Fed Wants Money for Treating Smokers
WASHINGTON (AP) - The Justice Department urged a federal judge Monday to reconsider an earlier decision not to let the government sue the tobacco industry to recover billions spent treating sick smokers.
U.S. District Court Judge Gladys Kessler ruled last year the government could not seek reimbursement for Medicare costs from the companies but could pursue a racketeering case against them to recover profits allegedly earned through fraud.
In her earlier ruling, Kessler had argued that the government waited too long to recover expenses dating to the 1950s. The government is now seeking costs dating back to the early 1990s. It estimates it spends $20 billion annually on tobacco-related illnesses.
Justice Department attorney James Ellison argued Monday the government should be able to recover those costs under a law that allows the government to recoup Medicare expenditures from insurers.
Ellison argued the tobacco companies did not purchase adequate product liability insurance over the years but developed self-insurance plans against liability from the manufacture, sale and promotion of cigarettes. He cited internal memos stating the companies decided to self insure rather than purchase insurance.
Ellison said that makes the industry liable for Medicare payments, assuming the government can prove the companies injured people through allegedly unlawful conduct.
Tobacco industry lawyer Herbert M. Wachtell called that a stretch.
He said decisions not to purchase large amounts of product liability insurance do not mean the companies decided to self insure.
``You have an allegation of decisions, but decisions do not a self-insurance plan make,'' he told Kessler.
The judge asked Wachtell how he would define a self-insurance plan, and he replied it would have to have a formal structure. ``Here we have none,'' he said.
Kessler said she would rule on the motion by the end of the summer and that her decision would be final. ``It stands or it falls everybody,'' she said.
Analyst David Adelman, who follows the industry for Morgan Stanley Dean Witter, predicted the judge would rule against the government.
``They're not self insured,'' he said of the tobacco companies. ``They're like any other company or any other industry that has not sought massive potential product liability insurance.''
A ruling in its favor would not be a total victory for the industry. If it loses on the racketeering charges, the industry could be forced to hand over profits dating back to the 1950s for allegedly concealing the dangers of smoking. A July 2003 trial is planned.
The case was initially filed by the Clinton administration in 1999.
The Bush administration recently requested $1.8 million to pay salaries and staff costs for the tobacco litigation team, but department budget writers did not seek money for legal work.
Attorney General John Ashcroft denied he was planning to drop the case, telling Congress in April he had not made a decision about it.
The lawsuit follows a 1998 decision by the tobacco companies to settle a slew of health-related lawsuits by agreeing to pay states $246 billion over 25 years. The money was to compensate states for the cost of treating smoking-related illnesses of people on Medicaid.