Tobacco giants appeal against $280bn levy

The Tobacco industry yesterday urged a federal appeals court in Washington to throw out an attempt by the US government to levy a record $280bn (£150bn) from companies for allegedly misleading the public about the dangers of smoking.

The Tobacco industry yesterday urged a federal appeals court in Washington to throw out an attempt by the US government to levy a record $280bn (£150bn) from companies for allegedly misleading the public about the dangers of smoking.

The move is an attempt by tobacco companies to strike out the claim, which they say would bankrupt them.

In the largest ever case brought by the Department of Justice, cigarette-makers including British American Tobacco (BAT), which used to own Brown & Williamson in the US, are accused of destroying or withholding scientific research on nicotine in a conspiracy dating back to 1954 to keep "profits above the public health".

The Department has brought the case, now being heard in a district court in the country's capital, under a 1970 civil racketeering statute originally designed to prosecute mobsters.

The tobacco industry is arguing that the Racketeer Influenced and Corrupt Organi- sations Act, or Rico, does not permit prosecutors to seek a defendant's past revenue.

Michael Carvin, for the defence, told an appeals court hearing that the government should have filed its case under criminal racketeering laws. "Forfeiture of illegal proceeds to the government is strictly limited to the criminal context," he said. "If the government wants to put money into the Treasury, they've got to jump through the hoops of proving their case beyond a reasonable doubt."

Shares rose in morning trading on the New York Stock Exchange in Altria, which owns Philip Morris, and Reynolds American, which owns RJ Reynolds. Both are on trial along with BAT in the ambitious case which was filed in 1999.

Michael Dreeben, the deputy solicitor general, countered that the racketeering statute did give judges the power to impose monetary remedies, enabling the Department to pursue companies for earnings allegedly made through fraud. The government has already succeeded in persuading the lower court that its bumper claim has a solid basis in law, but the tobacco companies have won the right to appeal the decision.

According to the government, the $280bn represents revenue earned by the industry between 1971 and 2000 by the sale of cigarettes to smokers who became addicted to nicotine before the age of 21. The industry says the government failed to distinguish between money earned legally and illegally.

The federal case comes six years after tobacco companies reached a $246bn agreement with individual states to pay for healthcare costs incurred on smoking-related illnesses. Other restrictions included banning ads on billboards and public transport.