[Congressional Record (Bound Edition), Volume 146 (2000), Part 11]
[House]
[Pages 16508-16512]
[From the U.S. Government Publishing Office, www.gpo.gov]



              IMPORTANT HEALTH CARE ISSUES FACING AMERICA

  The SPEAKER pro tempore. Under the Speaker's announced policy of 
January 6, 1999, the gentleman from Iowa (Mr. Ganske) is recognized for 
60 minutes.


                               HMO Abuses

  Mr. GANSKE. Mr. Speaker, tonight I am going to talk about two 
important health care issues that are facing Congress. One concerns HMO 
abuses, and the other concerns the number one public health problem in 
the country, and that is the use of tobacco.
  Mr. Speaker, about 8 months ago on the floor of this House we had a 
momentous debate for about 2\1/2\ days on patient protection 
legislation; and at the end of that debate, 275 bipartisan Republican 
and Democratic Members of this Congress voted to pass the Norwood-
Dingell-Ganske bipartisan consensus Managed Care Reform Act of 1999. 
Nearly every nurse, nearly every dentist, nearly every doctor who is a 
Member of this body voted for that.
  Well, what has happened since then? Very little. A conference 
committee was belatedly named to try to get agreement between the bill 
that passed the House, the strong patient reform bill, and the bill 
that passed the Senate, which was more an HMO reform bill.
  Unfortunately, nothing much is going on in that conference now. I do 
not think they have met for probably about 2 months. There has been a 
paucity of public meetings. But a few weeks ago the issue was brought 
back to the floor of the Senate and a GOP HMO bill was added as an 
amendment to a bill, and it passed, just barely. It was the Nickles HMO 
amendment.
  I would have to advise my colleagues that that GOP Senate bill that 
passed a few weeks ago by a margin of about one or two votes is worse 
than no bill at all. In fact, it is an HMO protection bill, not a 
patient protection bill. Would Members like to have some proof of that? 
Well, let me tell my fellow colleagues about some of the things that 
HMOs have been doing that have been documented in a recent article in 
Smart Money magazine in their July issue.
  Consider the case of a man named Jim Ridler. It was shortly after 
noon on a Friday back in August 1995 when Jim Ridler, then 35 years 
old, had been out doing some errands. He was returning to his home in a 
small town in Minnesota on his motorcycle when a minivan coming from 
the opposite direction swerved right into his lane. It hit Jim head on. 
It threw him more than 200 feet into a ditch. He broke his neck, his 
collarbone, his hip, several ribs, all of the bones in both legs. It 
ripped the muscles right through his arm.
  Over the next 4 months, after a dozen surgeries, he still did not 
know whether he would ever walk again. When he got a phone call from 
his lawyer who had started legal proceedings against the driver of that 
minivan who had swerved into his path, that call that he got from his 
lawyer really shook him up.
  ``I am afraid I have got some bad news for you,'' said his lawyer. He 
told Jim that even if Jim won his lawsuit, his health plan, his HMO, 
wanted to take a big chunk out of what they had spent on his care.
  ``You are joking, right?'' said Jim.
  ``Nope,'' said the lawyer.
  Jim's health plan had a clause in its contract that allowed the HMO 
to stake a claim in his settlement, a claim known in insurance as 
subrogation.
  ``So I pay the premium, and then something happens that I need the 
insurance for, and they want their money back?'' Ridler asked 
incredulously. ``The way I figure it, my health insurance is just a 
loan.''
  Well, Ridler eventually settled his lawsuit for $450,000, which was 
all the liability insurance available. His health plan then took 
$406,000, leaving him after expenses with a grand total of $29,000.
  Jim said, ``I feel like I was raped by the system,'' and I guess I 
can understand his point of view.
  I doubt that my colleagues know, and I doubt that most people know, 
that they have what are called subrogation clauses in their contracts 
that mean that if they have been in an accident and they try to recover 
from a negligent individual, like the person who almost killed Ridler, 
that their HMO can go after that settlement.
  Now, Mr. Speaker, originally subrogation was used for cases in which 
care was provided to patients who had no health insurance at all, but 
who might receive a settlement due to somebody else's negligence. 
However, HMOs are now even seeking to be reimbursed for care that they 
have not even paid for.
  Susan De Garmos found that out 10 years ago when her HMO asked for 
reimbursement on her son's medical bills. In 1990 her son, Stephen De 
Garmos, who was age 10 at that time, was hit by a pickup truck while 
riding his bike to football practice near his home in West Virginia. 
That accident left him paralyzed from the waist down. His parents sued 
the negligent driver; and they collected $750,000 in settlement, plus 
$200,000 from the underinsured motorist policy. Now, remember, this 
little boy is paralyzed for the rest of his life.
  Well, the Health Plan of Upper Ohio Valley wanted $128,000 in 
subrogation for Stephen's bills. It so happens that Stephen's mother 
thought that amount was high, so she phoned the hospital in Columbus, 
Ohio, where Stephen had been treated; and she got an itemized list of 
the charges.

