Federal Court Refuses to Dismiss Disgorgement Claim Prior to Trial

U.S. District Judge Gladys Kessler today ruled that she will wait until the lawsuit brought by the Department of Justice against tobacco companies is tried before deciding whether the government’s disgorgement claim is valid.  The lawsuit is a civil claim under the Racketeer Influenced Corrupt Organization Act (RICO).

In her ruling, Judge Kessler noted federal law requires the government to prove that the companies are likely to violate federal law in the future before she can order disgorgement.  Judge Kessler said, “the very nature of remedies permitted (by federal law) requires a showing of a reasonable likelihood of future RICO violations.”

At trial, the government will have the burden to show that the tobacco companies together engaged in a fraudulent scheme in violation of the RICO statute, that they received “ill-gotten” gains as a direct result of that scheme, and that they are likely to engage in future RICO violations.

“There is no question that Philip Morris USA and other tobacco companies have dramatically changed the way their products are marketed.  In many instances, Philip Morris USA has voluntarily gone even further than that which is required by the tobacco settlement agreement,” said William S. Ohlemeyer, Philip Morris USA vice president and associate general counsel. 

“Proving a likelihood of future violations is a burden that the company believes the government cannot carry at trial,” Ohlemeyer added.

While the company is disappointed with today’s ruling, it is prepared for a full airing of the facts as they relate to the issues surrounding the government’s disgorgement claim, including the economic models and calculations used by the government.

In addition, the company is looking into whether to file an interlocutory appeal and ask the appellate court to look at the disgorgement ruling prior to trial.

Altria Group is the parent company of Kraft Foods, the world’s second largest food company, Philip Morris International, the world’s leading international cigarette business, and Philip Morris USA, the leading cigarette manufacturer in the United States.  For more information about Altria, its family of companies, and the Department of Justice lawsuit, visit www.altria.com/doj.

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