Attorney General Janet Reno acknowledged a preliminary inquiry by her department into possible criminal, civil and antitrust violations by tobacco advertisers.
As requested by seven anti-tobacco congressmen, that inquiry-and whatever formal investigation might follow-would examine whether marketers, perhaps aided by their advertising and public relations agencies, trade associations and lobbyists, knowingly misled the public and Congress about the health hazards of tobacco, on which about $3 billion is spent a year in advertising, promotions and couponing.
The prospect of a Justice Department investigation into possible criminal or racketeering conduct was enough to silence most every tobacco marketer and agency. Only R.J. Reynolds Tobacco Co. offered more than the terse "no comment" responses by the Tobacco Institute, Marlboro cigarette agency Leo Burnett USA, Joe Camel shop Mezzina/Brown, Philip Morris Cos., the Association of National Advertisers, American Advertising Federation and others.
"There is no basis for moving forward," said Maura Ellis, RJR's director of media relations. "We are convinced that in an unbiased examination by the department, when the rhetoric and innuendo are stripped away, there will be no reason to take action."
But whether there is reason for Ms. Reno and her cohorts at Justice to act remains to be seen.
Brown & Williamson Co., the focus of two hearings last week by the House Energy & Commerce Committee's Subcommittee on Health & Environment, consistently denied allegations the company knowingly manipulated nicotine levels in tobacco.
B&W Chairman-CEO Charles Sandefur Jr., during five hours of intense questioning, also tried to defuse a bombshell dropped earlier in the week by Food & Drug Administration Commissioner David Kessler. Dr. Kessler alleged B&W secretly developed a new strain of high-nicotine tobacco, known as Y-1, in Brazil, and then denied its existence to the FDA.
"We have discovered the deliberate genetic manipulation of the nicotine content in a tobacco plant," Dr. Kessler testified, at one point holding up packs of B&W brands-Viceroy, Richlands and Raleigh-that contained Y-1.
Dr. Kessler said his agency's investigation disproved the tobacco industry's assertion that nicotine was not addictive. "The release of company documents, and the testimony of company scientists .*.*. has opened a window on what some senior tobacco officials knew about nicotine's physiological and addictive properties, as much as 30 years ago."
That allegation went straight to the heart of the investigation request sent to Justice.
That is why the seven congressmen charged that tobacco marketers, their agencies and representatives may be guilty of crimes including perjury, conspiracy to obstruct Congress, mail fraud, wire fraud and possibly violating the Racketeer Influenced & Corrupt Organizations Act.
Richard Leighton, a Washington attorney who in 1992 successfully defended client Alpo Pet Food Co. against a civil RICO lawsuit, said attempting to hit tobacco marketers with a RICO action might work "with some creative pleading."
"Dr. Kessler has implied that nicotine is a drug under the Food, Drug & Cosmetics Act, which is a civil and criminal statute," Mr. Leighton said. "A lawyer could ... argue that there was a pattern of racketeering present-selling the drug, then investing the proceeds from those sales into legitimate businesses, like Philip Morris used money to acquire Kraft."
In the Alpo case, consumers accused the company of defrauding the public by using the media to promulgate deceptive advertising, he said. "In this instance, one could argue that deceptive advertising or direct mail by the tobacco companies in interstate commerce was the fraudulent action."
Although courts dismissed the spate of RICO lawsuits major advertisers faced in the early 1990s, the threat remains, if for no other reason than the cost of losing-treble damages, all attorney fees and the stigma of a racketeering conviction.
The shattering prospect of a federal criminal investigation overshadowed stark, often contentious exchanges at the congressional hearings.
The hearings are expected to improve the chances of proposed legislation that would shift regulatory authority over tobacco manufacturing, distribution, advertising and promotion to the FDA from the Federal Trade Commission. Dr. Kessler already has said he could assert jurisdiction if convinced that tobacco products were marketed as delivery vehicles to satisfy "nicotine addiction," but wants Congress to tell him how to proceed.
FDA regulation likely would lead to dramatic reductions in nicotine content, and quite possibly to tightly controlled distribution and advertising similar to that the agency allows for prescription drugs. Indeed, Dr. Kessler declined to say what tobacco advertising might look like under FDA control, but noted to Advertising Age: "Prescription drug advertising is currently regulated by the FDA."
An executive at an agency with a history of handling tobacco business denounced the government inquiries, but acknowledged the end of tobacco advertising may be in sight.
"My guess is they'll phase it out, starting with the least targeted media, like out-of-home advertising," the executive said. For that reason, he said his agency was going after non-tobacco accounts "like crazy."
Ira Teinowitz and Melanie Wells contributed to this story.