                              {time}  1900

  What she found out infuriated her. The HMO had paid much less than 
the $128,000 it was now seeking from her son, her paralyzed son's 
settlement.
  Mrs. DeGarmo had found another dirty little secret of managed care, 
and that was that HMOs often use subrogation to go after a hospital's 
billed charges, the fee for full paying patients, even though the HMO 
gets a discount off the bill charges.
  According to DeGarmo's lawyer, the health plan of Upper Ohio Valley 
actually paid about $70,000 to treat Steve. That meant they were trying 
to take $50,000 that they had not even paid for from Steve's 
settlement. They were going to make money off this little boy who had 
been paralyzed.
  When the DeGarmos refused to pay, get this, the HMO had the gall to 
sue them.
  Well, others found out about this HMO's action and in 1999 the HMO, 
that HMO, settled suits for $9 million among roughly 3,000 other 
patients that they had treated like the DeGarmos.
  Now, when HMOs get compensation in excess of their costs, I believe 
they are depriving victims of funds that those victims need to recover. 
This subrogation process has even spawned an industry of companies that 
handle collections for a fee. It could be 25 to 33 percent of the 
settlement. The biggest of these subrogation companies is Louisville, 
Kentucky-based Health Care

[[Page 16509]]

Recoveries, Inc. Last year, Health Care Recoveries, Inc., of 
Louisville, whose biggest customer, not surprisingly is United Health 
Care, recovered $226 million from its clients and its usual cut was 27 
percent.
  According to one former claims examiner for HRI, Steve Pope, the 
company is so intent on maximizing collections that it crosses the line 
into questionable perhaps.
  Take the case of 16-year-old Courtney Ashmore, who had been riding a 
four-wheeler on a country road near her home by Tupelo, Mississippi. 
The owner of the bordering land had strung a cable across the road. You 
guessed it. Courtney ran into it and almost cut off her head.
  Her family collected $100,000 from the property owner. Their health 
plan paid $26,000 for Courtney's medical care. Steve Pope, the claims 
examiner for HRI, that Louisville, Kentucky, company, contacted the 
family's lawyer and wanted the $26,000 back.
  Well, the lawyer was no dummy. He asked for a copy of the contract 
showing the subrogation clause. Well, HRI could not find a copy of the 
contract so Mr. Pope was told by his supervisor at HRI to send out a 
page from a generic contract that did have a subrogation clause in it, 
and later Mr. Pope found out that Courtney's health plan did not, in 
fact, mention subrogation.
  Still he has testified he was told to pursue the money anyway. Let me 
repeat that. This employee of this company in Louisville, Kentucky, the 
right-hand man company for United Health Care, was told to go after 
part of this little girl's settlement even though they did not have a 
subrogation clause in the contract.
  Mr. Pope has testified, quote, these practices were so widespread and 
I just got tired of being told to cheat and steal from people, unquote.
  Mr. Speaker, the notion that subrogation should be prohibited or at 
least restricted is gaining ground. Twenty-five States have adopted 
doctrine that injured people get fully compensated before health plans, 
HMOs, can collect any share of personal injury money.
  In March, a Maryland appeals court went even further. It ruled that 
the State's HMO act prohibits managed care companies from pursuing 
subrogation at all. The Court said, quote, an HMO by its definition 
provides health care services on a prepaid basis. A subscriber has no 
further obligation beyond his or her fee, unquote.
  So what did the Senate GOP bill do to address this problem with 
subrogation? Did the Senate GOP bill try to make the system more fair 
for patients? Did it protect those State laws which are being passed to 
prevent subrogation abuses by HMOs? Oh, no, Mr. Speaker. The Senate GOP 
bill goes even further than subrogation in protecting HMOs. It says 
that the total amount of damages to a patient like Jim Ridler or Steve 
DeGarmo or Ashley Courtland could be reduced by the amount of care 
costs whether they have a subrogation clause in their contract or not.
  In other words, the Senate GOP bill passed a few weeks ago would 
preclude State laws being passed on subrogation entirely, and over in 
the Senate they say, oh, we are for States' rights; we do not want to 
take away the States rights to regulate insurance? And in their bill 
they do exactly that.
  If that were not enough of a sop to the HMO industry, the Nickels 
bill says that the reduction in the award would be determined in a 
pretrial proceeding.


