleased to be able to say that.
    Senator Durbin. And how many more attorneys will be you be 
bringing on board next year for preparation for trial?
    Mr. Schiffer. Well, happily, within a few weeks, those will 
be Mr. McCallum's decisions and not those of yours truly. But I 
think you have seen from the chart that we have submitted that 
the staffing for the case has been increasing steadily. I think 
in an effort to be very accurate, I have to tell you that after 
the testimony was prepared, I learned that one of my colleagues 
on the tobacco team has submitted a resignation to enter 
private practice. So I don't know that as of October 1st we 
will have that particular person replaced, but I think it can 
be expected that staffing will continue to grow.
    Senator Durbin. And will you be prepared to handle the 
documents that are produced in discovery, and review those 
documents, either within the Department or by hiring outside 
assistance?
    Mr. Schiffer. I don't know that we are ever prepared to 
handle cases with hundreds of millions of documents. We have 
coped in the so-called Winstar cases and in the A-12 litigation 
where we just obtained a very favorable ruling from the court. 
When I used to try cases before they told me that I was doing 
too much damage and I should just be a manager, someone would 
show me a file cabinet full of documents, and I would think 
surely we can deal with our best ten. And so it is a massive 
undertaking, but we will continue to move forward.
    Senator Durbin. Thank you. If there are no further 
questions, thank you, Mr. Schiffer and Mr. Schied.
    Mr. Schiffer. Thank you very much for having us.
    [The prepared statement of Mr. Schiffer follows:]

  Statement of Stuart E. Schiffer, Acting Assistant Attorney General, 
                 Civil Division, Department of Justice

    Mr. Chairman, I appreciate the opportunity to appear before the 
Committee today to discuss the Government's suit against the major 
tobacco companies.
    Since 1978, I have served as the Civil Division's senior career 
official. As I have done on a number of prior occasions, I have served 
since January 20TH of this year as the Acting Assistant Attorney 
General. My responsibilities in this interim capacity include 
supervision of the Division's tobacco litigation team.
    As I know that Members of the Committee can appreciate, I am 
obviously constrained in my ability to discuss the merits of a pending 
case. At the same time we recognize and appreciate the Committee's 
interest in this case, and I shall attempt to be as responsive as I can 
to the Committee's questions without discussing the substance of the 
case. My understanding is that the Committee is interested principally 
in discussing the status of funding and staffing of the case.
    The tobacco litigation team was formed after President Clinton 
announced in his 1999 State of the Union address that he was directing 
the Department of Justice to formulate a plan to take the cigarette 
companies to Court. The suit was filed in the District Court for the 
District of Columbia on September 22, 1999. The suit sought recovery 
under two statutes dealing directly with the recovery of health care 
costs, the Medical Care Recovery Act (MCRA) and the Medicare Secondary 
Payer (MSP) provisions of the Social Security Act. Additionally, the 
complaint sought equitable relief, including monetary disgorgement, 
under the Racketeer Influenced Corrupt Organizations (RICO) Act.
    On September 28, 2000, the Court dismissed the counts pertaining to 
the two health care cost recovery statutes and denied the defendants' 
motion to dismiss the RICO counts. In orders entered on July 27th of 
this year, the Court rejected our attempt to obtain reinstatement of 
the Medicare Secondary Payer count and portions of the Medical Care 
Recovery Act count. Intensive discovery is in progress and trial is 
scheduled for July 2003.
    Funding for the current fiscal year did not come into place until 
the fiscal year was well underway. The current $23.2 million budget for 
the case is made up of $1.8 million from the Civil Division's base 
appropriation, $9.4 million in reimbursements from other agencies and 
$12 million from the Health Care Fraud and Abuse Control Account 
established by the Health Insurance Portability and Accountability Act 
of 1996. By the end of this fiscal year, the entire amount budgeted for 
the case will have been expended or obligated. A larger amount will be 
required for the next fiscal year. The Department is well into the 
process of identifying appropriate sources for this funding.
    As the demands of the case have increased, so too has staffing, as 
indicated in the following chart:

                                                 Total Positions       Attorney Positions      Other Positions
                       February 1, 1999                      1                      1                     0
                         August 2, 1999                     18                     13                     5
                     September 27, 1999                     23                     16                     7
                         March 20, 2000                     23                     15                     8
                     September 27, 2000                     27                     20                     7
                         March 19, 2001                     31                     23                     8
                          July 30, 2001                     32                     24                     8
                        August 31, 2001                     34                     26                     8
            October 1, 2001 (projected)                     38                     29                     
    The numbers do not include additional personnel from other 
componentsincluding the Criminal Division, the FBI, and the Civil 
Division's Officeof Litigation Support.
    In summary, the case is proceeding. It is obviously a major 
undertaking, and the staff attorneys assigned to the case deserve great 
credit for their dedication and hard work.
    Mr. Chairman, that completes my prepared remarks. I would be 
pleased at this time to attempt to respond to any questions that you or 
other Members of the Committee may have.

    Senator Durbin. I would like to call up the next panel.
    Richard Blumenthal is the Attorney General of the State of 
Connecticut. He directed his State's litigation against the 
tobacco industry and was one of the national leaders in that 
effort and was at the forefront of seeking a comprehensive 
State settlement.
    David Ogden, a partner at Wilmer, Cutler and Pickering, is 
also the former Assistant Attorney General for the U.S. 
Department of Justice Civil Division, which he directed from 
February 1999 through January of this year.
    Pam DeNardo is one of my constituents from St. Charles, 
Illinois. I want to especially thank her for making this trip 
to Washington. She has an illness which has made it more 
difficult, and I appreciate her sacrifice. I think it is 
critically important that we recognize that this litigation is 
not just about groups of lawyers and courts but about real 
people and the harm they have suffered at the hands of the 
tobacco industry.
    Jonathan Turley, a professor of law at George Washington 
University, is Senator Hatch's witness.
    Robert Blakey is a professor of law at the University of 
Notre Dame and is one of the chief authors of the RICO statute 
and one of the Nation's foremost authorities on RICO.
    And David Adelman, executive director of Morgan Stanley, is 
also here at the request of Senator Hatch.
    I thank you all for coming. I would like to first ask Ms. 
DeNardo if she would testify, and we will make any written 
statement which you have part of the record and invite you to 
make your remarks and summarize them as you care.

 STATEMENT OF PAMELA DENARDO, ST. CHARLES, ILLINOIS, ON BEHALF 
                OF THE AMERICAN LUNG ASSOCIATION

    Ms. DeNardo. Thank you, Mr. Chairman and members of the 
committee. My name is Pam DeNardo. I live in St. Charles, 
Illinois, where I run my own small business. I am appearing 
today on behalf of the American Lung Association and EFFORTS, 
which stands for Emphysema Foundation for Our Right to Survive. 
I would like to tell you my story. It is not a new nor unusual 
story. There are literally hundreds of thousands just like me.
    I was a smoker. I started to smoke at the age of 17. I 
started smoking because it was cool. And for many years, I 
truly believed that I could quit any time I wanted to, that is, 
until I really tried. That is when I understood the word 
``addiction.'' And now I am sick. I have been diagnosed with 
chronic obstructive pulmonary disease. Even after being 
diagnosed, quitting was extremely difficult. It was literally 
the hardest thing I have ever done. I actually know people who 
will smoke a cigarette, suck on an inhaler, and smoke another 
cigarette. That is addiction.
    For those of you who are not familiar with chronic 
obstructive pulmonary disease, or COPD, I will attempt to 
explain to you. It is primarily a smoker's disease and consists 
of chronic bronchitis and/or emphysema. Each of these diseases 
share a common characteristic: obstruction of airflow out of 
your lung, causing shortness of breath and a raspy voice. COPD 
accounts for over 107,000 deaths per year in the United States 
alone. It is terminal and it is irreversible. There is no cure 
and there is not enough research being done to find a cure. 
COPD can be asymptomatic, especially in the early stages. Many 
patients do not report symptoms until they have lost over 50 
percent of lung function.
    COPD is the fourth largest killer in the United States 
behind heart disease, cancer, and stroke, which are also 
smoking-related illnesses. The World Health Organization 
estimates that in the year 2000, 2.7 million people died of 
COPD worldwide. In the simplest of terms, COPS robs you of the 
oxygen your body needs to survive and slowly progresses until 
you die. It is slow suffocation.
    If the non-smoking public believes this is not their 
problem, they should think again. People with severe difficulty 
breathing cannot work, they cannot pay taxes or survive without 
the help of our Government. We have to go on disability, 
receive Medicare, Medicaid--all paid for by taxes. Chronic 
bronchitis and emphysema take a heavy toll on the economy. 
According to estimates made by the National Heart, Lung, and 
Blood Institute, in the year 2000 the annual cost to the Nation 
for COPD was an estimated $30.4 billion. Mortality from COPD 
has increased sharply for more than two decades. Its increase 
right now is 16 percent per year. Data provided by the American 
Lung Association indicates that the number of deaths from COPD 
more than doubled between 1979 and 1998. This is not a disease 
or a problem that this country can afford to ignore.
    In my case, I have emphysema. And believe it or not, I 
consider myself lucky. Diagnosed early, I am still able to 
function well. I run my own small business. I have health 
insurance, and I am not on oxygen. Indeed, that is one of the 
reasons that I am here today. There are many people who could 
speak more eloquently to you and with much more experience than 
I. However, to book a flight on an airline if you are oxygen-
dependent is a nightmare. The rules and restrictions of the 
airline industry are such that a person on oxygen must start 
making arrangements months before departure, and some airlines 
will not take you at all.
    So I am here to speak for people who are much braver and 
much sicker than I, people who suffer every day from this 
dreadful disease yet continue to help others to cope. If you 
would like to experience firsthand what it feels like to 
breathe with this disease, there is a very simple exercise to 
provide you with this experience. Simply put a straw in your 
mouth at the beginning of your day. Do not breath in or out 
except through the straw. Even with healthy lungs, you will 
tire as you go about your daily activities, and it won't be 
long before you are very, very tired. COPD patients do not have 
the option of taking that straw out of their mouth.
    I am treated with asthma drugs because there are no drugs 
available for emphysema. When I was diagnosed, I was shocked. 
Emphysema to me is an ``old person's'' disease. That is what I 
thought at the time. I have since found out otherwise. Today 
the average age of diagnosis is in the mid-40s, and that 
average is going down yearly.
    When I started smoking, there were no warnings on the 
packages. Later the packages said, ``Cigarettes may be 
hazardous to your health.'' Other than tar and nicotine, no 
other ingredients were listed. They are still not listed. 
Tobacco products are still on the shelves today. There are 
today 599 ingredients added to tobacco in the manufacture of 
cigarettes by the five major American cigarette companies.
    I am just your typical middle-aged, taxpaying citizens. 
Perhaps I do not have the power or the education that you have. 
But I do know this: Sometime, somewhere, someone is going to 
have to pay for all of this illness and death. Some people in 
this country seem to think that it is all right to give carte 
blanche to an industry that is killing Americans. I disagree.
    I believe that it is crucial that the Department of Justice 
aggressively continue its lawsuit against the tobacco industry. 
It is the Department of Justice's responsibility, on behalf of 
taxpayers like me, to hold the tobacco industry accountable for 
their actions.
    Americans are dying in great numbers from tobacco-related 
diseases. The tobacco industry needs to be held responsible for 
these deaths and the years of lies and deception to the 
American public about the dangers of their products. I am here 
to urge the continuation of the Department of Justice lawsuit. 
The American people deserve their day in court.
    Believe it or not, I do take responsibility for smoking all 
those years, and that is why I am here today. I feel very 
responsible to speak out against smoking. I belong to an 
Internet organization of people suffering from COPD. EFFORTS 
encompasses over 1,000 people in many countries. All have this 
disease and many are in their 30s and their 40s. EFFORTS is 
non-profit and non-political. Their goals are to provide 
support to those suffering from COPD, work toward medical 
research into the disease, educate our youth about the dangers 
of smoking, and to become the most authoritative and effective 
source of information about COPD and available treatments. I 
encourage you to visit our Web site at www.emphysema.net. Once 
there, you will find endless testimonies regarding the effects 
of this disease, the difficulties of living with it, and the 
personal stories of very real people, some still active and 
some who have passed away.
    Please ensure that the Department of Justice aggressively 
pursues the case against the tobacco industry. It is critical 
to hold the tobacco industry accountable.
    Thank you for allowing me to speak today. I have nothing 
but admiration for the greatest country on the Earth. I am 
humbled by this opportunity to speak my mind. Only in this 
country is it possible for the average citizen to speak before 
its governing body. I am greatly appreciative of this 
particular.
    Thank you.
    [The prepared statement of Ms. DeNardo follows:]

Statement of Pamela DeNardo, on behalf of American Lung Association and 
        EFFORTS (Emphysema Foundation For Our Right To Survive )

    Thank you, Mr. Chairman and members of the Committee. My name is 
Pam DeNardo, I live in St. Charles, Illinois, where I run my own small 
business, which markets small group health insurance. I am appearing 
today on behalf of the American Lung Association and EFFORTS, which 
stands for Emphysema Foundation For Our Right To Survive. I would like 
to tell you my story. It is not a new story. It is not an unusual 
story. There are literally hundreds of thousands just like me. I was a 
smoker. I started to smoke 40 years ago at the age of 17. I started 
smoking because I thought it was the cool thing to do. And for many, 
many years, I believed that I could quit at any time. That is until I 
really tried to quit. Then I truly understood the word ``addiction.'' 
And now I am sick. I have been diagnosed with Chronic Obstructive 
Pulmonary Disease. Even after being diagnosed, quitting was extremely 
difficult. It was literally the hardest thing I have ever done. Even 
gasping for breath, I wanted a cigarette. I actually know people who 
will smoke a cigarette, suck on an inhaler and smoke another cigarette. 
That is addiction.
    For those of you who are not familiar with Chronic Obstructive 
Pulmonary Disease, or COPD, I will attempt to explain. It is primarily 
a smokers' disease and consists of chronic bronchitis and/or emphysema. 
Each of these diseases shares a common characteristic, which is an 
obstruction of airflow out of the lungs, causing shortness of breath. 
COPD accounts for over 107,000 deaths per year in the United States 
alone. COPD is terminal and irreversible. There is no cure and not 
enough research is being conducted toward finding a cure. Once 
diagnosed, the patient is told to quit smoking, eat a sensible diet and 
exercise. COPD can be asymptomatic, especially in the early stages. The 
lung has a great deal of reserve. Many patients do not report any 
symptoms until they have lost over 50 percent of lung function.
    COPD is the fourth largest killer in the United States behind heart 
disease, cancer and stroke (also smoking related illnesses). The World 
Health Organization estimates that in the year 2000, 2.74 million 
people died of COPD worldwide. What is COPD? In the simplest of terms, 
it robs you of the oxygen your body needs to survive and slowly 
progresses until you die. It is slow suffocation.
    If the nonsmoking American public believes this is not their 
problem, they should think again. People who have severe difficulty 
breathing cannot work or pay taxes or survive without the help of our 
government. They have to go on disability, receive Medicare, Medicaid--
all paid for by taxes. Chronic bronchitis and emphysema take a heavy 
toll on the economy. According to estimates made by the National Heart 
Lung and Blood Institute, in 2000 the annual cost to the nation for 
COPD was an estimated $30.4 billion. This included $14.7 billion in 
direct health care expenditures, $6.5 billion in indirect morbidity 
costs and $9.2 billion in indirect mortality costs. Mortality from COPD 
has increased sharply for more than two decades. Data provided by the 
American Lung Association indicate that the number of deaths from COPD 
more than doubled between 1979 and 1998. This is not a disease or a 
problem that this country can afford to ignore.
    In my case, I have emphysema. Believe it or not, I consider myself 
lucky. I am still able to function pretty well-I run my own small 
business, I have health insurance, and I am not yet on oxygen. Indeed, 
that is one of the reasons I was chosen to come here today. There are 
many people who could speak to you more eloquently and with a great 
deal more experience than I. However to book a flight on an airline if 
you are oxygen dependent is a nightmare. The rules and restrictions of 
the airline industry are such that a person on oxygen must start making 
arrangements months before departure. Some airlines will not take them 
at all. So, I am here to speak for people who are much braver and much 
sicker than I. People who suffer every day with this dreadful disease 
yet continue to help others learn how to cope. If you would like to 
experience first hand what it is like to breathe with this disease, 
there is a very simple exercise to provide you with this experience. 
Simply put a straw in your mouth at the beginning of your day. Do not 
breathe in or out except through this straw. Even with healthy lungs, 
you will soon tire as you go about your daily activities. COPD patients 
do not have the option of taking the straw out of our mouths. And our 
lungs are not healthy.
    I am treated with asthma drugs because there are no drugs available 
for emphysema. When I was diagnosed I was shocked. Emphysema is an 
``old person's'' disease. That is what I thought. I was diagnosed at 
age 55. I have since found out that today the average age of diagnosis 
is in the mid 40's and that average age is going down yearly. When I 
started smoking there were no warnings on the packages. Later the 
packages said ``cigarettes may be hazardous to your health'' and other 
than tar and nicotine, no other ingredients have ever been listed. 
Tobacco products are still on the shelves today. And there is still no 
list of ingredients. I have with me today a list of 599 ingredients 
added to tobacco in the manufacture of cigarettes by the five major 
American cigarette companies.
    I am just your typical middle aged, tax-paying citizen. Perhaps I 
do not have the power and education that you have. But I know this, 
somewhere, sometime, someone is going to have to pay for all of this. 
Some people in this country think that it is all right to give carte 
blanche to an industry that is killing Americans. I disagree.
    I believe that it is crucial that the Department of Justice 
aggressively continue its lawsuit against the tobacco industry. It is 
the Department of Justice's responsibility, on behalf taxpayers like 
me, to hold the tobacco industry accountable for their actions.
    Americans are dying in great numbers from tobacco-related diseases. 
The tobacco industry needs to be held responsible for these deaths and 
the years of lies and deception to the American public about the 
dangers of their products. I am here to urge the continuation of the 
Department of Justice lawsuit. The American people deserve their day in 
court!
    Believe it or not, I do take responsibility for smoking all of 
those years. That is why I am here today. I feel responsible to speak 
out against smoking. I belong to an Internet organization of people 
suffering from COPD. While my doctors take very good care of me, they 
could not tell me how to LIVE with COPD. How to cope and make the most 
of each and every day. Only people who live with this disease day in 
and day out can do that. EFFORTS encompasses over 1000 people in over 
six countries. They all have this disease and many are in their 30's 
and 40's.
    EFFORTS' goals are to provide support to those suffering from COPD, 
to actively work towards medical research into the disease, to show 
responsibility in educating our youth about the dangers of smoking, to 
work diligently in making sure that insurance companies and Medicare do 
not withhold reimbursements for treatments of our disease and to become 
the most authoritative and effective source for information about 
emphysema and available treatments. I encourage you to visit our 
website at http//www.emphysema.net. Once there you will find endless 
testimonies regarding the effects of this disease, the difficulties of 
living with it and the personal stories of very real people, some still 
active and some who have passed away.
    Please ensure that the Department of Justice aggressively pursues 
the case against the tobacco industry. It is critical to hold the 
tobacco industry accountable.
    Thank you for allowing me to speak today, I have nothing but 
admiration for the greatest society on the face of the earth and am 
humbled by this opportunity to speak my mind. Only in this country is 
it possible for the average citizen to speak before its governing body. 
I am greatly appreciative of this opportunity.
    Thank You.

    Senator Durbin. Thank you, Ms. DeNardo. We are honored that 
you have joined us and greatly appreciate your testimony.
    The Attorney General of the State of Connecticut, Richard 
Blumenthal, has received national recognition for his 
leadership on the State lawsuits, successful lawsuits against 
the tobacco industry, and we are happy to have your testimony 
today.

 STATEMENT OF HON. RICHARD BLUMENTHAL, ATTORNEY GENERAL, STATE 
                         OF CONNECTICUT

    Mr. Blumenthal. I am happy and honored to be here, Senator 
Durbin, and wish to begin by thanking you and Senator Hatch and 
others on this committee, including Senator Feinstein and 
Senator Kennedy and others in the Senate, for your leadership 
over the years in this very, very important cause and for 
holding these hearings, which really are designed to hold the 
Justice Department accountable for a lawsuit that is vitally 
important to the health of our Nation and the public interest.
    This effort really has been bipartisan and it is, as you 
have said very eloquently, Senator Durbin, about real people 
like Ms. DeNardo. And the lawsuit, in my view, absolutely must 
be vigorously prosecuted for reasons that I have set forth in 
my written testimony and won't repeat completely here. But let 
me just say that Big Tobacco continues to use the same kinds of 
tactics, targeting children, deceiving the public, and 
profiting literally billions of dollars, by misrepresenting and 
addicting the American public, particularly children.
    This long-sought Federal lawsuit--and I was questioned at 
the time I testified here on the first settlement about why the 
Federal Government was not receiving any of the money from the 
Attorneys General settlement, and I said, in effect, in 
response to that line of questioning, you have to bring a 
lawsuit. This lawsuit will not be settled unless the Department 
of Justice demonstrates the resources and resolve to win.
    The tobacco industry only understands unequivocal 
commitment, and it will come to the negotiating table only if 
the Department of Justice devotes the resources and resolve 
that are necessary to meet the very demanding schedule that you 
have heard described today. To complete discovery by the summer 
of 2002 is a huge undertaking. It is a mammoth challenge, not 
just because of the volume of documents and depositions and 
other discovery that will have to be obtained and then analyzed 
and reviewed and processed and made ready for trial, but also 
because the tobacco industry certainly will not willingly or 
eagerly provide any of that discovery.
    I personally litigated and argued in court this case on 
behalf of the State of Connecticut. I helped to lead the 
negotiating effort. My personal experience shows that the 
determination to stay the course against the delay, 
obfuscation, and deception that will be encountered by the 
Department of Justice are absolutely essential. And unless the 
Department of Justice demonstrates that resolve and devotes the 
resources, it will not be prepared for trial and it will not 
win.
    Let me also say that these Federal RICO remedies are very 
distinct and different from the available remedies in most of 
our State lawsuits and from the remedies that we eventually 
obtained. The majority of our claims were based largely on 
State law, brought in State courts, claiming violations of our 
State consumer protection statutes, antitrust, and other laws, 
as well as our common laws.
    Most States did not apply this Federal statute for reasons 
relating to Federal jurisdiction, but several States that did 
rely on the Federal RICO statute found that Big Tobacco was 
absolutely petrified of those claims. One example, Texas, in 
much the same position as the Department of Justice today, 
found that all of its other claims, State claims, were 
dismissed but the Federal RICO claim was preserved by the 
court, and the tobacco industry settled with Texas as one of 
the first States to do so. Other States brought these claims 
based on their State RICO statutes--Arizona, Colorado, Florida, 
Oregon--and four on the Federal statute--New York, Texas, Utah, 
and the city of San Francisco--and found much the same 
reaction. These RICO claims are powerful and compelling. And 
the best evidence of it is the district court's opinion, Judge 
Kessler's ruling, in which she said that there was apparent 
merit to these claims and they should go forward.
    You have recited, Senator Durbin, some of the very 
persuasive statistics that are a compelling reason to go 
forward with this action, and those same basic facts are the 
same ones that made our State lawsuits so compelling to the 
industry. But the point is that the industry is continuing with 
many of these actions. There is no requirement for disclosure 
in our Master Settlement Agreement. That is one of the 
objectives of the RICO claims, disclosure of documents and 
other scientific research that this industry has done that 
belies their claims that tobacco is not addictive and that they 
have not targeted children.
    The need to stop those companies from continuing those 
statements has not been achieved by the Master Settlement 
Agreement, and we are now involved in litigation. Connecticut 
is one of six States that has sued RJR again because it is 
advertising in magazines that have high youth readership. There 
are four other court actions currently pending seeking to 
enforce the Master Settlement Agreement, and there is 
substantial reason to think that other claims may be made as 
well. There are ongoing disputes about the terms of the 
settlement, and the point is that this industry continues to 
rely on the same tactics--Joe Camel may be dead, but the 
industry's tactics are alarmingly alive.
    In closing, let me say that money and appropriations, while 
they are very legitimately and importantly a topic of this 
committee today, are no substitute for a resolve to pursue this 
litigation as long and hard as is necessary. Only after the 
tobacco companies are persuaded that the Department of Justice 
means business will they come to the table in a realistic way, 
and talking settlement prematurely is unacceptable as a risk, 
let alone as a result. This lawsuit is a law enforcement 
action. It doesn't make new law. It doesn't create a new 
statute. It is about enforcing laws that now exist and 
preventing the tobacco companies from bringing to the table 
again 20 or even fewer years from now other victims, other 
people who were addicted as children, like Ms. DeNardo. We can 
prevent it as long as we hold the industry accountable.
    Thank you.
    [The prepared statement of Mr. Blumenthal follows:]

   Statement of Hon. Richard Blumenthal, Attorney General, State of 
                              Connecticut

    I appreciate the opportunity to speak before the Senate Judiciary 
Committee on the subject of the Department of Justice (DOJ) lawsuit 
against the tobacco companies--a lawsuit vitally important to public 
health and consumer protection in our nation.
    The lawsuit must be vigorously prosecuted, because Big Tobacco 
continues to lure children into lifetimes of addiction and disease, 
still causing tens of thousands of deaths each year, costing taxpayers 
millions of dollars, and reaping billions of dollars in profits. But 
this long sought federal legal action cannot bring Big Tobacco to the 
courtroom, let alone the bargaining table, unless the Department of 
Justice has both resources and resolve. I personally litigated and 
argued Connecticut's case in court, prepared to try it and negotiated 
with the tobacco companies--helping to lead the 50-state effort. My 
personal experience shows that both resources and resolve are 
indispensable. The determination to stay the course against delay, 
obfuscation and deception--and the financial wherewithal to win--are 
essential.
    As an early and active leader of the states' legal action, allow me 
to state the obvious: the state lawsuits were a profoundly significant 
step, but not the end-all solution. The federal lawsuit is a necessary 
next step, and this Administration's support--undelayed and 
undiminished--will determine the outcome.
    Big Tobacco will stop at nothing to defeat law enforcement. It will 
spend many multiples of the federal outlay. It will file endless, 
exhaustive motions to dismiss and disqualify, motions to delay and deny 
documents and discovery, motions to obfuscate and obstruct.
    Big Tobacco's strategy is to create motion sickness--paralyzing the 
process of justice.
    Joe Camel may be dead, but Big Tobacco's old tactics are alarmingly 
alive. Its spending on advertising and promotion is now more than $8 
billion per year, about 20% higher than at the time of the states' 
settlement. Its billboards are gone, but its ads in magazines with high 
youth readership are more numerous and seductive than ever. Its 
profits, stock prices and executive pay all are climbing. Earlier this 
year, a tobacco company explained in a report to the Czech Republic why 
promoting smoking is fiscally prudent because the government saves $146 
million yearly on welfare, pensions, housing, and health care otherwise 
spent on smokers whom tobacco kills. In short, Big Tobacco's basic 
mindset and culture--its contempt for human life--are unchanged.
    The DOJ has the moral and legal authority--indeed legal 
obligation--to prosecute violations of federal law, but equally 
important is the practical federal remedy for violations of the 
Racketeer Influenced and Corrupt Organizations Act (RICO) sought in 
this lawsuit: disgorgement of cigarette company profits obtained 
through violations of RICO, disclosure of all relevant internal 
cigarette research on smoking and health, and court orders to stop the 
companies from making false, misleading and deceptive statements about 
cigarettes and concealing the harms of smoking and to stop the 
companies from marketing their deadly product to kids.
    The federal RICO remedies are very distinct and different from 
available remedies in most of our state lawsuits. The majority of our 
claims were based largely on state law, brought in state courts, 
claiming violations of consumer protection, antitrust and other state 
statutes and common law. Most states did not apply the federal statute, 
for reasons relating to judicial jurisdiction. But several states that 
did rely on federal RICO or their state's version of RICO found that 
Big Tobacco was petrified of losing on RICO grounds. In Texas, for 
example, the tobacco industry settled for the then-largest payment when 
a federal district court allowed that state to proceed on its RICO 
claim even after all other state claims were dismissed.
    The DOJ lawsuit lists 106 separate acts by Big Tobacco comprising a 
pattern of racketeering activity. These 106 separate acts chronicle the 
systematic, calculated campaign by Big Tobacco to deceive the American 
people. The companies' own documents produced in our state lawsuits 
show how well and long they knew of the disease and addiction caused by 
smoking--indeed, how they targeted children and spiked nicotine levels 
to make their products more addictive. The result of this campaign: 
each day, 6,000 children in the United States start smoking and more 
than 3,000 become daily smokers. At this rate, 5 million of today's 
children will eventually die of smoking related diseases. These basic 
facts are the same ones that made the state lawsuits so compelling.
    The federal government's enforcement of RICO offers remedies 
providing a powerful new deterrent to Big Tobacco's unconscionable 
misconduct, forcing payment of penalties exceeding the profits obtained 
from their illegal activity.
    The lawsuit's remedies--additional penalties, damages and 
injunctive relief--greatly enhance the deterrent value of the Master 
Settlement Agreement (MSA) negotiated by the state attorneys general, 
which prohibits tobacco companies from marketing to children. Big 
Tobacco still spends more than $8 billion per year on an advertising 
and promotion campaign that continues to reach children. In a recent 
New England Journal of Medicine article, researchers found that tobacco 
companies spent more than $120 million advertising cigarettes in youth 
oriented magazines. Young people, 12 to 17 years of age, every year see 
50 or more ads for RJ Reynolds' products in magazines they regularly 
read. Other tobacco companies have similar strategies of saturation 
bombing--through relentless marketing in magazines widely read by 
children. Hence, my state and 5 others are again suing RJ Reynolds, and 
considering action against other tobacco companies for MSA violations. 
These insidious advertisements and promotions clearly hit their target: 
In Connecticut for example, 30% of our high school students are 
smoking, starting down the path of addiction to debilitating illness 
and premature death. No wonder that the average age children start 
smoking in Connecticut is 11 years old.
    The MSA sets a starting point for reform, permitting stronger 
federal limits on marketing and larger disgorgement of profits earned 
from unlawful activities. A federal court order also provides the 
states with a significant partner in monitoring and enforcing tobacco 
industry compliance. It will add force and effect to state consumer 
protection enforcement as a deterrent.
    More broadly, and bluntly, the message is compelling: the 
Department of Justice will not tolerate lawbreaking conspiracies that 
promote drug addiction and disease. It will act to protect the health 
of all citizens from the scourge of tobacco--a product different from 
all others, because tobacco is the one consumer product that, when used 
exactly as intended by its manufacturer, commonly kills the customer.
    In short, the federal lawsuit will advance state law enforcement 
goals, reduce state and federal health care spending on tobacco-related 
diseases, save lives and send a powerful signal about addiction and 
drug abuse as well as the credibility and staying power of public 
health commitments.
    The federal lawsuit can be successful only if the Department of 
Justice has the resources and resolve to aggressively prosecute its 
claims. The appropriation necessary for the lawsuit during this fiscal 
year is a significant amount of money, but a mere pittance compared to 
the federal costs of $35 billion annually in tobacco-related health 
care expenditures alone.
    A successful lawsuit against the tobacco companies--based on state 
attorneys general experience--requires a resolve to fight for many 
years and adequate resources to counter the industry's take no 
prisoners litigation tactics.
    Big Tobacco's tactics are well-calculated, time-consuming and 
costly. They have been successful against every individual victim who 
dared to seek justice against the tobacco manufacturers. Against us, 
they included attempts to remove our state court action to federal 
court, multiple attempts to disqualify legal counsel, motions to 
dismiss on personal jurisdiction and subject matter grounds and efforts 
to use the state freedom of information act to circumvent court 
production rules.
    The states needed substantial resources simply to obtain and review 
industry documents--often previously provided to other plaintiffs under 
protective orders that prevented such states from obtaining them from 
other plaintiffs, further duplicating costs, time and work. No doubt 
the DOJ will encounter similar trench warfare in its lawsuit.
    Money is no substitute for the resolve to pursue this litigation as 
long and hard as necessary. Only after the tobacco companies were 
persuaded that the state attorneys general were united and 
unequivocally committed to fight and win, did they agree to discuss 
settlement.
    Talking settlement prematurely--without showing plainly the 
resources and resolve to win--is a recipe for retreat and defeat. It 
constitutes surrender--simply unacceptable as a risk let alone a 
result.
    The federal lawsuit is a law enforcement action against an outlaw 
industry. The federal courts have explicitly upheld its merit and ruled 
it should move forward. It will help hold this industry accountable for 
its illegal actions--past, present and future.

