On July 18, 1996, Connecticut Attorney General Richard Blumenthal filed this suit against seven tobacco companies for $1 billion, charging that they had engaged in "conspiracy to mislead, deceive and confuse" the state and its residents about the debilitating and addictive effects of cigarettes. Two weeks ago, four tobacco companies sued Blumenthal in a pre -emptive strike, charging that his expected suit would unconstitutionally impede the interstate commerce of a legal product.

CONNECTICUT SUPERIOR COURT
STAMFORD, CT

STATE OF CONNECTICUT

V.

PHILIP MORRIS, INC.; R.J. REYNOLDS
TOBACCO COMPANY; BROWN &
WILLIAMSON TOBACCO CORPORATION;
B.A.T. INDUSTRIES P.L.C.; LORILLARD
TOBACCO COMPANY; LIGGETT GROUP,
INC.; UNITED STATES TOBACCO
COMPANY; HILL AND KNOWLTON, INC.;
THE COUNCIL FOR TOBACCO RESEARCH -
U.S.A. INC.; and THE TOBACCO INSTITUTE, INC.

JULY 18, 1996

COMPLAINT

The State of Connecticut, by its Attorney General Richard Blumenthal, brings this action to obtain monetary, injunctive and other equitable relief, and complains and alleges as follows:

I. NATURE OF THE ACTION

1. For years, and continuing to date, the major manufacturers of tobacco products and their agents have engaged in a conspiracy to mislead, deceive and confuse the State of Connecticut and its residents regarding the evidence that the use of tobacco products causes debilitating and fatal disease and that the nicotine in tobacco products is a powerfully addictive substance. Although these manufacturers promised the Connecticut public that they would lead the effort to discover and disclose the truth about tobacco products and health, they have, in fact, systematically suppressed and concealed material information and waged an aggressive campaign of disinformation about the health consequences caused by their products. The tobacco companies have taken these actions, even though they have known for years, based on their own secret research, that their products often injure or kill the consumer when used exactly as intended.

2. The major manufacturers of tobacco products and the other defendants have known for decades, on the basis of their own long- concealed research, that nicotine is addictive. At the same time, at least certain tobacco companies have developed sophisticated techniques to manipulate the amount of nicotine delivered by their tobacco products to the users so as to create and sustain addiction. Yet publicly they have denied, and continue to deny, that nicotine is addictive and that they manipulate the nicotine delivery of tobacco products.

3. The tobacco companies and the other defendants are engaged in this course of conduct despite their knowledge that the vast majority of new users of tobacco products are children and adolescents. Each year, these companies spend millions of dollars on marketing and public relations in Connecticut to attract children and adolescents, with the effect that each year, more Connecticut children and adolescents begin using and continue to use tobacco products. The Centers for Disease Control and Prevention ("CDC") has reported that almost 90% of all smokers start before the age of eighteen. Every day more than 3,000 American teenagers begin smoking. Surveys show that in Connecticut, 28.5% of high school males and 35% of high school females smoke, and as many as 15.5% of male high school students use smokeless tobacco. The CDC has determined that, nationwide, 11.9% of all males between the ages of 12 and 17 use smokeless tobacco products. The tobacco companies direct their products at children and adolescents, who cannot legally purchase them, as a central part of the manufacturers' business strategy.

4. Thousands of Connecticut residents die each year from using the defendants' tobacco products. The State of Connecticut is required to spend millions of dollars annually to purchase or provide medical and related services for Connecticut residents suffering from tobacco- related diseases. At the same time the manufacturers of tobacco products reap huge profits from the sale of tobacco products in Connecticut.

5. The State of Connecticut has a long-standing policy of preventing minors from using tobacco products and of preventing anyone from facilitating minors' access to or desire for such products. It is a crime in Connecticut to "sell, give or deliver to any minor under 18 years of age tobacco in any form."

6. The State of Connecticut has a nearly 350 year-old public policy to pay from the public fisc the health care costs of its needy residents, a public policy that has long predated defendants' marketing and sale of tobacco products in Connecticut. Since l650, the year of the earliest recorded code of Connecticut, the colonial and state legislative bodies have undertaken to pay these health care costs. In the past ten years alone, the State of Connecticut has spent over $13 billion in health care costs for its needy residents. Since the earliest days of this state policy, the State of Connecticut also has had a policy of recovering those costs from those who should have paid such costs.

II. THE PARTIES

A. THE PLAINTIFF

7. The State of Connecticut, by its Attorney General Richard Blumenthal, brings this action on its own behalf, on behalf of its Commissioners and agencies, including the Commissioner of theDepartment of Social Services, and as parens patriae, on behalf of residents of the State of Connecticut. This action is brought pursuant to the authority granted, inter alia, by Connecticut common law, Conn. Gen. Stat. __ 3-125, 42-110m, 35-32 and 33-301. Claims herein pursuant to the Connecticut Unfair Trade Practices Act are brought at the request of the Commissioner of Consumer Protection of the State of Connecticut.

8. The State of Connecticut brings this action to obtain monetary, injunctive and other equitable relief. The State of Connecticut seeks to prevent continued violations of law and duties by the defendants, to cause disgorgement of defendants' tobacco-related profits and gains and to recover actual and punitive damages on its own behalf and on behalf of its residents, including, inter alia, the damages to its general economy caused by the use of tobacco products. These damages include, inter alia, past and future expenditures for medical assistance provided under Connecticut's Medicaid program pursuant to Conn. Gen. Stat. _ 17b-260 et seq.; medical assistance provided under the General Assistance Medical Assistance Program pursuant to Conn. Gen. Stat. _ 17b-220 et seq.; the costs, both medical and non-medical, of caring for persons with tobacco-related illnesses who receive services through hospitals, health care facilities, residential facilities and other similar facilities owned, operated or maintained by the State of Connecticut or facilities under contract to the State to render similar services; and health care benefits for State of Connecticut employees and retirees, including sick leave and the provision of health insurance.

B. THE DEFENDANTS

9. Philip Morris Incorporated ("Philip Morris") is a Virginia corporation with its principal place of business at 120 Park Avenue, New York, New York 10017. Among other things, Philip Morris manufactures and distributes, or during times relevant herein manufactured and distributed, tobacco products under the brand names of Marlboro, Virginia Slims, Merit, Benson & Hedges, Cambridge, Saratoga and Parliament.

10. R.J. Reynolds Tobacco Company ("RJR") is a New Jersey corporation with its principal place of business at North Main Street, Winston-Salem, North Carolina 27102. Among other things, RJR manufactures and distributes, or during times relevant herein manufactured and distributed, tobacco products under the brand names of Camel, Winston, Salem, Vantage, Doral and Now.

11. Brown & Williamson Tobacco Corporation ("Brown & Williamson") is a Delaware corporation with its principal place of business at 1500 Brown & Williamson Tower, Louisville, Kentucky 40202. The American Tobacco Company ("ATC") was purchased by Brown & Williamson (or its parent or affiliate) and merged into Brown & Williamson, and Brown & Williamson has succeeded to the liabilities of ATC. Among other things, Brown & Williamson manufactures and distributes, or during times relevant herein Brown & Williamson or ATC manufactured and distributed, tobacco products under the brand names of Kool, Belair, Raleigh, Barclay, Viceroy, Lucky Strike, Pall Mall, Tareyton, and Bull Durham.

12. B.A.T. Industries P.L.C. ("BAT") is a British corporation with its principal place of business at Windsor House, 50 Victoria St., London. Through a succession of intermediary corporations and holding companies, BAT is the sole shareholder of Brown & Williamson. ThroughBrown & Williamson, BAT has placed tobacco products into the stream of commerce with the expectation that substantial sales of tobacco products would be made in the United States and in Connecticut. BAT has also conducted, or through its agents, subsidiaries, associated companies, and/or co-conspirators, conducted significant research for Brown & Williamson on the topics of smoking, disease and addiction. Brown & Williamson also sent to England research conducted in the United States on the topics of smoking, disease and addiction in order to remove sensitive and inculpatory documents from United States jurisdiction, and such documents were and are subject to BAT's control. BAT is a participant in the conspiracy described herein and has caused harm in Connecticut.

13. Lorillard Tobacco Company ("Lorillard") is a Delaware corporation with its principal place of business located at 1 Park Avenue, New York, New York l0016. Lorillard is a successor to P. Lorillard Company. Among other things, Lorillard manufactures and distributes, or during times relevant herein manufactured and distributed, tobacco products under the brand names of Old Gold, Kent, Newport and True.

14. Liggett Group, Inc. ("Liggett") is a Delaware corporation with its principal place of business at 700 West Main Street, Durham, North Carolina 27702. Among other things, Liggett manufactures and distributes, or during times relevant herein manufactured and distributed, tobacco products under the brand names of L&M, Chesterfield, Eve, Lark and Dorado.

15. United States Tobacco Company ("US Tobacco") is a Delaware Corporation with its principal place of business located at 100 West Putnam Avenue, Greenwich, Connecticut 06830. Among other things, US Tobacco now manufactures and distributes smokeless tobacco productsunder the brand names of Happy Days, Skoal and Copenhagen. US Tobacco is the principal manufacturer of smokeless tobacco products in the United States. During times relevant herein, US Tobacco also manufactured and distributed cigarettes.

16. Hill and Knowlton, Inc. ("Hill and Knowlton") is a New Jersey corporation with its principal place of business located at 420 Washington Avenue, New York, New York.

17. The Council for Tobacco Research - U.S.A., Inc. ("CTR"), successor in interest to the Tobacco Industry Research Committee ("TIRC"), is a non-profit corporation organized under the laws of the State of New York with its principal place of business at 900 3rd Avenue, New York, New York 10022.

18. The Tobacco Institute, Inc. ("Tobacco Institute") is a corporation organized under the laws of the State of New York with its principal place of business at 1875 I Street N.W., Suite 800, Washington, D.C. 20006.

19. As used in this Complaint, the term "defendant" includes all predecessor and successor entities to the named defendants.

20. Philip Morris, RJR, Brown & Williamson (including ATC), BAT, Lorillard, Liggett and US Tobacco are referred to in this Complaint as the "tobacco companies."

21. As used in this Complaint, the term "tobacco products" refers to cigarettes and non-smoking tobacco such as chewing tobacco and snuff. Non-smoking tobacco is sometimes referred to herein as "smokeless tobacco."

22. At all relevant times, the tobacco companies together controlled virtually 100% of the tobacco products markets in Connecticut and in the United States.

23. The claims against all defendants arise out of contracts to be performed in whole or in part in the State of Connecticut; business solicited in the State of Connecticut; the production, manufacture and/or distribution of goods by the defendants with the reasonable expectation that the goods would be used or consumed in the State of Connecticut; the production, manufacture and/or distribution of goods by the defendants that were used or consumed in the State of Connecticut; and tortious conduct by the defendants in or having an effect in the State of Connecticut.

III. NATURE OF DEFENDANTS' WRONGFUL CONDUCT AND CONSPIRACY

A. IN GENERAL

24. This action arises out of an ongoing course of wrongful conduct by each defendant individually and in conspiracy with each other.

25. Defendants have pursued a course of conduct and conspiracy of deceit and misrepresentation against the public in order to promote and maintain sales of tobacco products, and the profits derived therefrom, to shield themselves from having to pay the health care costs of tobacco-related diseases and to shift those costs to others, such as the State of Connecticut.

26. The means by which the defendants have carried out their conspiracy are twofold: first, they agreed to represent falsely to the public that they were creating a new, unbiased and therefore trustworthy source to answer questions about smoking and health, and second, they counted on the public's acceptance of their representations of such trustworthiness to misrepresent, suppress, distort and confuse the facts about the health dangers of tobacco products, including nicotine addiction. The tobacco companies set their plan in motion by creating a joint industry research organization in 1954. Since that time, they have used the credibility gained by false claims of disinterested industry-funded research to misrepresent the material facts to the public. Although knowing of the serious health dangers inherent in the use of their products and the addictive nature of their products, the defendants have utilized the above scheme to further their fallacious arguments that there is insufficient "objective" research to determine if use of tobacco products causes disease and death, and that tobacco products are not addictive.

27. The two interconnected strategies of misrepresenting their objectivity to gain credibility, and using that credibility better to deceive the public about smoking and health, have been repeated consistently for more than four decades. Defendants have engaged in a continuous conspiracy to deceive the public regarding facts material to the decision to purchase tobacco products.