                Announcement by the Speaker Pro Tempore

  The SPEAKER pro tempore (Mr. Green of Wisconsin). The Chair will 
caution the gentleman that it is not in order to characterize Senate 
action or to otherwise cast reflection on the Senate.
  Mr. GANSKE. In talking about other legislation on Capitol Hill, the 
bill that passed a couple of weeks ago says that the reduction in the 
award would be determined in a pretrial proceeding and that any 
evidence regarding this reduction would be inadmissible in a trial 
between the injured patient and the HMO.
  Well, what does that mean? Well, let us say that one is hit by a 
drunk driver while crossing the street and one's HMO subsequently 
refuses to pay for necessary physical therapy even though these are 
covered services under one's employer plan.
  So one files two separate lawsuits, one against the drunk driver in 
the State court and the other against the HMO in the Federal court 
because the HMO is not treating one fairly.
  Let us say the civil case against the drunk driver is delayed because 
criminal charges are prevailing against him. If the Federal case, the 
one against the HMO, proceeds to trial under the bill that passed a 
couple of weeks ago, the Federal judge would have to guess how much a 
State jury would award one, and the Federal judge would have no way of 
knowing what one actually could collect.
  This collateral source damages rule would leave patients 
uncompensated for very real injuries. For example, if one is injured in 
a car accident by another driver who has a $50,000 insurance policy but 
one has medical costs of $100,000 that one's HMO refuses to cover, when 
one goes to collect the $50,000 from the negligent driver they might 
get nothing. Why? Because whether one has brain damage or broken legs 
or one's loved one is dead, one gets nothing because under the bill 
that passed a couple of weeks ago the HMO gets to collect all $50,000, 
even though it denied one necessary medical care for their injuries and 
one does not get a penny.
  Mr. Speaker, bills that have passed in the other body that value the 
financial well-being of HMOs more than the values and well-being of the 
patient do not deserve the name ``patient protection.''
  We passed a strong bill in this House. That is what we should be 
working on. We can do better than what has been done recently. The 
voters are watching.
  Now, Mr. Speaker, the Congressional leadership is trying to limit 
damages by putting $300,000 caps on awards. Many times I have stood on 
this floor and talked about a mother, for instance, who has been 
mistreated by her HMO and lost her life. I want to ask, is that 
mother's life worth $350,000?
  How many times have I stood on this floor talking about a little boy 
in Atlanta, Georgia, whose HMO was responsible for his losing both of 
his hands and both of his feet, the rest of his life, no hands, no 
feet? And they want to put a cap of $350,000 on that? That little boy, 
when he grows up and gets married, will never be able to touch the face 
of the woman that he loves with his hand.
  I am sorry, Mr. Speaker, but that is a travesty. People who put those 
kind of provisions in bills that deal with patient protection should be 
ashamed of themselves.


