HealthLawProf Blog

Editor: Katharine Van Tassel
Akron Univ. School of Law

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Friday, June 17, 2005

Tobacco Settlement Update

Thursday's New York Times reports that politics may have been involved in the recent reduction in penalty against the tobacco companies from $130 billion to $10 billion.  The article states,

At the close of a major trial that dozens of Justice Department lawyers spent more than five years preparing, the department stunned a federal courtroom last week by reducing the penalties sought against the industry, from $130 billion to $10 billion, over accusations of fraud and racketeering.

The decision generated protests from health advocates and Democratic lawmakers, who accused the Bush administration of political motives, and it prompted an internal departmental inquiry. But details of the behind-the-scenes debate over the issue had remained a mystery.

The department has vigorously defended the decision, denying political motives and saying the $10 billion reflected an effort to arrive at a figure that would comply with an adverse decision from an appellate court this year that some officials said sharply limited the types of sanctions the department could seek. The department did not dispute the authenticity of the memorandum but declined to make Mr. McCallum or other lawyers available to discuss it.

A spokesman for the department, Kevin Madden, said political considerations were never factored into the decision to reduce the penalty.

"This was a decision that was made on the merits of the case and that strictly followed the law," Mr. Madden said.

In light of the appellate court ruling, he said, "a decision was made by the department that the best argument for the government to make was one that would preserve credibility in the government's case with the trial judge, would result in a favorable decision from the trial judge and would result in a trial court decision sustainable upon appeal."

The newly disclosed documents make clear that the decision was made after weeks of tumult in the department and accusations from lawyers on the tobacco team that Mr. McCallum and other political appointees had effectively undermined their case. Mr. McCallum, No. 3 at the department, is a close friend of President Bush from their days as Skull & Bones members at Yale, and he was also a partner at an Atlanta law firm, Alston & Bird, that has done legal work for R.J. Reynolds Tobacco, part of Reynolds American, a defendant in the case.

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