28. Moreover, as internal industry research confirmed the dangers of using tobacco products and addiction, the defendants' deception rose to a new level: although promising the public that they would make full disclosure of the results of their research, defendants concealed their own negative health and addiction research results from both the public and public health officials. These research results have still not been voluntarily released.

29. The defendants also have not disclosed to the public that the tobacco companies manipulate and control the content and delivery of nicotine in their products to create and sustain consumers' addiction to tobacco products.

30. The success of the industry's campaign of deceit and misinformation depended, in large part, on the tobacco companies acting in concert. Without the agreement of each tobacco company to suppress the truth about the health consequences and addictive nature of using tobacco products, thedeception that the joint industry research efforts were objective would be revealed, and the substantive claim that "not enough facts are known" to indict the use of tobacco products would ring hollow. The tobacco companies agreed to come together and to stay together in order to accomplish what would not have otherwise occurredthe unified and consistent distortion of public information about the use of tobacco products, health and addiction.

31. The defendants were aware that unless they took the actions they agreed to take and subsequently took, the volume of their sales of tobacco products would substantially decrease, and accordingly the profits the tobacco companies would realize would substantially diminish. Defendants were also aware that if they were required to pay the health care costs caused by the use of their products, then the tobacco companies' profits would have been substantially decreased.

32. The non-tobacco company have acted in concert with the defendant tobacco companies by implementing marketing and public relations strategies, facilities and operations to carry out the purpose and effect of the conspiracy and wrongful conduct alleged herein.

B. 1953 "BIG SCARE" AND THE JOINT INDUSTRY RESPONSE

33. In December of 1953, Dr. Ernest L. Wynder of the Sloan- Kettering Institute published the results of a study in which he painted the shaved backs of mice with cigarette smoke, providing biological evidence that cigarette smoke caused cancer. The previous year, a British researcher, Dr. Richard Doll, published a statistical analysis showing that lung cancer was more common among people who smoked and that the risk of lung cancer was directly proportional to thenumber of cigarettes smoked. The widespread reporting of these studies caused what officials of the tobacco companies later called the "Big Scare."

34. The tobacco products industry responded quickly to the mounting adverse publicity of a link between use of tobacco products and cancer. The Chief Executive Officers of the leading tobacco companies met on December 15, 1953, at the Plaza Hotel in New York City. Included at that meeting were representatives of Philip Morris, RJR, Brown & Williamson, ATC, Lorillard, Liggett and US Tobacco. Also in attendance was the public relations firm of Hill and Knowlton, which was to play a central role in formulating and executing the industry response.

35. According to a Hill and Knowlton memorandum summarizing the meeting, industry executives viewed the problem as "extremely serious and worthy of drastic action." The document continues, "officials stated that salesmen in the industry are frantically alarmed and that the decline in tobacco stocks on the stock exchange market has caused grave concern .... "

36. The participants in the meeting agreed that a strong public relations response from the industry was necessary. From the beginning, the emerging research linking use of tobacco products and cancer was viewed by these defendants as a public relations problem, not a public health issue. According to the Hill and Knowlton memorandum summarizing the meeting:

* a. The Chief Executive Officers of all the leading tobacco companies, except Liggett, "agreed to go along with a public relations program on the health issue."

* b. "They are also emphatic in saying that the entire activity is a long-term, continuing program, since they feel that the problem is one of promoting cigarettes and protecting them from these and other attacks that may be expected in the future."

* c. "The current plans are for Hill and Knowlton to serve as the operating agency of the companies, hiring all the staff and disbursing all funds."

C. CREATION OF TOBACCO INDUSTRY RESEARCH COMMITTEE

37. Nine days later, Hill and Knowlton presented a detailed recommendation to the tobacco companies and others. The recommendation recognized the importance of gaining the public trust, and avoiding the appearance of bias, if the "procigarette" strategy was to be successful. According to the memorandum: "[T]he grave nature of a number of recently highly publicized research reports on the effects of cigarette smoking . . . have [sic] confronted the industry with a serious problem of public relations.

"It is important that the industry do nothing to appear in the light of being callous to considerations of health or of belittling medical research which goes against cigarettes....

"The situation is one of extreme delicacy. There is much at stake and the industry group, in moving into the field of public relations, needs to exercise great care not to add fuel to the flames."

38. As a result of the December 15, 1953 meeting and the recommendations of Hill and Knowlton, Philip Morris, RJR, Brown & Williamson, ATC, Lorillard and US Tobacco agreed to create the Tobacco Industry Research Committee ("TIRC"). Liggett joined in 1964, the same year the Surgeon General issued his first report linking cigarette smoking to lung cancer. Also in 1964, TIRC changed its name to the Council for Tobacco Research - USA, Inc. ("CTR").

39. A second entity, the Tobacco Institute, was formed by tobacco companies in 1958 to assist in the industry's lobbying and public relations needs. Hill and Knowlton, however, continued to have substantial involvement in both TIRC and the Tobacco Institute. Hill and Knowlton's role in these organizations has been described by industry participants as: "Straddling both and acting as a buffer for each .... Hill and Knowlton decides whether questions from outside individuals or organizations are to be directed to the Tobacco Institute or the T.I.R.C. "

40. Hill and Knowlton coordinated the public relations activities of both TIRC and the Tobacco Institute. In this role, Hill and Knowlton helped forge a multi-prong industry propaganda strategy to counter the growing evidence that tobacco use causes adverse health consequences and the growing call for governmental regulation of tobacco products. At a 1963 strategy meeting of TIRC, the Tobacco Institute, Hill and Knowlton and representatives of the tobacco companies, Hill and Knowlton's role in responding to the anticipated Report of the Surgeon General was described:

"Because Phase I [of the Surgeon General's Report] is expected to be scientific in nature, T.I.R.C. expressed the belief that it will logically be the responsive agency, with Dr. Little or Mr. Hartnett as spokesman and with Hill & Knowlton providing public relations guidance. By the same token, the Tobacco Institute believes that Phase II [dealing with regulatory action] will probably be its primary concern, again with Hill & Knowlton's counseling."

D.CONTROL OF TIRC BY TOBACCO COMPANIES THROUGH HILL AND KNOWLTON

41. As had been proposed at the December 15, 1953 meeting, the tobacco companies, through their agent Hill and Knowlton, operated and effectively controlled TIRC.

42. TIRC's offices were located in the Empire State Building, one floor below the Hill and Knowlton offices. Internal documents confirm that Hill and Knowlton, and not independent scientists, actually ran TIRC. A "highly confidential" internal memo reported:

"Since the [TIRC] had no headquarters and no staff, Hill and Knowlton, Inc. was asked to provide a working staff and temporary office space. As a first organizational step, public relations counsel assigned one of its experienced executives, W.T. Hoyt, to serve as account executive and handle as one of his functions the duties of executive secretary for the [TIRC]."

43. There has been substantial staff overlap between Hill and Knowlton and TIRC (and later CTR). In 1954, 35 staff members of Hill and Knowlton worked full or part time for TIRC. In that year, TIRC, a purported research firm, paid $477,955 to Hill and Knowlton, the public relations arm of the tobacco companies. This amount constituted over 50% of TIRC's entire operating budget.

E. THE TOBACCO COMPANIES' FALSE PROMISE TO THE PUBLIC

44. On January 4, 1954, Philip Morris, RJR, Brown & Williamson, ATC, Lorillard, US Tobacco and others announced the formation and purpose of TIRC, with a full page newspaper advertisement entitled "A Frank Statement to Cigarette Smokers." The statement appeared in 448newspapers across the nation, reaching a circulation of 43,245,000 in 258 cities. The advertisement ran in the daily newspapers in Connecticut, including newspapers in Hartford, Waterbury, New Haven, Bridgeport and Stamford. As set forth below, this advertisement included an unambiguous pledge to the public, including the people of Connecticut and those who advance and protect the public health, that through TIRC these tobacco companies would conduct and report objective and unbiased research regarding the use of tobacco products and their effects on health.

45. The "Frank Statement to Cigarette Smokers" stated in part:

* a. "Recent reports on experiments with mice have given wide publicity to a theory that cigarette smoking is in some way linked with lung cancer in human beings."
* b. "Although conducted by doctors of professional standing, these experiments are not regarded as conclusive in the field of cancer research."
* c. "[T]here is no proof that cigarette smoking is one of the causes [of lung cancer]."
* d. "We accept an interest in people's health as a basic responsibility, paramount to every other consideration in our business."
* e. "We believe the products we make are not injurious to health."
* f. "We always have and always will cooperate closely with those whose task it is to safeguard the public health."
* g. "We are pledging aid and assistance to the research effort into all phases of tobacco use and health."
* h. "For this purpose we are establishing a joint industry group consisting initially of the undersigned. This group will be known as [the] TOBACCO INDUSTRY RESEARCH COMMITTEE."
* i. "In charge of the research activities of the Committee will be a scientist of unimpeachable integrity and national repute. In addition there will be an Advisory Board of scientists disinterested in the cigarette industry. A group of distinguished men from medicine, science, and education will be invited to serve on this Board. These scientists will advise the Committee on its research activities."
* j. "This statement is being issued because we believe the people are entitled to know where we stand on this matter and what we intend to do about it."

46. These representations were made by these defendants for the purpose and with the effect that consumers would consider the representations material to their decisions to purchase and use tobacco products. At that time, and continuing to the present, these defendants knew or should have known that their failure to fulfill the duty they undertook, and other conduct as alleged herein, would directly stabilize or increase the use of tobacco products. They also knew that an increase in health care costs for tobacco products users, including health care costs that would be incurred by the State of Connecticut, was the substantially certain consequence of the past and continued use of tobacco products.

47. By the spring of 1955, the self-defense propaganda strategy recommended by Hill and Knowlton and implemented by the industry through the "Frank Statement" had made steady progresstowards its desired results, including securing the confidence of those to whom it was directed. Hill and Knowlton reported to TIRC:

* a. "[P]rogress has been made.... The first 'big scare' continues on the wane."
* b. "The research program of the [TIRC] has won wide acceptance in the scientific world as a sincere, valuable and scientific effort."
* c. "Positive stories are on the ascendancy."

F. Defendants' Knowledge that Tobacco Products Use is Harmful

48. In the years following the 1954 "Frank Statement," and continuing to the present, the tobacco companies have repeatedly acted in breach of their assumed duty to report objective facts on tobacco products use and health. As evidence mounted through industry research and truly independent studies that the use of tobacco products causes cancer and other diseases, defendants continued publicly to represent that the link between tobacco use and human disease was not proven, despite the fact that even their own studies and information were to the contrary. Internally, defendants knew and acknowledged the veracity of the scientific evidence demonstrating the health hazards of using tobacco products and at the same time suppressed such evidence where they could and attacked it when it did appear.

49. Internal industry documents reveal, for example:

* a. A 1956 memorandum from the Vice President of Philip Morris' Research and Development Department to top executives at the company regarding the advantages of "ventilated cigarettes" stated that: "Decreased carbon monoxide and nicotine arerelated to decreased harm to the circulatory system as a result of smoking .... Decreased irritation is desirable ... as a partial elimination of a potential cancer hazard."
* b. A 1958 memorandum sent to the Vice President of Research at Philip Morris, who later became a member of its Board of Directors, from a company researcher stated "the evidence . . . is building up that heavy cigarette smoking contributes to lung cancer either alone or in association with physical and physiological factors . . ."
* c. A 1961 document presented to the Philip Morris Research and Development Committee by the company's Vice President of Research and Development included a section entitled "Reduction of Carcinogens in Smoke." The document stated, in part:

"To achieve this objective will require a major research effort, because - Carcinogens are found in practically every class of compounds in smoke. This fact prohibits complete solution of the problem by eliminating one or two classes of compounds. The best we can hope for is to reduce a particularly bad class, i.e., the polynuclear hydrocarbons, or phenols .... - Flavor substances and carcinogenic substances come from the same classes, in many instances."
* d. A 1963 memorandum to Philip Morris' President and CEO from the company's Vice President of Research describes a number of classes of compounds in cigarettesmoke which are "known carcinogens." The document goes on to describe the link between smoking and bronchitis and emphysema. "Irritation problems are now receiving greater attention because of the general medical belief that irritation leads to chronic bronchitis and emphysema. These are serious diseases involving millions of people. Emphysema is often fatal either directly or through other respiratory complications. A number of experts have predicted that the cigarette industry ultimately may be in greater trouble in this area than in the lung cancer field."
* e. Brown & Williamson and its parent company, BAT, researched the health effects of nicotine and were aware early on, as reported at a BAT Group Research Conference in November 1970, that "nicotine may be implicated in the aetiology [cause] of cardiovascular disease ...."
* f. A 1961 "Confidential" memorandum from the consulting research firm hired by Liggett to do research for the company states: "There are biologically active materials present in cigarette tobacco. These are: a) cancer causing b) cancer promoting c) poisonous d) stimulating, pleasurable, and flavorful."
* g. A 1963 memorandum from the Liggett consulting research firm states: "Basically, we accept the inference of a causal relationship between the chemical properties of ingested tobacco smoke and the development of carcinoma, which is suggested by the statistical association shown in the studiesof Doll and Hill, Horn, and Dorn with some reservations and qualifications and even estimate by how much the incidence of cancer may possibly be reduced if the carcinogenic matter can be diminished, by an appropriate filter, by a given percentage."