              The Results of Tobacco, a Tough Price to Pay

  Mr. GANSKE. Now, Mr. Speaker, I want to move on to another topic, a 
number one public health problem. I think that HMO patient protection 
is very important, but the reason that this House is out tonight is 
because we are having the Congressional baseball game. I think that is 
a good thing, a little bit of bipartisanship, have a nice competition, 
but I will say what is going on on that baseball field right now. There 
are colleagues of ours that are chewing tobacco, and they are spitting 
that tobacco out there and there are a bunch of little kids that are in 
that audience and they are looking at dad out there chewing and 
spitting that tobacco and they are thinking, boy, that is kind of a 
neat thing.
  There are over 1 million high school boys in this country who chew 
tobacco. They probably watch some of the baseball stars do it. They 
certainly have been enticed to do it by the tobacco companies.
  Before I came to Congress, I was a reconstructive surgeon and I can 
say about some of the patients that I took care of who chewed that 
tobacco, who ended up with cancer of their gums and cancer of their jaw 
and I had to remove their lower jaws, and they ended up like Andy Gump, 
cannot talk right, if at all. They end up breathing through a hole in 
their windpipe. That is a stiff price to pay for watching somebody 
chewing tobacco that one respects.
  Mr. Speaker, more than 400,000 people die prematurely each year from 
diseases attributable to tobacco use in the

[[Page 16510]]

United States alone. Tobacco really is the Grim Reaper. More people die 
each year from tobacco use in this country than die from AIDS, 
automobile accidents, homicide, suicides, fires, alcohol and illegal 
drugs combined.
  More people in this country die in one year from tobacco than all the 
soldiers killed in all of the wars that this country has fought.
  Treatment of these diseases will continue to drain over $800 million 
from the Medicare Trust Fund. The VA spends more than one half billion 
dollars annually on inpatient care of smoking-related diseases, but 
these victims of nicotine addiction are statistics that have names and 
faces.
  Mr. Speaker, about a month or two ago I was talking to a vascular 
surgeon who is a friend of mine in Des Moines, Iowa. He looked pretty 
tired. I said, ``Bob, you must be working pretty hard these days.''
  He said, ``Greg, yesterday I went to the operating room at about 7:00 
in the morning. I operated on three patients. I finished up about 
midnight and every one of those patients I had to operate on to save 
their legs.''
  I said, ``Were they smokers, Bob?''
  He said, ``You bet. And the last one that I operated on was a 38-
year-old woman who would have lost her leg to arteriosclerosis caused 
by heavy tobacco use.''
  I said, ``Bob, what do you tell those people?''
  He said, ``Greg, I talk to every patient, every peripheral vascular 
patient that I have, and I try to get them to stop smoking. I ask them 
a question, I say, if there were a drug available on the market that 
they could buy that would help save their legs, that would help prevent 
them from having coronary artery bypass surgery, that would 
significantly decrease their chances of having lung cancer or losing 
their larynx, would they buy that drug?''