    Senator Durbin. Thank you, Attorney General Blumenthal.
    Professor Turley?

    STATEMENT OF JONATHAN TURLEY, PROFESSOR OF LAW, GEORGE 
            WASHINGTON UNIVERSITY, WASHINGTON, D.C.

    Mr. Turley. Thank you, Senator Durbin, Senator Hatch. Thank 
you for giving me the opportunity to appear again before this 
committee and to talk of a subject that is of great importance 
to us all.
    Listening to Ms. DeNardo certainly shows that this is a 
subject upon which we cannot debate the merits of the campaign 
against tobacco. No one would contest the merits. Like Senator 
Hatch, I have been very critical of tobacco companies. I have 
been very critical of their conduct, both legal and social, and 
I have been very supportive of individual lawsuits against 
tobacco.
    What brings me here today is not to debate whether tobacco 
should be held accountable but the means to hold them 
accountable. This can be very, very difficult when you have 
some question, as I do, as to the means used by the Federal 
Government.
    I come to this with a purely academic interest. I have not 
received money from the tobacco industry or the anti-tobacco 
groups, and I have no particular interest in their future. This 
hearing brings together a number of areas which I have written 
on as an academic. I have shamelessly cited all of my work, 
which is demanded by academic vanity. But the thrust of what 
interests me about this subject as an academic--and forgive me 
for seeming somewhat arcane and abstract--is constitutional and 
historical. In a Madisonian democracy, it is often more 
important how we do something than what we do. This is a 
difficult, difficult point to make because the people who 
support the tobacco lawsuit are doing it for the world's best 
reason. The question here is simply whether they are using the 
wrong means for a worthy end.
    Justice Brandeis once said that what we have to worry about 
is not evil men, but men of zeal, well-meaning but without 
understanding. Not to be too harsh on this issue, I believe 
this lawsuit is well-meaning, but it fails to understand some 
of the foundational principle of the Madisonian democracy, 
particularly the dangers of legislative circumvention.
    I have attached an article--once again, as a shameless 
academic device--that I wrote for the Harvard Legislative 
Journal that is entitled ``Crisis of Faith,'' and it deals with 
the constitutional implications of the Federal lawsuit.
    I am not going to repeat these insular points because it is 
already laid out in the attached article. Suffice it to say, 
the Federal tobacco lawsuit is the most open and flagrant 
example of legislative circumvention that I have ever seen as 
an academic. The Attorney General who started this, Attorney 
General Janet Reno, actually said in her press conference the 
Justice Department was going to bring suit because Congress did 
not do what it wanted Congress to do in this area.
    So you often hear, particularly in testimony today, that we 
have to go forward because of inaction from Congress. But, by 
doing so, you change the political equation from convincing 535 
representatives of the people to convincing one, an Article III 
judge, as to what to do with this industry. Whether you like 
tobacco or not--most of us do not--there are a lot of people 
who are smokers. There are a lot of people who are obviously 
not smokers. This is an issue that divides our Nation, and that 
is one of the reasons Congress has not gone further in this 
area--it is because we are divided as a Nation.
    The solution is not to circumvent Congress. The solution is 
to convince, to use the crucible of the legislative process, 
the open and deliberative process, to convince. That is what 
James Madison wanted. James Madison didn't write a particularly 
inspiring document when he wrote the Constitution. He wrote a 
document to last. He knew what our inclinations were. He knew 
the temptations in a democratic society to solve problems at 
any cost to look at the ends and not the means. He knew about 
factions. If you look in this room, and you can see the face of 
faction. There are a dozen different factual interests present 
in this room alone.
    Madison used a system of constitutional implosion. He said 
that as a people we would direct our divisions to Congress 
where they would be resolved. There they would coalesce and 
transform.
    I have serious questions about the method used by the 
Justice Department because this is clearly an effort of 
legislation by litigation. You read what is requested in relief 
and the Department of Justice looks like it followed Oscar 
Wilde's rule that they could resist everything but temptation. 
This list is virtually identical to lists that were floated in 
Congress in terms of a Federal settlement, a bill that would 
essentially resolve all these issues. They have been taken from 
there and put in front of a single judge, who I respect, but I 
don't believe that she is the one that should decide this for 
the Nation.
    I also have serious questions about RICO which I have put 
into my written statement, but I wanted to emphasize the 
Madisonian issue so it will not get lost. But in some ways, 
legislative circumvention is like what Clausewitz said about 
war. He said that war is nothing but the continuation of 
political intercourse by another means. In the same way, people 
who look to litigation to legislate view it as a form of 
political intercourse by a different means. But it is very, 
very dangerous because the Government has habits, too. When you 
expand the power of the executive branch to the loss of this 
branch, it is a habit that is hard to break.
    I encourage Congress to deal with tobacco, deal with it 
firmly, and I will rally in support. And I know, Senator 
Durbin, probably more than anyone in the Senate, you feel 
passionately about this subject, and I respect that. I simply 
ask that you consider whether this institution's interest, 
crafted by James Madison, demands a level of self-defense. 
Regardless of what happens with tobacco, it is very important 
that we preserve a certain covenant that we made with people 
like James Madison as to how we would solve problems. We have 
never been defined as a people by our problems. We have always 
been defined by how we solve those problems. And I would submit 
this is the wrong way.
    I notice my time is out, so I will stop there.
    [The prepared statement of Mr. Turley follows:]
    [Additional material is being retained in the Committee 
files.]

  Statement of Professor Jonathan Turley, Shapiro Professor of Public 
Interest Law, George Washington University Law School, Washington, D.C.