50. These internal Liggett documents sharply contrast with the information Liggett provided to the Surgeon General in 1963. Liggett withheld from the Surgeon General the views of its researchers and consultants that the evidence showed that the use of tobacco products causes human disease. Instead, the report Liggett presented to the Surgeon General focused on alternative causes of disease, such as air pollution, coffee, alcohol consumption, diet, lack of exercise and genetics. Liggett criticized the known statistical association between smoking and mortality and various diseases as "unreliably conducted" and "inadequately analyzed." The Liggett report concluded that the association between tobacco products and disease was inconclusive and that diseases generally associated with tobacco products were, in fact, due to other factors.

51. Philip Morris also concealed from the public its actual views of the research conducted outside the influence of the industry. In a 1971 memorandum, Dr. H. Wakeham, then Vice President of Research and Development, stated in referring to a recent study that found cigarette smoke inhalation caused lung cancer in beagles: "1970 might very properly be called the year of the beagle. Early in the year, the American Cancer Society announced that they had finally demonstrated the formation of lung cancer in beagles by smoke inhalation in the now infamous Auerbach and Hammond study." Although Dr. Wakeham criticized the mice cancer studies, he conceded that "the beagle test was a critical one . . . for the cigarette causation hypothesis."

52. Dr. Wakeham's memorandum demonstrates Philip Morris' approval of the industry's public dismissals of these independent studies: "The strong opposition of the industry to the beagle test is indicative of a new, more aggressive stance on the part of the industry in the smoking and health controversy. We have gone over from what I have called the 'vigorous denial' approach, the take it on the chin and keep quiet attitude, to the strongly voiced opposition and criticism. I personally think this counter-propaganda is a better stance than the former one."

53. Similarly, BAT's internal view of the validity of mouse skin painting experiments differed markedly from the view expressed in public statements. Minutes from a 1969 BAT research conference stated "[h]istorically, bioassay experiments were undertaken by the industry with the object of clarifying the role of smoke constituents in pulmonary carcinogenesis. The most widely used of these methods [was] mouse-skin painting .... In the foreseeable future, say five years, mouse-skin painting would remain as the ultimate court of appeal on carcinogenic effects."

54. Two years later a Brown & Williamson public relations document stated that "[m]uch of the experimental work involves mouse-painting or animal smoke inhalation experiments . . . . [T]he results obtained on the skin of mice should not be extrapolated to the lung tissue of the mouse, or to any other animal species. Certainly such skin results should not be extrapolated to the human lung."

G. DEFENDANTS' REPEATED DECLARATIONS OF THEIR ASSUMED DUTY

55. The deceptions of the 1954 "Frank Statement to Cigarette Smokers" were consistently renewed and repeated by the industry. RJR Chairman Bowman Gray told Congress in 1964: "I stated that we feel, and we are on public record, that more research is needed and a great deal more researchis needed. We are doing what we can in our best efforts to encourage and provide for this research." "If it is proven that cigarettes are harmful, we want to do something about it regardless of what somebody else tells us to do. And we would do our level best. It's only human."

56. Another advertisement co-sponsored by TIRC and the Tobacco Institute, on behalf of the tobacco companies, called "A Statement about Tobacco and Health," stated: "We recognize that we have a special responsibility to the public -- to help scientists determine the facts about tobacco and health, and about certain diseases that have been associated with tobacco use. We accepted this responsibility in 1954 by establishing the TIRC, which provides research grants to independent scientists. We pledge continued support of this program of research until the facts are known. We shall continue all possible efforts to bring the facts to light."

57. Additional representations were made in 1970 when the tobacco companies, acting through the Tobacco Institute, placed a number of advertisements similar to the 1954 "Frank Statement." One advertisement stated in part:

* a. "After millions of dollars and over 20 years of research: The question about smoking and health is still a question."
* b. "In the interest of absolute objectivity, the tobacco industry has supported totally independent research efforts with completely non-restrictive funding."
* c. "In 1954, the Industry established what is now known as CTR, the Council for Tobacco Research--USA, to provide financial support for research by independent scientists into all phases of tobacco use and health. Completely autonomous, CTR'sresearch activity is directed by a board of ten scientists and physicians who retain their affiliations with their respective universities and institutions. This board has full authority and responsibility for policy, development and direction of the research effort."
* d. "The findings are not secret."

58. Another advertisement in 1970 stated that the industry "believes the American public is entitled to complete, authenticated information about cigarette smoking and health responsibility to promote the progress of independent scientific research in the field of tobacco and health."

59. In 1972, Tobacco Institute President Horace Kornegay testifying before Congress stated that "the cigarette industry is as vitally concerned or more so than any other group in determining whether cigarette smoking causes human disease .... That is why the entire tobacco industry . . . since 1954 has committed a total of $40 million for smoking and health research through grants to independent scientists and institutions."

60. In March of 1983, Sheldon Sommers, M.D., scientific director of CTR, testified before Congress that: "Cigarette smoking has not been scientifically established to be a cause of chronic diseases, such as cancer, cardiovascular disease, or emphysema. Nor has it been shown to affect pregnancy outcome adversely."

61. In 1984, RJR placed an editorial style advertisement in The New York Times stating that "[s]tudies which conclude that smoking causes disease have regularly ignored significant evidence to the contrary."

62. In 1994, the chief executives of the tobacco companies testified under oath before the Subcommittee on Health and the Environment of the Committee on Energy and Commerce, U.S. House of Representatives, chaired by Congressman Waxman ("Waxman Subcommittee"). These executives knowingly made material misrepresentations and/or omissions to the Subcommittee about tobacco products, health and addiction, and in particular, stated that nicotine is not addictive. These statements, as with the other deceptive statements and misrepresentations cited in this Complaint, were consistent with defendants' practice of providing disinformation to the public and were made with the knowledge and intention that they would be widely disseminated to the public, and communicated to Connecticut consumers. These defendants' testimony to the Waxman Subcommittee included the following:

* a. Philip Morris President and CEO William I. Campbell said, in response to what he described as "a number of charges . . . leveled against the tobacco industry generally, and Philip Morris specifically, . . . our consumers are being misled and when that happens Philip Morris has and will continue to speak out loudly and clearly. Our consumers deserve to know the truth ...." Campbellfurther stated that:
* i. "Philip Morris does not manipulate nor independently control the level of nicotine in our products."
* ii. "Cigarette smoking is not addictive."
* iii. "Philip Morris research does not establish that smoking is addictive."
* b. Andrew Tisch, then CEO of Lorillard, asserted that smoking does not cause cancer. "We have looked at the data and the data that we have been able to see has all been statistical data that has not convinced me that smoking causes death. "
* c. RJR CEO James W. Johnston said that, "smoking is no more 'addictive' than coffee, tea or Twinkies." * d. US Tobacco's President Joseph Taddeo stated:
* i. "The assertion that smokeless tobacco use can be addictive is without merit."
* ii. "U.S. Tobacco does not in any way manipulate the nicotine level in its tobacco products ...."
* iii. "Oral tobacco has not been established as a cause of oral cancer." 63. These continuing representations by defendants to the public about sponsoring independent objective research and bringing the truth to light were false and deceptive. The misrepresentations were made to gain the trust of the public to further defendants' scheme of distorting and suppressing substantive information about smoking and health in order to assure the continuing widespread sale and use of tobacco products.

64. Defendants' representations that their products are not addictive were made despite a substantial body of evidence, including evidence developed by the tobacco companies themselves, indicating that nicotine is not only addictive, but is the reason why people smoke and that the primary, if not sole, function of nicotine is to provide a pharmacological effect on the smoker that leads toaddiction. The tobacco companies continue to deny that nicotine is addictive and instead use various misleading euphemisms to describe the role of nicotine, such as "satisfaction," "impact," "strength," "rich aroma" and "pleasure."

H. DEFENDANTS' WRONGFUL AGREEMENT

65. This industry strategy depended for its success on joint and concerted action by the tobacco companies and the other defendants. Each of the defendants agreed not to reveal to the public the true nature of TIRC, and later CTR, and not to disclose adverse information on tobacco products use and health, in order to protect continued industry sales and profits and to prevent the manufacturers from having to pay the health care costs associated with the use of tobacco products.

66. In 1968, a memo addressed to the CEO of Liggett regarding a meeting of the research directors of the tobacco companies stated on the topic of tobacco and health "a general feeling that an industry approach as opposed to an individual company approach was highly desirable."

67. An example of the industry's united front and concerted action was demonstrated in 1977 after it was revealed that an employee of US Tobacco had stated to The New York Times that "[smokeless tobacco] presents the least possible danger of all [and] that it's when you light tobacco that you start doing damage." US Tobacco apologized to each of the cigarette companies despite the fact that the disclosure did not directly implicate its own products. US Tobacco assured the cigarette companies that the employee is "no longer employed at US Tobacco." Additionally, US Tobacco assured the other companies that it had undertaken action to prevent a similar breach by its employees. US Tobacco instituted a program within its company to educate its employees that the industry position was to disavow any relationship between tobacco products and disease.

68. Cigarette manufacturers and smokeless tobacco manufacturers monitored each other's research to assure that their common objectives were achieved. Thus, Brown & Williamson joined the Smokeless Tobacco Council in order to make sure that research that confirmed the link between tobacco products use and adverse health consequences was not done. Brown & Williamson described its reason for joining the Smokeless Tobacco Council this way: "The primary purpose of such membership, however, would be to know what the Smokeless Tobacco Council is doing as a protective measure both for our interest in that product area and against the possibility that some research they do could impact on our cigarette business."

69. Each company also agreed not to perform its own independent research on use of tobacco products and health on their own. This agreement was referred to as the "Gentlemans [sic] Agreement." A 1968 internal Philip Morris draft memorandum entitled "Need for biological research by Philip Morris research and development," and prepared by the company's Vice President of Research and Development, states:

"We have reason to believe that in spite of the gentlemans agreement for the tobacco industry in previous years that at least some of the major companies have been increasing biological studies with their own facilities." 70. As indicated by the 1968 "Gentlemans Agreement" memo, it was believed within the industry that individual companies were performing certain research on their own, in addition to the joint industry research. But the fundamental understanding and agreement remained intact: that harmful information and activities would be restrained, suppressed, and/or concealed. This includedrestraining, suppressing, and concealing research on the health effects of tobacco products use, including the addictive qualities of tobacco, and restraining, concealing, and suppressing the research and marketing of less hazardous tobacco products.

I. SUPPRESSION AND CONCEALMENT OF INDUSTRY- SPONSORED BIOLOGICAL RESEARCH

1.Role of CTR as a "Front"

71. In 1977, Addison Yeaman, Chairman and President of CTR, stated during a public speech that "[CTR] has no propaganda function of any kind or any degree." Internal documents demonstrate, however, that the tobacco companies' joint efforts undertaken through TIRC, and later, through CTR, were not disinterested or objective. Rather, they were designed and used to promote favorable research, to suppress negative research when possible, and to attack negative research where it could not be suppressed, all in order to convince the public that the "case against smoking is not closed."

72. A 1974 report to the CEO of Lorillard from a research executive described CTR's scientific projects as "hav[ing] not been selected against specific scientific goals, but rather for various purposes such as public relations, political relations, position for litigation, etc. Thus, it seems obvious that reviews of such programs for scientific relevance and merit in the smoking and health field are not likely to produce high ratings."

73. A 1972 internal document from a Tobacco Institute official to the group's President described the importance of using joint industry research to maintain public doubt about the link between smoking and disease:

"For nearly twenty years, this industry has employed a single strategy to defend itself on three major fronts -- litigation, politics, and public opinion.