                              {time}  1915

  Every one of those patients say, you bet I would buy that drug and I 
would spend a lot of money for it. Do my colleagues know what he says 
to those patients then, my friend, the vascular surgeon? He says, well, 
you know what? You can save an awful lot of money by quitting smoking, 
and it will do exactly the same thing as that magical drug would have 
done.
  Mr. Speaker, my mom and dad were both heavy smokers, and they are 
only alive today because coronary artery bypass surgery saved their 
lives; and they have finally stopped smoking. I will never forget some 
patients that I took care of in the VA hospital. They had a disease 
called thromboangitis obliterans.
  Now, I have talked about this on the floor a couple of times in the 
past, and we got some phone calls from constituents. They said, what 
are you talking about? I have never heard of this disease. Well, this 
is a disease that really happens, and I really took care of this 
patient I am about to describe. Basically, these people are addicted to 
tobacco, and it sets up sort of an allergic reaction to the small 
vessels in their fingers, in their hands, and in their feet, and those 
vessels clot off, they thrombose, and they start to lose one finger 
after another.
  I remember taking care of one patient who had lost both lower legs, 
he had lost all of the fingers in one hand, and he only had one finger 
left on his right hand, all due to that disease caused by his tobacco 
addiction. Do my colleagues know what he had done? He had a little wire 
loop made that he could put one loop over his one remaining finger and 
then a nurse or somebody, a friend, could stick a cigarette in the loop 
at the other end of that wire and then he could smoke. He knew that he 
could stop that disease from progressing and taking his fingers and his 
hand and his feet if he would just stop smoking.
  Mr. Speaker, he could not. Tobacco is one of the most addicting 
substances that we know of, nicotine and tobacco, we know that. It is 
as addicting as cocaine; it is as addicting as morphine and heroin.
  Statistics show the magnitude of this problem. Over a recent 8-year 
period, tobacco use by children increased 30 percent. More than 3 
million American children and teenagers now smoke cigarettes. Every 30 
seconds, a child in the United States becomes a regular smoker. The sad 
fact is, Mr. Speaker, that each day, 3,000 kids in this country start 
smoking. Each day. And 1,000 of those kids will die of a disease 
related to smoking tobacco.
  So why did it take a life-threatening heart attack to get my folks to 
quit smoking? I nagged at them all the time. It took that near-death 
experience to get them to quit. Why would my patient with that one 
finger not quit smoking? Why do fewer than one in seven adolescents 
quit smoking, even though 70 percent regret starting?
  I say to my colleagues, it is sadly because of that addictive nature 
of the drug nicotine that is in tobacco. The addictiveness of tobacco 
has become public knowledge in recent years as a result of painstaking 
scientific research that demonstrates that nicotine is similar to 
amphetamines, cocaine, and morphine. In fact, Mr. Speaker, there is a 
higher percentage of addiction among tobacco users than among users of 
cocaine or heroin; and recent tobacco industry deliberation show that 
the tobacco industry knew about this a long time ago. Those tobacco 
CEOs who testified before Congress raised their right hands and took an 
oath to tell the truth. When they testified that tobacco was not 
addicting, they were committing perjury, Mr. Speaker.
  Internal tobacco company documents dating back to the early 1960s 
show that tobacco companies knew of the addicting nature of nicotine, 
but they withheld those studies from the Surgeon General. A 1978 Brown 
& Williamson memo stated that very few customers are aware of the 
effects of nicotine, i.e., its addictive nature and that nicotine is a 
poison. A 1983 Brown & Williamson memo stated that nicotine is the 
addicting agent in cigarettes. Indeed, the industry knew that there was 
a threshold dose of nicotine necessary to maintain addiction.
  A 1980 Lorilard document summarized the goals of an internal task 
force whose purpose was not to avert addiction, but to maintain 
addiction. It said, ``Determine the minimal level of nicotine that will 
allow continued smoking. We hypothesize that below some very low 
nicotine level, diminished physiological satisfaction cannot be 
compensated for by psychological satisfaction. At that point, smokers 
will learn to quit or return to higher tar and nicotine brands.''
  Mr. Speaker, we also know that for the past 30 years, the tobacco 
industry manipulated the form of nicotine in order to increase the 
percentage of ``free base'' nicotine delivered to smokers as a 
naturally occurring base; and I have to say, Mr. Speaker, this takes me 
back to medical school, biochemistry. Nicotine favors the salt form at 
its lower PH levels, and the free base form at its higher levels.
  So what does that mean? Well, the free base nicotine crosses the 
alveoli in the lungs faster than the bound form, thus giving the smoker 
a greater kick, just like the druggie who free bases cocaine, and the 
tobacco companies knew that very well.
  In 1966, British American Tobacco, BAT, reported, ``It would appear 
that the increased smoker response is associated with nicotine reaching 
the brain more quickly. On this basis, it appears reasonable to assume 
that the increased response of a smoker to the smoke with a higher 
amount of extractable nicotine, not synonymous with, but similar to 
free-based nicotine, may be either because this nicotine reaches the 
brain in a different chemical form, or because it reaches the brain 
more quickly.''
  Tobacco industry scientists were well aware of the effect of PH on 
absorption and on the physiological response. In 1976, RJR reported, 
``Since the unbound nicotine is very much more active physiologically 
and much faster acting than bound nicotine, the smoke in PH seems to be 
strong in nicotine.'' Therefore, the amount of free nicotine in smoke 
may be used for at least a partial measure of the physiologic strength 
of the cigarette.
  Indeed, Mr. Speaker, Philip Morris commenced the use of ammonia in 
their Marlboro brand in the 1960s in