    Thank you, Mr. Chairman, it is an honor to appear again before this 
Committee and its distinguished members.
                            I. INTRODUCTION
    Chairman Leahy, Senator Hatch, members of the Committee, my name is 
Jonathan Turley and I am a law professor at the George Washington 
University Law School where I hold the J.B. and Maurice C. Shapiro 
Chair for Public Interest Law. I know that your time is limited today 
and, with the consent of the Committee, I would like to submit a longer 
written statement to augment my oral testimony, including a copy of a 
law review article that offers a more comprehensive academic treatment 
of some of these issues.
    At the outset, I wish to emphasize that I come to this question 
with a purely academic interest.\1\ Over the last decade, I have 
periodically taught and written on the subject of the Racketeer 
Influenced Corrupt Organization Act (RICO) \2\ and specifically the 
varied applications of civil RICO.\3\ I have also given prior testimony 
\4\ as well as presentations and commentary \5\ on the tobacco 
litigation. My most recent academic piece, A Crisis of Faith: Tobacco 
and the Madisonian Democracy,\6\ looks at governmental lawsuits against 
the tobacco industry from both a constitutional and statutory 
viewpoint, including discussion of the use of civil RICO by the federal 
government.\7\
---------------------------------------------------------------------------
    \1\ I do not consume tabacco prodducts and I have neither consulted 
for nor received money from either the tobacco industry or the anti-
tobacco organizations. While I have spoken to investor groups (as well 
as other organizations) on likely impact, outcome, and implications of 
the tobacco litigation, I have not advised or consulted with the 
tobacco industry. I did speak years ago to the tobacco industry on 
combating environmental crimes in their industry but I declined the 
$4000 speaking fee.
    \2\ Organized Crime Control Act of 1970, P.L. No. 91-452, 84 Stat. 
922 (codified as amended in scattered sections of 18 U.S.C.); see 18 
U.S.C. 1961-1968 (1994).
    \3\ My academic writings include Jonathan Turley, Laying Hands on 
Religious racketeers: Applying Civil Rico to Fraudulent Religious 
Solicitations, 29 William and Mary Law Review 441 (1988); Jonathan 
Turley, The RICO Lottery and the Gains Multiplication Approach: An 
Alternative Measurement of Damages Under CIvil RICO, 33 Villanova Law 
Review 239 (1988); see also Jonathan Turley, A Crisis of Faith: tobacco 
and the Madisonian Democracy, 37 Havard Journal of Legislation 433 
(2000) (discussing the various theories of the federal litigation, 
including civil RICO claims). It is fair to say that since I began 
writing on this subject over a decade ago, my views have evolved on the 
proper use of RICO and, more importantly, on the inefficiency or 
inequity of some types of racketeering actions.
    \4\ See, e.g., Big Government Lawsuits: Are Policy Driven Lawsuits 
in the Public Interest? Hearings Before the Senate Comm. on the 
Judiciary 105th Cong. (1999) (testimony of Professor 
Jonathan Turley).
    \5\ See, e.g., Jonathan Turley, A Bad Canadian Law Heads South, The 
Wall Street Journal, February 28, 2000, at A41; Jonathan Turley, 
Madison Felled by Tobacco?, The National Law Journal, December 13, 
1999, at A28; Jonathan Turley, Reforming the Great Litigation Lottery, 
Chicago Tribune, Nov. 1, 1999, at A11; Jonathan Turley, The New 
Profiteers of the Tobacco War, Wall Street Journal, Sept. 20, 1999, at 
A29.
    \6\ Turley, Crisis of Faith, supra note 2. It is not my habit to 
attach such writings, but, given the fact that the hearings was called 
with only a couple of days notice, there was limited time to prepare 
the type of comprehensive written testimony that this subject clearly 
merits. For that reason, I have yielded to practicality (and no small 
measure of academic vanity) in citing past work on some of the discrete 
issues.
    \7\ In the interests of full disclosure, this past work is 
generally critical of the government's legal action against the tobacco 
industry. While expressing great reservations about this litigation, I 
have also been highly critical of the industry and supportive of 
lawsuits by citizens in seeking damages for injuries caused by this 
harmful product. One of the my central concerns over the course of the 
tobacco litigation is the distributive problems of awards and the 
potential for windfall judgments to some questionable litigants 
(particularly governmental and institutional Litigants) and purely 
symbolic judgements for worthy individual litigants. See generally 
Turley Crisis of Faith, supra note 2, at 467-481; Turley, Reforming the 
Great Litigation Lottery, supra note 4, at A11; Turley, The New 
Profiteers, Supra note 4 A29; see also Senate Hearing, supra note 3.
---------------------------------------------------------------------------
    Despite prior academic work in the RICO area, my primary interest 
in today's hearing is more constitutional than statutory. While I have 
serious reservations regarding of the government's RICO claims against 
the tobacco industry, my paramount concern is with the overall use of 
the courts to achieve the government's objectives rather than its 
particular theories of recovery. It is important to emphasize that I do 
not contest the need for legal accountability for the tobacco industry, 
including civil liability. Rather, it is the means used by the 
government that should raise fundamental questions for this Committee. 
In a Madisonian democracy, it is often more important how you do 
something than what you want to achieve. It is my view that the federal 
lawsuit is an inappropriate means to achieve an otherwise worthy end. 
For that reason, I believe that the continuation of the federal tobacco 
lawsuit under the remaining civil RICO claim is ill-advised and should 
be declined as a matter of discretion by the Bush Administration.
 II. THE DANGERS OF LEGISLATIVE CIRCUMVENTION AND THE INTEGRITY OF THE 
                     MADISONIAN DEMOCRATIC PROCESS.
    Because my views on the dangers of legislative circumvention are 
already part of prior congressional testimony \8\ and specifically 
addressed in the attached copy of Crisis of Faith, I will not dwell on 
this aspect of the federal lawsuit. However, it is important to explain 
what I mean by ``legislative circumvention.'' The tobacco litigation is 
one of the most flagrant examples of the Executive Branch circumventing 
Congress in modern times. In January, 1999, former Attorney General 
Janet Reno was quite plain in the press conference announcing the 
federal lawsuit: ``[A]s I had indicated, we had hoped that this matter 
would be resolved through legislation. When the legislation failed to 
pass, I still felt very, very strongly that we should be able to 
recover damages.'' \9\ The federal lawsuit was filed only after the 
Clinton Administration concluded that Congress would not agree to the 
relief that it now seeks from a federal judge. By filing, the Clinton 
Administration changed the political equation from convincing 535 
representatives of the nation to convincing a single judge in 
Washington, D.C. This was done to force massive changes in an area of 
almost unrivaled controversy in the nation. To secure this tactical 
advantage, the Clinton Administration, in my view, jettisoned some of 
our most important constitutional values.
---------------------------------------------------------------------------
    \8\ see also Senate Hearing, supra note 3.
    \9\ Attorney General Janet Reno, Department of Justice Press 
Conference (Jan. 21, 1999).
---------------------------------------------------------------------------
    To understand the danger of legislative circumvention in the 
tobacco litigation, it is necessary to understand the most fundamental 
precepts and requirements of the Madisonian democracy. The brilliance 
of James Madison was found not in his articulation of our collective 
strengths as a people but his understanding of our individual flaws as 
citizens. The Madisonian democracy is based on a frank understanding of 
our human vulnerability to factional and even tyrannical impulse. In 
this sense, it can be fairly stated that Madison created a system 
designed to last rather than to inspire. He understood the dangers of 
factions in destabilizing governments. This danger was magnified by the 
tendency of constitutional drafters to emphasize those qualities and 
objectives that unified a people. In these systems, factional interests 
would remain below the surface where they would continue to fester and 
potentially explode. Madison not only recognized the presence of 
factions but encouraged their expression in the legislative system 
where they could be converted from discrete factional interests into a 
majoritarian compromise. It is the legislative system that allows for a 
type of ``constitutional implosion'' to occur that brings both 
stability and legitimacy to our system.\10\ Rather than have factional 
interests explode outwardly, they implode within the system where they 
are directed to its core: Congress. Ideally, it is here that factional 
interests coalesce and transform through open and deliberative 
debate.\11\ Conversely, while some academics have disparaged the 
significance of the so-called ``countermajoritarian problem,'' \12\ the 
courts can be the most dangerous branch for a democratic system.\13\ 
This countermajoritarian danger is realized when the Executive Branch 
attempts to use the courts as a more receptive branch for significant 
policy changes. By circumventing the Legislative Branch, the Executive 
Branch can achieve what may be too costly or too difficult to achieve 
in Congress.
---------------------------------------------------------------------------
    \10\ See generally Jonathan Turley, Senate Trials and Factional 
Disputes; Impeachment as a Madisonian Device, 49 Duke Law Journal 1, 
110-117 (1999); see also Jonathan Turley, An Imperfect Union: The 
Antithetical Elements of Military Governance in a Madisonian System 
(forthcoming).
    \11\ This is, of course, an ideal that is sometimes unrealized. The 
public choice school has shown that the legislative process can fall 
victim to special interest. See generally Jonathan Turley, 
Transnational Discrimination and the Economics of Extraterritorial 
Regulation, 70 Boston University Law Review 339, 349-70 (1990) (citing 
and discussing various theories of legispurdence and public choice).
    \12\ See Jonathan Turley, The Constitutional Guild: The Problem 
With Banality in Constitutional Law,--Northwestern University Law 
Review--(2001) (forthcoming).
    \13\ Alexander Hamilton referred to the judiciary as ``the least 
dangerous branch.'' The Federalist No. 78, at 465 (Alexander Hamilton) 
(Clinton Rossiter ed., 1961). Conversely, it is Congress that is often 
viewed as the most dangerous given its ability to extend with ``the 
sphere of its activity and drawing all powere into its impetuous 
vortex.'' The Federalist No. 48, at 309 (James Madison) (Clinton 
Rossiter ed., 1961). However, Madison viewed Congress, and not the 
courts, as the active component for social and political change. 
Because of their life tenure and constitutional authority as 
articulated under Marbury v. Madison, judges have the potential to 
exercise unbridled bias and to frustrate legitimate majoritarian goals.
---------------------------------------------------------------------------
    The tobacco litigation initiated by the Clinton Administration is 
the quintessential example of legislative circumvention. Likewise, if 
there is one example of the countermajoritarian danger realized, it is 
this image of a government arguing for a judge to order a massive 
transfer of wealth from an industry to governmental coffers as well as 
mandatory changes in an industry's structure and conduct. Congress has 
been repeatedly asked to take significant measures to curb or control 
the tobacco industry.\14\ Such measures included unsuccessful efforts 
to place tobacco under the jurisdiction of the Food and Drug 
Administration (FDA).\15\ Facing obvious opposition in Congress, the 
Clinton Administration attempted to circumvent the Congress with a 
litigation effort to secure the same authority from the courts. The 
Supreme Court rebuffed this effort in FDA v. Brown & Williamson Tobacco 
Corp.\16\ Ironically, this attempt to expand the FDA's jurisdiction was 
more defensible than the later effort at securing massive damages from 
the tobacco industry in the federal tobacco litigation.\17\ As noted 
earlier, the federal lawsuit was only filed after Attorney General Reno 
concluded that the Executive Branch could not achieve its goals in the 
legislative process.\18\ In this litigation, the Clinton Administration 
attempted to seek reimbursement and damages under the Medical Care 
Recovery Act (MCRA) \19\ and the Medicare Secondary Payer (MSP) \20\ 
provisions. These two claims offered wild departures from any notion of 
textualist or intentionalist statutory construction and, at points, 
bordered on the frivolous.\21\ It was clear that Attorney General Reno 
was correct that any effort to amend either the MCRA or MSP provisions 
in this way would have drawn considerable opposition and a dubious 
chance of success in Congress.\22\ However, the attempt to have a judge 
effectively amend these laws demonstrated a lack of discretionary 
judgment from a federal official sworn to protect the Constitution. To 
her credit, Judge Gladys Kessler made fast work of these claims in 
dismissing them from the federal lawsuit.\23\ She rejected, however, 
motions to dismiss the RICO counts.\24\
---------------------------------------------------------------------------
    \14\See Generally Turley, Crisis of Faith, supra note 2, at 443-
459.
    \15\ Id. at 454-455.
    \16\ 120 S.Ct. 1291 (2000).
    \17\ See Turley, Crisis of Faith, Supra note 2, 457.
    \18\ See infra note 9.
    \19\ 42 U.S.C. Sec. 2651 (1994 & Supp. IV 1998).
    \20\ 42 U.S.C. Sec. 1395(b)(2)(2000).
    \21\ See generally Turley, Crisis of Faith, supra note 2, at 460-
462.
    \22\ As will be discussed below, the Justice Department demands 
relief that reads like prior drafts of the omnibus tobacco proposals 
once floated (and then scuttled) in Congress.
    \23\ United States v. Philip Morris Inc., Civil Action No. 99-2496 
(D.D.C. 2000); see also United States v. Philip Morris, 116F.Supp.2d 
131 (D.D.C. 2000).
    \24\ Id.
---------------------------------------------------------------------------
    Putting aside the merits of the remaining RICO counts (which will 
be addressed below), the very initiation of this litigation effort 
should be a matter of concern for anyone who believes strongly in the 
tripartite system, and specifically the importance of the legislative 
process in dealing with divisive national issues like tobacco. As a 
nation, our views of tobacco have radically changed over time and these 
views continue to evolve. The only point of agreement in this on-going 
national debate is that we remain deeply divided on the consumption and 
marketing of tobacco. Even our government's role in tobacco has been 
evolutionary and conflicting with periods as tobacco's greatest 
protagonist and other periods as its chief antagonist.\25\ What is 
clear is that a significant number of Americans either want to consume 
this product or support the right of citizens who wish to do so 
(subject of time and place restrictions in public accommodations). The 
federal lawsuit places the future of this industry (and therefore this 
product) in question by demanding a massive judgment in its lawsuit. 
When the government seeks the disgorgement of an entire industry for 
decades of past ``gains,'' the lawsuit takes on an obvious and 
important public policy dimension. Yet, the debate over this 
governmental action will not be part of the open and deliberative 
process of Congress but a dialogue between litigants and a single judge 
- a dialogue which will affect not only an industry and its employees 
and shareholders but every citizens in this country, smoker or non-
smoker.
---------------------------------------------------------------------------
    \25\ See Turley, Crisis of Faith, supra note 2, 438-449.
---------------------------------------------------------------------------
    The most obvious cost of circumvention is the loss of the quality 
of legislation formed through the open and deliberative process of 
Congress. This process is not only important for the expression of 
democratic values but it is also important to the crafting of good law. 
The pressures of this system and the influence of the presidential veto 
authority mold legislation in a highly efficient and beneficial way. As 
the members of this Committee know, legislation can be transformed in 
the crucible of the legislative process to make it more balanced and 
moderate. Legislative committees have the resources and expertise to 
research and analyze core assumptions. Floor debates and later 
conferences bring further amendment and refinement to the final 
product. The use of a single judge's equitable authority to achieve 
such results reduces a collective process of revision to a personal 
judgment of entitlement or equity.
    Circumvention also has a deleterious effect on the political 
process and the integrity of the legislative process by insulating 
representatives from controversial policy decisions. It is not 
surprising that, despite increased public statements condemning this 
industry and this product, there has been little interest in Congress 
for a frontal assault on tobacco. Millions of Americans continue to 
consume this product despite well-known governmental warnings and 
campaigns against consumption.\26\ Certainly, congressional 
representatives are aware that many of their constituents would 
actively oppose any significant increase in the price of this product 
due to increased government-mandated costs. Circumvention adds various 
barriers for the public in moving from the relatively open and 
deliberative debate of Congress to the more closed environment of the 
courts.\27\ This circumvention also diminishes political accountability 
for representatives. While most politicians would be unwilling to take 
legislative action to ban this product or gut this industry, a court 
action can achieve the same result with simple acquiescence of 
Congress.\28\ While Congress can use a variety of powers to check 
Executive Branch excesses in court,\29\ it can also remain silent and 
play a purely pedestrian role in the process. When an industry is 
fatally damaged or a product restricted, politicians are protected from 
any public backlash by the perception that it was part of a purely 
legal decision by the courts and not a political decision.\30\ The 
public does not associate the failure to act vis-`-vis a court action 
with a political decision of its congressional representatives.
---------------------------------------------------------------------------
    \26\ See Turley, A Bad Canadian Law Heads South, supre note 4, A41 
(discussing efforts to educate and deter tobacco consumption).
    \27\ This argument is held in a courtroom with a small live public 
audience, due to the ban on television coverage, and decisions are 
rendered in the context of arcane statutory provisions. The courts 
further increase informational costs for citizens by translating 
significant public policy issues into legalistic terminology and forms. 
Obviously, Congress is neither entirely open nor free of informational 
costs or barriers for the public. However, it remains considerably more 
accessible than the legal system for citizens.
    \28\ Smoking is an interesting political issue since, due to its 
addictive elements, consumers have a concentrated interest in its 
future and their numbers are spread fairly evenly across congressional 
districts and states.
    \29\ See Turley, Crisis of Faith, supra note 2, 466.
    \30\ Notably, the most significant legislative effort to curb 
tobacco was a passing legislative interest in expanding the 
jurisdiction of the FDA, an agency that would have acted with a degree 
of political distance from Congress.
---------------------------------------------------------------------------
    If successful, the government will have secured a major change with 
both economic and social implications without a single vote of this 
body. The interests of the affected smokers and investors will be left 
to the judgment of a single judge and a handful of appellate judges. 
Regardless of the outcome of this legal debate, the process is clearly 
not the best method to deal with such matters. As discussed below, even 
if the government can prevail in such an effort, this is a case where 
discretion should militate in favor of what is right as opposed to what 
is convenient.
 III. THE CONSTITUTIONAL AND PUBLIC POLICY IMPLICATIONS OF THE FEDERAL 
                            TOBACCO LAWSUIT.
    Today's hearing offers a unique opportunity to consider when it is 
appropriate for the government to play the role of litigant and when it 
is inappropriate to do so. The foregoing discussion of the dangers of 
legislative circumvention largely encourages Congress to use its 
persuasive and coercive authority to oppose legislation by litigation 
like the tobacco lawsuit. However, the Bush Administration faces a 
slightly different question of whether to use its discretionary 
authority to decline further litigation of the tobacco lawsuit as a 
matter of good policy. While it appears that such a declination is not 
in the offing, I believe that the tobacco lawsuit offers a useful 
example of when the government should not assume the role of a 
litigant.
    Because of the power of the government to do great harm as well as 
great good, the tripartite system largely leaves to Congress to 
determine the conditions under which the United States can appear as a 
party in federal court. While the United States exercises discretion as 
to how it uses this authority, the government must largely act under 
authority that is both granted and tolerated by the electorate.\31\ 
There are obviously a great number of statutes under which the 
government commonly acts that range from criminal prosecution to 
consumer protection to environment. In most civil actions, the 
government can either be characterized as a victim or a regulator. In 
the first category of cases, the government sues for recovery of damage 
done directly to the government; on behalf of a victim; or as a 
statutorily defined representative of victims. In the second category 
of cases, the government sues to enforce federal laws, often through an 
agency with delegated authority.
---------------------------------------------------------------------------
    \31\ Obviously, there are circumstances where the Executive Branch 
litigates to advance constitutional or common law authority that is not 
dependent upon congressional authorization. However, the vast majority 
of government filings are based on congressional authorization.
---------------------------------------------------------------------------
    The Justice Department under the Clinton Administration determined 
that there was not sufficient evidence to prosecute tobacco officials 
or corporations on a criminal basis. The use of civil RICO by the 
government is an available option to deter future misconduct in the 
absence of criminal violations. However, when the government acts as a 
civil litigant, the legitimacy and basis for the lawsuit can be more 
problematic than in the criminal prosecution. Despite their manifest 
weakness, the government's claims under MCRA and MSP did advance a 
valuable notion of government injury. In alleging the loss of federal 
monies under programs like Medicare, the government was advancing a 
``government as victim'' theory. It lost that alleged status with the 
dismissal of the MCRA and MSP claims by Judge Kessler. It now is acting 
as neither a classic victim nor a classic regulator. This does not in 
itself make the government's use of civil RICO inappropriate. What 
makes the civil RICO claims disturbing is not the fact that the 
government is bringing the action, but that the government is bringing 
the action against an entire industry as opposed to a single company. 
Not only has the government sued nine corporations \32\ controlling the 
tobacco market but also two associational organizations.\33\ The 
government not only seeks to change the way that the industry operates 
but to restrict corporate speech by associational groups as well as 
corporate associational contacts\34\. To attempt such changes in the 
ambiguous role of a civil RICO litigant is, in my view, dangerously 
opportunistic.
---------------------------------------------------------------------------
    \32\ These include Philip Morris, Inc.; R.J. Reynolds Tobacco Co.; 
Brown & Williamson Tobacco Co.; Lorilland Tobacco Company; The Liggett 
Group, Inc.; American Tobacco Co.; Philip Morris Cos.; B.A.T. 
Industries p.l.c.; British American Tobacco (Investments) Ltd. See 
United States v. Philip Morris, 116 F.Supp.2d at 4 n.1.
    \33\ These two organizations are The Council for Tobacco Research--
USA, Inc. and The Tobacco Institute, Inc. Id.
    \34\ Some of the government's detailed acts supporting the 
racketeering claims against these associations include the distributing 
of a news article and the mailing of press releases to media.
---------------------------------------------------------------------------
    The clear intent behind the lawsuit is to fundamentally change an 
industry with significant collateral effects on both the market and its 
consumers. To my knowledge, the government has never attempted such a 
massive public policy change in civil litigation without a prior 
congressional decision. Without addressing the other issues below, 
basic principles of good government and comity should have militated 
heavily against such an effort. The obvious legislative character of 
the relief only reaffirms this conclusion. As noted earlier, the 
government has asked the judge to mandate industry changes that appear 
to come directly out of prior proposals that were advanced and then 
abandoned in Congress. These include barring industry use of particular 
industry association groups; restrictions and supervision of public 
relations statements and activities; funding for a national education 
campaign; compelled disclosure of internal documents and material; 
compelled public statements by the corporations; funding of cessation 
programs for smokers; and a separate national campaign to discourage 
smoking by minors.\35\
---------------------------------------------------------------------------
    \35\ United States v. Philip Morris, 116 F.Supp.2d at 147 n.24. 
There are many disturbing aspects to this ``broad equitable relief'' 
but the most disturbing is the image of a few Justice Department 
officials expressing their own preferences and interests in shaping a 
national industry. Adding a federal judge to this equation does not 
materially improve the image.
---------------------------------------------------------------------------
    In reviewing this list, Justice Department lawyers appear to follow 
Oscar Wilde's rule that the only way to be rid of temptation is to 
yield to it. It is particularly alarming to have an industry-wide 
reform package pushed through the courts that includes government 
demands that restrict speech. The court is asked to not only bar 
association with industry groups like the Tobacco Institute but to 
compel statements and public conduct by these corporations. Any such 
restrictions or manipulation on speech rights for either individuals or 
corporations raise fundamental questions that should be debated in 
Congress and not simply imposed by fiat by executive officers. While 
industry can be compelled to issue warnings or information and can be 
restricted in their marketing of products, these restrictions are not 
part of any congressionally authorized agency power.\36\ They are 
simply ad hoc restrictions to be imposed directly by the Executive 
Branch ``in equity'' with the cooperation of a federal judge.
---------------------------------------------------------------------------
    \36\ In fact, some of the items on this list would effectively 
negate the effect of the SUpreme Court's ruling in FDA v. Brown & 
Williamson Tobacco Corp, 120 S.Ct. 1291 (2000), refusing to judicially 
expand the jurisdiction of the FDA. Here, the Justice Department would 
impose many of the same conditions that would have been sought from the 
FDA under the guise of equitable relief rather than administrative 
action.
---------------------------------------------------------------------------
    The demand for disgorgement of ``gains'' from the last forty years 
only magnifies these concerns. As an institutional matter, it should be 
clear that a federal court is the least competent institution to 
perform such an undertaking. The government has refused to put a figure 
on this amount, stating that the court will have to determine the 
extent of the gains linked to the alleged fraudulent conduct of the 
industry. Thus, a judge will have to set a value on the percentage of 
tobacco products in the last forty years that are due to industry 
misconduct. A host of congressional committees could work years on such 
a daunting statistical issue with dozens of different views heard in 
expert testimony. Instead, the Justice Department wants the country to 
abide by the conclusion of Judge Kessler on her deduction of the 
statistical percentage of attributed ill-gotten gains. Moreover, 
whatever figure would result, such disgorgement will impose costs that 
could radically increase the price of tobacco for millions of citizens. 
This increase would be ordered by a politically unaccountable judge at 
the behest of largely unaccountable federal bureaucrats. The question 
for the Justice Department should not have been whether it could 
prevail but whether it should prevail in such circumstances.
    By circumventing the legislative process, the Justice Department 
opted for a course that sacrificed legitimacy for convenience. Every 
administration should be concerned that its objectives are not only 
realized but accepted by the public. The legislative process can bring 
a legitimacy and a consensus that is sorely needed in the area of 
tobacco. There are many aspects of the tobacco industry that may be 
ripe for public condemnation and legislative reform, including the 
question of the possible prohibition of tobacco as an addictive 
product. Such reforms can be given persuasive authority by collective 
decision-making in the political process. Rather than work for such a 
meaningful result, the Justice Department has sought to impose its view 
on the industry despite a still divided nation. In doing so, it has not 
only lost the legitimization of the legislative process but the value 
of that process to educate and unify the public behind a new policy 
initiative.
    Any of these issues should have prompted a declination from the 
Justice Department. However, even if these issues were not viewed as 
determinative, one would expect that the legal theories used to demand 
such relief would be settled and uncontroversial. Yet, in the tobacco 
litigation, the government sought not only to secure unprecedented 
relief but did so on the basis of highly debatable statutory 
interpretations. As noted earlier, the MCRA and MSP claims were largely 
meritless.\37\ The civil RICO claims were more plausible because of 
RICO's history of elastic interpretations. However, as indicated below, 
the government's RICO claims raise disturbing questions not only for 
this industry but for many other industries involved in debates over 
the injurious products.
---------------------------------------------------------------------------
    \37\ See, e.g., Turley, Crisis of Faith, supra, at 460-64.
---------------------------------------------------------------------------
      IV. STATUTORY ISSUES RAISED BY THE GOVERNMENT'S CIVIL RICO 
                            INTERPRETATION.
    As should be obvious, I have major reservations with the attempt to 
use the courts to secure industry-wide reforms in this area-regardless 
of the particular legal theory or statutory vehicle. Nevertheless, I do 
want to briefly raise a few aspects of the government's RICO claims 
that should warrant your attention and, in my view, your concern. Given 
the limited time to prepare this testimony, I will dispense with the 
controversial history and application of civil RICO. Suffice it to say, 
civil RICO has been the subject of considerable criticism for its 
seemingly infinite variety of uses. Requiring only a couple of 
instances of mail or wire fraud as predicate offenses \38\ to establish 
a ``pattern'' of racketeering, businesses and individuals accused of 
fraud are vulnerable to substantially enhanced penalties and stigma. 
While I believe that some of this criticism is over-stated and that 
civil RICO serves an important deterrent function, I do believe that 
some interpretations of RICO have lowered the prerequisite standards to 
a dangerous degree. There is no greater example of this problem than 
the theories advanced by the government in their tobacco lawsuit.
---------------------------------------------------------------------------
    \38\ See 18 U.S.C. Sec. Sec. 1341 (mail fraud); 1343 (wire fraud); 
1961 (5) (racketeering pattern).
---------------------------------------------------------------------------
    While there are a fair number of RICO issues that will present 
problems for its case, the government is most vulnerable on (1) the 
inference of an enterprise; (2) the evidence of a reasonable likelihood 
of future violations; and (3) the use of disgorgement in a civil RICO 
context. The first issue of the requisite showing of an ``enterprise'' 
is a matter of division among the circuits. Adopting the broadest 
possible interpretation, Judge Kessler ruled that the government did 
not need to support the elements of an ``enterprise'' and a ``pattern 
of racketeering'' with separate evidence. Rather, Judge Kessler 
followed a rule accepted in the District of Columbia and other circuits 
that the government could essentially infer an enterprise from the 
predicate offenses composing the pattern of racketeering. Quoting the 
Fifth Circuit, Judge Kessler noted that an enterprise can be ``an 
'amoeba-like infra-structure that controls a secret criminal network.'' 
\39\ This Circuit requires evidence of an enterprise that shows ``(1) a 
common purpose among the participants, (2) organization, and (3) 
continuity.'' \40\ Moreover, there is no question that other circuits 
have accepted that the enterprise requirement only demands a showing of 
``some structure . . . but there need not be much.'' \41\ However, in 
this context, the inference of an enterprise should receive a closer 
review on the appellate level. How much structure and evidence is 
needed to show an enterprise in an industry of competing companies is a 
matter of first impression. While the government is certainly correct 
that there is evidence of coordination, the implications of such a 
relaxed standard must weigh heavily in any review.
---------------------------------------------------------------------------
    \39\ United States v. Philip Morris, 116 F.Supp.2d at 152 (quoting 
United States v. Elliott, 571 F.2d 880, 898 (5th Cir. 
1978)).
    \40\ United States v. Perholtz, 842 F.2d 343, 362, (D.C. CIr 1988).
    \41\ Burdett v. Miller, 957 F.2d 1375, 1379 (7th Cir. 
1992).
---------------------------------------------------------------------------
    While the government might prevail on the first issue, the 
government is in a far more precarious position over its claim of a 
reasonable likelihood of future violations. As noted above, the 
government's role as a litigant is problematic in this litigation. Most 
litigants file under 18 U.S.C 1964(c) because of personal property loss 
attributed to the alleged racketeering. The government could not claim 
such a loss and was compelled to try a filing under 18 U.S.C. 1964 (a) 
and (b) seeking equitable relief. However, these provisions are 
designed to prevent future violations and are not to be used to impose 
punitive measures for past conduct. To fit this theory, the government 
claimed, and Judge Kessler accepted, that there was evidence of a 
reasonable likelihood of future violations based on the past conduct of 
the industry over the past forty years.\42\ The government presents 
support for this assertion that is both conclusory and rather dated. 
There is no question that this industry has historically acted in a 
reprehensible manner, a point not seriously contested by the 
defendants. Moreover, the defendants accepted that past conduct as 
relevant to this question.\43\ However, such evidence should be the 
start and not the end of the judicial review. A great deal has happaned 
in the last few years that makes the government's exclusive reliance on 
past violations rather dubious. First, the industry has changed its 
public stance and no longer contests research linking smoking with 
serious health risks. The largest companies have issued statements 
confirming the dangers of smoking and would be highly unlikely to 
reverse that position in future activities. Second, and more 
importantly, the industry has entered into the Master Settlement 
Agreement (MSA) that contains strong equitable provisions that bar the 
future misconduct that is the subject of the Justice Department's 
claims. Not only does the MSA already bind these companies but it 
augments the already high-level of scrutiny for tobacco companies in 
their future dealings. This not only diminishes the opportunity for 
such misconduct but the rational expectation that such conduct would 
succeed. Third, the industry also faces a much greater level of 
scrutiny in private lawsuits and discovery after the success of various 
lawsuits-in a sharp departure from prior efforts to hold tobacco 
companies liable for tobacco-related injuries. Judges have become much 
more critical of the industry and recent judgments are expected to draw 
additional contingency lawsuits-with an added level of monitoring. 
Deterrence is determined by levels of detection and penalty. In this 
area, both the detection and penalties for the industry have increased 
significantly in the last few years.
---------------------------------------------------------------------------
    \42\ United States v. Philip Morris, 116 F.Supp.2d at 147-150.
    \43\ Id. at 148 (``Defendants concede that `past allegations may be 
relevant to whether. . .a `reasonable likelihood exists' that such acts 
will continue into the future'') (quoting Defendants' Trial Memorandum 
at 65.).
---------------------------------------------------------------------------
    Judge Kessler's decision sweeps too broadly in accepting the 
government's claims. While this can be defended in part by the generous 
standard of review on a motion to dismiss,\44\ Judge Kessler adopts a 
view that makes it also impossible for the defendants to rebut. The MSA 
should have weighed heavily in this equation, but Judge Kessler simply 
dismisses its relevance: ``Even assuming the Court could take judicial 
notice of the MSA, that document's existence certainly does not mean 
that the Court can or should assume that the MSA will be fully enforced 
or otherwise accomplish its intended objectives.'' \45\ It is difficult 
to imagine any evidence that would be viewed as relevant under this 
view. Obviously, a company can take every effort to reorganize and to 
repent but it can never erase history. When faced with a regulated 
industry subject to a formal comprehensive settlement and intense 
scrutiny from Congress, the media, and independent legal actions, a 
court should demand more than a recitation of prior conduct over a 
forty-year span. After all, the government itself has gone from one of 
tobacco's chief marketers and supporters to one of its greatest rivals 
in the same span of time.\46\ The government's exclusive reliance on 
past acts only reinforces the view that this civil RICO action is a 
thinly veiled effort to secure punitive relief in the absence of a 
compelling criminal case.
---------------------------------------------------------------------------
    \44\ Conley v. Gibson, 355 U.S. 41, 45-46 (1957) (holding that a 
``complaint should not be dismissed for failure to state a claim unless 
it appears beyond doubt that the plaintiff can prove no set of facts in 
support of his claim which would entitle him to relief.''); see also 
United States v. Philip Morris, 116 F.Supp.2d at 136 (quoting Conley 
and other cases on standard of review).
    \45\ United States v. Philip Morris, 116 F.Supp.2d at 149.
    \46\ See generally Turley, The New Profiteers, Supra note 4, at 
A29.
---------------------------------------------------------------------------
    The third area of concern also highlights the punitive aspect of 
the government's case. As noted earlier, the government has asked for 
disgorgement of gains that extend over forty years for this industry. 
This was part of the equitable relief folded into the 18 U.S.C. 1964(a) 
and (b) claims. Disgorgement, however, is generally viewed as a 
punitive sanction \47\ and is specifically provided under criminal 
RICO. The use of disgorgement in a civil RICO action against an entire 
industry combines the ultimate punitive measure for a corporation in 
the criminal area with the lesser standard of proof in the civil area. 
Such a combination would invest the government with a disturbing level 
of coercive authority in the market. Even with civil RICO's history of 
expansion, such an interpretation would produce a grotesque 
exaggeration of the original function of civil RICO.
---------------------------------------------------------------------------
    \47\ Alexander v. United States, 50 U.S. 544, 550 (1993) (noting 
that disgorgement or forfeiture is ``not a prior restraint. . .but a 
punishment for past criminal conduct.''.
---------------------------------------------------------------------------
    In fairness to Judge Kessler, her decision on the motion to dismiss 
did not hold that she would find that gains in the industry ``are being 
used to fund or promote the illegal conduct, or constitute capital 
available for that purpose.'' \48\ Rather, Judge Kessler is simply 
holding that she will not rule out such relief. She is supported in 
this view by the Second Circuit's decision in United States v. 
Carson.\49\ However, there was a strong basis to bar such relief and 
Judge Kessler was not bound by the decision in Carson. Not only does 
such relief remove critical distinctions between criminal and civil 
actions under RICO, but it departs from the approach under the Clayton 
Act, which was the model for RICO.\50\ At least one district court in 
the District of Columbia has rejected the use of disgorgement under the 
Clayton Act.\51\ Judge Kessler clearly felt that disgorgement is a 
proper remedy in an action that is by definition future-oriented and 
non-punitive. I respectfully disagree with that view.
---------------------------------------------------------------------------
    \48\ United States v. Philip Morris, 116 F.Supp.2d at 151 (quoting 
Carson, 52 F.3d at 1182).
    \49\ Carson, 52 F.3d 1173.
    \50\ See Turley, The RICO Lottery, supra note 2, at 249-261
    \51\ FTC v. Mylan Labs., Inc., 62 F.Supp.2d 25, 40-42 (D.D.C. 
1999).
---------------------------------------------------------------------------
    Obviously, people of good faith can disagree on these 
interpretations and their implications. What I do not understand is why 
the government has elected to advance such sweeping claims in an 
already controversial suit against an entire industry. These theories 
fit an image of a purely outcome-driven lawsuit that employs any means 
and embraces any theory to achieve its goal. If the government prevails 
in all of these theories, civil RICO would be radically altered into a 
tool for industry-wide actions. This expansion of authority would be 
accompanied by an expansion of available penalties. Such an expansion 
should raise serious concerns of governmental abuse and the chilling 
effect of governmental authority. The greatest dangers lie in the 
misguided, not the malicious, use of authority. As Justice Brandies 
once warned, ``[t]he greatest dangers to liberty lurk in insidious 
encroachment by men of zeal, well-meaning but without understanding.'' 
\52\
---------------------------------------------------------------------------
    \52\ Olmstead v. United States, 277 U.S. 438, 479 (1928) (Brandeis, 
J., dissenting).
---------------------------------------------------------------------------
                             V. CONCLUSION
    Legislative circumvention has an interesting comparison to Count 
Carl von Clauswitz's view of war. In his book On War, Clauswitz stated 
that ``war is nothing but a continuation of political intercourse. . 
.by other means.'' \53\ The same can be said of some types of 
governmental litigation. For foes of the tobacco industry, the use of 
the courts can be easily justified as politics ``by other means'' to 
achieve a just result.\54\ However, in a Madisonian system, there is a 
distinct danger raised by ``political intercourse. . .by other means.'' 
While courts clearly have some social transformative role, we have 
always been weary of the countermajoritarian problem of judges deciding 
questions left unanswered by the legislative process.
---------------------------------------------------------------------------
    \53\ Carl Von Clauswitz, On War, (Anatol Rapoported ed. & Col. J.J. 
Graham, Penguin Books 1968).
    \54\ It is interesting that Clauswitz defined war as ``an act of 
violence intended to compel our opponent to fulfill our will.'' Id. at 
101. So too, governmental litigation can be used on an industry that 
does not readily yield or conform to its demands.
---------------------------------------------------------------------------
    Suffice it to say, as a parent, I would like nothing better than 
for my sons to inherit a world free of addictive products like tobacco. 
Yet, I would also like them to inherit a government fully grounded in 
the principles of representative democratic process and limited 
government. The greatest dangers lie not in the conspicuous influence 
of a given product on the health of individuals but in the insidious 
encroachment of governmental authority on the rights of individuals. It 
is far easier to quit or avoid the addiction of a voluntary product 
than it is to reduce the authority of the government once it has 
developed new avenues of expression.
    Tobacco is a product that is thankfully in decline in terms of 
consumption, but, regardless of the continuation of this trend, it is a 
product that will ebb and flow with the individual tastes of our 
citizens. However, the Framers understood that government never loses 
its taste for expansion or new forms of authority. For that reason, it 
created a tripartite system in which no branch could govern alone. The 
intention was to give each branch the self-interest to resist the 
usurpation or expansionist inclinations of the other branches. In this 
system, the most destabilizing effect is not action but inaction; when 
one branch, particularly the legislative branch, acquiesces to a 
unilateral expansion. When Congress remains silent as the Executive 
Branch circumvents the legislative process in areas like tobacco, it 
undermines the integrity of a system in which the most divisive and 
important issues are directed to Congress and not the courts.
    The process by which a government acts to achieve its objectives 
defines both that government and its people. In this sense, we have 
never been defined as a people by our problems but how we chose to 
settle them. To put it simply, means that we use matters in a 
democratic system. It is the very distinction between a democracy and 
an oligarchy or, at its greatest extreme, a tyranny. We have been 
vigilant in keeping the individual branches in check because we know 
that power itself can be addictive and, once government is allowed to 
exercise extra-constitutional power, it is a habit that is hard to 
break.
    I have tremendous respect for the members of Congress and many of 
my friends on the other side of this debate. I respectfully disagree 
with the means that they have chosen to combat this problem. As 
citizens, we have always had significant divisions over a variety of 
issues in governance but we have remained unified in our faith in the 
process. The use of novel theories in court to achieve what has been 
denied in the Congress will bring far greater long-term costs to our 
system than the short-term benefits of combating this one product. It 
often falls to elected officials like yourself and appointed officials 
like Attorney General Ashcroft to protect this system by resisting the 
temptations of circumvention. I encourage you to assert the authority 
of this institution in resolving the tobacco controversy and to resist 
the use of litigation as legislation ``by other means.''
    I would be happy to answer any questions that the Committee may 
have on this subject.

    Senator Durbin. Thank you, Professor Turley.
    Professor Blakey?

STATEMENT OF G. ROBERT BLAKEY, PROFESSOR OF LAW, NOTRE DAME LAW 
                  SCHOOL, NOTRE DAME, INDIANA

    Mr. Blakey. My name is G. Robert Blakey. I am the William 
J. and Dorothy O'Neill Professor of Law at the Notre Dame Law 
School. I want to thank the committee for asking me to come and 
testify before it. In a sense, I am coming home, as I worked 
for this committee a number of years ago, for Senator McClellan 
and Senator Bayh. So I am happy to be here. I thank you for 
asking me to come.
    I ask that my full statement, my resume, and the charts 
that I have prepared to illustrate the suit be printed in the 
record in full at this point, Mr. Chairman.
    Senator Durbin. Without objection.
    Mr. Blakey. I understand that the committee wants me to 
discuss the Federal racketeering statute in the context of the 
Government's civil suit under RICO against the tobacco 
industry. It is litigation that I recommended to the Department 
in 1999 that it undertake.
    If time permits me, I will comment on Professor Turley's 
view of Madison and Mr. Adelman's view of the chance of the 
Government's RICO suit succeeding.
    I am not just an academic. I not only drafted the Federal 
RICO statute, I drafted the Florida RICO statute. I drafted the 
complaint in Florida. I argued it in Florida. And we won. The 
tobacco industry settled. This was a Government-initiated suit 
under Florida State statute. The court held that we did have 
disgorgement powers, and it was, frankly, only after that 
decision that the case settled.
    I also redrafted the Texas suit. The Texas suit was based 
on Federal RICO. I argued the Texas suit. We faced similar 
questions. We were winning when the industry decided to settle.
    In contradistinction to Mr. Adelman, or my good friend 
Professor Turley, I have seen the evidence. I studied it in 
detail. I know what it is on liability, that is, on all the 
elements of RICO. I saw the punitive damage presentation that 
was made in Florida. I was also one of the lawyers that argued 
in court successfully to pierce the attorney-client privilege 
in the litigation because, in fact, this decades-old conspiracy 
was managed and orchestrated by the lawyers.
    I know what I am talking about. This industry produces the 
only consumer product that kills or injures when used as 
directed. I have heard enough about this being a ``legal 
product sold legally.'' In fact, it is illegal in 50 States to 
sell it to children. Period. End of the matter. When it is sold 
to children, it is not a legal product. Even libertarians--and 
on this issue I consider myself a libertarian--draw the line at 
children.
    People are suggesting somehow that this suit is 
illegitimate because the statute was originally designed for 
organized crime. In 1969 and 1970, that issue was debated on 
the Senate floor, it was debated on the House floor, and it was 
resolved after debate to approve this statute's application 
beyond organized crime. RICO applies to ``any person'' for 
those people who make that objection, I would ask the following 
question: What part of ``any'' don't you understand in ``any 
person''?
    When the tobacco industry sells nicotine to children, they 
fall within ``any person.''
    They are indistinguishable from drug dealers who sell 
cocaine to children.
    They are both illegal.
    If that argument were good, we couldn't apply the Ku Klux 
Klan Act of 1871, which was designed to prohibite ``white-
capping'' in the South by the klan, to violence by the LAPD 
officers against Rodney King. That result would be bizarre.
    The Sherman Act of 1890 was aimed at the Rockeffer oil 
trust, It is now applied legitimately, if Notre Dame were to 
sit with George Washington and figure out what to fix the 
amount to award with scholarships. That is beyond the 
``specific intent'' of Congress; it is not beyond the ``scope'' 
of the legislation.
    The Supreme Court took issue of organized crime not once, 
but twice, and rejected it each time.
    I will not go into the details of the elements of the 
claim. I have done it in my outline.
    This is a good suit.
    The evidence supports it, and the remedy is wholly 
appropriate.
    Senator Hatch, you and I have discussed RICO in hearings 
here for something like 15 years now from time to time. People 
say I have never seen a RICO suit that I didn't like. We could 
discuss one suit, the Scheidler suit, that I didn't like. But 
this is not a suit that I don't like. This is not even on the 
outer edge with a novel remedy.
    My good friend Mr. Adelman doesn't know the law. He should 
read my statement. Most of what he says is contrary to the law.
    And my good friend Mr. Turley has a wrong conception of 
Madison. Madison suggested that we have three branches of 
Government, not in order that they would, always in opposition 
one to another. He envisioned that they would also cooperate.
    Let me cite for you the example of the civil rights 
movement. Repeatedly, Congress declined to enact civil rights 
legislation. Because they couldn't get relief from Congress, 
the NAACP went to the United States Supreme Court in Brown v. 
Board of Education. They got relief. When they got relief from 
the Court, Congress then got off its duff and enacted civil 
rights legislation.
    I don't see anything illegitimate in that story. I think 
the three branches of government work in tandem.
    Sometimes the other two branches stimulate you, Mr. Hatch, 
Mr. Durbin, and sometimes Congress stimulate the executive on 
the judiciary.
    That is the cooperation in Government.
    Senator Hatch, I am with you. Reform should have been done 
with legislation. It was irresponsible that Congress didn't do 
it with legislation.
    But that is not a reason for the executive not to take an 
existing statute, apply it to conduct that falls within its 
language, and secure appropriate equity relief to stop this 
industry from pushing cigarettes on our children today.
    Thank you.
    [The prepared statement of Mr. Blakey follows:]