While the strategy was brilliantly conceived and executed over the years helping us win important battles, it is only fair to say that it is not - nor was it ever intended to be- a vehicle for victory. On the contrary, it has always been a holding strategy, consisting of

* creating doubt about the health charge without actually denying it
* advocating the public's right to smoke, without actually urging them to take up the practice
* encouraging objective scientific research as the only way to resolve the question of the health hazard.

As an industry, therefore, we are committed to an ill-defined middle ground which is articulated by variations on the theme that, 'the case is not proved.'

In the cigarette controversy, the public -- especially those who are present and potential supporters (e.g. tobacco state congressmen and heavy smokers) -- must perceive, understand, and believe in evidence to sustain their opinions that smoking may not be the causal factor.

As things stand, we supply them with too little in the way of ready- made credible alternatives."

74. A 1978 memo addressed to the CTR file from a Philip Morris official characterized CTR as "an industry 'shield.'" The memorandum goes on to state:

"the 'public relations' value of CTR must be considered and continued . . . . It is extremely important that the industry continue to spend their dollars on research to show that we don't agree that the case against smoking is closed for 'PR' purposes . . . ."

75. In 1993, a former 24-year employee of CTR confirmed publicly that the joint industry research efforts were not objective: "When CTR researchers found out that cigarettes were bad and it was better not to smoke, we didn't publicize that. The CTR is just a lobbying thing. We were lobbying for cigarettes. "

76. This and other evidence demonstrates that the role and purpose of TIRC and CTR in the tobacco companies' strategy was to seek to use the public's trust to propagate "pro-tobacco" propaganda. An industry official wrote in his personal notes describing a meeting that included high level officials from various tobacco companies that:

"CTR is best & cheapest insurance the tobacco industry can buy and without it the Industry would have to invent CTR or would be dead."

77. Nonetheless, in its annual reports published between 1985 and 1992, CTR stated that its Scientific Advisory Board funded peer- reviewed research projects "judging them solely on the basis of scientific merit and relevance." In 1994, Dr. James F. Glenn, CEO of CTR, submitted testimony to the Waxman Subcommittee that:

* a. "The Council . . . sponsors research into questions of tobacco use and health and makes the results available to the public."
* b. "Council grantees are assured complete scientific freedom in conducting their studies . . . Publication of research results is encouraged in all instances."

2. The Example of Dr. Homburger

78. In fact, CTR-sponsored research projects were directed away from research that might add to the evidence against the use of tobacco products. When CTR-sponsored research did produce unfavorable results the information was distorted or simply suppressed. For example, Dr. Freddy Homburger, a researcher in Cambridge, Massachusetts, undertook a study of smoke exposure on hamsters. According to Dr. Homburger, he received a grant from CTR that was changed half-way through the study to a contract "so they could control publication -- they were quite open about that." Dr. Homburger has testified that when the study was completed in 1974, the Scientific Director of CTR and a CTR lawyer "didn't want us to call anything cancer" and that they threatened Dr. Homburger with "never get[ting] a penny more" if his paper was published without deleting the word cancer.

79. An internal CTR document describes how Dr. Homburger attempted to call a press conference about the incident and how CTR stopped it: "He . . . was to tell the press that the tobacco industry was attempting to suppress important scientific information about the harmful effects of smoking. He was going to point specifically at CTR. . . .

"I arranged later that evening for it to be canceled. "Homburger was given a cordial welcome and nicely hastened" out the door. "P.S. I doubt if you or Tom will want to retain this note."

3. CTR Special Projects Division

80. Another mechanism that CTR used to suppress research results that demonstrated the link between tobacco products and disease was to involve lawyers selectively, and then invoke the attorney/client or work product privilege to prevent the disclosure of harmful information. CTR used the term "special projects" to refer to projects funded by CTR that did not get approved through CTR's traditional peer review process but that were still desirable for the industry's public relations and propaganda purposes. "Special projects" were selected and monitored by industry lawyers to prevent disclosure if the results were adverse to the industry position. One Philip Morris official characterized CTR as a "front" for performing "special projects."

81. Notes prepared at a 1981 meeting of the tobacco companies' Committee of General Counsel state: "When we started the CTR Special Projects, the idea was that the scientific director of CTR would review a project. If he liked it, it was a CTR special project. If he did not like it, then it became a lawyers' special project. . . .

"[W]e were afraid of discovery for FTC and Aviado, we wanted to protect it under the lawyers. We did not want it out in the open."

4. Use of Lawyers to Further Conspiracy

82. The Kansas City law firm of Shook, Hardy & Bacon and other lawyers played a critical role in furthering the conspiracy to suppress and conceal information about the adverse health effectscaused by the use of tobacco products. The lawyers' strategy was to attempt to protect damaging tobacco-related documents from disclosure under the attorney-client or work product privileges regardless of whether such documents were prepared in anticipation of litigation or represented confidential communications made between lawyer and client for the purpose of rendering legal advice. Lawyers routinely provided a number of non-legal services to the defendants such as deciding which CTR "special projects" should receive funding, dispensing funding to the "scientists" involved in such projects, and designing the scope and approach of the special project. Shook, Hardy & Bacon also undertook to coordinate the tobacco companies CTR "special projects" subterfuge.

83. For example, in 1976, Donald K. Hoel of Shook, Hardy & Bacon wrote to in-house lawyers at the various tobacco companies that a study to measure environmental tobacco smoke should be modified in such a way that so that the study would yield more favorable results for the tobacco companies' position. The study was subsequently modified to de-emphasize the role of second-hand tobacco smoke relating to indoor environmental quality.

84. In addition, a May 19, 1981 letter from Ernest Pepples, Vice President and General Counsel of Brown & Williamson, to Patrick Sirridge of Shook, Hardy & Bacon requests that Sirridge evaluate the qualifications of various scientists seeking to conduct scientific studies for Brown & Williamson. Sirridge responded by providing biographical sketches of potential consultants including whether they previously had taken scientific position favorable to the industry's position. Sirridge also cooperated with Pepples' request in 1984 to transfer the funding of some helpful research by a cooperative scientist from a CTR account to a law firm project: "I do not think . . . that we should continue burdening CTR with such programs, and instead suggest that they be handled as law firm projects.

85. In 1972, William Shinn of Shook, Hardy & Bacon wrote to tobacco company officials that a potentially favorable study should be secretly funded by the tobacco companies as a "non-CTR special project" in order to make the study appear independent of the industry and thus heighten its perception as unbiased and reliable.

86. By becoming intimately involved in the funding and design of these scientific studies, these lawyers attempted to further the conspiracy and fraud of the tobacco companies and CTR by (1) clothing such studies in the attorney-client or work product privilege in order to protect them from disclosure if their results were unfavorable, and (2) by creating the perception that CTR and the tobacco companies were fairly and appropriately fulfilling their obligations and promises to the public that they would, in a vigorous and unbiased manner investigate and report to the public the link between their products and human disease.

87. At least one tobacco company used similar tactics in-house to suppress and avoid disclosure of its internal research on smoking and disease. At a time when the company was resisting discovery in a number of personal injury lawsuits, Brown & Williamson's general counsel, J. Kendrick Wells, recommended in a memorandum dated January 17, 1985, that much of the company's biological research be declared "deadwood" and shipped to England. He recommended that no notes, memos or lists be made about these documents. Wells stated, "I had marked certain of the document references with an X . . . which I suggested were deadwood in the behavioral and biological studies area. I said that the "B" series are "Janus" series studies and should also be considered as deadwood." ("Janus"was a name of a project that attempted to isolate and remove the harmful elements of tobacco.) Wells further recommended that the research, development and engineering department also should undertake "to remove the deadwood from the files."

88. Thus, the tobacco companies and their lawyers have misused claims of attorney/client privilege to insulate CTR-funded research projects and internal documents from disclosure to the public and to government officials. This conduct demonstrates the falsity of the tobacco companies' representations that they would jointly fund objective research and report the results of that research to the public.

J. SUPPRESSION AND CONCEALMENT OF INTERNAL BIOLOGICAL RESEARCH

1. "Mouse House Massacre"

89. In the 1960s, RJR established a facility in Winston-Salem, North Carolina, to perform research on the health effects of smoking using mice. Nicknamed the "Mouse House," RJR scientists conducted research in a number of specific areas, including studies of the actual mechanism whereby smoking causes emphysema in the lungs.

90. Although the RJR lab made significant progress in understanding this mechanism, RJR disbanded the entire research division in one day, and fired all 26 scientists without notice.

91. Several months before the 1970 closure and firings, RJR attorneys collected dozens of research notebooks from the scientists. The notebooks have still not been disclosed. One of the researchers later stated about RJR's executives and lawyers that "they like to take the position that you can't prove harm because you don't know mechanism . . . . And sitting right under their noses is evidence of mechanism[.] What are they going to do with this stuff? They decided to kill it."

92. Internally, an RJR-commissioned report favorably described the Mouse House work as "the more important of the smoking and health research effort because it comes close to determining what was thought to be the underlying pathobiology of emphysema." None of the work done at the "Mouse House" was disclosed to the public.

2. The "Safer Cigarette"

93. Several tobacco companies' biological research appears to have been directed toward developing a cigarette with reduced health risks. These companies performed research that involved dividing cigarette smoke into its different chemical constituents, or "fractions," to discover which part of the cigarette smoke caused disease. Several companies were successful in discovering which constituents in tobacco smoke were carcinogens, or were otherwise linked to diseases. This research was kept secret and never reported to the public.

94. A number of companies also successfully removed certain harmful constituents from cigarette smoke or treated the products to decrease the harmful effects of such constituents, and developed prototype cigarettes with reduced adverse health effects. These products were never marketed.

95. A memorandum written by an attorney at Shook, Hardy & Bacon articulated the industry-wide position regarding the issue of a so-called "safer cigarette." The 1987 memorandum, referring to the marketing by RJR of a smokeless cigarette, Premier, stated that the smokeless cigarette could "have significant effects on the tobacco industry's joint defense efforts" and that "[t]heindustry position has always been that there is no alternative design for a cigarette as we know them." The attorney also noted that, "unfortunately, the Reynolds announcement . . . seriously undercuts this component of the industry's defense."

96. As early as 1958, a memorandum from a Philip Morris researcher to the company's Vice President of Research and Development proposed that the company attempt to make a "safer cigarette" that could enable it to "jump on the other side of the fence . . . on the issue of tobacco smoking and health . . . ."

97. Although Philip Morris did undertake research and development of such a product, the company never released the research, and never informed the public that existing cigarettes were not safe or that a "safer cigarette" was possible. As a research and development presentation to Philip Morris' Board of Directors in 1964 stated:

"Two years ago, in anticipation of a health crisis to be precipitated by the Smoking and Health Report of the Surgeon General's Committee, we undertook to develop a physiologically superior cigarette.

[W]e put together a charcoal filter product with performance superior to anything in the market place. That product was known as Saratoga. Physiologically it was an outstanding cigarette. Unfortunately then after much discussion we decided not to tell the physiological story which might have appealed to a health conscious segment of the market. The product as test marketed didn't have good 'taste' and consequently was unacceptable to the public ignorant of its physiological superiority."

98. The research and development department at Philip Morris nonetheless viewed continued research into "safer cigarettes" as necessary to compete in the event that another cigarette company marketed a "safer cigarette." The presentation to the Philip Morris Board of Directors continued:

"The Research and Development Department is working to establish a strong technological base with both defensive and offensive capabilities in the smoking and health situation. Our philosophy is not to start a war, but if war comes, we aim to fight well and to win."

(a) Liggett "Safer Cigarette": XA

99. Liggett also developed a cigarette with reduced adverse health effects. Company researchers believed that they had discovered which cigarette smoke constituents were carcinogens, and found a way to remove them. Despite Liggett's belief that the product was commercially marketable, the company never marketed the cigarette and suppressed the research that led to its development.

100. Liggett began its research by repeating the smoke condensate painting studies of mice performed by Dr. Wynder through a contract with a consulting firm. The consulting firm confirmed Dr. Wynder's findings, and as a result, in 1968, Liggett began "a tobacco additive program designed to reduce or eliminate the tumorigenic activity of cigarette smoke."

101. By 1979, Liggett had declared the work a success. Company documents state:

"Briefly, as a result of 20 years effort in cooperation with [the consulting firm], we have developed a cigarette system which produces smoke of reduced biological activity. additives has resulted in a product with lower carcinogenic effects . . . ."