[[Page 16511]]

order to raise the PH of its cigarettes, and it subsequently emerged as 
the leading brand.
  So, by reverse engineering, the other manufacturers caught on to 
Philip Morris's nicotine manipulation, and they copied it. The tobacco 
industry hid the fact that nicotine was an addicting drug for a long 
time, even though they privately called cigarettes ``nicotine delivery 
devices.''
  Claude E. Teague, assistant director of research at RJR said in a 
1972 memo, ``In a sense, the tobacco industry may be thought of as 
being a specialized, highly ritualized and stylized segment of the 
pharmaceutical industry. Tobacco products uniquely contain and deliver 
nicotine, a potent drug with a variety of physiologic effects. Thus, a 
tobacco product is, in essence, a vehicle for the delivery of nicotine 
designed to deliver the nicotine in a generally acceptable and 
attractive form. Our industry is then based upon the design, 
manufacture, and sale of attractive forms of nicotine.''
  Mr. Speaker, I yield to the gentleman from California (Mr. Dreier.)
  Mr. DREIER. Mr. Speaker, I would like to thank the gentleman for 
allowing me to take this time to congratulate him on his effort. While 
our Republican colleagues are at this point out working on a stunning 
victory over our Democratic colleagues on the baseball field, the 
Committee on Rules is hard at work; and I know my friend from Iowa is 
working hard too, and I thank him.
  Mr. GANSKE. Mr. Speaker, I have a bill before Congress that would 
basically allow the FDA to prevent the tobacco companies from marketing 
and targeting children. It is not a tax increase bill, it is not a 
prohibition bill, it simply addresses the Supreme Court's decision 
which says, Congress must give the FDA authority for the FDA to 
regulate, to issue regulations that would prevent tobacco companies 
from marketing and targeting kids. We have 95 bipartisan cosponsors on 
that bill.
  Mr. Speaker, I want to continue on about tobacco, because I came 
across an article in the July 31 issue of Newsweek magazine, and it is 
entitled ``Big Tobacco'S Next Legal War.'' I wanted to bring this to 
the attention of my colleagues. I sit on the Committee on Commerce, and 
we held hearings on tobacco a couple years ago when Senator McCain had 
his tobacco bill outstanding and we were looking at a tobacco bill here 
in the House. The tobacco companies said, if you raise the tax on 
tobacco, that will create a black market, and a lot of smuggling and 
illegal activities, i.e., look at what happened in Canada.
  Well, since that testimony, it turns out that it was the tobacco 
companies who were involved in the smuggling. This is an amazing story. 
I would highly recommend it to my colleagues. It is called ``Tobacco's 
Next War,'' Newsweek magazine, July 31. I just need to read a few of 
the excerpts from this article.
  This is a quote from the article: ``For cigarette salesman Leslie 
Thompson, 1993 was an especially good year. A star employee with 
Northern Brands International, a tiny 4-person export outfit owned by 
the tobacco giant RJR Nabisco, Thompson sold an astonishing 8 billion 
cigarettes that year, reaping about $60 million in profits. Walking the 
company's halls, Thompson received a standing ovation from RJR 
executives who had gotten hefty bonuses as a result of his work. On his 
wrist he flashed a Rolex, a gift from grateful wholesalers.''
  ``These days, Thompson's name is no longer greeted with applause in 
the tobacco industry. He and other former executives are soon to be 
quizzed by Federal prosecutors about the shady side of the cigarette 
business. Newsweek has learned that a Federal grand jury in North 
Carolina is investigating explosive allegations about links between 
major cigarette makers and global smuggling operations that move vast 
quantities of cigarettes across borders without paying any taxes. It is 
a multibillion-dollar-a-year enterprise.
  ``The grand jury deliberations spotlight a new round of legal 
troubles for big tobacco. The proceedings are secret and it could not 
be learned which companies are under scrutiny. The U.S. Attorney in 
Raleigh, North Carolina declined to comment. Cigarette makers are under 
attack from governments around the world that seek to hold them 
responsible for the costs of smuggling: billions in lost taxes, soaring 
violence, and weakened efforts to prevent kids from smoking.''