    Statement of G. Robert Blakey, Professor, Notre Dame Law School

    My name is G. Robert Blakey.
    I am the William J. and Dorothy O'Neill Professor of Law at the 
Notre Dame Law School.\1\
---------------------------------------------------------------------------
    \1\ Attached to this statement is my resume.
---------------------------------------------------------------------------
    I understand that the Committee wants me to discuss the federal 
racketeering statute, 18 U.S.C. Sec. 1961 et. seq. (``RICO''), in the 
context of the Government's civil suit under RICO against the tobacco 
industry in United States v. Philip Morris, Inc., 116 F. Supp. 
2d 131 (D.C. D.C. 2000) (``Philip Morris''), litigation that 
I recommended 1999 to the Department that it undertake.
    Candor requires that I acknowledge, before making this statement, 
that I represented Florida,\2\ Texas,\3\ and several other states, in 
their successful litigation against the industry;\4\ I represented 
several Taft-Harley Funds in their unsuccessful litigation against the 
industry; and, I represented the Government of the Republic of 
Guatemala in its unsuccessful suit against the industry.\5\
---------------------------------------------------------------------------
    \2\ Florida settle for $11.3 billion. John Schwartz, Cigarettes 
Makers Settle Florida Suit for $11.3 B., Wash. Post, Aug 26th, 1997, at 
A. 1.
    \3\ Texas settled for $1.45 billion. Saundra Torry & Ceci Connolly, 
Tobacco Firms Set to Pay Texas 14.5 Billion, Wash. Post, Jan. 16, 1998, 
at A1.
    \4\ See generally Stasia Mosesso, Up in Smoke: How the Proximate 
Cause Battle Extinguished the Tobacco War, 76 Notre Dame L. Rev. 257 
(2000) (``Smoke'').
    \5\ In Re/Governmental Health Care Cost Litigation, 83 F. Supp. 
2d 125 (D.C.D.C. 1999), aff'd 249 F.3d 1068 (D.C. Cir. 
2001).
---------------------------------------------------------------------------
               Basic Facts of Fraud and Disease: A Primer
    Cigarette smoking is the ``most important preventable cause 
of...premature mortality in the United States. . . .'' \6\ ``[T]obacco-
related diseases are the most common disorders found among hospitalized 
populations and disproportionally affects low-income medically indigent 
[individuals].'' \7\ Smoking related disease cost upward 50 billion 
dollars each year.\8\
---------------------------------------------------------------------------
    \6\ Medical-Care Expenditures Attributed to Cigarette Smoking-
United States 1993, Morbidity and Mortality Wk. Rep. 469 (1994).
    \7\ Raymond Gangaroua, et. al., Suits by Public Hospitals to 
Recover Expenditures for Treatment of Disease, Injury and Disability 
Caused by Tobacco and Alcohol, 22 Forham Urban L.J. 81, 87 (1994)
    \8\ Id.
---------------------------------------------------------------------------
    That this impact is brought about by a decades old illicit 
conspiracy, which was only recently unmasked, is intolerable.
    It was intolerable when I recommended this litigation to the 
Department in 1999.
    It is intolerable today.
        After a meeting in the Plaza Hotel in New York City on December 
        15, 1953, called to develop a public relations response to a 
        Sloan-Kettering Institute report that established cigarette 
        smoke condensate as a cause of cancer in mice, the tobacco 
        industry began its conspiracy to mislead, deceive, and confuse 
        smokers, physicians, health care payers, and government 
        officials about nicotine, its lethal and addictive 
        properties.\9\
---------------------------------------------------------------------------
    \9\ See generally Philip Morris, 116 F. Supp. at 135-38; Smoke at 
262-84.
---------------------------------------------------------------------------
    The industry produces the only consumer product that injures or 
kills when used as directed.
    The industry manipulates the nicotine content in cigarettes.
    Despite its own scientific studies telling it otherwise for 
decades, the industry misrepresented, concealed, and suppressed 
information about the health consequences of smoking and the addictive 
character of nicotine.
    During this period of time, the industry engaged in deceptive 
practices relating to ``light'' cigarettes, and it illicitly restrained 
the market in less dangerous cigarettes.
    Even though it is illegal to sell cigarettes to children in fifty 
states, the industry targets children to replace smokers who die.\10\ 
The model who portrayed the ``Marlboro Man'' testified before Congress: 
``I was clearly told that young people were the market that we were 
going after.''
---------------------------------------------------------------------------
    \10\ Jennifer McCullough, Note, Lighting up the Battle Against the 
Tobacco Industry Prohibiting Cigarettes Sales to Minors, 28 Rutgers 
L.J. 709, 727 n. 114 (1997) (collecting state statutes and other data 
on child smoking). Even libertarians, draw the line at children. John 
Stuart Mill, on Liberty 10 (1859).
---------------------------------------------------------------------------
    Almost 3,000 children begin smoking each day, about 1 million a 
year. One out of three of these children will die of smoking related 
diseases.
    More than 400,000 people die each year from smoking related 
diseases, more than auto accidents, AIDS, alcohol use, illicit drugs, 
homicides, suicides, and fires combined.\11\ Smoking related causes 
account for one out of five deaths each year. Second-hand smoke kills 
another 53,000 people. Approximately 85% of lung cancer is smoking 
related; it surpasses breast cancer for a cause of death among women; 
and it accounts for 30% of cancer deaths.
---------------------------------------------------------------------------
    \11\ See Mortality Trends for Selected Smoking-Related Cancers and 
Breast Cancer United States, 1950-1990, 42 Morbidity and Morality Wkly. 
Rep. 857 (1993).
---------------------------------------------------------------------------
    Repeatedly, company executives lied to Congress and the Executive 
Branch about tobacco. James W. Johnston, the chief executive officer of 
R.J.R Tobacco., for example, told Congress that ``smoking is no more 
addictive than coffee, tea or Twinkies.'' \12\
---------------------------------------------------------------------------
    \12\ Castano v. American Tobacco Co., 870 F. Suppl 1425, 1433 
(E.D.La. 1994) (reporting the testimony of chief executive officers of 
major tobacco companies that nicotine is not addictive and a Philip 
Morris add following the testimony: ``Philip Morris does not believe 
cigarette smoking is addictive.'').
---------------------------------------------------------------------------
    The cigarette industry is the most profitable in the United States; 
its profit margins run as high as 30%.
    Internal reports in Philip Morris describe the delivery system of 
nicotine:
    The cigarette should be conceived not as a product but a package. 
The product is nicotine. . . .Think of the cigarette pack as a storage 
container for a day's supply of nicotine. . . .Think of the cigarette 
as a dispenser of a dose unit of nicotine.
    Approximately 82% of daily smokers in the United States began 
before the age of 18; 62% before 16, 38% before the age of 14. 
Approximately 46 million adults in the United States are current 
cigarette smokers.\13\ A person who does not begin smoking in childhood 
or adolescence is unlikely ever to begin. Approximately, 66% of 
teenagers who smoke say they want to quit; 51% who try and make a 
serious effort fail. Children and adolescents buy the most heavily 
advertised cigarettes. Adults tend to buy more generic or value-based 
cigarettes.
---------------------------------------------------------------------------
    \13\ Cigarette Smoking Among Adults--United States, 1993, 43 
Morbidity and Mortality Wkly. Rep. 925 (1994).
---------------------------------------------------------------------------
    The tobacco company's illicit conspiracy was designed, supervised 
and implemented by lawyers working in concert for the tobacco 
companies.\14\
---------------------------------------------------------------------------
    \14\ American Tobacco Co. v. Florida, 697 So. 2d 1249, 
1257 (4th Dist. Fla 1997) (crime fraud exception to lawyer-client 
privilege established) (``[T]he defendants utilized their attorneys in 
carrying out their misrepresentations and concealment to keep secret 
research and other conduct related to the true health dangers of 
smoking.'').
---------------------------------------------------------------------------
    Tobacco may be a legal drug when it is sold to adults, but it is 
illegal, addictive, and lethal when it is pushed on children.
    that this conduct continues is intolerable in a free 
society.
                           RICO: Introduction
    In 1970, Congress enacted the Organized Crime Control Act, Title IX 
of which is known as ``RICO.'' \15\ Title IX was drafted to deal with 
enterprise criminality, that is, ``patterns'' of violence, the 
provision of illegal goods and services, corruption in the labor or 
management relations, corruption in government, and criminal fraud by, 
through, or against various types of licit or illicit enterprises. 
Because Congress found that the sanctions and remedies available were 
unnecessarily limited in scope and impact, it enacted RICO to provide 
enhanced criminal and civil sanctions, including fines, imprisonment, 
forfeiture, injunctions, and treble damage relief for persons injured 
in their business or property by reason of a violation of the statute.
---------------------------------------------------------------------------
    \15\ Pub. L. No. 91-452, 84 Stat. 922 (1970) (codified as amended 
at 18 U.S.C. Sec. Sec. 1961-68 (1988 & Supp. I 1989). Commentary on 
RICO is extensive. See generally G. Robert Blackey, of Characterization 
and Other Matters: Thoughts About Multiple Damages, 60 Law and 
Contemporary Problems 97 (1997); G. Robert Blakey & Kevin P. Roddy, 
Reflections on Reves v. Ernst & Young: Its Meaning and Impact on 
Substantive, Accessory Aiding and Abetting, and Conspiracy Liability 
Under RICO, 33 Am Crim. L. Rev. 1345 (1997) (``Reflections''); G. 
Robert Blakey & Thomas A. Perry, An Analysis of the Myths that Bolster 
Efforts to Rewrite RICO and the Various Proposals for Reform, 43 Vand. 
L. Rev. 851 (1990) (``Myths''); G. Robert Blakey, The RICO Civil Fraud 
Action in Context: Reflections on Bennett v. Berg, 58 Notre Dame L. 
Rev. 237 (1982) (``Civili Fraud Action'') G. Robert Blakey & Scott D. 
Cessar, Equitqable Relief Under Civil RICO, 62Notre Dame L. Rev. 526 
(1987) (``Equitable Relief'') G. Robert Blakey & Brain Gettings, 
Racketeer Influenced and Corrupt Organizations (RICO): Basic Conepts--
Criminal and Civil Remedies, 53 Temp. L.Q. 1009 (1980) (``Basic 
Concepts''); Gerard E. Lynch, RICO: The crime of Being a Criminal 
(pts.1-4), 87 Colum. L. Rev. 661, 920 (1987); Michael Goldsmith, RICO 
and Enterprise Criminality: A Response to Gerard E. Lynch, 88 Colum. L. 
Rev. 774 (1988); Gerard E. Lynch, A Reply to Michael Goldsmith, 88 
Colum, L. Rev, 892 (1988). Some of the best student pieces on RICO are 
collected in Reflections at 1348 n.3. See also U.S. Department of 
Justice, Racketeer Influenced and Corrupt Organizations (RICO): A 
Manual for Federal Prosecutors (1990). RICO type legislation has been 
enacted by the states, twenty nine of which now have it. Myths at 988 
(Chart comparing federal and state legislation).
---------------------------------------------------------------------------
    The legislative history of RICO clearly demonstrates that ``it was 
intended to provide new weapons of unprecedented scope for an assault 
upon organized crime and its economic roots.'' Russello v. United 
States, 464 U.S. 16, 26 (1983). The major purpose of RICO was to 
address the ``infiltration of legitimate business by organized crime,'' 
but the statute was designed to reach both ``illegitimate'' and 
``legitimate'' enterprises. United States v. Turkette, 452 U.S. 576, 
590-91 (1981). As the Supreme Court observes, the idea that RICO is 
limited to ``organized crime''--however defined--``finds no support in 
the Act's text, and is at odds with the tenor of its legislative 
history.'' \16\ H.J. Inc. v. Northwestern Bell Telephone Co. 492 U.S. 
229, 244 (1988). Accordingly, RICO fits well into a pattern of 
legislation enacted by Congress over the years as general reform, aimed 
at a specific target, but not limited to the specific target.
---------------------------------------------------------------------------
    \16\ To be sure ``a'' purpose of RICO was to combat ``organized 
crime,'' but that specific purpose was not its ``only'' purpose. 
``[A]lthough the legislative history of RICO vividly demonstrates that 
it was primarily enacted to combat organized crime, nothing in that 
history, or in the language of the statute itself, expressly limits 
RICO's use to members of organized crime.'' Owl Construction CO., Inc. 
v. Ronald Adams Contractors, Inc., 727 F.2d 540, 542 (5th 
Cir. 1981)). ``[C]ommentators have persuasively and exhaustively 
explained why the stature. . .[does] not require [such a showing].'' 
Id. (Citing Civil Fraud Action, 58 Notre Dame L. Rev. at 284-85). 
Accord Sedima S.P.R.L. v. Imrex Co. Inv., 472 U.S. 479, 499 (1984) (not 
just ``mobsters and organized criminals'') (``Congress wanted to reach 
both `legitimated' and `illegitimate' enterprises. . . .The former 
enjoy neither an inherent incapacity for criminal activity nor immunity 
from its consequences.'')
---------------------------------------------------------------------------
                        I. Liberal Construction
    Congress directed that RICO be liberally construed to effectuate 
its remedial purposes. If RICO's language is plain, it controls. NOW v. 
Scheidler, 510 U.S. 249, 261-62 (1994); Turkette, 452 U.S. at 587 n.10; 
Russello 464 U.S. at 29; Shearson/American Express, Inc. v. McMahon, 
482 U.S. 220, 239 (1987); United States v. Monsanto, 491 U.S. 600, 606 
(1989); H.J. Inc., 492 U.S. at 249. If its language, syntax, or context 
is ambiguous, the construction that would effectuate its remedial 
purposes by providing ``enhanced sanctions and new remedies'' is to be 
adopted. Turkette, 452 U.S. at 587-88, 593; Russello, 464 U.S. at 27; 
Sedima, 473 U.S. at 497-98; Monsanto, 491 U.S. at 609; Tafflin v. 
Levitt, 493 U.S. 455, 465 (1990). Its language is to be read in the 
same fashion, whatever the character of the suit. Sedima, 473 U.S. at 
489; Shearson, 482 U.S. at 239 (``a `pattern' for civil purposes is a 
`pattern' for criminal purposes'') (quoting Page v. Moseley, Hallgarten 
Estabrook & Weeden, Inc., 806 F.2d 291, 299 n.13 (1st Cir. 
1986)); H.J. Inc., 492 U.S. at 236 (pattern) (``appl[ies] to criminal 
as well as civil applications of the Act'').
                       II. Interpretation of RICO
    Four basic assumptions are integral to any principled effort to 
interpret a statute:

        (1) legislative supremacy within the constitutional framework;
        (2) the use of the statutory vehicle to exercise that 
        supremacy;
        (3) reliance on accepted means of communication; and
        (4) reasonable availability of the statutory vehicle to those 
        to be governed by it, not only its text, but any other part of 
        its legislative context that serves to give it meaning.

    See Reed Dickerson, The Interpretation and Application of Statutes 
7-12 (1975); United States v. Whitridge, 197 U.S. 135, 143 (1905) 
(Holmes, J.) (``[T]he general purpose is a more important aid to the 
meaning than any rule which grammar or formal logic may lay down.'').
    The Supreme Court's principal RICO decisions include: Turkette; 
Russello; Sedima; Agency Holding Corp. v. Malley-Duff & Assocs., Inc., 
483 U.S. 143 (1987); Shearson; Caplin & Drysdale v. United States, 491 
U.S. 617 (1989); Monsanto; Tafflin; Holmes v. Securities Investor 
Protection Corp., 491 U.S. 617 (1989); Reves v. Ernst & Young, 503 U.S. 
258 (1992); NOW; Klehr v. A.O. Smith Corp., 507 U.S. 170 (1993); 
SalinaT1 v. United States, 525 U.S. 299 (1999); Humana, Inc. v. 
Forsyth, 528 U.S. 494 (2000); Beck v. Prupis, 528 U.S. 549 (2000); 
Rotella v. Wood, 529 U.S. 494 (2001); and Cedric Kushner Promotions, 
Ltd. v. King 121 S. Ct. 2087 (2001). In these decisions, the Court 
acknowledges several general propositions of statutory construction and 
establishes the basic principles that govern the reading of RICO. The 
Court consistently applies these principles to the statute:

        (1) read the language of the statute (Turkette, 452 U.S. at 
        580, 593; Russello, 464 U.S. 16, 20 (1983) (citing Turkette); 
        Sedima, 473 U.S. at 495 n.13; Shearson/American Express, 482 
        U.S. at 227; Monsanto, 491 U.S. at 606 (citing Turkette); H.J. 
        Inc., 492 U.S. at 237 (citing Russello)); Holmes, 503 U.S. at 
        265-66; Reves, 507 U.S. at 177 (citing Turkette and Russello)), 
        Beck, 120 S. Ct. at 1613; Cedrick Kushner Promotions, Ltd., 121 
        S. Ct. 2090);
        (2) language includes its structure (Turkette, 452 U.S. at 581, 
        587; Russello, 464 U.S. at 22-23; Sedima, 473 U.S. at 490 n.8, 
        496 n.14; Agency Holding Corp., 483 U.S. at 152);
        (3) language should be read in its ordinary or plain meaning, 
        but must be viewed in context (Turkette, 452 U.S. at 580, 583 
        n.5, 587; Russello, 464 U.S. at 20 (citing Turkette), 21-23, 
        25; Sedima, 473 U.S. at 495 n.13; H.J. Inc., 492 U.S. at 238 
        (citing Richards v. United States, 369 U.S. 1, 9 (1962); Reves, 
        507 U.S. at 178); Cedric Kushner Promotions, Ltd., 121 S. Ct. 
        at 2090), and common law words must be given common law 
        meanings (Salinas, 522 U.S. at 60 (criminal conspiracy) Beck, 
        120 S. Ct. at 1615) (civil conspiracy);
        (4) similar language should be given a similar construction 
        (Sedima, 473 U.S. at 489; Reves, 507 U.S. at 177);
        (5) language should not be read differently in criminal and 
        civil proceedings (Sedima, 473 U.S. at 489, 492; Shearson, 482 
        U.S. at 239-40); H.J. Inc., 492 U.S. at 236); but see Klehr v. 
        A.O. Smith Corp., 521 U.S. 179, 188 (1997) (different 
        considerations apply to civil and criminal statutes of 
        limitations); Beck, 120 S. Ct. 1614 n.6 (application of 
        conspiracy implicates both criminal (``violation'') and civil 
        (``conspiracy'') principles);
        (6) look to the legislative history of the statute (Turkette, 
        452 U.S. at 586, 589; Sedima, 473 U.S. at 486, 489; Shearson, 
        482 U.S. at 238-41; Agency Holding Corp., 483 U.S. at 151; 
        Monsanto, 491 U.S. at 613; H.J. Inc., 492 U.S. at 236-39 
        (citing Sedima); Tafflin, 493 U.S. at 461; Holmes, 503 U.S. at 
        267; Reves, 507 U.S. at 179; Cedric Kushner Promotions, Ltd., 
        121 S. Ct. at 2092);
        (7) if the statute is unambiguous, legislative history must be 
        clear to warrant a different construction (NOW, 510 U.S. at 261 
        (citing Reves and Turkette));
        (8) look to the policy of the statute (Turkette, 452 U.S. at 
        590; Russello, 464 U.S. at 24; Sedima, 473 U.S. at 493; 
        Tafflin, 493 U.S. at 467; Cedric Kushner Promotions, Ltd., 121 
        S. Ct. at 2092);
        (9) the statute was aimed at the infiltration of legitimate 
        business by organized crime (Turkette, 452 U.S. at 591; 
        Russello, 464 U.S. at 26, 28 (citing Turkette); Caplin & 
        Drysdale, 491 U.S. at 630; H.J. Inc., 492 U.S. at 245 (citing 
        Russello and Turkette); Cedric Kushner Promotions, Ltd., 121 S. 
        Ct. at 2092);
        (10) the statute was not limited to the infiltration of 
        legitimate business by organized crime (Turkette, 452 U.S. at 
        590-91; Russello, 464 U.S. at 28; Sedima, 473 U.S. at 495, 499; 
        H.J. Inc., 492 U.S. at 242-49 (citing Sedima); NOW, 510 U.S. at 
        260 (citing H.J. Inc.));
        (11) the statute is to be broadly read and liberally construed 
        (Turkette, 452 U.S. at 587, 593; Russello, 464 U.S. at 21; 
        Sedima, 473 U.S. at 491 n.10, 497-98; Monsanto, 491 U.S. at 609 
        (citing Sedima); H.J. Inc., 492 U.S. at 237; Tafflin, 493 U.S. 
        at 467 (citing Sedima)); Holmes, 503 U.S. at 274);
        (12) liberal construction, while it seeks to ensure that an 
        overly narrow construction is avoided, is not an invitation to 
        apply RICO beyond the purposes that Congress intended (Reves, 
        507 U.S. at 183-84);
        (13) where Congress rejects proposed limiting language in a 
        bill, it may be presumed that the omission was intended 
        (Russello, 464 U.S. at 23-24; Sedima, 473 U.S. at 498);
        (14) where Congress includes or omits limiting language in a 
        bill, it is presumed that it did so intentionally (Turkette, 
        452 U.S. at 581; Russello, 464 U.S. at 23-24); and
        (15) RICO was modeled on the antitrust statutes, but it is not 
        necessarily limited by antitrust doctrine (Sedima, 473 U.S. at 
        498; Shearson, 482 U.S. at 241; Agency Holding Corp., 483 U.S. 
        at 150-51; Holmes, 503 U.S. at 269 n.15; Rottela, 120 S. Ct. 
        1082-83).
                           III. No Preemption
    When Congress enacted RICO, an issue arose whether it should 
preempt other federal or state statutes or remedies when it entered 
RICO's ``new domain.'' Turkette, 452 U.S. at 586. The question, 
however, was quickly resolved; Congress decided to save provisions of 
``federal, state, or other law imposing scriminal penalties or 
affording civil remedies in addition to those provided for'' in RICO. 
892 Stat. 947 (1970); Haroco, Inc. v. American Nat'l Bank & Trust Co. 
of Chicago, 747 F.2d 384, 392 (7th Cir. 1984), aff'd, 473 
U.S. 606 (1985) (``Congress enacted RICO in order to supplement, not 
supplant, the available remedies since it thought those remedies 
offered too little protection for the victims.''). Such overlap between 
statutes ``is neither unusual nor unfortunate.'' SEC v. National 
Secur., Inc., 393 U.S. 453, 468 (1969). The existence of cumulative 
remedies furthers remedial purposes. Herman & MacLean v. Huddleston, 
459 U.S. 375, 386 (1983).
                             IV. Standards
    RICO sets forth standards of ``unlawful'' conduct, which are 
enforced through criminal and civil sanctions. Section 1963 of Title 18 
sets out the criminal remedies, while Section 1964 of Title 18 sets out 
the civil remedies. Since Section 1962 states what is ``unlawful,'' not 
``criminal,'' RICO is not primarily a criminal statute; indeed, the 
civil scope of RICO is broader than its criminal scope. As such, RICO 
is not primarily criminal and punitive, but rather primarily civil and 
remedial. See Sedima, 473 U.S. 497-98 (``read broadly'' to ``effectuate 
its remedial purpose''); Turkette, 452 U.S. at 593 (RICO is ``both 
preventive and remedial''); United States v. Corrado, 227 F.3d 543, 
552-52 (6th Cir. 2000) (broadly interpreted to effectuate 
its remedial purpose) (citing Russello v. United States, 464 U.S. 16, 
26-27 (1983)). Based on a showing of the preponderance of the evidence, 
RICO's civil remedies are available to the Government or other parties. 
United States v. Cappetto, 502 F.2d 1351, 1357 (7th Cir. 
1974), cert. denied, 420 U.S. 925 (1975) (Government suit); Liquid Air 
Corp. v. Rogers, 834 F.2d 1297, 1303 (7th Cir. (1987) 
(private suit)), cert. denied, 492 U.S. 917 (1989). See generally Civil 
Fraud Action at 258 n.59 (legislative history, analogies, and economic 
analysis).
                 V. The Criminal Enforcement Mechanism
    The criminal enforcement mechanism of RICO provides for 
imprisonment, fines and criminal forfeiture. RICO authorizes 
imprisonment of up to twenty years, or life, where the predicate 
offense authorizes life. See 18 U.S.C. Sec. 1963(a) (1988); U.S.C. 
Sec. 2E1.1.
                  VI. The Civil Enforcement Mechanism
    The civil enforcement mechanism of RICO provides for injunctions, 
treble damages, and counsel fees, 18 U.S.C. Sec. 1964.
    RICO authorizes United States Courts ``to prevent and restrain'' 
violations of the statute. 18 U.S.C. Sec. 1964(a). The phrase is a 
``common law couplet'' that carries with it the meaning all forms of 
equitable relief. deBeers Consoliates Mines Ltd. v. United 
States, 325 U.S. 212, 218 (1945); Ernest Weekly, Cruelty To Words 43 
(1931) (Anglo Saxon peasants could not understand French after conquest 
in 1066, so law was expressed in pairs of words, one Anglo-Saxon and 
one French). Neither inadequacy of the remedy at law nor irreparable 
injury need be shown. United States v. Cappetto, 502 F.2d 1351, 1358-59 
(7th Cir. 1974), cert. denied, 420 U.S. 925 (1975).
    18 U.S.C. Sec. 1964(b) expressly authorizes the Government to seek 
equity relief under RICO. Significantly, equitable disgorgement of 
profits obtained from a RICO violation is a well-established RICO 
remedy. See, e.g., United States v. Private Sanitation Indus. Ass'n of 
Nassau/Suffolk, 44 F.3d 1082, 1084 (2nd Cir. 1995). It is 
also well-recognized in other areas of federal law. See, e.g., SEC v. 
First Jersey Sec. Inc., 101 F.3d 1450, 1474-77 (2nd Cir. 
1996) (securities fraud) (``The primary purpose of the disgorgement as 
a remedy. . .is to deprive violators of their ill-gotten gains. . 
.thereby effecting. . .deterrence. . .''), cert. denied, 118 S. Ct. 57 
(1997); Commodity Futures Trading comm v. British Am. Commodity Options 
Corp., 788 F.2d 92, 94 (2nd Cir.) (commodities fraud) (``to 
depriv[e] the wrongdoer of his ill-gotten gains and deter [. . .] 
violations of law''), cert. denied, 479 U.S. 853 (1986). Beyond 
equitable disgorgement, far-reaching other forms of equity relief may 
also be granted to reform and restructure corrupted entities. 18 U.S.C. 
Sec. 1964(a).
    Today, the Government is employing these powers almost exclusively 
in the effort to weed out mob influence in unions. See, e.g., United 
States v. Local 560 IBT, 780 F.2d 267 (3rd Cir.), cert. denied, 476 
U.S. 1140 (1986); Oversight on Civil RICO Suits, Hearing Before the 
Senate Committee on the Judiciary, 99th Cong., 
1st Sess., 109-11 (1986) (testimony of Assistant Attorney 
General Stephen Trot).
    RICO's use, however, need not be so limited. The legislative 
history of RICO, Sec. 1964 in particular, indicates that the ``only 
limit on remedies is that they accomplish the aim set out of removing 
the corrupting influence and making due provision for the rights of 
innocent parties.'' S. Rep. No. 91-617, 91st Cong., 
1st Sess. 160 (1969). In fact, the Senate Report includes an 
extensive and approving discussion of such federal antitrust decisions 
as those authorizing divestment, United States v. duPont & 
Co., 366 U.S. 316, 326-27 (1961), and the prohibition of engaging in 
the future in certain fields of work, United States v. Grinnell Corp., 
384 U.S. 563, 579 (1966). Id. at 79-83.
    Private suits under 18 U.S.C. Sec. 1964(c) ``provide a significant 
supplement to the limited resources available to the Department of 
Justice'' to enforce the law.\17\ Like the antitrust laws, RICO creates 
``a private enforcement mechanism that (1) deters violators, (2) 
deprives them of their illicit proceeds, and (3) provides ample 
compensation to the victims. Blue Shield of Va. v. McCready, 457 U.S. 
465, 472 (1982).\18\ In fact, RICO and the antitrust statutes are well-
integrated.\19\ Together, they legally promise a market that is 
economically free and characterized by integrity and the absence of 
patterns of violence.
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    \17\ Ritter, 442 U.S. at 344. In fact, between 1960 and 1980, of 
the 22,585 civil and criminal cases brought under the antitrust 
provision by the government or private parties, 84% were instituted by 
private plaintiffs. See United States Dep't of Justice, U.S. Department 
of Justice Source Book of Criminal Justice Statistics 431 (1981). 
Professor (now Chief Judge Seventh Circuit Court of Appeals) Richard 
Posner also argues on economic grounds forcefully for private 
enforcement of more than actual damages awards against al forms of 
deliberate antisocial conduct, particularly where the factor of of 
concealment is present. See Richard A. Posner, Economic Analysis of Law 
462 (private enforcement), 143, 272 (more than actual damage awards for 
deliberate conduct) 235 (concealment) (2d ed. 1977). The 
number of criminal to civil RICO suits is now running at roughly the 
same ratio. See Myths at 1020 (150 against 1000). Since 1989, the date 
of the Supreme Court's H.J. Inc. ``pattern'' decision, the number of 
civil RICO decisions filed has steadily declined. From 1980-1996, the 
number of civil cases filed in federal courts increased from 168,800 to 
272,700 per year. Statistical Abstract of the United States 1997 at 216 
(Table No. 346). The total number of civil RICO cases filled, however, 
decreased from 903 each year to 840 from 1993 to 1997. 
Judicial Business of the United States Courts 1997 Table C-2A.
    \18\ See also Agency Holding Corp., 483 U.S. at 151 (``private 
attorneys general [for] a serious national problem for which public 
prosecutorial resources are deemed inadequate''); Shearson/American 
Express, Inc. v. McMahon, 482 U.S. at 421 (``vigorous incentives for 
plaintiffs to pursue RICO claims''); Sedima, 473 U.S. at 493 (``private 
attorney general provisions. . .designed to fill prosecutorial gaps'') 
(citing Reiter, 442 U.S. at 344)).
    \19\ ``There are three possible kinds of force which a firm can 
resort to: violence (or threat of it), deception, or market power.'' 
Carl Kaysen & Donald F. Turner, Antitrust Policy 17 (1959). RICO 
focuses on the first two; antitrust focuses on the third. See also 
American Column & Lumber Co. v. United States, 257 U.S. 377, 414 (1921) 
(Brandeis, J., dissenting) (``Restraint may be exerted through force or 
fraud or agreement.'') See generally Judith A. Morse Nore, Treble 
Damages Under RICO: Characterization and Computation, 61 Notre Dame L. 
Rev. 526, 533-34 (1986) (``(1) encourgage private citizens to bring 
RICO actions, (2) deter future violators, and (3) compensate victims 
for all accumulative harm. These multiple and convergent purposes make 
the treble damage provision a powerful mechanism in the effort to 
vindicate the interests of those victimized by crime.'').
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                        VII. Summary Of Elements
    The Second Circuit aptly summarized the substantive elements under 
18 U.S.C. Sec. 1962 of RICO:

        (1) that the defendant (2) through the commission of two or 
        more acts (3) constituting a ``pattern'' (4) of ``racketeering 
        activity'' (5) directly or indirectly invests in, or maintains 
        an interest in, or participates in (6) an ``enterprise'' (7) 
        the activities of which affect interstate or foreign commerce.