102. Liggett's "safer cigarette," a product called "XA," was never marketed and the XA project was abandoned. Liggett did so for two reasons. First, disclosing the feasibility of a "safer cigarette" would imply that all existing cigarettes were not safe. Second, Philip Morris apparently threatened Liggett with retaliation if Liggett violated the industry agreement not to disclose negative information on use of tobacco products and health. Liggett's Assistant Research Director, Dr. James Mold, reported that Liggett's president said that he was "told by someone in the Philip Morris Company that if we tried to market such a product that they would clobber us."

(b) Liggett, James Mold and Suppression of the XA Research

103. During the XA project, Liggett attempted to insulate the research by the use of company lawyers. According to Dr. Mold, after 1975, "all meetings that we had regarding this project were to be attended by a lawyer . . . . All paper that was generated . . . [was] to be directed to the Law Department." Dr. Mold stated that lawyers even collected all the notes after each meeting.

104. Dr. Mold stated that despite its significance, Liggett's lawyers not only ultimately succeeded in stopping the project, but ordered him not to publish the results of the research that led to the "safer cigarette." Only an abstract of the paper, modified by the legal department, was published by the consulting firm, without Dr. Mold's name.

105. When asked why Liggett never marketed the safer XA cigarette, Dr. Mold explained that:

"[Management circles] felt that such a cigarette if put on the market would seriously indict them for having sold other types of cigarettes that didn't contain this, for example. Or that they were carrying on this biological research at the same time saying it meant nothing."

(c) Liggett "Safer Cigarette" Patent

106. Liggett had also obtained a patent for the process it had discovered to produce its "safer cigarette." The patent application described the reduction in cancer in mouse studies, prompting stories in the media that Liggett was the first cigarette company to admit that smoking caused cancer. Liggett responded by issuing a press release it called a "Liggettgram" which stated: "Liggett and the cigarette industry continue to deny, as they have consistently, that any conclusions can be drawn relating such test results on mice in laboratories to cancer in human beings. It has never been established that smoking is a cause of human cancer.

"The laboratory experiments reported in the patent were conducted for Liggett by an independent researcher, The Life Sciences Division of Arthur D. Little, Inc."

107. Dr. Mold has estimated that, at the time Liggett made this statement, Liggett had spent a total of $10 million on research involving mice, in part to develop the XA cigarette. Liggett's internal reports on the benefit of the XA, and the absence of increased risk of harm from the additives used, specifically used animal studies as reliable indicators of the health effect of the product on humans.

108. Brown & Williamson also attempted to develop a so-called "safer cigarette." By the end of the 1970's, however, Brown & Williamson, in a pattern that was repeated throughout the industry, halted all work on a "safer cigarette."

109. RJR also undertook efforts to develop a so-called "safer cigarette," focusing on delivering nicotine to the consumer without the harmful constituents of tobacco smoke. In the late 1980's, RJR developed and test marketed Premier, a smokeless and virtually tobacco-free cigarette, which was, in essence, a nicotine delivery system. RJR ultimately abandoned development of Premier or other "safer" cigarette products.

K. ENVIRONMENTAL TOBACCO SMOKE

110. The tobacco companies have also attempted to mislead the public regarding the health risks of environmental tobacco smoke. Environmental tobacco smoke, also called "second hand smoke" primarily consists of sidestream smoke (SSS) and mainstream smoke (MSS). SSS is the smoke that issues from the end of a burning cigarette, cigar or pipe in between puffs. MSS is the smoke that smokers draw into and expel from their lungs. Approximately 85% of environmental tobacco smoke is SSS.

111. The United States Environmental Protection Agency has listed environmental tobacco smoke as a Class A (known human) carcinogen and a major source of respiratory problems in children. It is estimated that 650-700 non-smoking Connecticut residents die each year due to the effects of enviromental tobacco smoke.

112. The tobacco companies have long known that environmental tobacco smoke is dangerous to human health but, despite their repeated promises to investigate the health risks of their products, have not disclosed this knowledge to the public. For example, internal documents of Brown & Williamson and BAT demonstrate that, as early as the mid-1970's, the industry began the work ofidentifying "sidestream constituents which may be considered harmful to non smokers." Internal documents show that BAT was actively engaged in measuring the levels of nitrosamine, potent human carcinogens, in second hand smoke: "It is clear that in many countries there is a concern over the level of nitrosamine in foodstuffs. This explains in part the sensitivity to the presence of nitrosamine in tobacco smoke, and, perhaps particularly, the levels of nitrosamine in sidestream smoke. The latter is a potential threat to the currently held view by many authorities that passive smoking does not constitute a direct hazard."

113. In fact, in recognition of the dangers of environmental tobacco smoke, Brown & Williamson and BAT secretly attempted to reduce the amount of sidestream smoke from cigarettes. Notes from a 1980 BAT research conference state: "There was strong support for research into the generation and control of sidestream smoke. . . . The research into the source and mechanism of formation of nitrosamine in both sidestream and mainstream should be considered with urgency." Notes from a 1982 research conference state: "Sidestream has long been known to be different chemically from mainstream, but only recently have there been signs from [BAT's] inhalation studies that the biological activity [carcinogenic effect] of sidestream may also be significantly different from mainstream. An early design of reduced sidestream product developed at [BAT's research facilities in Southampton, England] has recently been screened."

114. In conjunction with the attempt to reduce sidestream smoke because of its admitted dangers, Brown & Williamson and BAT -- in violation of the promise to investigate in an unbiasedmanner the health effects of smoking -- also conducted defensive scientific research designed "to anticipate and refute claims about the health effects of passive smoking."

115. The attempt to mislead the public about the dangers of environmental tobacco smoke and to conceal and distort the true facts was not limited to Brown & Williamson and BAT. The tobacco industry as a whole, through CTR and the Tobacco Institute, also participated in the deception and wrongful conduct. For example, CTR sponsored a research project on sick building syndrome to be conducted by an allegedly independent firm. However, the Tobacco Institute, the industry's chief public relations and lobbying arm, chose the homes that would participate in the study. The tobacco companies also heavily relied on another study, funded through an industry sponsored organization, to support its claim that the dangers of environmental tobacco smoke were not proven. That study was later found, following a congressional inquiry, to be rife with falsified data and grossly underestimated the impacts of environmental tobacco smoke on indoor air quality.

116. The tobacco companies have also attacked independent studies that demonstrate the link between environmental tobacco smoke and adverse health effects despite internally recognizing their validity. For example, a 1981 Japanese study found that non-smoking women married to smokers have a greater chance of dying of lung cancer than non-smoking women married to non-smokers. The Tobacco Institute immediately ran large advertisements in newspapers and magazines denouncing the study despite the fact that industry scientists privately recognized its validity.

L. SUCCESS AND RENEWAL

117. Since its inception in the mid 1950's, the plan of the tobacco companies to engage in a pattern of misrepresentation, disinformation and suppression regarding the adverse health effects caused by tobacco products has been carried out for four main purposes: (1) to prevent, limit or forestall the erosion of demand for tobacco products; (2) to shield tobacco companies from having to pay the health care costs for tobacco-related diseases; (3) to restrain competition within the tobacco products industry and (4) to prevent, limit and forestall governmental regulation of tobacco products. Reflecting back on this plan, a 1972 internal Tobacco Institute memorandum stated:

"For nearly twenty years, this industry has employed a single strategy to defend itself on three major frontslitigation, politics and public opinion.... On the litigation front for which the strategy was designed, it has been successful... [W]e have not lost a liability case."

118. That 1972 Tobacco Institute memorandum recognized the need to continue and intensify the work of the past twenty years:

"In the cigarette controversy, the public-especially those who are present and potential supporters (e.g., tobacco state congressman and heavy smokers) -- must perceive, understand and believe in evidence to sustain their opinions that smoking may not be a causal factor.

As things stand, we supply them with too little in the way of ready- made credible alternatives."

The memorandum goes on to propose the "steps required to start a shift in public opinion" in part by designing a study whose results would be disclosed only "if favorable."

119. Despite overwhelming scientific evidence, and the confirmation of this evidence by their own internal research, the tobacco companies and the other defendants continue to this day to repeat over and over, in a unified stance, that there is no causal connection between the use of tobacco products and human diseases. These representations are misleading, deceptive and untrue. They rest at the heart of the industry's ongoing conspiracy to market and profit from a product it knows is deadly.

IV. THE ROLE OF NICOTINE IN TOBACCO PRODUCTS

120. The tobacco companies also have made every effort to conceal and deny that the nicotine in tobacco products is a powerfully addictive substance. Because nicotine is addictive, consumers who use tobacco products often find themselves "hooked" and are unable to stop using the products even if they want to. Of the seventeen million smokers who try to quit each year, fewer than one out of ten succeeds. The tobacco companies have carefully studied nicotine's addictive character and acted upon that knowledge to maintain tobacco products sales. Yet, each of the tobacco companies has denied that nicotine is addictive.

121. This public deception and the industry's secret manipulation of nicotine were and are critically important to the tobacco companies. As objective researchers increased their warnings about the health dangers of tobacco products, nicotine addiction kept people using those products despite those warnings. This aspect of their deception allowed and continues to allow the tobacco companiesto continue to sell their dangerous products -- even to those who eventually come to doubt the industry's health claims. And if a new consumer is fooled for a time by "pro-tobacco" disinformation on health or seduced by the industry's aggressive marketing techniques, and uses tobacco products, it may well be too late. Instead of a simple decision not to purchase a product, the consumer then must fight an addiction to nicotine.

A.INDUSTRY RESEARCH OF NICOTINE AND KNOWLEDGE OF ITS ADDICTIVENESS

122. Tobacco companies have known since at least the early 1960s of the addictive properties of the nicotine contained in the tobacco products they manufacture and sell. Industry documents are replete with evidence of such knowledge:

* a. In 1962, Sir Charles Ellis, scientific advisor to the board of directors of BAT, stated at a meeting of BAT's worldwide subsidiaries, that "smoking is a habit of addiction" and that "[n]icotine is not only a very fine drug, but the technique of administration by smoking has considerable psychological advantages . . . ." He subsequently described Brown & Williamson as being "in the nicotine rather than the tobacco industry." * b. A research report from 1963 commissioned by Brown & Williamson describes the results if a chronic tobacco products user is denied nicotine: "A body left in this unbalanced state craves for renewed drug intake in order to restore thephysiological equilibrium. This unconscious desire explains the addiction of the individual to nicotine." * c. Addison Yeaman, general counsel at Brown & Williamson, summarized his view about nicotine in an internal memorandum also in 1963: "Moreover, nicotine is addictive. We are, then, in the business of selling nicotine, an addictive drug effective in the release of stress mechanisms." * d. Internal reports prepared by Philip Morris in 1972 and the Philip Morris U.S.A. Research Center in March 1978, demonstrate Philip Morris' understanding of the role of nicotine in tobacco use: "We think that most smokers can be considered nicotine seekers, for the pharmacological effect of nicotine is one of the rewards that come from smoking. When the smoker quits, he foregoes [sic] his accustomed nicotine. The change is very noticeable, he misses the reward, and so he returns to smoking." * e. From 1940 to 1970, ATC conducted its own nicotine research, funding, in whole or in part, over 90 studies on the pharmacological and other effects of nicotine on the body. This research constituted 80% of all biological studies funded by ATC over this period. From its earliest work, ATC understood that nicotine had addictive qualities. In a 1945 study summarized in an ATC report on its research, 24 smokers were given cigarettes with extremely low levels of nicotine. The study showed that 12 of the subjects "definitely missed the nicotine" and 9 of the subjects continued to do so throughout the one month period of the study. The study concluded that "with some individuals, nicotine becomes a major factor in the cigarette habit." * f. In a 1972 document entitled "RJR confidential research planning memorandum on the nature of the tobacco business and the crucial role of nicotine therein," an RJR executive wrote: "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 physiological effects." * g. In a 1972 memorandum on product development, US Tobacco noted that a particular focus should be on assuring adequate "nicotine satisfaction." In a 1981 memorandum, Per Erik Lindqvist, US Tobacco Senior Vice President of Marketing set out the criteria for a new smokeless tobacco product: "Flavorwise we should try for innovation, taste and strength. Nicotine should be medium, recognizing the fact that virtually all tobacco usage is based upon nicotine, 'the kick,' satisfaction." Asked to later explain this statement, Lindqvist admitted: "All tobacco products contain nicotine. Nicotine gives the consumer satisfaction. Some would describe it as a pleasant feeling. Others would describe it as a kick . . . . Others would describe it as a relaxing feeling."

123. The tobacco companies understood early on that nicotine was the key to their industry's success. The tobacco companies have conducted extensive research establishing that users of tobacco products require a certain level of nicotine and that tobacco "satisfaction" is attributable to nicotine's effect on the body after absorption.