                              {time}  1930

  Last week, the European Union announced that it plans to launch a 
civil suit against U.S. cigarette makers for their alleged involvement 
in smuggling. In the last 8 months, Canada, Colombia, and Ecuador have 
all filed smuggling suits against American tobacco companies using U.S. 
anti-racketeering laws.
  Britain, Italy, China have also mounted extensive investigations. The 
Canadian and European investigators are cooperating closely with their 
U.S. counterparts building a case against the industry. The World Bank 
and World Health Organization plan to release the results of the 3-year 
investigation claiming the tobacco industry has deliberately thwarted 
international efforts to control the tobacco trade.
  In the United States, Thompson is expected to be an important witness 
in the Grand Jury proceedings. In February, he began serving a 6-year 
sentence in Federal prison after pleading guilty to money laundering 
related to the smuggling case.
  American and Canadian prosecutors charged that Thompson racked up his 
impressive sales numbers through his involvement with smugglers who 
shipped billions of RJR cigarettes into Canada. On the books, 
everything looked legitimate. But once over the border, the cigarettes 
were passed on to black marketers, evading high Canadian cigarette 
taxes.
  Investigators believe this soft-spoken 52-year-old family man was 
merely a bit player in the global smuggling scene. Before his 
sentencing and in press interviews before he went to prison, he said he 
operated with the knowledge and encouragement of his superiors.
  His case has given prosecutors a road map of how the underground 
trade works. His company MBI was located inside R.J. Reynolds' Winston 
Salem, North Carolina headquarters. To the public Thompson's job was to 
sell Export A's, a leading Reynolds brand in Canada. But the Canadian 
government charges MBI was nothing more than a shell company that 
supplied smugglers with cigarettes.
  According to court documents and Thompson's own testimony, Thompson 
shipped millions of cartons of Export A's from Canada and Puerto Rico 
to the United States where virtually no one smokes them. The crates 
were then diverted to a Mohawk reservation on the U.S.-Canadian border, 
the secret staging ground for the operation.
  Smugglers on the reservation built huge warehouses to stockpile the 
cigarettes. After dark, a flotilla of speed boats would ferry the cargo 
across the Saint Lawrence River to the Canadian side of the 
reservation. The cigarettes were then sold on the black market, 
skirting Canada's cigarette taxes.
  In 1994, Canadian politicians were so horrified by the brazenness of 
the law breakers that the government rolled back the cigarette taxes, 
and that slowed down the smuggling.
  MBI worked out a plea bargain with U.S. prosecutors and paid $15 
million in fines and forfeitures. In a related Canadian proceeding 
against Thompson, the prosecutors made it clear that he believed that 
the tobacco company had hung its former employee out to dry. In other 
words, he was a little guy, so he was going to get the 6-year term in 
jail while his superiors who knew about those tobacco CEOs for RJR, 
they skate free with their big bonuses.
  ``Thompson was not on a lark of his own here, he told the court. He 
did not commit this crime by himself. His acts were part and parcel of 
a corporate strategy developed largely by other senior executives who 
closely monitored his work.''
  We then have reports in the British press that have focused attention 
on the alleged role of British-American