    Moss v. Morgan Stanley, Inc., 719 F.2d 5,17 (2d Cir. 
1983), cert. denied, 465 U.S. 1025 (1984). See also St Paul Mercury 
Ins. Co. v. Williamson, 244 F.3d 524, 445 (5th Cir. 
2000)(plain English restatement of RICO's elements).
                             VIII. Persons
    ``Persons'' may violate the provisions of Sec. 1962 and sue under 
Sec. 1964 (c). The term is defined to include individuals and entities 
capable of holding a legal or beneficial interest in property. 18 
U.S.C. Sec. 1961(3). Despite this all-inclusive language, the circuits 
exclude federal and local governmental agencies from those who may be 
sued, and the federal, but not foreign, state and local governments 
from those who may sue for damage relief. See, e.g., Berger v. Pierce, 
933 F.2d 393, 397 (6th Cir. 1991) (Federal Insurance 
Administration not ``person'') (``[I]t is self-evident that a federal 
agency is not subject to state or federal criminal law.''); Lancaster 
Community Hosp. v. Antelope Valley Hosp. Dist., 940 F.2d 397, 404-05 
(9th Cir. 1991) (municipal entity incapable of criminal 
intent; ``market share'' not property within mail fraud), cert. denied, 
502 U.S. 1094 (1992); Genty v. Resolution Trust Corp., 937 F.2d 899, 
908-14 (3d Cir. 1991) (municipality not liable for 
racketeering activity of its officers or a agents); United States v. 
Bonnano Organized Crime Family, 879 F.2d 20, 21-27 (2d Cir. 
1989) (federal government not ``person''), but see 18 U.S.C. 
Sec. 1964(b) (attorney general may sue under ``section''); Republic of 
Philippines v. Marcos, 862 F.2d 1355, 1358 (9th Cir. 1988) 
(en banc) (foreign government is a ``person''), cert. denied, 490 U.S. 
1035 (1989); Illinois Dep't of Revenue v. Phillips, 771 F.2d 312, 314-
17 (7th Cir. 1985) (state); cf. County of Oakland v. City of 
Detroit, 866 F.2d 839, 845 (6th Cir. 1989) (county), cert. 
denied, 497 U.S. 1003 (1990). Fleischhauer v. Feltner, 879 F.2d 1290, 
1299 (6th Cir. 1989), cert. denied, 493 U.S. 1074 (1990).
                  IX. Interstate and Foreign Commerce
    Each section of Sec. 1962 requires either interstate or foreign 
commerce or an effect on it. United States v. Robertson, 514 U.S. 669, 
671-72 (1995). Local enterprises affect commerce if the pattern of 
racketeering activity affects commerce. See e.g., Bunker Ramo Corp. v. 
United Bus. Forms, Inc., 713 F.2d 1272, 1288-89 (7th Cir. 
1983). ``[E]ven a minimal effect on interstate commerce'' is 
sufficient. United States v. Bagnariol, 665 F.2d 1877, 892 
(9th Cir. 1981) (purchase of natural gas from out of 
supplier), cert. denied, 456 U.S. 962 (1982).
                     X. Elements Of Section 1962(a)
    The standards of 18 U.S.C. Sec. 1962(a) embody four essential 
elements: (1)income derived from a ``pattern'' of racketeering or the 
collection of an unlawful debt (2) the use or investment'' of the 
income in the acquisition, establishment, or operation by a defendant 
(3) of an ``enterprise'' (4) engaged or affecting interstate commerce. 
Pelletier v. Zweifel, 921 F.2d 1465, 1489-90, 1518-19 (11th 
Cir. 1991), cert. denied, 502 U.S. 855 (1991).
    The investment of the illicit funds may be direct or indirect. 
Compare A.W. Hemmings v. Barian, 822 F.2d 688, 692 (7th Cir. 
1987) (direct) with United States v. McNary, 620 F.2d 621, 628 
(7th Cir. 1980) (indirect). The circuits are split on 
requiring an ``investment or use'' injury in civil suits under 
Sec. 1962(a). See Court Watch: A Circuit-by-Circuit Analysis of the 
Statute's Most Litigated Issues, Civil RICO Report (Special Report June 
15, 2001) (``Court Watch''). Other courts also require ``acquisition'' 
injury under Sec. 1962(b). Advocacy Org. for Patients & Providers v. 
Auto Club Ins. Ass'n, 176 F.3d 315, 329-31 (6th Cir. 1999), 
cert. denied, 528 U.S. 871 (1999); discon, Inc. v. Nynex 
Corp., 93 F.3d 1055, 1062-63 (2d Cir. 1996) (cases collected 
on Sec. 1962(a) and Sec. 1962(b)), vacated, 525 U.S. 128 (1998). While 
the collection of an unlawful debt need not be part of a pattern, it 
must be in connection with a business; an isolated transaction is not 
within the statute. See Wright v. Sheppard, 919 F.2d 665, 673 
(11th Cir. 1990).
             XII. Excursus: ``Pattern'' And ``Enterprise''
    The two basic elements of RICO that give litigants the most trouble 
are ``pattern'' and ``enterprise.'' Each is unique. The Supreme Court 
clarified the ``pattern'' element in H.J. Inc., in which the Court 
developed a fairly precise six-step process that can be used for 
determining if a ``pattern'' is present within the meaning of RICO. Two 
goals must be realized: relationship and continuity (or its threat). 18 
U.S.C. Sec. 1961(5); H.J., Inc., 492 U.S. at 237 (``pattern'' reflects 
relation and continuity); Western Assocs. Ltd. Partnership v. Market 
Square Assoc., 235 F.3d 629, 633-36 (D.C. Cir. 2001) (pattern includes 
relation and continuity; single scheme to achieve single real estate 
objective not pattern) (citing H.J. Inc., 492 U.S. at 239)); Ahmed v. 
Rosenblatt, 118 F. 3d 886, 889 (1st Cir. 1997) 
(purposes, participants and methods plus continued activity or its 
threat). Justice Scalia's call in dissent in H.J., Inc. for a 
reexamination of the constitutionality of RICO's ``pattern'' concept 
resulted in the statute being uniformly upheld in the circuits. Compare 
H.J., Inc., 492 U.S. at 239 with Court Watch; G. Robert Blakey, Is 
'Pattern' Void for Vagueness?, Civil RICO Report at 6 (December 12, 
1989) (arguing no).
    To see if these two goals are met up to six questions must be 
asked:

        (1) Are the acts in a series (at least two) related to one 
        another, for example, are they part of a single scheme?
        (2) If not, are they related to an external organizing 
        principle, for example, to the affairs of the enterprise? H.J., 
        Inc., 492 U.S. at 238; United States v. Elliot, 571 F.2d 880, 
        899 (5th Cir. 1978), cert. denied, 439 U.S. 953 
        (1978), and United States v. Sinito, 723 F.2d 1250, 1261 
        (6th Cir. 1983), cert. denied, 469 U.S. 817 (1984). 
        See generally, John Robert Blakey, Could Prosecutors Convict 
        John Gotti in the Fifth Circuit? A Criticism of Heller v. 
        Grammco's Approach to the Relatedness Requirement, Civil RICO 
        Report at 6 (April 17, 1996) (criticizing the restrictive 
        approach of Heller Fin. Inc. v. Grammco Computer Sales, 71 F.3d 
        518 (5th Cir. 1996), and Vild v. Visconsi, 956 F.2d 560 
        (6th Cir. 1992), cert. denied, 506 U.S. 832 (1992)).

    If both questions are answered in the negative, relationship is not 
present, one prong of the two-prong test is not met, and it is not 
necessary to proceed further. If either question is answered in the 
affirmative, up to three additional questions must be asked:

        (3) Are the acts in the series open-ended, that is, do the acts 
        have no obvious termination point? 492 U.S. at 241-43;
        (4) If not, did the acts in the closed-ended series go on for a 
        substantial period of time, that is, more than a few weeks or 
        months? Id. at 242.

    If either question is answered in the affirmative, continuity is 
present.
    If both questions are answered in the negative, up to two 
additional questions must be asked:
    (5) May a threat of continuity be inferred from the character of 
the illegal enterprise? Id. at 242-43.
    (6) If not, may a threat of continuity be inferred because the acts 
represent the regular way of doing business of a lawful enterprise? Id.
    If either question is answered in the affirmative, a threat of 
continuity is present. See generally Court Watch.
    As a rule of thumb, a closed-end scheme that does not extend beyond 
twelve months lacks continuity. Religious Tech. Ctr. v. Wollersheim, 
971 F.2d 364, 367 (9th Cir. 1992); Hughes v. Consol-
Pennsylvania Coal Co. 945 F.2d 594, 609-11 (3d Cir. 1991), 
cert. denied, 504 U.S. 955 (1992). But see Allwaste, Inc. v. Hecht, 65 
F.3d 1523, 1528 (9th Cir. 1995) (refusing to adopt a per se 
rule). Continuity is assessed prospectively, not from hindsight, that 
is, after the pattern ends. United States v. Aulicino, 44 F.3d 1102, 
1112 (2d Cir. 1995), cert. denied, 522 U.S. 1138 (1998). A 
threat of continuity may be shown by establishing that the conduct is a 
``regular way of doing business.'' See, e.g., Shields Enters., Inc. v. 
First Chicago Corp., 975 F.2d 1290, 1296-97 (7th Cir. 1992) 
(extortion to coerce shareholders).
    The ``pattern'' must, of course, be in the affairs of the 
enterprise under Sec. 1962(c). See, e.g., United States v. Miller, 116 
F.3d 641, 676-67 (2d Cir. 1997) (related to activities, even 
if not in furtherance or if able to commit solely by virtue of position 
in enterprise), cert. denied, 524 U.S. 905 (1998); United States v. 
Starrett, 55 F.3d 1525, 1542 (11th Cir. 1995) (effect upon 
the common, everyday affairs of the enterprise or that the facilities 
or services of the enterprises were regularly and repeatedly utilized), 
cert. denied, 517 U.S. 1111 (1996). If not, liability will not obtain. 
Palmetto State Medical Ctr. v. Operation Lifeline, 117 F.3d 142, 149 
(4th Cir. 1997) (no evidence conduct in affairs of enterprise).\20\
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    \20\ The definition of ``pattern'' affects the running of the 
statue of limitations. See. U.S. Department of Justice, Racketeer 
Influenced and Corrupt Organizations (RICO): A Manual for Federal 
Prosecutors, 155-61 (1990) (application of 18 U.S.C. Sec. 3282 (five 
years) to criminal RICO); Agency Holding Corp., 483 U.S. at 156, held 
that the civil period, borrowed from anti-trust law, is four years. The 
Court did not decide when the four year period began to run or how to 
calculate the damages within the period. The Court granted cetiorari in 
Grimmett v. Brown, 75 F.3d 506 (9th Cir. 1996), cert. 
granted, 518 U.S. 1003 (1996), to decide the when issue; it then 
dismissed it, 519 U.S. 233 (1997), and granted certiorari in a new 
petition. Klehr v. A.O. Smith Corp., 87 F.3d 231 (8th Cir. 
1996), Cert. granted, 520 U.S. 1154 (1997). Unfortunately, it only 
decided on the accrual issue that the ``last predicate act'' rule was 
inappropriate. 521 U.S. 179 (1997) (due diligence required for tolling 
through fraudulent concealment; last predicate act rule of Keystone 
Ins. Co. v. Houghton, 863 F.2d 1125, 1126 (3d Cir 1988) 
rejected (other cases collected)). In Rotella v. Wood, 120 S. Ct. 1075, 
1079-89 (2000), the Court then precluded us of the ``injury pattern'' 
rule. Left open was the adoption of an ``injury occurrence'' or 
``injury discovery'' rule. 120 S. Ct. at 1080 n.2 (injury occurrence 
rule not focused on by parties; not on it ``without more attentive 
advocacy''). Left open, too, was the situation where an injury occurs, 
but is not yet part of a pattern. Id. at 1084. The best general 
discussion of the conflicting civil rules in the circuits prior to 
Klehr and Rotella is found in McCool v. Strata Oil Co., 972 F.2d 1452, 
1463-66 (7th Cir. 1992).
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    The application of the ``enterprise'' concept to legitimate 
entities presents few problems. See, e.g., United States v. Beasley, 72 
F.3d 1518, 1525 (11th Cir. 1996), cert. denied, 518 U.S. 
1027 (1996); See 18 U.S.C. Sec. 1961 (4) (enterprise definition is an 
ostensive or a partial denotative definition; it is not connotative; 
its list of ``enterprises'' is illustrative, not exhaustive); United 
States v. Masters, 924 F.2d 1362, 1366 (7th Cir. 1991) 
(includes a group of individuals, a law firm and two police 
departments), cert. denied, 500 U.S. 919 (1991). See Helvering v. 
Morgan's Inc., 293 U.S. 121, 125 n.1 (1934) (``means'' and ``includes'' 
distinguished); Aetna Casualty Sur. Co. v. P & B Autobody, 43 F.3d 
1546, 1557 (1st Cir. 1994) (insurance fraud). See 
Now v. Scheidler, 510 U.S. 249, 259 n.5 (1994) (enterprise includes, of 
course, lawful entities that may be victimized; ``prize,'' 
``instrument,'' ``victim'' and ``perpetrator'') (citing Civil Fraud 
Action at 307-25).
    Its application to other RICO enterprises called ``associations-in-
fact,'' however, has its difficulties. The Supreme Court attempted to 
clarify the issue in Turkette, in which the Court observed:

        An association in fact ``is an entity, for present purposes a 
        group of persons associated together for a common purpose of 
        engaging in a course of conduct. . . . The [enterprise] is 
        proved by evidence of an ongoing organization, formal or 
        informal, and by evidence that the various associates function 
        as a continuing unit.''

    Turkette, 452 U.S. at 583 (enterprise not limited to licit 
entities). See also United States v. Arthur, 248 F.3d 11, 19 
(1st Cir. 2001) (illegitimate drug ring is an 
enterprise); United States v. Phillips, 239 F.3d 829, 845-46 
(7th Cir. 2001) (evidence supports gang as a RICO 
enterprise).
    Prior to Turkette--with the exceptions of the First and Eighth 
Circuits whose approach was rejected by the Supreme Court in Turkette--
the decisions of the courts of appeals reflected little difficulty 
finding that associations-in-fact existed. See, e.g., United States v. 
Errico, 635 F.2d 152, 156 (2d Cir. 1980) (``community of 
interest and continuing core of personnel''), cert. denied, 453 U.S. 
911 (1981); United States v. Elliott, 571 F.2d 880, 898 (5th 
Cir. 1978) (diversified criminal enterprise), cert. denied, 439 U.S. 
953 (1978).
    Since Turkette, the courts of appeals still reflected difficulty in 
implementing the approved perspective, but the focus of the 
difficulties is different. Nonetheless, a few enterprise rules have 
evolved:

        1(1) not only individuals, but also corporations may compose 
        associations-in-fact. See (United States v. Perholtz, 842 F.2d 
        343, 353, 356-59 (D.C. Cir. 1988) (cases collected), cert. 
        denied, 488 U.S. 821 (1988));
        (2) an association-in-fact is not a conspiracy; it may include 
        the victim. (Aetna Cas.y Sur. Co. v. P. & G. Auto Body, 43 F.3d 
        1546, 1557 (1st Cir. 1994) (not 
        conspiracy); United States v. Feldman, 853 F.2d 648, 655-57 
        (9th Cir. 1988) (not conspiracy), cert. denied, 489 
        U.S. 1030 (1989); United Energy Owners Comm., Inc. v. United 
        States Energy Mgmt. Sys., 837 F.2d 356, 362-64 (9th 
        Cir. 1988) (include victim); see also Jacobson v. Cooper, 882 
        F.2d 717, 720 (2d Cir. 1989) (similar)); and
        (3) while an association-in-fact must have more structure than 
        a mere conspiracy, it need not be much. (United States v. 
        Korando, 29 F.3d 1114, 1117-19 (7th Cir. 1994), 
        cert. denied, 513 U.S. 993 (1994) (continuity and 
        differentiation of roles provides structure); see generally St. 
        Paul Mercury Ins. Co. v. Williamson, 224 F.3d 425, 440-41 
        (5th Cir. 2000) (association-in-fact requires 
        evidence of an ongoing organization, formal and informal, that 
        functions as a continuing unit over time through a hierarchical 
        or consensual decision-making structure); see also United 
        States v. davidson, 122 F.3d 531, 534-35 
        (8th Cir. 1997), cert. denied, 522 U.S. 1034 
        (1997)(``small but prolific crime ring'' will suffice)).

    Under Sec. 1962(c), the ``person'' and ``enterprise'' must be 
separate. Cedric Kushner Promotions, Ltd., 121 S. Ct. at 2090 (must 
prove a ``person'' and an ``enterprise'' that are separate; employees 
separate from corporation; collecting decision from 12 circuits); 
Bessette v. AVCO Fin. Servs., Inc., 230 F.3d 439, 448-49 
(1st Cir. 2000) (subsidiary not ``person'' distinct from 
parent company ``enterprise''), cert. denied, 121 S. Ct. 2016 (2001); 
Begala v. PNC Bank, Ohio, N.A., 214 F.3d 776, 781 (6th Cir. 
2000) (corporation cannot be both a ``person'' and an ``enterprise''), 
cert. denied, 121 S. Ct. 1082 (2001).\21\
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    \21\ In United States v. Hartley, 678 F.2d 961, 988 
(11th Cir. 1982) cert. denied, 459 U.S. 1170(1983), 
overruled by United States v. Goldin Indus., 219 F.3d 1268, 1271 
(11th Cir. 2000)), the Eleventh Circuit did not adopt the 
enterprise-person rule. Hartley was correctly decided, though Cedric 
Kushner Promotions, Ltd. virtually precludes revisiting the rule. Why 
the rule should not have been adopted is set out in Equitable Relief at 
n.235; Henry A. LaBrun, Note, Innocence by Association: Entities and 
the Person-Enterprise Rule Under RICO, 63 Nortre Dame L. Rev. 179 
(1988)
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    The person-enterprise rule is generally not held to apply to 
Sec. 1962(a) and Sec. 1962(b). See, e.g., United Energy Owners 
Committee, Inc., 837 F.2d at 364.
    The rule may not be circumvented by pleading respondent superior, 
aiding and abetting, or conspiracy. See Cox v. Adm'r United States 
Steel & Carnegie, 17 F.3d 1386, 1403-06 (11th Cir. 1994), 
modified, 30 F.3d 1347 (11th Cir. 1994) (en banc) (cases 
collected), cert. denied, 513 U.S. 1110 (1995).
    Secondary liability is appropriate where the entity is a 
``person'', but not an enterprise, under Sec. 1962(c). See, e.g., 
davis v. Mut. LifeIns. Co. of N.Y., 6 F.3d 367, 379 
(6th Cir. 1993) (Schofield distinguished), cert. denied, 510 
U.S. 1193 (1994).
    The rule does not apply to associations-in-fact, unless they are 
composed of only two entities, one of which is the putative defendant, 
as ``sufficient'' separation would not then be present. Crowe v. Henry, 
43 F.3d 198, 206 (4th Cir. 1995). Accordingly, an 
association-in-fact may not be composed of simply a corporation, its 
officers, employees and agents. See e.g., Khurana v. Innovative Health 
Care Sys., Inc., 130 F.3d 143, 154-56 (5th Cir. 1997) 
(enterprise and person must be distinct; employees and agents not 
distinct from corporation, but may be individually named; parent and 
subsidiary not distinct), vacated as moot, 525 U.S. 979 (1998); United 
States v. Robinson, 8 F.3d 398, 406-07 (7th Cir. 1993); 
Feldman, 853 F.2d at 656-59 (containing an excellent discussion of 
associations-in-fact composed of entities).
    The ``enterprise'' must be separate from the ``pattern of 
racketeering activity.'' Turkette, 452 U.S. at 583 (RICO requires 
``separate elements,'' though proof may ``coalesce''). The Eighth 
Circuit initiated a split in the circuit courts when it added gloss to 
Turkette in United States v. Bledsoe, 674 F.2d 647, 664-65 
(8th Cir. 1982) (association-in-fact requires: (1) common 
purpose, (2) ongoing organization with members functioning as 
continuing unit, and (3) an ascertainable structure distinct from that 
inherent in pattern of racketeering activity) (``the command system of 
a Mafia family is an example of this type of structure''), cert. 
denied, 459 U.S. 1040 (1982). Accord Chang v. Chen, 80 F.3d 1293, 1297-
1301 (9th Cir. 1996) (reviewing decisions and adopting 
structure approach, which must be plead). See Handeen v. Lemaire, 112 
F.3d 1339, 1351-53 (8th Cir. 1997); United States v. 
Kragness, 830 F.2d 842, 854-60 (8th Cir. 1987); see State v. 
Ball, 268 N.J. Super. 72, 87, 632 A.2d 1222, 1237 (N.J. Super. Ct. App. 
Div. 1993) (federal and state cases collected; majority rule requiring 
``structure'' rejected under N.J. statute), aff'd, 141 N.J. 142, 661 
A.2d 251 (1995), cert. denied, 516 U.S. 1075 (1996).
    Under the Bledsoe rule, the easiest way to show separateness is to 
show that the enterprise is a legal entity or possess functions other 
than racketeering. See, e.g., Bennett v. Berg, 685 F.2d 1053, 1060 n.9 
(8th Cir. 1982) (legal entity), aff'd in part and reversed 
in part, 710 F.2d 1361 (8th Cir. 1983) (en banc), cert. 
denied, 464 U.S. 1008 (1983); United States v. Blinder, 10 F.3d 1468, 
1473-75 (9th Cir. 1993) (other activities). It is not, 
however, necessary, even in those circuits following Bledsoe, to show 
that the association-in-fact engaged in lawful conduct beyond the 
pattern or even engaged in more than one kind of illegal conduct. 
Webster v. Omnitrition Int'l Inc., 79 F.3d 776, 786-87 (9th 
Cir. 1996) (corporation set up to perform only unlawful activities 
nonetheless enterprise separate from illegal activities), cert. denied, 
519 U.S. 865 (1996). Compare United States v. Pelullo, 964 F.2d 193, 
210-12 (3d Cir. 1992) (organization may be inferred from 
pattern; need not engage in conduct beyond pattern) (citing Perholtz, 
842 F.2d at 363), with United States v. Console, 13 F.3d 641, 649-52 
(3d Cir. 1993) (mail fraud RICO), cert. denied, 511 U.S. 
1076 (1994). See generally, Reflections at 1646-56.
                    XII. Elements Of Section 1962(b)
    The standards of 18 U.S.C. Sec. 1962(b) embody three essential 
elements: (1) the acquisition or maintenance through a ``pattern'' of 
racketeering activity or the collection of an unlawful debt by a 
defendant (2) of an interest in or control of an ``enterprise'' (3) 
engaged in or affecting interstate commerce. Pelletier, 921 F.2d at 
1490, 1518-19. The circuits are split on requiring an ``acquisition or 
maintenance'' injury in civil suits under 18 U.S.C. Sec. 1962(b). See 
Court Watch.
                   XIII. Elements Of Section 1962(c)
    The standards of 18 U.S.C. Sec. 1962(c) embody four essential 
elements: (1) employment by or association of a defendant with (2) an 
``enterprise'' (3) engaged in or affecting interstate commerce (4) the 
affairs of which are ``conducted by or participated in'' by a defendant 
through a ``pattern'' of racketeering activity or the collection of an 
unlawful debt. Sedima, 473 U.S. at 496 (``A violation of Sec. 1962(c). 
. .requires (1) conduct (2) of an enterprise (3) through a pattern (4) 
of racketeering activity.'').
    In Reves v. Ernst & Young, 507 U.S. 170, 179 (1993), the Supreme 
Court resolved a split in the circuits and held that under Sec. 1962(c) 
``conduct or participate'' requires ``some part in directing those 
affairs'' through ``operation or management.'' 507 U.S. at 177-86. The 
Reves test is used to include and exclude defendants. Compare Slaney v. 
Int'l Amateur Athletic Fed'n, 244 F.3d 580, 598 (7th Cir. 
2001) (person charged with violating RICO must have participated in the 
operation or management of the enterprise and must have asserted some 
control over the enterprise); United States v. Viola, 35 F.3d 37, 43 
(2d Cir. 1994) (unwitting janitor and handyman excluded), 
cert. denied, 513 U.S. 1198 (1995), with Aetna Casualty Sur. Co. v. P. 
& B. Autobody, 43 F.3d 1546, 1559 (1st Cir. 1994) (causing 
insurance payments to be made included in ``operation''). See generally 
G. Robert Blakey and Marc Haefner, Did Reves Give Professionals A Safe-
Harbor Under RICO?, Civil RICO Report (August 11, 1993) (arguing that 
Reves did not alter aiding and abetting or conspiracy liability).
    That a particular defendant does not fall within the class that can 
violate a substantive offense, however, is no defense to aiding and 
abetting if the person he aids or abets falls within the class. Coffin 
v. United States, 156 U.S. 432, 447 (1895); In Re Nofziger, 956 F.2d 
287, 290 (D.C. Cir. 1992). RICO jurisprudence reflects this general 
principle. See United States v. Rastelli, 870 F.2d 822, 831-32 
(2d Cir. 1989), cert. denied, 493 U.S. 982 (1984); United 
States v. Margiotta, 688 F.2d 108, 131-33 (2d Cir. 1982), 
cert. denied, 461 U.S. 913 (1983).
    Defense attorneys are also seeking under Reves to avoid the impact 
of Sec. 1962(d) (conspiracy); they are having little success. See, 
e.g., Smith v. Berg, 247 F.3d 532, 536-37 (3d Cir. 2001) (no 
need to actually operate corrupt enterprise, so long as defendant 
facilitates scheme, including RICO enterprise) (Reves does not apply to 
Sec. 1962(d) in light of Salinas v. United States, 522 U.S. 52 (1997)), 
cert denied, 526 U.S. 1031 (1999); United States v. Starrett, 55 F.3d 
1525, 1542 (11th Cir. 1995) (Reves applies to criminal RICO, 
but operation or management rule does not apply to conspiracy under 
Sec. 1962(d)), cert denied, 517 U.S. 1111 (1996); Viola, 35 F.3d at 43 
(need not be within prohibited class to conspire; knowledge required, 
but not shown); United States v. Quintanilla, 2 F.3d 1469, 1484-85 
(7th Cir. 1993) (Reves ``did not address the principle of 
conspiracy law undergirding Sec. 1962(d)''); United States v. Norton, 
867 F.2d 1354, 1358-59 (11th Cir. 1989) (pre-Reves RICO 
conspiracy conviction upheld, although the defendant was not an officer 
of a union under 18 U.S.C. Sec. 1954, the predicate offense), cert. 
denied, 491 U.S. 907 (1989). See generally Reflections (scope of 
Reves).
                    XIV. Elements Of Section 1962(d)
    Section 1962(d) makes it unlawful for any person to conspire to 
Violate subsections (a), (b) or (c). See United States v. Gonzalez, 921 
F.2d 1530, 1539-40 (11th Cir. 1991) (``That the many 
defendants and predicate crimes were different, or even unrelated, . . 
.[is] irrelevant, so long as it. . .[can] be reasonably inferred that 
each crime was intended to further the enterprise.'') personal acts not 
required unless single objective conspiracy (citations omitted), cert. 
denied, 502 U.S. 827 (1991); United States v. Friedman, 854 F.2d 535, 
562 (2d Cir. 1988) (A RICO conspiracy is ``by definition 
broader than an ordinary conspiracy to commit a discrete crime. . .''), 
cert. denied, 490 U.S. 1004 (1989); United States v. Valera, 845 F.2d 
923, 930 (11th Cir. 1988) (``Under RICO Act. . .a series of 
agreement, which, pre-RICO, would constitute multiple conspiracies, can 
form, under RICO, a single `enterprise' conspiracy''), cert. denied, 
490 U.S. 1046 (1989); United States v. Rosenthal, 793 F.2d 1214, 1228 
(11th Cir. 1986) (``Congress intended to authorize the 
single prosecution of a multifaceted, diversified conspiracy. . . .The 
RICO statutes permit the joinder into a single RICO count or counts 
several diverse predicate acts. . . .''), modified on other grounds, 
801 F.2d 378 (11th Cir. 1986) (en banc), cert. denied, 480 
U.S. 919 (1987); Nancy A. Ickler, Note, Conspiracy To Violate RICO: 
Expanding Traditional Conspiracy Law, 58 Notre Dame L. Rev. 587 
(1983).\22\ The traditional law of conspiracy is followed. United 
States v. Neapolitan, 791 F.2d 489, 494-97 (7th Cir. 1985) 
(``a conspiracy to violate RICO should not require anything beyond that 
required for a conspiracy to violate any other statute''), cert. 
denied, 479 U.S. 939 (1986).
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    \22\ The circuits were split on whether or not injury must be by an 
overt act or a predicate act in civil suits under Sec. 1962(d), but 
Beck v. Prupis, 120 S. Ct. 1608, 1616 (2000), resolved the split; it 
held that an overt act, not otherwise wrongful under RICO, is not 
sufficient to give rise to a claim for relief. The Court left open 
requiring an investment injury, not only in Sec. 1962(a), but also in a 
conspiracy to violate Sec. 1962(a). Id. at 1616 nn. 9-10. See G, Robert 
Blakey, Foreword RICO Syposium, 64 St. John's L. Rev. 701, 721 n. 111 
(1990) (authorities collected). The federal courts of appeal were also 
split on requiring a ``personal'' act. See, e.g., United States v. 
Vaccaro, 115 F.3d 1211, 1211, (5th Cir. 1997), cert. denied, 
522 U.S. 1047 (1998). The issue is analyzed in Reflections at 1453-55, 
which reflects a view that prevailed in Salinas v. United States, 522 
U.S. 52, 60 (1997) (``1997) (``to conspire'' reflects usual rules; 
agree that they be committed, not to commit personally).
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    XV. Application Of RICO To The Tobacco Industry
    On the application of RICO to a suit brought by Blue Cross against 
the tobacco industry, United States District Judge Jack Weinstein aptly 
concluded:

        Application of RICO to the facts alleged in the complaint is 
        entirely consonant with the statute's stated aims and purpose. 
        The alleged injury to the Blues' business and property has 
        undermined the financial health and stability of a critical 
        industry in this nation's economy. This country is currently 
        said to be facing a crisis of health care finance. * * * If the 
        allegations are true, the well orchestrated racketeering on the 
        part of the defendants has played a major role in precipitating 
        this crisis and inflating this nation's health care costs to 
        their current levels. The Blues provide medical care and 
        coverage to almost 70 million Americans.
    Just as the legislative history of RICO forewarned, the defendants' 
racketeering has allegedly ``drained billions from the American 
economy.'' It is difficult to imagine a sector in the economy, a 
portion of the nation's resources, or an aspect of its economic life, 
which has not been severely affected by the defendants' alleged 
racketeering. For example, the nation's employers have found it 
increasingly expensive and difficult to fund health care coverage for 
their own employees * * *  In order to stay competitive, businesses 
have been forced to devote larger and larger portions of their 
resources to providing health care or have reduced benefits to their 
workers, forcing taxpayers, the Blues, and premium payers to subsidize 
the medical treatment of those who can no longer afford insurance. 
Research or treatment which would have been supported by resources of 
the health care industry have, it is contended, been neglected as a 
result of the defendants' alleged pattern of racketeering.
    In sum, the allegations in the complaint describe precisely the 
type of far-reaching, economic dislocation which RICO was intended to 
combat. The Blues represent the kind of business which RICO is designed 
to protect from racketeering. It may be reasonable to conclude that 
Congress assumed plaintiffs with personal injury claims would avail 
themselves of existing remedies under state law. It is not reasonable 
to believe that the systemic, economic injuries allegedly sustained by 
the plaintiffs in the instant case were beyond the designed scope of 
RICO when Congress explicitly provided that ``any person injured in his 
business or property'' shall have a cause of action under the statute.
    Any doubts concerning the applicability of the statute should be 
resolved in favor of the vigorous enforcement of RICO's remedies. 
Congress specifically instructed the courts to interpret the statute 
broadly. It provides, ``the provisions of this title shall be liberally 
construed to effectuate its remedial purposes.'' * * * In Sedima, 
S.P.R.L. v. Imrex Co. . . .the Supreme Court firmly rejected the 
attempt by the court of appeals for the Second Circuit to narrow the 
reach of RICO's civil provisions, pointing out, ``RICO is to be read 
broadly. . . .This is the lesson not only of Congress' self-consciously 
expansive language and overall approach but also of its express 
admonition. . . .'' (citation omitted). Enforcement of RICO to 
compensate for economic and business injuries such as those claimed by 
plaintiffs is entirely consistent with the statute's meaning and 
purpose.\23\
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    \23\ Blue Cross and Blue Shield of New Jersey,36 F.Supp. 2d 560, 
572 (.D.N.Y. 1999). Judge Weinstein's opionion is not free of 
criticism. See e.g., Int'l Bhol. of Teamsters Local, 734 Health & 
Welfare Fund. V. Philip Morris Inc. 196 F. 4d 818, 827 (7th 
Cir. (1999) (Easterbrook, J.)
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                (a) The Pattern Of Racketeering Activity
    Unquestionably, the industry's conduct since the 1950s constitutes 
a ``pattern.'' H.J. Inc., 492 U.S. at 238-43 (relationship and 
continuity).
    That conduct also constitutes a ``scheme to defraud'' under 18 
U.S.C. Sec. Sec. 1341 (mail fraud), 1343 (wire fraud).
    The focus of the concept of ``scheme to defraud'' is on ``dishonest 
methods or schemes and [it] usually signif[ies] the deprivation of 
something of value by trick, deceit, chicane or overreaching.'' 
Carpenter v. United States, 484 U.S. 19, 27 (1987). The Fifth Circuit 
originated the Gregory standard, the broadest understanding of ``scheme 
to defraud'' in the circuits: Gregory v. United States, 253 F.2d 104, 
109 (5th Cir. 1958) (``moral uprightness, or fundamental 
honesty, fair play and right dealing in the general and business life 
of members of society''). It is properly followed in most circuits. 
Reflections at 1586.
    Proof of ``intent to defraud'' is usually accomplished by showing 
the conduct of the defendant from which his state of mind is inferred. 
See generally, Reflections at 1591-94. Here that conduct includes:

        (1) the intentional sale of a defective product that is both 
        addictive and lethal;
        (2) the targeting and sale of the product to children in 
        Violation of the law and ethical standards adopted by the 
        industry itself;
        (3) the failure to market ab available safer product;
        (4) the suppression of a less hazardous product;
        (5) the covert manipulation of an addictive drug (nicotine);
        (6) the unethical generation of a false scientific 
        ``controversy" surrounding the health effects of tobacco;
        (7) the creation of bogus doubts about the addictive quality of 
        nicotine and its dangers to the life and health of those who 
        use it;
        (8) the suppression of unfavorable'' useful data on their 
        product; the public discrediting of ``favorable'' useful data 
        on their product;
        (9) false statements to the public and to governmental bodies' 
        concealing relevant information from public and governmental 
        bodies that had requested the information and had a right to 
        obtain it from the industry; and
        (10) the illegal and unethical abuse of the attorney client 
        privilege.\24\
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    \24\ Charts illustrating the application of the ``scheme to 
defraud'' theory that is appropriately alleged against the tobacco 
industry are attached to this statment.
---------------------------------------------------------------------------
                             (b). Defenses
    The industry's record of fighting smoker litigation is nothing 
short of extraordinary.
    Until the state attorneys general started to bring their 
litigation, a pack of cigarettes could hardly be purchased with what 
the industry had paid out in damages.
    That success is attributable in part to rhetorical fallacies. Judge 
Jerome Frank once observed: ``It would be time-saving if [courts] had a 
descriptive catalogue of recurrent types of fallacies encountered in 
arguments addressed to [them]. United Shipyards v. Hoey, 131 F.2d 525, 
526 (2nd Cir. 1942), cert. denied, 318 U.S. 791 (1943). The 
field of public debate is no different. One source of that success is 
the ``mini-skirt'' fallacy, which focuses litigation against the 
industry on the conduct of the ``victim'' and away from the conduct of 
the industry. See generally, Note, Plaintiff's Conduct as a Defense to 
Claims Against Cigarette Manufacturers, 99 Harv. L. Rev. 809 (1986).
    Another source of that success is the ``twinkie'' fallacy. You are 
going after tobacco today. Will you be going after sugar tomorrow? Or 
alcohol, fat, caffeine, lead. . .or another noxious substance? Jeremy 
Bentham, The Handbook of Political Fallacies 93-99, 136-38, (Harper 
Torchbooks 1962) variously called this fallacy the ``Hobgoblin 
Argument'' or ``Fallacy of Artful Diversion.''

        Bentham observed:
         ``Here it comes!'' exclaims the barbarous or unthinking 
        servant in the hearing of the a frightened child, when, to rid 
        herself of the burden of attendance, such servant does not 
        scruple to employ an instrument of terror. . . .
        Or:
         The Device Here in Question may be explained by the following 
        directions or recipe for its manufacture and application: When 
        a measure is proposed which on any account whatever it suits 
        your interest or your humor to oppose at the same time that, 
        because of its undeniable utility, you find it inadvisable to 
        condemn directly, hold up some other measure which will present 
        itself to the minds of your hearers. . . .

    As a product openly sold to consumers, tobacco is, in fact, unique, 
no matter how the industry might want to divert our attention with a 
supposed parade of horribles. When the case that is made today against 
tobacco can be made against another substance, and its illicit 
marketing, if ever, it will be time enough then to consider those other 
products and ways to remedy their abuse.
    Our attention should be focused today on tobacco.
    It is difficult enough to get one thing at a time done.
    Fortunately, Government litigation outflanks those defenses. We may 
expect that, though, that the industry will make every effort at trial 
and on appeal--and in the court of public opinion--to assert against 
the Government any defense that it can imagine.
    Those efforts should fail.
    Only a few defenses can be plausibly asserted affirmatively against 
the Government in civil RICO. None should succeed.\25\
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    \25\ The industry often raises another fallacious defense, but 
seldom in public debate: it is the ``Grim Reaper'' Fallacy. I will not 
dignify it by putting it in the text . We kill a lot of people, it 
goes, but when you count our taxes or the money you save by not paying 
pensions, etc., we save you money! See, e.g., cnnfr.cnn.com/2. . .16/
companies/czech-morris/index.htm (reporting July 10, 2001 a Philip 
Morris study given to the Czech government claiming that while 
healthcare costs were substantial, the Government had a net gain of 
$147 million, mainly in tax revenue, but also $24 to $30 million in 
health care, pension and public housing, due to the early death of 
smokers, a ``positive'' benefit of smoking). Omitted from the study is 
the ``value'' of the pain and suffering of the smokers and their 
families, as the government does not ``pay'' it. Nor does it include 
the ``value'' of life lost by early death. Beware of the hired gun 
economist, like lawyers, they will argue whatever their master demands!
---------------------------------------------------------------------------
                             (i) Time Bars
    Traditionally, statutes of limitations or laches do not bar the 
Government from seeking equity relief. United States v. Beebe, 127 U.S. 
338, 344 (1888) (cited with approval in S. Rep. No. 91-452, 
91st Cong., 1st Sess. at 160 (1969)). Accord 
Chesapeake & Delaware Canal Co. v. United States, 250 U.S. 123, 125 
(1919) (citing United States v. Kirkpatrick, 22 U.S. (9 Wheat) 720, 735 
(1824) (Story, J.).
    Similarly, the failure to enforce a statute does not make it 
unenforceable. District of Columbia v. John R. Thompson Co., Inc., 346 
U.S. 100, 113-143 (1953) (civil rights); Times-Picayune Publishing Co. 
v. United States, 345 U.S. 549, 623-24 (1953) (antitrust); United 
States v. Socony-Vacuum Oil Co., 310 U.S. 150, 225-27 (1940) 
(antitrust).
                       (ii) Conduct of the Victim
    The common law knew two possible defenses of ``unclean hands.'' 
Criminally, it was known as particeps crimis. It was not recognized as 
a defense to a crime. See, e.g., State v. Wellenberger, 95 
P.2d 709, 710-20 (Ore. 1939) (leading decision; obtaining 
money by false pretenses; other decisions reviewed). Civilly, it was 
known as in pari delicto. JOSEPH STORY, Equity Jurisprudence 304-05 
(13th ed. 1886) (``equal fault'').
    Common law defenses do not, however, generally limit statutory 
provisions enacted in the public interest. See, e.g., Perma Life 
Muffler, Inc. v. Int'l Parts Corp., 392 U.S. 134, 138 (1968) 
(securities; private enforcement); see also Kiefer-Stewart Co. v. 
Joseph E. Seagram & Sons, 340 U.S. 211, 214 (1951) (antitrust) 
(``unclean hands''), but see Pinter v. Dahl, 486 U.S. 622, 634 (1988) 
(equal involvement defense limit on private securities enforcement); 
Eichler v. Berner, 472 U.S. 299, 306-19 (1984) (same).
    Similarly, consent of the victim, unless it negates an element of 
the offense (e.g., rape), is not a defense to a crime, nor is 
contributory negligence nor condonation. See, e.g., Martin v. 
Commonwealth, 184 Va. 1009, 37 S.E. 2d 43 (1946) (leading 
decision; victim hearing of defendants' homicidal intentions gave 
perpetrator gun and ammunition; no defense); Levin v. United States, 
119 U.S. App. D.C. 156, 338 F.2d 265 (1964) (larceny by trick 
established by inducing victim to part with embezzled funds; no 
defense); State v. Moore, 129 Iowa 514, 106 N.W. 16 (1906) (leading 
decision; contributory negligence not defense to crimes); State v. 
Craig, 124 Kan. 340, 259 P.802 (1927) (mother forgave son's burning 
barn; no defense to arson, even though beforehand would have negated 
liability).
    Since RICO civil liability is premised on the ``violation'' of its 
criminal provisions, these general principles of criminal 
responsibility ought to negate any ``victim defenses'' by the tobacco 
industry in the civil context as well.\26\
---------------------------------------------------------------------------
    \28\ See generally Sedima, 473 U.S. at 489, 492 (language read same 
in civil and criminal decisions); H.J. Inc., 492 U.S. at 236 (same), 
cf. United States Ex. Rel. Marcus et. al. v. Hess, 317 U.S. 537, 542 
(1943) (False Claims Act) (Black, J.) (``[W]e cannot say that the same 
substantive language has one meaning if criminal prosecutions are 
brought by public officials and quite a different meaning where the 
same language is involved by the informer''); Northern Sec. Co. v. 
United States, 193 U.s. 197, 401 (1904 (antitrust) (Holmes, J., 
dissenting) (``The words cannot be read one way in a suit which is to 
end in fine and imprisonment and another way in one which seeks an 
injunction''); Wayne LaFave et. al., Criminal Law Sec. 5.11 at 477-483 
(2nd ed. 1986).
---------------------------------------------------------------------------
                       (c) Remedies: Disgorgement
    Disgorgement is a familiar equitable remedy. ``[I]t is simple 
equity that a wrongdoer should disgorge his fraudulent enrichment.'' 
Janigan v. Taylor, 344 F.2d 781, 786 (1st Cir.), cert. 
denied, 382 U.S. 879 (1965). See also FTC v. Gem Merchandising Corp., 
87 F.3d 466, 469 (11th Cir. 1996) (``Among the equitable 
powers of a court is the power to grant restitution and 
disgorgement.''); SEC v. AMX, 7 F.3d 71, 76 n.8 (5th Cir. 
1993) (``a disgorgement order is considered to be in the form of a 
continuing injunction in the public interest''); Sec. Exch. Comm'n v. 
Huffman, 996 F.2d 800, 803 (5th Cir. 1993) (``disgorgement 
is more like a continuing injunction in the public interest than a 
debt''); Sec. Exch. Comm'n v. Blatt, 583 F.2d 1325, 1335 
(5th Cir. 1978) (purpose of disgorgement is to ``deprive the 
wrongdoer of his ill-gotten gains and deter[] violations of the law''); 
United States v. Furlett, 781 F. Supp./ 536, 544 n.5 (N.D. Ill. 1991) 
(``disgorgement is a remedial rather than punitive measure'').
    In Porter v. Warner Holding Co., 328 U.S. 395 (1946), a landmark 
decision, the Supreme Court confirmed that equitable jurisdiction was 
present to disgorge rents collected from Minneapolis tenants in 
violation of federal price controls. Id. at 396. The statute provided 
for ``a permanent or temporary injunction, restraining order, or other 
order,'' but it did not mention restitution of profits or disgorgement. 
Id. at 397. Nevertheless, the Court concluded that it was ``readily 
apparent'' that once a trial court's equitable jurisdiction was 
invoked, ``a decree compelling one to disgorge profits, rents or 
property acquired in violation'' of the statute was proper. Id. at 398-
99 (emphasis added). The Court explained:

        Unless otherwise provided by statute, all the inherent 
        equitable powers of the District Court are available for the 
        proper and complete exercise of that jurisdiction. And since 
        the public interest is involved in a proceeding of this nature, 
        those equitable powers assume an even broader and more flexible 
        character than when only a private controversy is at stake. 
        Power is thereby resident in the District court, in exercising 
        this jurisdiction, ``to do equity and to mold each decree to 
        the necessities of the particular case.''. . . .Unless a 
        statute in so many words, or by a necessary and inescapable 
        inference, restricts the court's jurisdiction in equity, the 
        full scope of that jurisdiction is to be recognized and 
        applied.

    Id. at 398 (emphasis added) (citations omitted).
    A possible limit on the extent of disgorgement is the Second 
Circuit's sadly mistaken and misguided decision in United States v. 
Carson, 52 F.3d 1173 (2d Cir. 1995), cert. denied, 517 U.S. 
1210 (1996), which reversed a RICO disgorgement order requiring a 
former union official to return $76,000 in ill-gotten gains. Carson 
accepted kickbacks from 1972 to 1988 and then retired. The Second 
Circuit confirmed that, ``[a]s a general rule, disgorgement is among 
the equitable powers available to the district court by virtue of 18 
U.S.C. Sec. 1964.'' Id. at 1181. Disgorgement ``serve[s] the goal of 
foreclosing future violations.'' Id. at 1182. The Court, however, held 
that the test for determining whether disgorgements are permissible is 
``whether the disgorgements. . .are designed to `prevent and restrain' 
future conduct''; ``disgorgement of gains ill-gotten long ago'' could 
not be justified. Id.
    Categorical disgorgement of all ill-gotten gains may not be 
justified simply on the ground that whatever hurts a civil RICO 
violator necessarily serves to ``prevent and restrain'' future RICO 
violations. If this were adequate justification, the phrase ``prevent 
and restrain'' would read ``prevent, restrain and discourage''. . . .
    Id.
    The Court suggested that disgorgement even of ``gains ill-gotten 
long in the past'' would be permissible if ``there is a finding that 
the gains are being used to find or promote the illegal conduct, or 
constitute capital available for that purpose.'' Id. ``The disgorgement 
of gains ill-gotten relatively recently is more easily justifiable on 
the basis of the same analysis.'' Id. See also SEC v. First Jersey 
Secs., Inc., 101 F.3d 1450, 1475 (2d Cir. 1996) (``a 
divestiture order under RICO must be designed to prevent future conduct 
rather than to remedy past wrongdoing'').
    Even if correctly decided, which it is not, Carson is 
distinguishable here.\27\ Carson involved a retiree who was not in a 
position to commit any more RICO predicate offenses. In the tobacco 
context, however, the predicate offenses and the RICO enterprise are 
still ongoing. Recently earned tobacco profits that are poured back 
into industry marketing efforts are used to fund additional acts of 
mail and wire fraud as part of its ``schemes to defraud.'' In fact, 
despite a national agreement not to target children, the industry 
continues its reprehensible practice. See, Alex Kuczynski, Tobacco 
Companies Accused of Still Aiming At Youths, N.Y. Times, Aug. 15, 2001, 
col. 2., p.1.
---------------------------------------------------------------------------
    \27\ Carson is criticized and rejected as wrongly decided in 
Reflections at 1627-37.
---------------------------------------------------------------------------
    A substantial portion of those sums would, even under Carson, be 
subject to disgorgement, if they are being used to fund an ongoing 
``scheme to defraud.'' Not all tobacco profits are, of course, used to 
fund wrongdoing: many are paid to shareholders and others are used for 
legitimate corporate purposes. Nonetheless, a significant amount of 
disgorgement should be available. The precise amount would depend on 
the companies' financial statements and expert accounting testimony. 
But the sum would likely prove to be large.
    Carson, moreover, is poorly reasoned; and it is, in fact, wrongly 
decided. Disgorgement is a well-settled remedy of traditional equitable 
powers. The legislative history of RICO indicates that its authors 
intended to grant courts at least as much authority as they possessed 
under the antitrust statutes. See, e.g., 115 Cong. Rec. 9567 (1969) 
(statement of Sen. McClellan) (``Nor do I mean to limit the remedies 
available to those which have already been established.''); Id. at 
69993-94 (statement of Sen. Hruska) (``The bill is innovative. . . 
.Hopefully, experts on organized crime will be able to conceive of 
additional applications of the law. The potential is great.'').
    While Sec. 1964(a) contains the phrase ``prevent and restrain,'' 
the legislative history indicates that this language was not intended 
to confine the courts to purely forward-looking remedies. The list is 
``illustrative, not exhaustive.'' S. Rep. No. 91-617 at 160 (``the list 
is not exhaustive'').
    Tobacco profits are, like illicit drug profits, subject to 
forfeiture criminally and disgorgement civilly.
    That the product may be ``legal'' under certain circumstances is no 
defense when it is, in fact, marketed illegally. Disgorgement is 
ordered, for example, in cases involving the sales of securities, 
United States v. DuPont & Co.; SEC v. First Jersey Secs., Inc., 101 
F.3d 1450, 1474-75 (2d Cir. 1996), security alarm services, 
United States v. Grinnell Corp., sanitation services, United States v. 
Private Sanitation Industry Ass'n, 44 F.3d 1082, 1084 (2d 
Cir. 1995), and union activities, as noted above.
    The Government also sometimes seeks equitable relief in civil RICO 
actions involving ``legitimate'' business activities. For example, in 
United States v. Ianniello, 824 F.2d 203, 206-07 (2d Cir. 
1987), the Second Circuit affirmed a district court order granting an 
application by the Government for the appointment of a receiver 
pendente lite to run a restaurant; in United States v. Local 6A, Cement 
and Concrete Workers, 663 F. Supp. 192 (S.D. N.Y. 1986), the Government 
brought an action under 18 U.S.C. Sec. 1964 requesting the appointment 
of trustees to conduct the business of Local 6A. In United States v. 
Local 359, 87 Civ. 7351 (S.D.N.Y., filed Oct. 15, 1987), the Government 
sought to seize control of the Fulton Fish Market in lower Manhattan--
in effect requesting that an entire commercial center be placed under 
court supervision. Thereafter, pursuant to default and consent 
judgments entered against the Genovese crime family and individuals 
named as defendants in the lawsuit, an administrator for the Fulton 
Fish Market was appointed by the district court to ensure compliance 
with the judgments, including prohibitions against the defendants' 
having dealings with Local 359 or with the Fish Market. The District 
Court rejected the Government's efforts to take control of Local 359 
itself, but this aspect of the District Court's judgment was, in fact, 
later vacated by the Second Circuit. United States v. Local 359, 705 F. 
Supp. 984 (S.D.N.Y. 1989), vacated in part, 889 F.2d 1232, 1235 
(2d Cir. 1989).
    No legal obstacle stands in the way of the success of the 
Government's case against the industry, least of all the successful 
state suits.\28\
---------------------------------------------------------------------------
    \8\ The Government seeks to require the industry itself to rectify 
its own wrongs by conducting anti-smoking campaigns. 116 F. Supp. at 
147. Such an advertising campaign would be welcome in light of the 
failure of the states to use their tobacco funds for health purposes. 
Stephanie Simon, Little of Tobacco Money Goes to Kicking Habit, Los 
Angeles Times, Aug. 26, 2001, p.1., col. 1.
---------------------------------------------------------------------------
                               Conclusion
    While criminal and civil RICO is controversial, the statute's two 
track system of public and private enforcement is operating today 
largely as it was written. Its impact on organized crime, for example, 
is unparalleled in the history of criminal law enforcement. See 
President's Commission on Organized Crime, Report to the President and 
the Attorney General--Impact: Organized Crime Today, at 133-34 
(1986)(concluding that RICO is one of the most powerful and effective 
weapons in existence for fighting organized crime); Selwyn Raab, A 
Battered And Ailing Mafia Is Losing Its Grip On America, N.Y. Times, 
Oct. 22, 1990, p. A12, Col. 1.
    At one time, legitimate businesses shunned the civil provision of 
the statute, feeling that to use it would legitimate a litigation 
technique that in the early days of its implementation was widely felt 
to be illegitimate. That day is no more. See, e.g., Saul Hansell, 
Bankers Trust Settles Suite With P. & G., N.Y. Times, May 10, 1996, 
P.1., Col. 5 (reporting the settlement of a civil RICO suit between two 
major corporations over an investment fraud).
    The Government is now properly using RICO, not only criminally, but 
civilly.
    In short, RICO's use by the Government in its civil suit against an 
unreformed industry, which addicts children with a drug that horribly 
kills them as adults, is wholly proper, and it is manifestly necessary 
to bring an outlaw industry to book under the law.

    Senator Durbin. Thank you, Professor Blakey.
    Mr. Adelman?