124. Documents from a BAT study called Project Hippo demonstrate that as far back as 1961, BAT was actively studying the physiological and pharmacological effects of nicotine in order to understand "why cigarette smokers are so fond of their habit." Project Hippo reports were circulated to other U.S. tobacco products manufacturers and to TIRC, demonstrating that at least some of the industry's nicotine research was shared. BAT sent the reports to officials at Brown & Williamson and RJR, and circulated a copy to TIRC with a request that TIRC "consider whether it would help the U.S. industry for these reports to be passed on to the Surgeon General's Committee."

125. A 1983 industry report also concluded that the primary reason people use tobacco products "is probably the physiological satisfaction provided by the nicotine level of the product." 126. The industry's recognition of the extent to which nicotine defines its product is illustrated in a 1972 Philip Morris report on a CTR conference, which stated:

"As with eating and copulating so it is with smoking. The physiological effect serves as the primary incentive, all other incentives are secondary. The majority of the conferees would go even further and accept the proposition that nicotine is the active constituent of cigarette smoke. Without nicotine, the argument goes, there would be no smoking. . . .

"Why then is there not a market for nicotine per se, eaten, sucked, drunk, injected, inserted, or inhaled as a pure aerosol? The answer, and I feel quite strongly about this, is that the cigarette is in fact among the most awe-inspiring examples of the ingenuity of man. Let me explain my conviction. The cigarette should be conceived not as a product but as 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 for the dose unit of nicotine."

127. As recently as December 1995, the Wall Street Journal reported on an internal Philip Morris draft document analyzing the competitive market for tobacco products for the years 1990 -1992. The report describes the importance of nicotine:

"Different people smoke for different reasons. But the primary reason is to deliver nicotine into their bodies. . . substance. Similar organic chemicals include nicotine, quinine, cocaine, atropine and morphine. While each of these substances can be used to affect human physiology, nicotine has a particularly broad range of influence. During the smoking act, nicotine is inhaled into the lungs in smoke, enters the bloodstream and travels to the brain in about eight to ten seconds."

128. The tobacco companies have long understood that reducing or eliminating nicotine from their products would hurt sales and profits. As one company researcher wrote in a 1978 report to Philip Morris executives:

"If the industry's introduction of acceptable low-nicotine products does make it easier for dedicated smokers to quit, then the wisdom of the introduction is open to debate."

129. Instead of reducing or eliminating nicotine from their products, the industry attempted to develop ways of delivering adequate doses of nicotine to create and sustain addiction in the user. Nicotine, in itself, however, causes dangerous cardiovascular effects. In particular, it causes a narrowing of the blood vessels, increased heart rate, increased blood pressure, changes in lipid metabolism and, in some cases, irregular heart rhythms, all of which can accelerate the accumulation of fatty deposits in the arteries and contribute to myocardial infarctions.

130. Some tobacco companies studied artificial nicotine or nicotine analogues that would have the addictive and psycho-pharmacological properties of nicotine without its dangerous effects on the heart. Dr. Victor DeNoble was hired by Philip Morris, in part, to research and develop a nicotine analogue.

131. DeNoble discovered such an analogue, but Philip Morris chose to halt its effort to determine whether the nicotine analogue could be used to make a so-called "safer cigarette." Philip Morris decided not to pursue nicotine analogues in order to avoid the risk of adverse publicity and of compromising the industry's consistent position that there was no alternative design for cigarettes.

132. Brown & Williamson also understood that nicotine was the essential ingredient in maintaining tobacco sales. During its efforts to develop the so-called "safer cigarette," internal documents describe such a product as "a nicotine delivery device."

133. RJR's efforts to develop its "safer cigarette" also focused on delivering nicotine to the consumer without the harmful constituents of tobacco smoke.

134. To this day, the tobacco companies have concealed from the public, public health officials, and Congress their extensive knowledge of the addictive properties of nicotine and its critical role in tobacco products use.

135. In addition to concealing their knowledge, the tobacco companies have affirmatively misrepresented the role of nicotine in tobacco use. Even today, defendants continue to claim that nicotine is important in cigarettes for taste and "mouth-feel." However, tobacco industry patents specifically distinguish nicotine from flavorants and an RJR book on flavoring tobacco, while listing approximately a thousand flavorants, fails to include nicotine as a flavoring agent. The tobacco companies have actually concentrated on developing technologies to mask the acrid flavor of increased levels of nicotine in cigarettes.

B. SUPPRESSION AND CONCEALMENT OF RESEARCH ON NICOTINE ADDICTION

136. The tobacco companies, rather than fulfilling their promise to the public to disclose material information about the use of tobacco products and health, chose a course of suppression, concealment and disinformation about the true properties of nicotine and the addictiveness of using tobacco products.

137. Philip Morris hired Victor DeNoble in 1980 to study nicotine's effects on the behavior of rats and to research and test potential nicotine analogues. DeNoble carried out his research with Paul C. Mele, a behavioral pharmacologist.

138. DeNoble and Mele discovered that nicotine met two of the hallmarks of potential addiction -- self-administration (rats would press levers to inject themselves with a nicotine solution)and tolerance (a given dose of nicotine over time had a reduced effect).

139. Philip Morris instructed DeNoble and Mele to keep their work secret, even from fellow Philip Morris scientists. Test animals were delivered at dawn and brought from the loading dock to the laboratory under cover. Memos, notebooks, external communications and internal reports were increasingly scrutinized, revised and censored by Philip Morris management to make sure that no sensitive terms such as "addictive" were being incorporated into any of the company's written documentation.

140. DeNoble was later told by the company that the data he and Mele were generating could be damaging. Philip Morris executives began talking of killing the research or moving it outside of the company so Philip Morris would have more freedom to disavow the results.

141. In August 1983, Philip Morris ordered DeNoble to withdraw from publication a research paper on nicotine that had already been accepted for publication after peer review by the journal Psychopharmacology. According to DeNoble, the company changed its mind because it did not want its own research to compromise the company's defense asserted in litigation recently filed against it. Philip Morris officials had interpreted the suppressed nicotine studies as showing that, in terms of addictiveness, "nicotine looked like heroin."

142. In April 1984, Philip Morris closed DeNoble's nicotine research lab. DeNoble and Mele were forced abruptly to halt their studies, turn off all their instruments and turn in their security badges by morning. Philip Morris subsequently threatened them with legal action if they published or talked about their nicotine research. According to DeNoble, the lab literally vanished overnight. The animals were killed, the equipment was removed and all traces of the former lab were eliminated.

143. DeNoble testified to the Waxman Subcommittee that "senior research management in Richmond, Va., as well as top officials at the Philip Morris Company in New York, continually reviewed our research and approved our research." DeNoble also stated that these officials, including the president of Philip Morris, were specifically told that nicotine had addictive qualities.

144. Other tobacco companies were also actively suppressing and concealing their research on nicotine addiction. For example, Brown & Williamson undertook its potentially sensitive research on nicotine through a contractor in Geneva, Switzerland, and through British affiliates at an English lab called Harrogate.

145. In 1963, Brown & Williamson debated internally whether to disclose to the U.S. Surgeon General, who was preparing his first official report on smoking and health, what the company knew about the addictiveness of nicotine and the adverse effects of the use of tobacco products on health. Addison Yeaman, the company's general counsel, advised Brown & Williamson to "accept its responsibility" and disclose its findings to the Surgeon General. He said that such disclosure would then allow the company openly to research and develop a "safer cigarette."

146. Brown & Williamson rejected Yeaman's advice to make full disclosure to the Surgeon General. A series of six letters and telexes exchanged by Yeaman and senior BAT official A.D. McCormick between June 28 and August 8, 1963 document the company's decision not to disclose its research findings to the Surgeon General. Some of that research was later characterized in a report in the Journal of the American Medical Association as "at the cutting edge of nicotine pharmacology." Tobacco industry internal research on the effects of nicotine preceded the main published reports from the general scientific community by several years.

C. INDUSTRY CONTROL AND MANIPULATION OF NICOTINE

147. Tobacco companies have developed and used highly sophisticated technologies designed to deliver nicotine in precisely calculated quantities -- quantities that are more than sufficient to create and sustain addiction in the vast majority of individuals who use tobacco products regularly. Tobacco companies control the nicotine content of their products through selective breeding and cultivation of plants for nicotine content, and careful tobacco leaf purchasing plans. The companies control nicotine delivery (i.e., the amount made available to the tobacco products user) with various design and manufacturing techniques.

1. Manipulation of Nicotine Content: Y-1

148. Brown & Williamson's development of a new tobacco plant dubbed "Y-1" is an egregious example of the cigarette industry's concealment of its control and manipulation of the nicotine levels in its products.

149. In a decade-long project, Brown & Williamson secretly developed a genetically-engineered tobacco plant, which the company called "Y-1," with a nicotine content more than twice the average found naturally in flue-cured tobacco. Brown & Williamson took out a Brazilian patent for the new plant, which was printed in Portuguese. Brown & Williamson and a Brazilian sister company, Souza Cruz Overseas, grew Y-1 in Brazil and shipped it to the United States where it was used in five Brown & Williamson cigarette brands sold in Connecticut, including three labeled "light."

150. When four investigators from the Food and Drug Administration ("FDA") visited the Brown & Williamson plant in Macon, Georgia on May 3, 1994, Brown & Williamson officials denied that the company was involved in "any breeding of tobacco for high or low nicotine levels." As part of its attempt to cover-up its project, Brown & Williamson instructed the DNA Plant Technology Corporation of Oakland, California, which had developed Y-1, to tell FDA investigators that Y-1 had "never [been] commercialized."

151. Only after the FDA discovered two United States Customs Service invoices indicating that "more than a half-million pounds" of Y-1 tobacco had been shipped to Brown & Williamson on September 21, 1992, did the company admit that it had developed the high- nicotine tobacco and that close to four million pounds of Y-1 were stored in company warehouses in the United States.

152. Philip Morris also undertook development of methods to boost or manipulate the nicotine content of tobaccos. According to Ian Uydess, a Philip Morris scientist:

"In the 1980's, Philip Morris conducted field experiments on the growth of tobacco with elevated nicotine levels for possible use in their products. Philip Morris examined a technique called 'ratooning' which involved cutting down of the tobacco plant early in the harvest cycle before the plant had fully matured. As the cut plant resumed its growth, the roots deposited elevated levels of nicotine in the leaves of the plant. . . . This technique produced tobacco leaves that had higher nicotine levels than the leaves of non-ratooned plants."

153. Y-1 and the experiments conducted by Philip Morris are examples of an overall trend in the tobacco industry to increase the nicotine content of tobaccos. American tobaccos of all types haveundergone cumulative increases in total nicotine levels since the 1950s. Nicotine levels in the most widely grown American tobaccos increased between 10 - 50 percent between 1955 and 1980. This increase is the result of the industry's active and controlling participation in efforts to breed and cultivate tobacco for high nicotine levels.

2. Manipulation of Nicotine Delivery

154. The nicotine content of unprocessed tobacco is not the only variable manipulated by the tobacco companies to deliver a pharmacologically active dose of nicotine to the tobacco products user. Modern tobacco products as sold in Connecticut are painstakingly designed and manufactured to control nicotine delivery to the consumer.

155. David A. Kessler, M.D., Commissioner of the Food and Drug Administration, testified in detail before the Waxman Committee about the various forms of nicotine manipulation practiced by the tobacco industry: manipulating the rate at which nicotine is delivered in the cigarette; transferring nicotine from one material to another; increasing the amount of nicotine in cigarettes; and adding nicotine to any part of a cigarette.

156. Dr. Kessler's testimony shows that nicotine is not an inevitable or unavoidable component of tobacco products, and that the tobacco companies have the capability to remove all or virtually all of the nicotine from tobacco products using technology already in existence. They also have the capability to add nicotine to tobacco products.

157. One tobacco company, ATC, has admitted test- marketing a nicotine-enriched cigarette in 1969.

158. Tobacco industry patents show that the tobacco companies have developed the capability to manipulate nicotine levels in cigarettes to an exacting degree. For example:

* a. A Philip Morris patent application discusses an invention that "permits the release . . . in controlled amounts and when desired, of nicotine into tobacco smoke." * b. Another Philip Morris patent application explains that the proposed invention "is particularly useful for the maintenance of the proper amount of nicotine in tobacco smoke," and notes that "previous efforts have been made to add nicotine to Tobacco Products when the nicotine level in the tobacco was undesirably low." * c. A 1991 RJR patent application states that "processed tobaccos can be manufactured under conditions suitable to provide products having various nicotine levels."