[[Page 16512]]

tobacco in foreign smuggling operations drawing on internal company 
documents recently made public.
  The British House of Commons, the equivalent of our House of 
Representatives, has recommended that the British government launch a 
formal investigation into the allegations. One set of documents 
highlighted by English anti-smoking groups they say indicates that the 
company went out of its way to bill market share by encouraging 
smuggling.
  Those pages, culled from vast archives, suggest that the company was 
aware of just how many of its own cigarettes were being smuggled. The 
1993 through 1997 marketing plan for one of BAT's key subsidiaries 
included projected profits from what are called ``general trade'' 
cigarettes. These are cigarettes where taxes are not paid on them.
  The document describes plans to ``grow our business'' in ``general 
trade'' countries, including China and Vietnam where most foreign-made 
cigarettes are illegal.
  Anti-smoking activists say that general trade is industry jargon for 
smuggled cigarettes. Another BAT document they focus on suggests that 
the company closely monitored the smuggling of its brands. Records show 
it tracking how cigarettes entered Vietnam ``from sailors, 40 percent; 
from fisherman, 25 percent; from smuggling by sea, 35 percent.''
  Mr. Speaker, Mr. Thompson was the first to go to jail, but given all 
the heavy guns trained on the industry, I doubt that he will be the 
last.
  I would ask this of my colleagues, especially my colleagues and the 
chairman of the Committee on Commerce on which I sit, we have ample 
evidence that the tobacco companies have been smuggling cigarettes and 
breaking the law. It is time for the oversight committee of the 
Committee on Commerce to hold a full-scale investigation into this 
corrupt practice, another example of how tobacco companies have not 
really shot straight with the American public.
  Mr. Speaker, I have talked briefly tonight about patient protection 
legislation, something we need to get done before we recess, a piece of 
legislation modeled after what passed the House. Neither the gentleman 
from Georgia (Mr. Norwood), the gentleman from Michigan (Mr. Dingell), 
nor I who wrote the bill that passed with 275 votes have ever said that 
it has to be every word our way or the highway. We have never said 
that. We have always said that we would be willing to sit down and try 
to achieve a compromise.
  Unfortunately, the Speaker of this House decided not to appoint to 
the conference committee the two Republicans, the gentleman from 
Georgia (Mr. Norwood) and myself, who wrote the bill that passed this 
House with 275 votes, thus precluding our efforts to try to achieve a 
compromise to get a strong piece of legislation passed. But we are 
still available, and we are still working.
  I actually am optimistic about the chances of getting true patient 
protection legislation passed because, as I look at the vote in the 
Senate, I think we now have 50 supporters plus for the bill that passed 
this House. I expect that, when that bill comes up again in the Senate 
after the August recess, we very well may see that the bill that passed 
the House with 275 votes also passes the Senate, and I am sure the 
President will sign that.
  On the matter of tobacco, I see very little movement in the House 
even though the gentleman from Michigan (Mr. Dingell) and I have 95 
cosponsors for a bill that would simply allow the FDA the authority to 
regulate an addicting substance, as I said, not to increase taxes and 
not to prohibit the substance, but to make sure that those tobacco 
companies which have marketed and targeted kids 14 and younger cannot 
get away with that in the future.
  Well, I remain optimistic that, as we continue to work on these 
issues, we will make progress. I sincerely thank all of my colleagues 
from both sides of the aisle who have shown so much interest in 
actually achieving true and real reform legislation in both of these 
areas.

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