STATEMENT OF DAVID ADELMAN, EXECUTIVE DIRECTOR, MORGAN STANLEY, 
                       NEW YORK, NEW YORK

    Mr. Adelman. Chairman Durbin, Senator Hatch, it is a 
pleasure to be before you once again and to share with you my 
assessment of the Department of Justice's lawsuit. To put my 
comments into context, I am an executive director at Morgan 
Stanley, where I have been the firm's senior U.S. tobacco 
industry analyst for the last 10-plus years, and my primary 
function is to provide insight to institutional and retail 
investors into the risks facing the U.S. tobacco manufacturers, 
and I constantly strive to provide an objective, realistic 
assessment. I am not an advocate of the industry. I am not a 
critic of the industry. And it is within that context that I 
would like you to evaluate my comments.
    There is no question that the U.S. tobacco manufacturers 
face several serious legal challenges, but I do not consider 
the Department of Justice's lawsuit to be among them, and I 
believe that the lawsuit will either ultimately be dismissed or 
resolved at very low or minimal cost to the manufacturers. And 
I base that view primarily on three factors:
    First, all of the health care cost recovery claims have 
been dismissed not once but twice by Judge Kessler. And if you 
go back to the Department of Justice's original commentary when 
this case was announced, that was a fundamental premise of the 
lawsuit, and the DOJ emphasized the fact that they felt that 
those claims, as well as the RICO claims, had strong legal 
basis. That has subsequently, at least from Judge Kessler's 
view, proven to be inaccurate.
    Also, in assessing her dismissal of all health care counts, 
I think it is important to recognize that many outsiders 
consider her to be particularly sympathetic, given her 
leanings, towards the Federal Government's claim. And she also 
recognized that the Federal Government has a far narrower cause 
of action than the States who were ultimately successful in 
their lawsuit. So point one is that all health care cost 
recovery claims have been dismissed. This is a much narrower 
case than it once was, and as a result, the potential financial 
risks have been substantially reduced.
    The second key point is that, in my view, the RICO counts 
face very substantial legal and factual challenges, and I will 
only raise three of them with you.
    First of all, it will be the burden of the Government to 
establish that the tobacco manufacturers are engaged in ongoing 
wrongdoing because the entire premise of the statute is to 
prevent and restrain. You can't look backwards. You need to 
look forward with RICO. And what is interesting about the 
Government's allegation is that they plead essentially no post-
1995 wrongdoing by the tobacco manufacturers. They don't take 
on board the substantial restrictions under the Master 
Settlement Agreement that the industry currently operates 
under. Nor do they take into account the consent decrees in 
which they operate. And as a result of that, I think it is 
going to be difficult to establish that this industry is 
engaged as an ongoing criminal enterprise.
    Secondly, essentially all of the injunctive relief that the 
Government is requesting, there are analogous restrictions that 
they currently operate under, under the Master Settlement 
Agreement, whether it deals with false misrepresentations about 
the risks associated with smoking or targeting minors, and 
General Blumenthal and all the other State Attorneys General 
are certainly fully authorized to enforce those consent 
decrees, as he is. But, again, I think that that is going to 
provide a significant hurdle to the Government.
    And then, thirdly, in terms of the specific issue of 
disgorgement of ill-gotten gains in the past, which, without 
question, is the bulk of the financial threat to the 
manufacturers, I think it is important to recognize that the 
statute certainly doesn't say disgorgement is available. The 
D.C. Circuit, where this case is pending, has never authorized 
a claim of disgorgement. The Second Circuit, which has 
authorized disgorgement, financial disgorgement in a claim, has 
said that you can't go far back in time. It cannot be punitive 
in nature, but it can only be put into place to impact future 
ongoing illegal activity. Again, it gets back to the first 
point. You have to establish that there is ongoing illegal 
activity. And I also think it will be difficult to establish 
that the industry's prior gains were ill-gotten, which is 
certainly a fundamental threshold that will have to be crossed 
because, as you are well aware, there has been a warning label 
on cigarettes since 1966, and since 1964 the Surgeon General 
has been publishing biannual reports on the risks associated 
with smoking.
    Finally, I think it is important to recognize that since 
this case was filed, the U.S. Court of Appeals for the D.C. 
Circuit dismissed unanimously two groups of novel tobacco 
reimbursement claims brought by foreign governments and brought 
by private third-party payers. Both of those claims included 
RICO counts, different than the RICO count that the Federal 
Government is pursuing but, nevertheless, including RICO 
counts. And that increases my confidence that the D.C. Circuit 
is not going to twist existing precedent to target what is 
currently an unpopular industry.
    So for those three key reasons--the fact that all of the 
health care cost recovery claims have been dismissed, the fact 
that the RICO claims I think objectively face serious and 
substantial legal and factual hurdles, and the fact that the 
appellate jurisdiction in which this case relies has not shown 
itself to be particularly flexible in interpreting existing 
statutes and legal principles--I don't view the Department of 
Justice's lawsuit as representing a substantial risk facing the 
U.S. tobacco manufacturers.
    Thank you, and I would be more than happy to answer any 
questions you may have.
    [The prepared statement of Mr. Adelman follows:]

  Statement of David Adelman, Executive Director, Morgan Stanley, US 
                        Tobacco Industry Analyst

    Chairman Leahy, Senator Hatch, and members of the Committee, it is 
my pleasure to provide you with my assessment of the Department of 
Justice's (DOJ) lawsuit currently pending against the leading US 
cigarette manufacturers. I am an Executive Director at Morgan Stanley, 
where I have been the Firm's senior US tobacco industry equity analyst 
for more than ten years. I am neither an advocate nor an opponent of 
the tobacco industry; rather, I endeavor to provide our Firm's retail 
and institutional clients with an accurate and objective assessment of 
the various issues facing the industry. It is in that spirit and 
context that I am providing to you my assessment of the DOJ's tobacco 
lawsuit this afternoon. My key conclusion is that while the US tobacco 
industry faces many legal challenges, I do not believe that the DOJ's 
tobacco claim represents a significant legal threat to the industry. I 
believe that the lawsuit will ultimately be dismissed or otherwise 
resolved at little financial cost to the Defendants. My assessment is 
primarily based on five factors:
    First, on two separate occasions lower court Judge Gladys Kessler 
has dismissed all of the DOJ's claims for tobacco-related health care 
cost reimbursement. Recall that the primary original rationale for the 
DOJ's tobacco lawsuit was to seek the recovery of tobacco-related 
health care costs. Following the rejection of all claims based on the 
Medical Care Recovery Act (MCRA) and the Medicare Secondary Payers 
(MSP) provisions, only the RICO components of the Government's tobacco 
claim remain. As a result, the potential financial threat of the 
lawsuit has already been significantly reduced.
    Second, I believe that the remaining RICO counts represent novel 
legal claims and face significant legal and factual challenges. In 
particular, the DOJ will be required to establish that prior industry 
profits were ``ill gotten;'' that future industry wrongdoing is likely 
despite the extensive restrictions placed on industry conduct as a 
result of the Master Settlement Agreement (MSA); and that disgorgement 
is an allowable and appropriate remedy under the equitable provisions 
of RICO.
    Third, since the DOJ's tobacco lawsuit was originally filed, the US 
Court of Appeals for the DC Circuit has unanimously dismissed two 
separate groups of tobacco health care cost recovery claims. 
Importantly, Judge Kessler had initially allowed the RICO claims in one 
of these groups of lawsuits to proceed to trial. The US Court of 
Appeals for the DC Circuit's ruling in those cases, in my opinion, 
indicates an unwillingness to alter existing precedent to punish a 
currently unpopular defendant. As long as existing law is applied 
fairly to the remaining RICO claims, we believe that the DOJ's tobacco 
lawsuit will ultimately be dismissed or otherwise resolved at little 
financial cost to the Defendants.
    Fourth, Judge Kessler's earlier rulings, in our opinion, provide 
little ground for DOJ-optimism regarding the ultimate outcome of the 
lawsuit. As outlined above, Judge Kessler has twice rejected much of 
the lawsuit. Equally important, given the fact-based nature of the RICO 
claims, while it is not surprising and we anticipated that Judge 
Kessler did not dismiss the DOJ's RICO claims in response to the 
industry's Motion to Dismiss, in our opinion, she left little ground 
for DOJ-optimism regarding her ultimate evaluation of the RICO counts. 
In particular, she indicated that ``The Government has stated a claim 
for injunctive relief; whether the Government can prove it remains to 
be seen.'' For example, the government will probably have to prove that 
the industry is currently in violation of the MSA and that it is 
currently engaged in an ongoing criminal Enterprise.
    Finally, we believe that it is important to recognize that many of 
the advocates of the DOJ's remaining tobacco RICO claims were earlier 
optimistic regarding the prospects for other ultimately unsuccessful 
legal attacks against the US tobacco industry. These included the FDA's 
effort to claim tobacco regulatory authority, the initial health care 
cost recovery claims in the DOJ's tobacco lawsuit, and the RICO counts 
in private third-party payer tobacco health care cost reimbursement 
actions.
    Below, I review some of these points in greater detail.
    First, lower court Judge Gladys Kessler has TWICE dismissed ALL of 
the DOJ's claims for tobacco-related health care cost recovery. In 
reaching these decisions, Judge Kessler indicated that the Federal 
Government lacks any common law right to seek health care cost 
reimbursement, lacks any statutory right to seek cost recovery on a 
direct or independent basis, and cannot seek recovery of any Medicare 
or Federal Employee Health Benefits Act (``FEHBA '') costs. It is 
important to note that these claims were originally lauded by the DOJ 
as having a sound basis in law. As a result of Judge Kessler's rulings, 
the potential financial threat of the DOJ's tobacco claim has been 
significantly reduced, and the Government's remaining claims have been 
limited to potential RICO recovery.
    Second, the remaining RICO counts are novel claims and face 
significant legal and factual challenges. Under the infrequently 
utilized equitable provisions of RICO (Section A), the DOJ is pursuing 
``disgorgement'' of allegedly ``ill gotten'' gains that resulted from 
the industry's alleged wrongful conduct, and other equitable injunctive 
relief that it considers necessary to reform industry practices. The 
Government alleges that equitable relief is necessary to prevent and 
restrain the Defendants from continuing their unlawful conduct in the 
future. As an initial threshold matter, we know of no instance in which 
an equitable RICO claim has been allowed to proceed to trial without a 
prior criminal conviction based on the same underlying activity. The 
DOJ has indicated, however, that it has dropped all of its criminal 
investigations of the US tobacco industry. More significant legal and 
factual hurdles facing the DOJ's RICO claims include:
    A) Can the DOJ establish that prior industry wrongful conduct 
generated ``ill gotten'' gains? The core of the government's RICO claim 
for disgorgement of ``ill gotten'' gains is that the tobacco industry 
deceived the public and the government regarding the health risks 
associated with smoking. In our opinion, there has been decades-long 
widespread awareness of these risks, and in particular, the federal 
government has required a health warning on all cigarettes sold in the 
US since 1966, has published ongoing Surgeon General reports on the 
health risks associated with smoking since 1964, and concluded in 1988 
that cigarette smoking is ``addictive.'' As a result, we believe that 
it may prove difficult for the Government to establish that a causal 
nexus exists between the industry's alleged wrongful conduct and its 
``ill gotten'' gains. Note that the industry has often prevailed 
against allegations of prior wrongful conduct (e.g., the unanimous 
defense verdict in Ohio Iron Workers, and the rejection of all RICO 
claims in Empire Blue Cross).
    B) Can the DOJ distinguish the industry's prior ``ill gotten'' 
gains? Even if the DOJ can prevail in establishing prior industry 
wrongful conduct, we believe that it may face a significant challenge 
in quantifying the extent to which prior industry gains were ``ill 
gotten.'' In particular, we believe that the DOJ would likely have to 
establish which consumers, at which specific times, and at which 
specific transactions, were deceived by the industry regarding the 
risks associated with cigarette smoking (and would not have purchased 
cigarettes absent the deception). Although the DOJ would presumably 
intend to rely on statistics and extrapolations to determine the 
magnitude of the industry's allegedly ``ill gotten'' gains (e.g., it 
will likely argue that people would have smoked some percentage less if 
they were aware of the true risks associated with cigarette smoking), 
courts have typically rejected the use of statistics and/or aggregation 
to determine damages.
    C) Can the DOJ establish a reasonable likelihood of future industry 
wrongdoing in light of the Master Settlement Agreement (MSA)? 
Irrespective of prior alleged wrongful conduct, equitable relief under 
RICO must be closely tied to a threatened future occurrence of wrongful 
conduct so as to ``prevent and restrain'' future RICO violations. 
Importantly, the DOJ's complaint alleges essentially no post-1995 
wrongful industry conduct, and the MSA arguably addresses essentially 
all of the equitable relief that the DOJ is seeking. As a result, we 
believe that it may prove difficult for the DOJ to argue that 
additional equitable relief is necessary.
    For example, while the DOJ seeks an injunction against making 
misrepresentations, the companies are barred from making any material 
misrepresentations regarding the health consequences of smoking under 
the MSA. While the DOJ seeks the disclosure of smoking and health 
research, the manufacturers are already required to do so under the 
MSA. While the DOJ seeks an injunction against future advertising 
campaigns targeting minors, the manufacturers are explicitly barred 
from doing so under the MSA (and are subject to a variety of extensive 
marketing restrictions). Finally, while the DOJ seeks the funding of a 
``corrective public education campaign,'' under the MSA the Defendants 
are required to contribute $1.7 billion to an independent foundation to 
take such action.
    Although at this early stage of the litigation Judge Kessler was 
understandably not willing to assume that the Defendants have complied 
with the MSA, or that the MSA has adequate enforcement mechanisms in 
the event of non-compliance (e.g., consent decrees with each settling 
State and Territory), as the case proceeds we expect the Court to fully 
consider these issues in the context of the need to ``prevent and 
restrain'' future wrongful conduct.
    D) Is disgorgement an available remedy under the equitable 
provisions of RICO? Traditionally, equitable relief has been provided 
through an injunction or specific performance, in contrast to monetary 
damages. While disgorgement of allegedly ``ill gotten'' gains is the 
primary financial threat remaining in the DOJ's tobacco claim, several 
factors, in our opinion, limit the potential financial threat 
associated with disgorgement. First, disgorgement is not even listed as 
a remedy under the equitable RICO statute. While the statute lists 
divestiture, injunctions, and reorganization as possible relief, it 
does not mention disgorgement (which is arguably not ``forward looking 
''). Second, disgorgement has never been authorized under the equitable 
provisions of RICO within the DC Circuit. Third, while among Federal 
Courts of Appeal only the Second Circuit in United States v. Carson has 
authorized disgorgement under the equitable provisions of RICO (to our 
knowledge, only in Carson has the Government been awarded monetary 
relief under the specific RICO cause of action being pursued in this 
case), that Court: i) required evidence that disgorgement of particular 
``ill gotten'' gains was necessary to ``prevent and restrain'' future 
RICO violations ``rather than to punish past conduct;'' ii) determined 
that ``RICO does not authorize disgorgement of gains ill-gotten long in 
the past;'' and iii) ruled that whether disgorgement is appropriate in 
a particular circumstance depends on whether there is a ``finding that 
the gains are being used to fund or promote illegal conduct.'' Each of 
these rulings, in our opinion, limits the potential financial threat of 
disgorgement under the equitable provisions of RICO in the DOJ's 
tobacco claim, if such relief is allowed.
    With respect to the legal challenges confronting the pursuit of 
disgorgement under RICO, also note that a DC District Court in FTC v. 
Mylan Labs, a 1999 decision, ruled that disgorgement was not a 
permissible remedy under the Clayton Act--whose remedial provisions are 
similar to RICO's--because it considered disgorgement a retrospective, 
rather than prospective, remedy. In Mylan Labs, the DC Court ruled that 
disgorgement is only available under statutes that explicitly provide 
for that remedy.
    Third, since the DOJ's tobacco lawsuit was originally filed, the US 
Court of Appeals for the DC Circuit has unanimously dismissed two 
separate groups of tobacco health care cost recovery claims. Its 
rulings were consistent with the unanimous decisions of seven other 
Federal Courts of Appeal, and in our opinion, indicate an unwillingness 
to alter existing law to punish a currently unpopular defendant. Given 
existing law and the issues outlined above, we believe that DOJ's 
tobacco lawsuit will ultimately be dismissed or otherwise resolved at 
little financial cost to the Defendants.
    Let me conclude with an observation based on my training and 
experience as a financial analyst. The public policy purpose of this 
lawsuit is presumably to stop any unethical behavior by the tobacco 
companies; for example, marketing to children. While the federal 
government could strongly support the MSA to promote that worthwhile 
goal, further monetary transfers from the tobacco industry, in my 
opinon, will not. Rather, monetary payments will only increase the 
economic partnership between the industry and the federal government, 
resulting in further taxes on people who in many cases can least afford 
to pay them.

    Senator Durbin. Thanks, Mr. Adelman.
    Mr. Ogden?

   STATEMENT OF DAVID W. OGDEN, PARTNER, WILMER, CUTLER AND 
    PICKERING, AND FORMER ASSISTANT ATTORNEY GENERAL, CIVIL 
                DIVISION, DEPARTMENT OF JUSTICE

    Mr. Ogden. Thank you, Mr. Chairman, Senator Hatch. I am 
pleased to respond to the committee's request that I testify 
about how the Justice Department managed United States v. 
Philip Morris during my tenure at the Justice Department.
    I served at the Department of Justice from August of 1995 
until January of this year, first in the Deputy Attorney 
General's Office, then as counselor and chief of staff to 
Attorney General Reno, and finally from February 1999 until 
January of 2001 as the Acting Assistant Attorney General and 
then the Assistant Attorney General in charge of the Civil 
Division.
    While on the Attorney General's staff, I represented the 
Department in the administration's efforts to work with the 
Congress on the enactment of comprehensive tobacco legislation 
in 1998. During the consideration of that legislation, the 
Department did put on hold its consideration of a lawsuit by 
the Justice Department against the cigarette manufacturers. But 
with all respect to the points that Professor Turley made 
earlier--and I have not read his article and will do so--I 
think one critical aspect of what that legislation was about 
needs to be understood to understand why the Justice Department 
put consideration of the lawsuit on hold. While that 
legislation would have done much that you can't do with a 
lawsuit, such as establishing FDA jurisdiction, for example, 
over tobacco, which we still do not have, it would also have 
done a couple of things that legislation very rarely does: 
Number one, it would have provided a stream of payments from 
the industry over a long period of time to the Federal 
Government, and, number two, it would have extinguished any 
claims that the Federal Government had against the tobacco 
industry. So, effectively, the legislation would have 
constituted a settlement of those claims.
    Now, it is because those claims were encompassed within the 
legislative process that we held off. Obviously it would have 
been far better to resolve any such claims in the context of a 
global settlement arrived at by the Congress. But when that 
effort collapsed, we then began to look very seriously at the 
underlying claims because they had not been resolved and 
because very similar claims had been successfully prosecuted by 
State Attorneys General across the country with great effect.
    Attorney General Reno had previously indicated that she did 
not believe that there were claims by the Federal Government 
for Medicaid payments, but she all along was very interested in 
the question of whether there was a claim for Medicare 
payments, other Federal health care payments, and specifically 
for injunctive relief.
    In December of 1998, the Attorney General concluded that 
there were viable theories along both lines, but that much work 
needed to be done to decide the specific shape of any lawsuit 
that would be filed.
    I was appointed Acting Assistant Attorney General for the 
Civil Division on February 1, 1999. One of my tasks was to 
establish a process to ensure a full evaluation of such a 
lawsuit and to make a recommendation to the Attorney General. 
Soon after I arrived, we completed a process begun by my 
predecessor to establish the Tobacco Litigation Team, comprised 
of career lawyers drawn mostly from the Civil Division, who 
were charged with developing and, if a case were approved, with 
pursuing the litigation. Simultaneously, we organized a 
distinct working group of about 15 to 20 attorneys drawn from 
across the Department with expertise in relevant areas, again, 
career lawyers, to evaluate the merits of the lawsuit. This 
group included career attorneys from other parts of the Civil 
Division, from the Criminal Division, the Antitrust Division, 
the Environment and Natural Resources Division, and the Office 
of Legal Counsel.
    These teams developed and evaluated the potential case 
through the spring and summer of 1999. Ultimately, they 
recommended that a lawsuit containing three counts be filed 
against the tobacco companies, and the nature of those counts 
has been described--one under the Medical Care Recovery Act, 
one under the Medicare Secondary Payer Act, and the last under 
the RICO statute, and specifically under the equitable portions 
of that statute which are available only to the Attorney 
General of the United States.
    I received those recommendations, and critical to my 
personal evaluation of those career lawyers' recommendations, I 
asked the Criminal Division to consider both the proposed RICO 
suit, because they have special expertise with that statute and 
the legal responsibility to approve any filing, and to look at 
the underlying fraud theory. The Criminal Division endorsed the 
filing. I recommended filing suit. And on September 21, 1999, 
the Attorney General directed us to do so. We filed the case 
the following day.
    I would note that in addition to the fine career lawyers in 
the Civil Division who have been litigating this case since 
that time, equally capable career lawyers in the Criminal 
Division have also been critical members of the litigation 
team.
    Before recommending to the Attorney General that we file 
suit, I had concluded that the Government had a strong case. I 
am particularly confident, and was then, about the strength of 
the claim under RICO. The evidence the litigation team had 
gathered demonstrated that over four and a half decades the 
cigarette manufacturers had engaged in a campaign of deception 
that both harmed the public health and cost American taxpayers 
billions of dollars. Given this evidence, I believed that the 
United States should sue to reverse, to the extent possible, 
the consequences of the cigarette manufacturers' long-standing 
conspiracy to defraud the American public, as well as to 
recover the health care costs that American taxpayers had 
shouldered.
    About a year ago, the court dismissed the counts for 
recovery of health care costs, but made clear that the 
Government had a right to proceed under RICO. And under that 
statute, the Government has the opportunity to recover the 
profits that the manufacturers have reaped as a result of their 
unlawful conduct, to obtain injunctive relief to put an end to 
the conduct that violated the Act, and to ameliorate its 
continuing effects.
    Now, in undertaking the case, we knew the task was large 
and that to succeed, the litigation team needed to be confident 
that it would have sufficient resources. Knowing that if we 
decided to file suit it would require substantial funding, in 
February 1999 the administration's budget for fiscal year 2000 
included a request for $20 million to fund the lawsuit, 
including 50 positions. After Congress declined to provide 
specific funding but also declined to bar the administration 
from spending funds from other sources to support the suit, the 
administration made more than $13 million available during that 
fiscal year, using funds from the Justice Department and the 
client agencies, an approach that is not dissimilar from the 
way other expensive litigation is funded by the Justice 
Department.
    Our planning for fiscal year 2001 began late in 1999. The 
litigation team and the budget experts in the Department 
determined that the team would need about $26 million. Based on 
our experience with funding the case in fiscal year 2000, 
instead of sending a specific budget request for that amount 
up, we put together a similar kind of plan to fund it from 
other sources and made clear to Congress, both through 
statements of the Justice Department and statements of the 
client agencies, that that was the intention of the Department. 
There was subsequently an effort in Congress to deprive the 
Department of the authority to use funds from those other 
sources, an effort that did not succeed, and ultimately we 
funded the case with $23.2 million for this fiscal year.
    We also addressed the number of employees that would be 
needed to litigate the case. We had envisioned from the first 
that eventually we would need about 50 people to do so. In the 
early years, in the first phases, we didn't need that many, but 
by late 2000, I believe that the team had approximately 25 
lawyers and 10 non-attorney staff. And the budget plan at that 
time, which was, of course, my last contact with the case, the 
budget plan was for the staff to reach 44 during the current 
fiscal year. And when I left the Department, the litigation 
team was actively hiring to reach that goal.
    Just as in the year before, the budgeting process for this 
fiscal year began late in 2000. By that time, I had been 
advised by Civil Division staff that the budget would need to 
be significantly higher than in 2001 because full-blown 
document discovery would have begun. Of course, pursuant to the 
normal budget timetable, the completion of that budget was left 
to the incoming administration when we left in January.
    It is important to note, Mr. Chairman, that while funding 
for the case was controversial on Capitol Hill throughout the 
period that I was there, we always began our budget planning 
early and the litigation team always understood the funding 
level that the administration would support. Obviously, the 
team also always knew that the administration supported the 
suit. That kind of certainty is important for long-term 
planning in any case, but it is particularly important in a 
case of this magnitude.
    With my time expired, I will stop now and would welcome any 
questions.
    [The prepared statement of Mr. Ogden follows:]

 Statement of David W. Ogden, Wilmer, Cutler & Pickering, Washington, 
D.C., and former Assistant Attorney General, Civil Division, Department 
                               of Justice

    Mr. Chairman and Members of the Committee, I am pleased to respond 
to the Committee's request that I testify about how the Department of 
Justice managed United States v. Philip Morris during my tenure at DOJ.
    I served in the Department of Justice from August 1995 until 
January 2001, first in the Deputy Attorney General's office, then as 
Counselor and Chief of Staff to the Attorney General, and finally from 
February 1999 through January 2001 as Acting Assistant Attorney General 
and then Assistant Attorney General in charge of the Civil Division.
    While on the Attorney General's staff, I represented the Department 
in the Administration's efforts to work with the Congress on the 
enactment of comprehensive tobacco legislation in 1998. During the 
consideration of legislation, the Department put on hold its 
consideration of a Justice Department lawsuit against the cigarette 
manufacturers. When the legislative effort collapsed in the summer of 
1998, the Department began more seriously evaluating the merits of such 
a lawsuit. Attorney General Reno had previously indicated that she did 
not believe the United States could recover from cigarette 
manufacturers for Medicaid expenditures (as the states had in their 
$240 billion settlement), but she was interested in whether the United 
States could recover expenditures under Medicare and other federal 
healthcare programs and obtain meaningful injunctive relief. In 
December 1998, the Attorney General concluded that there were 
substantial legal theories upon which a lawsuit by the United States 
against the major cigarette manufacturers could be based, but that much 
work needed to be done to decide the specific shape of any lawsuit that 
would be filed.
    I was appointed Acting Assistant Attorney General for the Civil 
Division on February 1, 1999. One of my tasks was to establish a 
process to ensure a full evaluation of such a lawsuit and to make a 
recommendation to the Attorney General. Soon after I arrived, we 
completed the process begun by my predecessor to establish the Tobacco 
Litigation Team, comprised of career lawyers mostly drawn from the 
Civil Division, who were charged with developing and, if a case were 
approved, with litigating the case. Simultaneously, we organized a 
distinct working group of about 15 to 20 attorneys to evaluate the 
merits of such a lawsuit. This group included career attorneys from 
other parts of the Civil Division, the Criminal Division, the Anti-
Trust Division, the Environment and Natural Resources Division, and the 
Office of Legal Counsel.
    These teams developed and evaluated the potential case through the 
spring and summer of 1999. Ultimately, they recommended that a lawsuit 
containing three counts be filed against the tobacco industry. The 
first count was under the Medical Care Recovery Act, which permits the 
United States to recover medical costs under circumstances creating 
tort liability. The second count was under the Medicare Secondary Payer 
Act, which gives the United States a right to recover healthcare costs 
paid under the Medicare Program from insurers and self-insurers. The 
third count was under the civil, equitable provisions of the Racketeer 
Influenced and Corrupt Organizations Act (``RICO''), which gives the 
Attorney General the express authority to seek equitable relief to 
remedy certain persistent patterns of unlawful conduct, including 
fraud.
    Critical to my personal evaluation of the career lawyers' 
recommendations, I asked the Criminal Division to consider both the 
proposed equitable RICO count (with respect to which that Division has 
particular expertise, as well as the legal responsibility to approve 
any filing) and the fraud theory underlying the entire suit. The 
Criminal Division endorsed filing suit on those theories; I recommended 
filing suit; and on September 21, 1999, the Attorney General directed 
us to do so. We filed the case the following day. I would note that in 
addition to the fine career lawyers in the Civil Division who have been 
litigating the case since that time, equally capable career lawyers in 
the Criminal Division have also been critical members of the litigation 
team.
    Before recommending to the Attorney General that we file suit, I 
had concluded that the government had a strong case. I was particularly 
confident about the strength of the government's claim under RICO. The 
evidence the Litigation Team had gathered demonstrated that over four 
and a half decades the cigarette manufacturers had engaged in a 
campaign of deception that both harmed the public health and cost 
American taxpayers billions of dollars. Given this evidence, I believed 
that the United States should sue to ask the court to reverse, to the 
extent possible, the consequences of the cigarette manufacturers' long-
standing conspiracy to defraud the American public, as well as to 
recover the healthcare costs that taxpayers had incurred due to the 
companies' misconduct. Under RICO, the government has the opportunity 
to recover the profits that the manufacturers have reaped as a result 
of their unlawful conduct. In addition, RICO permits the government to 
obtain injunctive relief to put an end to the conduct that violated the 
Act and amerliorate its continuing effects. In this case, this could 
include requiring the dedication of funds for public education and 
smoking cessation treatment programs, requiring effective measures to 
halt advertising of tobacco products to children, and imposing other 
appropriate management controls to ensure an end to the unlawful 
patterns of the past.
    The case was filed in the United States District Court for the 
District of Columbia. The cigarette manufacturers filed a motion 
arguing that the Justice Department had no legal basis to bring the 
case. As to the RICO count, the Court denied the companies' motion, 
upholding the government's legal theories under that statute. The Court 
granted the motion to dismiss the counts under the Medical Care 
Recovery Act and the Secondary Payer Act, however, and has now denied 
the government's motions for reconsideration of those rulings. The 
parties are in the discovery phase of the case on the RICO counts and 
the Court has scheduled trial for July 2003. As the Court said in 
ruling on the cigarette manufacturers' motions, under the RICO counts 
the defendants continue to face billions of dollars of potential 
liability for their ill-gotten profits. All of the injunctive relief 
sought by the government also still may issue.
    In undertaking the case, we knew the task was large, and that to 
succeed, the Litigation Team needed to be confident that it would have 
sufficient resources. Knowing that if we decided to file suit it would 
require substantial funding, in February 1999, the Administration's 
budget for FY 2000 included a request for $20 million to fund the 
lawsuit, including 50 positions (40 attorneys). After Congress declined 
to provide explicit funding but also declined to bar the Administration 
from funding a tobacco lawsuit from other sources, the Administration 
made more than $13 million available for FY 2000, using funds from the 
Justice Department and the client agencies. This approach was not 
dissimilar to the manner in which other expensive litigation of the 
United States has been funded.
    Our planning for the FY 2001 budget began in late 1999. The 
Litigation Team and the budget experts in the Department determined 
that the Team would need approximately $26 million to litigate the case 
during FY 2001. Based on our experience with funding the case in FY 
2000, the Administration did not include a specific line item for the 
tobacco lawsuit in the budget for FY 2001. Instead, by the spring of 
2000, the Administration determined to fund the lawsuit in FY 2001 in a 
manner similar to the way it had been funded in FY 2000. In May 2000, 
senior officials at the Departments of Defense, Health and Human 
Services, and Veterans Affairs wrote Congress endorsing the lawsuit and 
indicating that these departments expected to participate in funding 
the case in the coming fiscal year. Ultimately, the $23.2 million 
package that was put together included substantial amounts from those 
client agencies and the Health Care Fraud and Abuse Control Program, as 
well as $1.8 million from the Civil Division's base budget.
    We also addressed the number of employees that would be needed to 
litigate this case. We had envisioned that about 50 people would be 
required to litigate the case, as the Administration had provided in 
its 1999 budget. We did not need that many in the first phases of the 
case, but by late 2000 I believe that the team had approximately 25 
attorneys and 10 non-attorney staff, and the budget plan provided for 
the Team to reach a total of 44 staff during the balance of FY 2001. 
When I left the Department, the Litigation Team was actively hiring 
toward that goal so that it would have sufficient staff to meet the 
mounting demands of the litigation.
    Just as in the year before, the Division's budgeting process for 
the upcoming fiscal year--FY 2002--began in late 2000. By that time, I 
had been advised by Civil Division staff that the budget for FY 2002 
would have to be substantially higher than the previous year's because 
by then full blown document discovery would have begun. Of course, 
pursuant to the normal budget timetable, its completion was left to the 
incoming administration.
    It is important to note that while funding for the case was 
controversial on Capitol Hill throughout this period, we began our 
annual budget planning early, and the Litigation Team always understood 
the funding level that the Administration would support. Obviously, the 
Team also always knew that the Administration supported the suit. That 
kind of certainty is important for long-term planning and strategy in 
any case, and particularly in a case of this magnitude.
    Mr. Chairman, in closing I would like to say that I consider this 
to be a very important lawsuit. Proceeding under established legal 
principles, it calls upon the federal courts to send the message that 
businesses may not operate by defrauding the public about deadly and 
addictive products and expect to profit from it. It also calls upon the 
courts to fashion injunctive relief to address a national health crisis 
born of decades of fraud, and to stop the cigarette companies from 
continuing to market cigarettes--and their cycle of addiction, disease 
and death--to America's youth.
    If you have any questions, I would be pleased to respond to them.