159. One method that the tobacco companies use to manipulate nicotine levels in their products involves the addition of several ammonia compounds during the manufacturing process which increase the delivery of nicotine and almost double the nicotine transfer efficiency of cigarettes.

160. Brown & Williamson has recently publicly denied that the use of ammonia in the processing of tobacco increases the amount of nicotine delivered to the smoker. Nevertheless, the company's own internal documents reveal that it and virtually all other tobacco companies use ammonia compounds to increase nicotine delivery. A 1991 Brown & Williamson confidential blending manual states:

"Ammonia, when added to a tobacco blend, reacts with the indigenous nicotine salts and liberates free nicotine . . . extractablenicotine to bound nicotine in the smoke may be altered in favor of extractable nicotine. As we know, extractable nicotine contributes to impact in cigarette smoke and this is how ammonia can act as an impact booster."

According to the Brown & Williamson manual, all American tobacco companies except Liggett use ammonia technology in their cigarettes.

161. At Philip Morris, ammonia is regularly added to the slurry of tobacco by-products from which reconstituted tobacco is made.

162. According to Dr. Wigand, a former Brown & Williamson scientist, "[t]he primary form of managing or manipulating nicotine delivery . . . is by use of ammonia compounds."

163. The tobacco companies' manipulation and control of nicotine levels is further evidenced by the emergence of companies that specialize in manipulating nicotine and that are now offering their services to tobacco manufacturers. A process called tobacco reconstitution, patented and marketed by a Kimberly-Clark Corporation subsidiary, LTR Industries, is widely used throughout the industry.

164. Reconstituted tobacco is made from stalks and stems and other waste that tobacco companies formerly discarded and now used to make cigarettes more cheaply. In the reconstitution process, pieces of tobacco material undergo treatment that results in the extraction of some soluble components, including nicotine. The pieces are then physically formed into a sheet of tobacco material, to which the extracted nicotine is re-added. Although denied by tobacco executives, it has been publicly reported that this process adjusts nicotine levels in the products, and that one manufacturer, RJR, "readily admits to setting levels of nicotine . . . for the tobacco sheet."

165. An advertisement in tobacco industry trade publications for the Kimberly-Clark tobacco reconstitution process states:

"Nicotine levels are becoming a growing concern to the designers of modern cigarettes, particularly those with lower 'tar' deliveries. The Kimberly-Clark tobacco reconstitution process used by LTR Industries permits adjustments of nicotine to your exact requirements . . . . We can help you control your tobacco."

166. The tobacco industry's own trade literature explains that the Kimberly-Clark process enables manufacturers to triple or even quadruple the nicotine content of reconstituted tobacco, thereby increasing the nicotine content of the final manufactured product.

167. Another enterprise quite explicitly specializes in the manipulation of nicotine and its use as an additive. This company does business under the name "The Tobacco Companies of the Contraf Group." An advertisement run by the Contraf Group in the international trade press states: "Don't Do Everything Yourself! Let us do it More Efficiently!" Calling itself "The Niche Market Specialists," Contraf lists among its areas of specialization "Pure Nicotine and other special additives."

168. Two former Philip Morris scientists, Ian Uydess and Jerome Rivers, have described in affidavits how Philip Morris manipulates the nicotine content of its tobacco products in order to deliver targeted levels of nicotine to the smoker. According to Dr. Uydess:

"Nicotine levels were routinely targeted and adjusted by Philip Morris in its various products at least in part through blend changes and blend design. . .

Tobacco companies like Philip Morris learned a long time ago that it was hard to get people to stay with a good tasting product if the nicotine level was too low. . . . Theinformation gained by Philip Morris from the chemical analysis of tobacco of different varieties, ripeness, etc., was used in the blend design of new products to ensure that the desired amount of "high" or "low" nicotine tobaccos were present in order to deliver the amount of nicotine (or other tobacco constituents) that had been targeted for that product."

If sales of a new product in test markets were disappointing, "it was suggested that the product development group might have to adjust the blend so as to raise the nicotine level in order to increase its 'staying power' (acceptability and sale) in the market place."

169. According to Dr. Jeffrey Wigand, a former researcher for Brown & Williamson, Brown & Williamson manipulated nicotine levels in its products in a number of ways. In addition to using additives such as ammonia to change the pH of the tobacco smoke in order to convert total nicotine to free nicotine, Brown & Williamson, like Philip Morris, utilized blending techniques "as a way of assuring the appropriate nicotine level." The company also manipulated nicotine levels "through cigarette design, through filtration, through paper design."

3.Manipulation of Nicotine Delivery in Smokeless Tobacco

170. US Tobacco has intentionally manipulated the amount of nicotine in its products since at least the 1970s. This manipulation is achieved through several means. First, the amount of total nicotine contained in the product is manipulated through the selection and blending of particular types of tobaccoleafs. Second, US Tobacco manipulates the amount of "free" nicotine in its products. The amount of "free" nicotine determines how much nicotine is actually absorbed into the users' system. Levels of "free" nicotine are controlled by adjusting the pH of the product, either through a fermentation process, by adding alkaline buffering agents such as sodium bicarbonate and ammonium bicarbonate, or by altering moisture content.

171. Several former US Tobacco chemists have admitted that US Tobacco manipulates the amount of free nicotine in its product. For example, one employee stated in 1994 that "US Tobacco routinely adds chemicals to its snuff to deliver the free nicotine faster and to make the product stronger . . . sodium bicarbonate and ammonium bicarbonate." Another admitted: "The fermentation process involves adding chemicals and, at the end, you add some more chemicals which increase the pH too . . . . Without increasing the pH, you couldn't get nicotine release."

172. US Tobacco has used its manipulation of nicotine content in a carefully designed marketing strategy to attract new users to its smokeless tobacco and then to addict them to the nicotine in its products. This strategy has been described by US Tobacco as a "graduation" strategy because it employs lower nicotine product choices from which the more "experienced" smokeless tobacco user graduates to heavier nicotine brands.

173. If new users, such as children or adolescents, begin smokeless tobacco use with one of US Tobacco's high nicotine brands such as Skoal Fine Cut or Copenhagen, a toxic response to the nicotine such as dizziness or nausea may occur and the novice is more likely to quit before tolerance to the toxic effects of nicotine begins to develop. To respond to this scenario and to attract and keep new customers, US Tobacco has developed low nicotine starter brands such as Happy Days, Skoal Bandits and Skoal Long Cut.

174. In 1985, US Tobacco Vice President Jack Affrick explained in a company newsletter:

"As far as our strategy for entering a new market is concerned-- for each market there is a set of criteria which have been established, and must be met. Skoal Bandits is the introductory product, and then we look towards establishing a normal graduation process."

175. Marketing consultants for US Tobacco also have described the graduation theory:

"New users of smokeless tobacco -- attracted to the category for a variety of reasons -- are most likely to begin with products that are more mild tasting, more flavored, and easier to control in the mouth. After a period of time, there is a natural progression of product switching to brands that are more full-bodied, less flavored [and] have more concentrated 'tobacco taste' than the entry brand."

176. US Tobacco has also referred to this strategy within the company. Ken Carlson, a division manger in US Tobacco's sales department from 1979 to 1986, has disclosed: "they talked about graduation all the time-- in sales meetings, memos and manuals for the college program. It was a mantra."

177. A 1986 brochure for US Tobacco's Skoal Bandits describes to new users how to begin the graduation process by developing a tolerance for the toxic effects of nicotine:

"How long should I keep the pouch in my mouth? If you haven't tried Skoal Bandits before, we recommend that you keep your first one in for about a minute--then remove. The next time you try another one, leave it in for a bit longer. Like your first beer, Skoal Bandits can be a taste that takes time to acquire and get the most out of. After four or five Skoal Bandits you'll find you've developed qite a taste for them and you'll want to keep a pouch in as long as the flavour lasts -- this varies from person to person."

D. LIGHT CIGARETTES: A MARKETING HOAX

178. The tobacco companies' manipulation of nicotine is particularly deceptive in its marketing of "light" or low-tar and low- nicotine cigarettes to retain the "health conscious" segment of the smoking market. Recent studies demonstrate that cigarettes advertised as low tar and low nicotine have higher concentrations of nicotine, by weight, than high yield cigarettes. Nevertheless, the tobacco companies have successfully identified "light" cigarettes to consumers as a reduced tar and reduced nicotine product. The tobacco companies have accomplished this deception through several strategies.

179. First, tobacco companies have designed their "light" products so that advertised tar and nicotine levels, as measured by the FTC method, understate the amounts of tar and nicotine actually ingested by human smokers. Such design features include a technique called filter ventilation in which nearly invisible holes are drilled in the filter paper, or the filter paper is made more porous. Predictably, many smokers of advertised low tar and nicotine cigarettes block the tiny, laser-generated perforations in ventilated filters with their fingers or lips, thereby resulting in greater tar and nicotine yields to those smokers than those measured by the FTC smoking machine.

180. Tobacco companies know that the ability to block ventilation holes allows smokers to "compensate" for nicotine losses that would otherwise be caused by tar-reducing modifications. The industry has studied smoker compensation in order to design cigarettes that allow smokers tocompensate for lower nicotine yields. One such design feature is known as "elasticity." This refers to the ability of a cigarette, whatever its FTC measured nicotine yield, to deliver enough smoke to permit a smoker to obtain the nicotine he needs, e.g., through more or longer puffs, or by covering ventilation holes.

181. Industry studies show that smokers tend to obtain close to the same amount of nicotine from each cigarette despite differences in yield as measured by the FTC smoking machine. In a 1974 BAT conference, researchers described the result of one such study:

"The Kippa study in Germany suggests that whatever the characteristics of cigarettes as determined by smoking machines, the smoker adjusts his pattern to deliver his own nicotine requirements (about 0.8 mg. per cigarette)."

182. Second, the FTC testing method does not distinguish between the slower acting salt-bound nicotine and the more potent "free" nicotine that ammonia helps release. An ammoniated cigarette that delivers more potent nicotine to smokers measures the same as a cigarette with no such additives.

183. The use of ammonia is another method used by the tobacco companies to reduce the FTC measured tar and nicotine levels in their cigarettes over the past two decades while still furnishing smokers with sufficient nicotine delivery. According to John Kreisher, a former associate scientific director for CTR, "[a]mmonia helped the industry lower the tar and allowed smokers to get more bang with less nicotine. It solved a couple of problems at the same time."

184. Third, the tobacco companies maintain that nicotine levels follow tar levels. In the words of Dr. Alexander Spears, Vice Chairman of Lorillard, in his 1994 testimony before the WaxmanSubcommittee -- "[n]icotine [level] follows the tar level," and the correlation between the two "is essentially perfect," and "shows that there is no manipulation of nicotine." As Dr. Spears neglected to mention to Congress, however, in a 1981 study not intended for public release he stated explicitly that low-tar cigarettes use special blends of tobacco to keep the level of nicotine up while tar is reduced: "[T]he lowest tar segment [of product categories] is composed of cigarettes utilizing a tobacco blend which is significantly higher in nicotine."

185. RJR, ATC and the Tobacco Institute have similarly represented to the public and to the FDA that the nicotine levels in their products are purely a function of setting the tar levels of such products.

186. ATC told the Waxman Subcommittee in an October 14, 1994 letter that "nicotine follows 'tar' delivery, i.e. high 'tar' -high nicotine, low 'tar' -- low nicotine . . . . Nicotine is neither adjusted nor altered to compensate for losses inherent in the manufacturing process." Internal company documents reviewed by the Waxman Subcommittee show, however, that ATC's experimentation with adding nicotine to its tobacco was extensive -- extensive enough for ATC executive John T. Ashworth to instruct employees in a confidential memorandum: "In the future, our use of nicotine should be referred to as 'Compound W' in our experimental work, reports, and memorandums, either for distribution within the Department or for outside distribution."

187. Recent tests conducted at the direction of the FDA show that the low-tar brands actually have more nicotine by weight than the non-"light" brands. The defendants' misrepresentation that cigarettes with lower levels of tar also have lower levels of nicotine seriously misleads consumers and renders false the industry's claim of an "essentially perfect" correlation between reduced tar andnicotine levels. According to the FDA, this has been accomplished by a combination of the methods described above for boosting nicotine delivery to compensate for nicotine losses from the application of tar- reducing design modifications. The tobacco companies thereby maintain a continuing market for a product that consumers are misled to believe contains less of all of the harmful ingredients in regular cigarettes.