    Senator Durbin. Mr. Ogden, in the time that you were with 
the Department of Justice working on this lawsuit, there was 
never any question in your mind of the commitment of the 
Attorney General to pursuing the lawsuit.
    Mr. Ogden. Absolutely not, Mr. Chairman. In fact, the 
Attorney General made that clear to me from the very beginning. 
She was the one who urged us to look at this and to analyze the 
opportunities for a lawsuit, and she personally met on at least 
two occasions with the litigation team to tell them how much 
she appreciated what they were doing.
    Senator Durbin. In contrast in this case, we are still 
waiting for Attorney General Ashcroft to make a definitive 
statement on this lawsuit. He has said repeatedly it is under 
review, whatever that means, while we find the deadline is 
approaching. And with the deadline approaching of July next 
year for the close of discovery, the next 9 or 10 months are 
going to be extraordinarily busy, are they not, for the 
Department of Justice in preparing for this deadline?
    Mr. Ogden. As I think Mr. Schiffer made clear, this is a 
very busy time in the lawsuit. He knows better than I exactly 
what the current exigencies are, but it is clearly, if not the 
most demanding, one of the most demanding periods for the suit.
    Senator Durbin. And it sounds unusual that at this point in 
time, 25 days before the end of the fiscal year, it is still 
not clear where the $44 million will come from for the next 
fiscal year.
    Mr. Ogden. Well, I will say in that regard that it is not a 
simple task to put together the funding involved, and it took 
us some time to finalize where exactly the money would come 
from. What was always clear was how much money we were 
attempting to get and what the effort would be to do that, and 
that I think is absolutely what the litigation team needs to 
know.
    Senator Durbin. And to some extent, your efforts were 
complicated because your friends on Capitol Hill, some of them, 
had a different view about what agencies would contribute to 
this effort. Is that not true?
    Mr. Ogden. I would not disagree with that, Senator.
    Senator Durbin. General Blumenthal, you made a very, I 
think, important point about not only needing the resources but 
also the resolve. I was struck when I heard about the 
settlement conference that the Department of Justice was 
walking into the room with these tobacco companies in 
positively the weakest possible position. I am not putting 
words in your mouth, but what was your impression?
    Mr. Blumenthal. My impression was that the Department was 
about to surrender, that this was a prelude to retreat and 
defeat, an admission by the Department of Justice that it was 
about to throw in the towel. And the effect is not just on the 
Department itself, but on the individuals, the professional 
staff, working day and night very hard on litigation where 
morale is tremendously important, and also on the court itself. 
The Department of Justice sends very important signals by the 
public statements it makes.
    So that kind of statement could not help but be a self-
fulfilling prophecy in a way, and as you put it at the 
beginning, as a trial lawyer there is no way that I would say 
anything like that about a potential failing or weakness in a 
lawsuit that I was prosecuting without having first very 
thoroughly evaluated the merits with my staff and without a 
court decision that made defeat inevitable. And we have no such 
situation here.
    Indeed, you know, in hearing some of the other witnesses, I 
couldn't help but go back to the time when Connecticut, as one 
of the first States to go to court, began its lawsuit against 
the industry, and we were given not a prayer, not a chance, not 
a nickel by our State legislature to begin this action. The 
prospects for victory here are momentous and tremendously 
promising compared to what the States encountered when they 
took those first steps. And, indeed, the lack of resources from 
our State legislature was one of the reasons why we were 
obliged to go to outside counsel to prosecute this case.
    Senator Durbin. Well, I think that is one of the things 
that strikes me. This does strike me as a lawsuit, as Professor 
Blakey and others have said, that has great potential, not only 
in terms of the settlement but possible recovery if it goes to 
trial, and the kinds of efforts that you can make against the 
tobacco companies. And yet the response from this new 
administration, from the Department of Justice, has been 
noncommittal, lukewarm. I don't understand that. The only 
explanation, unfortunately, is a bad one politically, that 
there for some reason is no political will in the Department of 
Justice to aggressively pursue a lawsuit against the tobacco 
companies. I hope that is not the case, but I am waiting for 
strong evidence otherwise.
    What kind of preparations were made by the State Attorneys 
General to finally bring this to a settlement? We have talked 
about the amount of money that the Department of Justice might 
have to put together to prepare for this lawsuit. Can you 
recall the kind of dollars that had to be spent by the States 
that were involved in your effort?
    Mr. Blumenthal. Well, we spent certainly more than the $23 
or $24 million that was spent last year and the next $23 or $24 
million that is contemplated for the coming year. We had to 
deal literally with warehouses of documents that were in the 
end, many of them, worthless to our lawsuit. We had to go after 
the documents that were, in fact, valuable to our lawsuit and 
which eventually won us the settlement that we achieved because 
the industry resisted disclosing them, tremendous preparation 
in working against the motions to disqualify, to dismiss, to 
remove Federal court, to delay, to obfuscate.
    This battle is really trench warfare, hand-to-hand combat 
in terms of litigation of the most demanding kind, and that 
kind of preparation is what we did in our lawsuit at various 
stages. Minnesota actually tried its lawsuit. Connecticut had a 
trial date and was prepared to go to trial. Some States were 
not as far along, which is why our individual costs differed. 
But the point is that there has to be no doubt or question in 
the minds of the people working on this case, as well as the 
opponent defendants, that the Department of Justice will spare 
no effort or no resources to pursue it.
    Senator Durbin. Well, I have to say that that is lacking at 
this point. I really had hoped the Attorney General could come 
today, as he was invited, and that he could state unequivocally 
that they were going forward with the lawsuit and they would 
gather the resources as needed to put together the most 
favorable case on behalf of taxpayers, the people of this 
country. The Attorney General could not attend, and we are 
still waiting for a statement from him, despite repeated 
requests along those lines. We will continue to make those 
requests because I think that that is essential if this is 
going to be a successful effort.
    Professor Blakey, could you address Mr. Adelman's 
observations on RICO so that we have the record complete on 
that as far as your point of view?
    Mr. Blakey. He has made a number of comments, and I don't 
want to be uncharitable, but, of course, I am now going to be 
uncharitable. If I were to grade him as an analyst, I don't 
know how to grade him. If I were to grade him as a law student, 
he flunks. His whole analysis is premised, for example, is on 
the validity of the Carson decision, which says disgorgement 
must be forward-looking and not backward-looking. Carson is 
wrongly decided for technical reasons that I need not go into. 
They are fully laid out in my statement.
    In April, the phrase ``prevent and restrain'' in 18 
U.S.C.Sec. 1964(a) is a common law couplet that is designed to 
tell the court that it has all of the powers of a common law 
court, and the Supreme Court--I don't care about the D.C. 
Circuit--said in Porter Wagoner that if you are going to 
withhold from a court the power of disgorgement, you have to be 
express about it.
    Mr. Adelman makes the remark that, oh, but it is not 
listed. He didn't read it the statute. It says ``including, but 
not limited to,'' and the legislative history says ``this list 
is not exhaustive.''
    Disgorgement is a standard equity remedy, it is done in 
securities fraud; it is done in commodities fraud; it is done 
in RICO cases. And it makes good sense. Industry stole money, 
and it now says, ``We won't do it again. Let us keep the 
money?''
    The courts have said again and again and again--and I am 
quoting now, Janigan v. Taylor--``It is simple equity that a 
wrongdoer should disgorge his fraudulent enrichment.'' That 
makes sense to me. You steal it, you have to give it back.
    Now I am reading from Securities and Exchange Commission v. 
Blatt: The purpose of disgorgement is to ``deprive the 
wrongdoer of his ill-gotten gains and deter'' other people. The 
decision doesn't say anything about forward-looking.
    He suggests that in other civil cases the government always 
preceeded after a criminal conviction, and here none is 
present. The Supreme Court in Sedima decided you don't need a 
criminal conviction before you bring a civil RICO. And stop and 
think about it. It is modeled on antitrust. They can sue first. 
They don't have to indict first. It is modeled on securities. 
In securities you can sue first. You don't have to indict. It 
is modeled on the EPA. In EPA actions, you can sue first. You 
don't to indict. RICO has two tracks. No preference is given to 
the criminal as opposed to the civil track.
    I don't want to go through his statement point by point, 
but based on his recommendations, I would be willing to bet--I 
don't bet on litigation--but based on his recommendations. . . 

    I cannot say that this suit lacks merit. Let me put it to 
you this way: We got a decision in the State case in Texas that 
we could bifurcate the litigation, do RICO liability first, 
then the other parts. That course would have led to 
disgorgement. The tobacco industry sought a mandamus in the 
Fifth Circuit. It told the court that if we had the chance to 
show RICO liability apart from the common law claims, it would 
have no choice but to settle. The Fifth Circuit turned them 
down and they settled.
    I cannot give you a complete mind-read of the industry, Nor 
can I give you a complete mind-read of the negotiators. But I 
was involved in the litigation when we got to disgorgement in 
Florida, and it settled. When we got to disgorgement in Texas, 
we got its attention.
    You want to get a litigator's attention? It is like a mule. 
You got to get a two-by-four. Once you get his attention, then 
you can sit down and do the right thing.
    Senator this case is not about money. It is about conduct. 
We can't do anything with the 40 million people that are 
already addicted. We probably have to give them their 
cigarettes until they die and take care of them. But we can 
prevent the 3,000 children becoming addicted each year by 
simply shutting down advertisement. And we can shut down the 
advertisement through a negotiated settlement in a way in which 
under prevailing Supreme Court jurisprudence we can't do 
through legislation. We can tailor that State by State, 
jurisdiction by jurisdiction. This is something that is 
peculiarly apt for an equity resolution, particularly when they 
understand that it is either clean up your act or cough up your 
profits.
    Senator the people are not moral people. They are 
economists. Every time we dealt with them, they were 
economists. They added up what it was going to cost either way, 
and they took the cheapest way. If we can explain to them that 
it is more expensive for them to continue to addict children 
than it is not to, they will stop.
    Senator Durbin. Thank you very much.
    Professor Turley, let me just note, I listened to your 
reference to James Madison and Clausewitz On War, or whatever 
the reference was. I know the book but I have not read it. I 
think it should be said for the record, the tobacco companies 
are more than big companies. They are big political players in 
America. The tobacco companies, because of their political 
clout, stopped us from legislating, literally stopped us, 
although the American people were solidly behind us. Because of 
our campaign finance system, because of connections on Capitol 
Hill, we were unable to pass even the most basic legislation to 
protect children and families across this country. That is just 
a fact.
    I hope that that is not the force that is at work now in 
the Department of Justice. I hope instead that the statement 
made earlier by Mr. Schiffer is an indication that they are 
determined, that they will go forward. I don't know how James 
Madison would view it. I don't care. Frankly, if at the end of 
the day we save some lives, Ms. DeNardo and others who have 
been afflicted by this product have a better chance to live, 
let me tell you, I am prepared to use the courts, the 
legislature, even a courageous President, if we could find one 
on this issue, to take them on in any way we can. And I have to 
say I agree with Professor Blakey. Accepting your premise, I 
don't know how you could ever rationalize Brown v. Board of 
Education. But thank God the Supreme Court did, and we are 
better country for it.
    Mr. Turley. Could I respond, Senator?
    Senator Durbin. Of course.
    Mr. Turley. Thank you, sir. First of all, I don't disagree 
with you necessarily about the lobbying ability and authority 
of this industry in Congress. I know that you have done 
herculean efforts to try to get things through. But in terms of 
the comparison between principles of the Madisonian system and 
the particular dangers of smoking, every generation as a 
scourge. At one time, it was liquor. At one time, it was 
racism. But every generation has a scourge. And every scourge 
demands immediate response.
    I have two sons and a third one coming. I would love them 
to grow up in a world without tobacco. I truly would. But I am 
less concerned about the danger of this addictive product to 
them than I am about the Government that they inherit. In my 
view, the road to constitutional perdition is paved with good 
intentions.
    I should note, Senator, I don't agree entirely with my 
friend Bob Blakey in terms of disgorgement and some of the 
rules of RICO. I am loath to disagree with him about anything 
dealing with RICO. But, for example, I don't agree that the 
Supreme Court said you had to be express in order to eliminate 
disgorgement as a remedy. It said that it has to be a necessary 
and inescapable inference. You don't have to be express.
    I agree with Robert that that is still a high standard and 
that that is still a question of some doubt. The problem that I 
have with this use of RICO is that this is a case of first 
impression because they are not suing a single company but an 
industry. In my view, something of that magnitude belongs to 
you. Quite frankly, as a Chicagoan, I am happy to give that 
issue to you and to the rest of your colleagues. I just have a 
problem with the means, and I don't think we can lose sight of 
the means because the ends are meritorious.
    By the way, I do not agree with the testimony earlier that 
the chances of this litigation is momentous, and I have an 
explanation of why you have heard these statements coming from 
the Department of Justice. The fault, with all due respect to 
Mr. Ogden, lies with the Department of Justice. They had two 
counts that most of us immediately criticized as bordering on 
the frivolous. The MCRA and MSP counts certainly bordered on 
the frivolous and Judge Kessler spent little time to get rid of 
those counts. The reason there is this doubt about the strength 
of the Government's case is that two-thirds of the Government's 
case was so facially weak. I agree with you that RICO is the 
strongest part of that case but I think that the Department of 
Justice undermined its ability to settle. I also do litigation 
and you do not create a case with weaknesses like those and 
hope that you can flex your muscle in settlement. Not after 
two-thirds of their ship went down.
    But I have taken too much of your time, but I appreciate 
the opportunity to respond.
    Senator Durbin. We could argue about RICO forever, and we 
won't. I can recall one of the most basic things I learned in 
law school about when the facts are on your side, beat on the 
facts. When the law is on your side, beat on the law. And when 
neither law nor facts are on your side, beat on the table.
    At this point the United States Government has decided to 
proceed with this lawsuit. If it does it half-hearted without 
the resources and commitment, it will lose. The taxpayers will 
lose. We have a RICO cause of action which good legal minds 
happen to believe is a sound one. The question is whether we 
will dedicate the resources to try to make sure we win. And 
that was the purpose of this hearing.
    I want to thank everyone who came to testify, and 
particularly Ms. DeNardo. Thank you so much for coming and 
putting a human face on an issue that is important for all of 
us to remember as we deliberate lawyer talk and all of the 
different legal theories.
    We are going to put Senator Kennedy's statement in the 
record.
    And I want to state that the record will remain open for 
one week, consistent with committee practices, for Senators who 
want to submit statements and questions to the witnesses. And 
the committee will stand adjourned.
    [Whereupon, at 4:27 p.m., the committee was adjourned.]
    [Submissions for the record follow.]

                       SUBMISSIONS FOR THE RECORD

Statement of Hon. Orrin G. Hatch, a U.S. Senator from the State of Utah

    Mr. Chairman, let me start by saying that you and I share an 
antipathy to the use of tobacco. You may recall that beginning in 1997, 
in this Committee, I held 10 hearings on the state tobacco litigation 
settlement which I strongly supported.
    Senator Feinstein and I developed a bipartisan, comprehensive 
tobacco bill that encompassed the major elements of the settlement 
agreed upon the by the state attorneys' general, public health 
advocates, plaintiffs' attorneys and the tobacco industry. 
Unfortunately, the Senate was unable to come to consensus on any 
tobacco legislation. In my view, this happened because the Senate floor 
vehicle became way too expansive and extremely expensive because some 
of our friends could not exercise restraint.
    Clearly, I am no friend of tobacco use nor an apologist for the 
tobacco industry. Indeed, I have never used tobacco products in my 
life. However, it is also no secret that I have been extremely 
skeptical of the federal lawsuit from its inception.
    From a policy and Constitutional perspective, no administration 
should be able to circumvent the Constitution and Congress' sole 
authority to raise and spend revenue for the general welfare by suing 
for billions of dollars and then spending the money without 
congressional appropriation. If there is no legitimate lawsuit, the 
action by the Department of Justice would violate our necessary 
principles of separation of powers, a cornerstone of our Constitution's 
guarantee of liberty. Simply put, litigation should not replace 
legislation as the means to effect public policy in a democracy.
    Granting the federal government the unfettered ability to sue any 
industry, which happens to fall into disfavor, in order to effectuate a 
social goal like reduction in tobacco-related illnesses, is a mistake. 
It would in essence allow the executive branch to bypass Congress and 
the law, and set unilaterally our nation's tobacco policy.
    In 1999, when the Clinton Administration decided to file its own 
suit against the tobacco companies it based the claim on a distorted--
at least in my opinion--interpretation of three federal statutes: the 
Medical Care Recovery Act (MCRA); the Medicare Secondary Payer (MSP) 
provisions; and the civil provisions of the Racketeering Influenced and 
Corrupt Organizations Act (RICO). As many will recall, I and others on 
this committee believed that there was no legal basis for the first two 
claims. Turns out we were right. In September of 2000, Judge Kessler 
dismissed both the MCRA and MSP claims, leaving only the RICO count 
standing. She resoundingly reaffirmed that dismissal in the face of the 
government's attempt to amend its complaint and re-plead the dismissed 
counts.
    In my opinion the RICO claim was ill conceived as well. While Judge 
Kessler did allow the RICO claim to remain, she also clearly suggests 
that the government, at best, has a long way to go to prove its claim. 
She indicated discomfort with this novel application of the theory of 
disgorgement. As she noted, ``whether disgorgement is appropriate in a 
particular case depends on whether there is a `finding that the gains 
are being used to fund or promote the illegal conduct, or constitute 
capital available for that purpose'.'' That being said, Judge Kessler 
also clearly indicated that she was not making any finding endorsing 
the substance of the government's RICO claim, that ``this Court has not 
made such a finding, nor could it at this stage.'' I think we can make 
better use of the tax-payers' money.
    As we all know, in 1998, 46 states, the District of Columbia and 
five U.S. territories signed a contractual agreement--the Master 
Settlement Agreement. In addition to paying out large monetary 
settlements to the states, the Agreement imposed restrictions on 
tobacco advertising, marketing and promotion. It also addresses the 
allegations that tobacco companies had long concealed the dangerous 
health effects of smoking by prohibiting manufacturers from suppressing 
health research and requiring them to fund anti tobacco research and 
education. It is my understanding there is no credible evidence that 
the companies are not in compliance with the terms of the Master 
Agreement. If the Agreement is being violated--then shouldn't the state 
attorneys' general be taking action to ensure enforcement? If our goal 
is truly to address health issues related to tobacco use, then we 
should be seeking to ensure enforcement of the Agreement which already 
deals with those concerns. But, if the goal of federal litigation is to 
effectively take a legislative function and extort a huge monetary 
settlement that we can spend, then aren't we in effect addicting the 
federal government to nicotine?
    Since the Executive Branch elected to pursue this litigation in the 
Clinton Administration (in my opinion without legal foundation), and 
the Legislative Branch declined to act, we should defer to the 
Executive Branch and its enforcement arm at the DOJ on how the case is 
handled absent a clear indication of an overuse of tax-payer money. It 
is my understanding that the DOJ's budget request in relation to this 
litigation is identical to its budget request from last year and that 
they have obtained additional funding from other agencies to support 
the case. There is no lack of funding here. In fact, is everyone aware 
of just how expensive it has been for the federal government to pursue 
this case? The budget for this year was approximately $23 million. If 
you ask me that is a lot of money to pursue a case that has a 
questionable return value given that the majority of its legal claims 
have been dismissed. Moreover, the Civil Division continues to add 
staff attorneys as needed to handle the litigation. Staffing needs are 
being met and funding request levels maintained--I do not see any clear 
indication of mismanagement here. I sincerely hope that we are not here 
today to cross examine the Department on the particulars of ongoing 
litigation.
    I hope that we can resolve this in a way that is within the law, 
makes sense and saves taxpayer money.

                                

 Statement of Hon. Edward M. Kennedy, a U.S. Senator from the State of 
                             Massachusetts

    I am deeply concerned about the lack of commitment which the Bush 
Administration has shown to date regarding the Department of Justice's 
lawsuit against the tobacco industry. For more than eight months, the 
Administration's official position has been only that they are 
``reviewing the case.'' At the same time, we have witnessed a steady 
stream of unofficial comments from within the Administration that the 
case is weak, that the DOJ litigation team ``had done a poor job'', and 
that the White House is preparing to abandon the case. Unfortunately, 
the Administration has not publicly repudiated these statements, even 
though they are clearly injurious to the government's position in this 
landmark case. The Committee invited Attorney General Ashcroft to 
personally address this important issue at today's hearing. He 
declined.
    I had hoped that this hearing would produce a strong, unequivocal 
statement by the Administration that it would vigorously pursue the 
case against the tobacco industry on behalf of the American people. 
Those who we represent deserve their day in court against this industry 
whose product is the number one cause of preventable death in the 
nation. The major tobacco companies have engaged in a forty year 
conspiracy to conceal the lethalness and addictiveness of smoking. They 
have engaged in the most massive consumer fraud in history. The 
industry has deliberately targeted children as ``replacement smokers'' 
in violation of the laws of nearly every state. Generations of children 
have been subjected to a marketing campaign of unprecedented size and 
duration, aimed at seducing them into smoking. These unlawful 
activities by the tobacco industry are the basis for the United States 
Government's RICO claim. The evidence of wrongdoing is overwhelming. 
The federal district court judge hearing the case has already 
considered and denied defendants' motions to dismiss the RICO claim. In 
essence, this ruling upholds the legal theory supporting the 
government's case. Justice requires that this case now go forward.
    Those who oppose this litigation make much of the judge's decision 
to dismiss claims brought under the Medical Case Recovery Act and the
    Medicare Secondary Payer Act. However, they conveniently ignore the 
decision of the judge permitting the RICO claim to proceed to trial. In 
their motions, the tobacco companies challenged the legal basis for the 
government's case. Their arguments were rejected by the court. The RICO 
claim goes to the heart of the case. It focuses directly on the 
fraudulent misconduct of the tobacco companies. Under RICO, the court 
can order both disgorgement of illegal profits--the profits which these 
companies made as a result of their fraudulent behavior--and injunctive 
relief prohibiting future misconduct.
    Disgorgement of the industry's illegal profits will compensate 
American taxpayers for the more than $20 billion annual cost of medical 
care provided to those suffering from tobacco induced disease. It is 
long past time that those costs were borne by the companies that cause 
them. The purpose of the suit goes beyond compensation. The case also 
seeks to invoke the equitable powers of the Court to force real change 
in the conduct of the tobacco industry--an end to marketing targeted at 
children, an end to the massive disinformation campaign which the 
industry has waged to mislead
    the public about the health consequences of smoking, and an end to 
their efforts to use the addictiveness of their products to entrap new 
consumers.
    The stakes are vast. Three thousand children begin smoking every 
day. A thousand of them will die prematurely from tobacco-induced 
diseases. Cigarettes kill well over four hundred thousand Americans 
each year. This is more lives lost each year than from automobile 
accidents, illegal drugs, AIDS, murder, suicide, and fires combined.
    The tobacco industry currently spends five billion dollars a year 
to promote its products. Much of that money is spent in ways designed 
to tempt children to start smoking, before they are mature enough to 
appreciate the enormity of the health risk. The industry knows that 
more than 90% of smokers begin as children and are addicted by the time 
they reach adulthood. Documents obtained from tobacco companies prove, 
in the companies' own words, the magnitude of the industry's efforts to 
trap children into dependency on their deadly product.
    Nicotine in cigarettes is a highly addictive drug. Medical experts 
say that it is as addictive as heroin or cocaine. Yet for decades, 
tobacco companies have vehemently denied the addictiveness of their 
products. No on can forget the parade of tobacco executives who 
testified under oath before Congress as recently as 1994 that smoking 
cigarettes is not addictive. Overwhelming evidence in industry 
documents obtained through the discovery process proves that the 
companies not only knew of this addictiveness for decades, but actually 
relied on it as the basis for their marketing strategy. As we now know, 
cigarette manufacturers chemically manipulated the nicotine in their 
products to make it even more addictive. Even today, the industry is 
still relying on this addictiveness to sell their product.
    The tobacco industry has a long, dishonorable history of providing 
misleading information about the health consequences of smoking. These 
companies have repeatedly sought to characterize their products as far 
less hazardous than they are.
    It would be a public health tragedy if the Bush Administration 
decides to abandon this case or to deny it the litigation resources 
which are essential to success. The federal court has ruled that the 
government's RICO claim against the tobacco industry should proceed to 
trial. Let the evidence be presented and let the court decide. The 
American people are entitled to their day in court.

                                

  Statement of Hon. Mitch McConnell, a U.S. Senator from the State of 
                                Kentucky

    Mr Chairman, as you may well imagine, I am unable to say ``thank 
you'' for scheduling this hearing to determine whether the Department 
of Justice is effectively prosecuting and managing its case against the 
tobacco companies. I have been, and will continue to be, steadfastly 
opposed to this case. Therefore, I do not think this case should be 
prosecuted and managed at all.
    My strong opposition to this case is not due just to the toll the 
tobacco litigation ``free-for-all'' has taken on my constituents, 
Kentucky's tobacco farm families, although this toll is certainly 
substantial. When the War on Tobacco began, I represented 60,000 
tobacco farm families. Now, more than eight years later, I represent 
fewer than 45,000 tobacco farm families. Farmers who, for generations, 
have grown a legal product, a product which their elected 
representatives in the federal government-the United States Congress-
said they could grow, harvest and sell.
    My strong opposition to this case is not solely for parochial 
reasons, however. You see, the Congress still, to this day, has not 
told my constituents or tobacco farm families in other states that what 
they are growing is anything other than a perfectly legal commodity. 
Instead, a branch of the federal government which is not charged with 
making the nation's laws decided to do an end-run around the 
legislative process. The Clinton-Gore Administration did not like it 
that Congress had refused to legislate a legal commodity out of 
existence, so it decided to try to litigate tobacco out of existence by 
punishing those who grow tobacco and make tobacco products.
    I object to this usurpation of Constitutional authority and to the 
sorry precedent it sets. As an example of the unhealthy fruit this case 
has borne, one need look no further than the similarly specious 
lawsuits some cities have filed against another perfectly legal 
American industry, the American firearms manufacturers. Thus, I oppose 
this litigation as a matter of principle, and I will continue to oppose 
the end-running of the legislative process through the filing of 
specious legal claims that are designed to punish American businesses 
for producing legal commodities. And I will do so regardless of who 
occupies the White House.
    I am not the only one who believes this case has no merit. For 
starters, there is the judge who has thrown-out two-thirds of this 
case. Then there is not one, but two, cabinet secretaries who agree 
with me, and interestingly, these were cabinet officers who served in 
the administration of President Clinton. In testifying before this 
body, then-Attorney General Janet Reno questioned the legal bases for a 
federal suit against the tobacco industry. And former Secretary of 
Labor Robert Reich noted that the tobacco litigation was a naked 
attempt to circumvent the authority of the Congress. Writing in The 
Wall Street Journal, Secretary Reich lamented that the Clinton 
Administration had ``lost faith in democracy'', stating:

        Fed up with trying to move legislation, the [Clinton] White 
        House is launching lawsuits to succeed where legislation 
        failed. The strategy may work, but at the cost of making our 
        frail democracy even weaker. . .  .[T]he biggest problem is 
        that these lawsuits are end-runs around the democratic process. 
        We used to be a nation of laws, but this new strategy presents 
        novel means of legislating-within settlement negotiations of 
        large civil lawsuits initiated by the executive branch. This is 
        faux legislation which sacrifices democracy to the discretion 
        of administration officials operating in secret. [The Wall 
        Street Journal, January 12, 2000]

    My hometown newspaper, the Louisville Courier-Journal, a media 
organ with which I am not often in agreement, has also spoken out 
against this case, saying that the federal government's ``lawsuit never 
should have been filed,'' and that ``The Bush Administration is right 
to look for a way to end it.'' [Courier Journal, June 21, 2001] And 
after two-thirds of this suit was thrown-out, The Washington Post also 
questioned the continued maintenance of this case. It said:

        We have our own reservations about what remains of the lawsuit; 
        what seemed to us to be the strongest claims have been thrown 
        out; and the two that are left rely on a civil racketeering 
        statute whose use in cases such as this we don't much like. So 
        maybe the Administration is right to abandon the case, and 
        certainly it is within its rights. [Washington Post, June 21, 
        2001]

    Unfortunately, it appears the current Administration is going down 
the road paved by the past Administration. Regardless of who prevails, 
this lawsuit is a sorry precedent that compromises the role of the 
legislative branch in our Constitutional order.
    Thank you.

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