188. Notwithstanding the tobacco companies' ongoing manipulation and control of nicotine levels in tobacco products, the tobacco companies continue to deny to the public, and recently denied to Congress under oath,

189. Top executives from Philip Morris, RJR, Lorillard, Liggett, Brown & Williamson and US Tobacco testified in April 1994 that their respective companies do not manipulate nicotine, add it, independently control it, restore it during the manufacturing process, or otherwise achieve a minimum level of nicotine in their products. Thomas E. Sandefur, Jr., then CEO of Brown & Williamson, admitted that the company controlled nicotine, but in a now familiar refrain, stated that the company did so only for "taste."

190. As recently as April 1994, tobacco companies placed advertisements across the country denying that they believe the use of tobacco products is addictive, and misleading the public about whether the tobacco companies deliberately control nicotine levels in their products.

191. An advertisement placed by Philip Morris in newspapers across the country, including the Hartford Courant, in April 1994, affirmatively represented that Philip Morris does not "manipulate" nicotine levels in its cigarettes, and that "Philip Morris does not believe that cigarette smoking is addictive."

192. RJR placed a similar advertisement in newspapers across the United States in 1994 stating that "we do not increase the level of nicotine in any of our products in order to 'addict' smokers. Instead of increasing the nicotine levels in our products, we have in fact worked hard to decrease 'tar' and nicotine . . . ." RJR's advertisement then touted its use of "various techniques that help us reduce the 'tar' (and consequently the nicotine) yields of our products."

193. These statements mislead the consuming public because, as set forth above, Philip Morris and RJR use various sophisticated techniques to increase the nicotine content in their tobacco products and the actual nicotine delivery to the tobacco products user.

194. As a result of defendants' actions, as many as 74% to 90% of tobacco products users are addicted. Eight out of ten smokers say they wish they had never started smoking. 74% of young people regularly using smokeless tobacco find quitting extremely difficult. Over 90% experience withdrawal symptoms when they try. Two- thirds of adults who smoke say they wish they could quit. Seventeen million try to quit each year, but fewer than one out of ten succeeds. A high percentage of the smokers who have surgery for lung cancer or heart attacks return to smoking, as do 40% of smokers who have had their larynxes removed.

V. TARGETING MINORS

A. THE NEED TO ATTRACT AND ADDICT CHILDREN TO TOBACCO PRODUCTS

195. In addition to ensuring a captive market through the addiction of its customers, the tobacco companies maintain their sales and replace hundreds of thousands of tobacco users who die each year by target marketing and promoting their products to minors.

196. Despite the best efforts of parents, educators, the medical profession and public health officials, tobacco use among children and adolescents has been is on the rise. The tobacco companies' pervasive advertising associates tobacco use with healthy, glamorous and athletic lifestyles, with success and with sexual attractiveness. Within a short period of time, the underage tobacco user becomes addicted to tobacco. Later, as the maturing tobacco user begins to wish he or she could quit, advertising reinforces the practice and seeks to minimize health concerns and creates doubt and confusion. The images and message of these advertisements have the purpose and effect of providing tobacco users an excuse to avoid the pain and discomfort of attempting to break their addiction to nicotine. This conduct on behalf of the tobacco companies is particularly egregious in that it is directed at children and adolescents who lack the maturity, judgment and experience of adults. Manipulating levels of nicotine, the addictive ingredient in tobacco products, and then targeting children and adolescents is particularly reprehensible.

197. The overwhelming majority of tobacco products use and addiction begins when users are children or adolescents. Approximately 90 percent of smokers began smoking when they were under the age of eighteen, and the prevalence of tobacco use among adolescents is continually increasing. In 1989 in Connecticut, over one third of all girls and 28.5 percent of boys in grades 9-12 reported that they had smoked in the past month. A survey of high school seniors found that 54 percent of males had used smokeless tobacco products and, of those, over 53 percent had used such products before the eighth grade. Studies demonstrate that the younger one begins to smoke, the more likely it is that that person will become a heavy smoker. Accordingly, the younger a person begins smoking, the more likely it is that he or she will die of a tobacco-related disease.

198. The tobacco companies are well aware of the importance of reaching the child and adolescent market. For example, in 1984, an RJR marketing report detailed federal research showing that smokers began as early as age 12 and rarely after age 25, with a median age of 17. The tobacco companies have also studied the development of brand loyalty among child and adolescent smokers.

199. Although children and adolescents frequently believe that they will not become addicted to nicotine or become long-term users of tobacco products, they often find themselves unable to quit. Among smokers aging from 12 to 17 years of age, a 1992 Gallup survey found that 70 percent regret their decision to smoke and 66 percent indicate that they want to quit. Fifty one percent of adolescent smokers had made a serious effort to quit, but had failed. Those who are able to quit experience withdrawal symptoms similar to those experienced by adults. The nicotine contained in smokeless tobacco has been shown to have similar effects to that in cigarettes.

200. Tobacco companies understand that advertising campaigns directed at children and adolescents are important tools in increasing their sales. Since 1964, about 44 million Americans have quit smoking and approximately 9 million more have died of tobacco- related diseases. For the tobacco companies to preserve their market status, they must attract two million new users each year to replace these lost consumers. Such new users will overwhelmingly be adolescents who, because of the addictive quality of tobacco products, will be likely to continue their tobacco use through adulthood.

201. While many segments of the adult population have decreased their tobacco use, the prevalence of tobacco use by children and adolescents is on the rise. Between 1991 and 1995, the rate of cigarette consumption among students in grades 9 through 12 increased from 27.5 percent to 34.8percent. Illegal sales to minors have been estimated to generate well over a billion dollars per year in revenue for the tobacco companies.

202. Tobacco products are among the most heavily advertised in the United States. In 1990, cigarette advertising expenditures were second only to automobile advertising. Between 1970 and 1993, cigarette expenditures for marketing increased from $361 million to over $6 billion, a 1,562 percent increase. In 1993, marketing expenditures for the significantly smaller smokeless tobacco products market exceeded $119 million. As a result, tobacco product brand names, logos and advertising messages appear on billboards, trains, in magazines with high-youth readership and newspapers, on clothing and other goods. Such pervasive images and messages convey to children and adolescents that tobacco use is desirable, socially acceptable, safe, healthy and prevalent in society.

B. THE USE OF MARKETING TO INDUCE MINORS

203. The increase in underage tobacco products use is perpetuated by advertising campaigns that have particular appeal to children and adolescents. Such campaigns promote the product for its symbolic attributes to convey the impression that consumption of the product will enhance the user's self image or image in the community. By way of example, the "Marlboro Man," a Philip Morris campaign, presents an image of adventure and freedom while RJR's "Joe Camel" gives humorous dating tips and engages in activities such as motorcycle riding and waterskiing. Newport advertisements show young men and women having fun, usually in sexually suggestive positions, under the slogan "Alive with Pleasure" or "Newport Pleasure." Such advertising techniques appeal to children and adolescents by providing them with images to wear as badges of identity.

Notsurprisingly, Marlboro, Camel and Newport are the leading cigarette brands used by children and adolescents, among them accounting for 85 percent of the underage market in 1993. These three brands accounted for only 35 percent of the total market share in the same year.

204. Marlboro, which has traditionally dominated the children and adolescent cigarette market, was originally a red tipped cigarette targeted toward the female market with the slogan, "Mild as May." In the 1950s, an advertising campaign which culminated in the creation of the Marlboro cowboy, transformed Marlboro into a "masculine product" intended to appeal to the starter market. Because young smokers often take up the habit as an assertion of independence and adulthood, the Marlboro cowboy campaign emphasizes themes of independence. The Marlboro man is always alone, free from the constraints of an authority figure. There are no parents, no older brothers and no bullies in Marlboro country.

205. While Philip Morris' Marlboro brand has been positioned to appeal to young male smokers, Philip Morris and other defendant tobacco companies have also specifically targeted young females, with brands such as Virginia Slims, Eve and Silva Thins.

206. Thus, Philip Morris has had particular success in appealing to adolescent girls with its "You've Come a Long Way Baby" campaign, promoting Virginia Slims cigarettes. One of the most important psychological needs of most adolescent girls, is to become independent from their parents. Another important psychological need of adolescent girls is to be perceived as slim. By associating smoking with women's liberation, Philip Morris intended to create in the minds of teenage girls the vision of smoking as a symbol of autonomy and independence. By associating their cigarettes with images of thin and glamorous models, Philip Morris conveys the image that smoking will help girls tolose weight and look slimmer. Indeed, the very name, Virginia Slims, is suggestive. Ads for Virginia Slims and other "feminine" cigarettes prey upon the natural and common insecurity and sense of inferiority experienced by adolescents, by portraying the cigarette as a crutch and a symbol of superiority.

207. As a result of these efforts to target young females, there was, between 1967 and 1975, a substantial rise in the numbers of new female smokers between the ages of 11 and 17.

208. RJR's subsequent use of the "Joe Camel" campaign is a striking example of the power that marketing can have on capturing children and adolescent smokers. The "Joe Camel" campaign was initiated in 1987 to commemorate the 75th anniversary of Camel cigarettes. It soon became evident that the "Joe Camel" cartoon character strikes a responsive chord among children and adolescents. Since then, the campaign has been used to target children to induce them to start smoking as early as possible, so they can become addicted to nicotine and form brand loyalties which will last the rest of their lives.

209. When RJR began the "Joe Camel" cartoon campaign, Camel's share of the children's and adolescent's market was estimated to be between 0.5 percent and 3 percent. In just a few years, Camel's share of the children's and adolescents' market increased to over 13 percent and by some accounts, had increased to over 32 percent.

210. Tobacco products advertising is becoming increasingly concentrated in youth-oriented publications. Moreover, tobacco products ads in these youth-oriented magazines are frequently multi- page, pop-up ads which are significantly more costly, but also more attention-grabbing than conventional ads. By way of example, Rolling Stone magazine recently ran a "rockin ticketmaster" adin which the opening page featured the Joe Camel character in a leather jacket and t-shirt looking down at the reader saying "Wanna See a Show?" When the reader turns the page, the Joe Camel character pops out of the magazine to hand the reader two tickets with the caption, "Go ahead, its on me."

211. Another strategy that tobacco companies use to appeal to children and adolescents is distributing promotional items, such as T- Shirts, baseball caps and pocket knives through the mail and at promotional events. These items encourage adolescents, to whom such items have great appeal, to accumulate merchandise by buying more cigarettes. More importantly, the items, which do not generally display warning labels, turn the children into walking advertisements that penetrate into schools and other areas where advertising would otherwise be restricted. A 1992 Gallup poll found that about half of adolescent smokers and one quarter of non-smoking adolescents had received at least one of these items.

212. Tobacco companies have also marketed to youth by inserting advertisements for their products into movies that have appeal to children. Such movies include, for example, Superman II, Supergirl and James Bond. A 1983 letter signed by the actor Sylvester Stallone documents one such agreement. Mr. Stallone writes, "I guarantee that I will use Brown & Williamson tobacco products in no less than five feature films. It is my understanding that Brown & Williamson will pay a fee of $500,000.00." Such "stealth" advertisements are particularly disturbing in that the child and adolescent is particularly susceptible to such role models and is wholly unaware that he or she is the subject of the marketing.

213. Sponsorship of, and placement of billboards at, sporting and entertainment events is another effective means of stealth advertising. Such advertising makes its way onto television, where cigarette advertising is otherwise prohibited. By way of example, when the 1989 Marlboro Grand Prix was televised, the Marlboro logo could be seen for 46 of the 94 total minutes of the event's broadcast time.

214. Despite the overwhelming evidence, the tobacco companies continue to deny any youth-directed advertising and promotional activities. The tobacco companies represent that the purpose and effect of their advertising is limited to maintaining brand loyalty and enticing existing adult smokers to switch brands and that it has no role in encouraging children and adolescents to experiment with tobacco products.

C. The Success of the Strategy

215. The tobacco companies have pursued, and continue to pursue, such advertising campaigns knowing them to be particularly effective for inducing children and adolescents to purchase, use and become addicted to tobacco products. One study found that 30 percent of three year olds and 91 percent of six year olds associated the "Joe Camel" cartoon character with cigarettes. By the age of six, the face of "Joe Camel" and the silhouette of Mickey Mouse were equally well recognized. Studies also show that while adolescents' cigarette consumption tends to be closely correlated to the level of advertising, adults tend to purchase generic or "value category" cigarette brands, which use little or no "image" advert