The Dirty Story of How Big Tobacco Was Brought Down to Size

This month is the 20th anniversary of a deal that changed the face of smoking – and prompted a bunch of dirty tactics from the tobacco companies in the process.

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Nov 5 2018, 11:59am

Image: Sira Anamwong

It was the Stalingrad of Big Tobacco: the moment a previously indestructible adversary was brought to heel.

This month marks 20 years since the Tobacco Master Settlement Agreement, a piece of paper sealed in a US courtroom that changed the face of smoking forever and won an incredible, staggering, never-bettered $365 billion (£280 billion) legal victory. For years, what now seems inevitable was a pipe-dream. The industry's rearguard action was vast, disciplined, with deep pockets. By the early 1990s, they'd shut down over 800 lawsuits.

But all of that ended with one lawyer, and an entirely new class of litigation. Forty-six US states banded together to sue the tobacco companies for the hospital bills of millions of American smokers.

The story starts, though, not in the American courts, but in an English medical lab.

The Radcliffe Infirmary, Oxford. May, 1950.

In his lab, Dr Richard Doll scans through a sheaf of test results. Dr Doll has been doing things to mice again. But this time, it's personal. As he examines the first results of his tobacco experiments, Doll crosses the room and chucks his pack of Craven As in the bin. From then on, he never smokes again.

The paper Doll publishes in September of that year in the British Medical Journal is the first to show a link between smoking and cancer. His name is forgotten now, but in his own way Doll was another Alexander Fleming, a Jonas Salk. The link we now see as obvious simply wasn't back then.

The scale of medical confusion can be measured from how Doll's previous research attempted to pin the blame on literal tar in roads:

"We looked at occupational studies in road workers but they didn't have higher rates of lung cancer. We were put off [tobacco] by researchers who had tried to produce cancer in animals by painting tobacco derivatives on their skin, but the results proved negative. What no one realised then was that tobacco contained weak carcinogens which required exposure over a long period of time to have an effect."

Leo Burnett's Home. Lake Zurich. Illinois. 7 June, 1971.

Leo Burnett returns home from work at the ad agency that bears his name, to his mansion on Lake Zurich. He exchanges a few brief words with his wife, slumps over and dies from a heart attack.

Two months earlier, a cigarette pinched in his fat hand, Burnett had been briefing a documentary team about how he'd invented the Marlboro Man. In fact, Burnett's agency had imagined a whole generation of Americana: Tony the Tiger was one, the Pillsbury Doughboy another.

Across 20 years, five Marlboro Men will die of lung cancer and emphysema. But Leo Burnett is the tobacco biz's favourite ad guy. Marlboro's manufacturers, Philip Morris, remain their client well into the 1990s. It's Leo Burnett's agency who tell Philip Morris that they should "shift the focus" from a report linking environmental tobacco smoke to lung cancer. Rather than eliminate passive smoking, a leaked memo suggests they campaign for better air conditioning – though the memo is only made public years later, as part of the documents subpoenaed for the Tobacco Master Agreement.

young woman smoking
Photo: Emily Bowler

April 1977. Thames Television House, Euston Road, London.

Helmut Wakeham, the vice-president of the science and technology division of Philip Morris, has the honour of being the first company executive to admit a link between smoking and dying:

Yeah, cigarettes are [...] So what are we to do, stop living? The best way to avoid dying is not to be born, you know.

Phillip Morris executives are interviewed for a remorseless Thames TV documentary, called Death in the West. It tracks five Marlboro Man-style cowboys, all of whom are dying from smoking-related illnesses. Intercut with these are interviews with tobacco business executives.

When the execs see the finished product, they hit the roof. Philip Morris claim they were tricked, and throw a vast army of lawyers at Thames TV.

One of the featured cowboys, John Holmes, receives a strange visit from some private investigators in Kansas City, sent to undermine his credentials:

They were very sly in their questions. [...] They wanted to know how long I had been in the cattle business… I've had this ranch 20 years, but they tried to make a big thing of the fact that some of that time I was also teaching school.

Philip Morris wins. The Lord Chancellor interdicts the film, which remains locked in a London court vault, blocked from being shown again.

If it wasn't already before, this smother tactic is now the mainstay of the industry. Lawyer-up, dig deep into your vast pockets and, above all else, hold the legal culpability line: no one is to sniff blood in the water.

John Holmes dies a few months later.

June 1977. Shockerwick House, Bathford, Somerset.

Call it real-life SPECTRE. After the Death in the West debacle, all seven heads of the world's largest tobacco firms sit around a boardroom table. Smoking. All have been summoned by the chairman of Imperial Tobacco: the lithe, gregarious old fop, Tony Garrett. They are there to solve a problem, by getting their story straight.

In their own words, they aim:

"To develop a defensive smoking and health strategy, to avoid our countries and/or companies being picked off one by one, with a resultant domino effect."

This is Operation Berkshire, and from this day on the tobacco industry doesn't simply shrug about the metastasising mound of cancer evidence – they're actively suppressing it.

They begin the process of creating a full-blown parallel narrative, setting rival information systems, a complete alternative scientific consensus. Among them:

– The Centre For Indoor Air Research, a research unit, staffed by top people, set up to "keep the controversy alive" when it comes to proof of the ill-effects of secondhand smoke.

– INFOTAB, the intelligence arm, designed to monitor anti-tobacco organisations, to "enlist allies" and rebut data from the anti-smoking lobby.

Someone strokes a white cat, which coughs up a hairball of tar.

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Photo: Emily Bowler

May 1993. Baptist Central Hospital. Memphis, Tennessee.

In the Intensive Care Unit, Alice Thompson studies a pile of locks of brown hair, from recent chemo patients, still strewn on the white tiled floor. Thompson is checking in on her mother. Jackie, 49, used to be a pretty, vivacious brunette. Now, she weighs 90 pounds, is shrivelled, balding, yellowing, dying.

Every revolution needs its plucky underdog, its Karen Silkwood kicking against the pricks. For our purposes, Mike Moore, the Attorney-General of Mississippi, will do.

Moore is in his office late one afternoon when he takes a call from his friend Mike Lewis, who is friends with Alice Thompson. Lewis, who has just come back from the hospital, wonders out loud whether there's any action the state can take against the tobacco industry.

Moore hangs up, thinking it isn't a great idea – but later in the day he turns it around a couple of times, and figures that maybe it has "merit".

The odds, though, are stupidly long. In the 40 years until 1994, over 800 private claims have been brought against tobacco companies in state courts across the US. Almost without exception, each has been shot down in flames by the tobacco industry's litigation squads.

Even as late as 1994, all seven heads of the Operation Berkshire companies appear before a Congressional Hearing, and state, under oath, that nicotine is not addictive. The line shows no signs of breaking.

June 20, 1997. The ANA Hotel. Washington DC.

Lawyers. Thousands of 'em.

In the ballroom of the ANA hotel in DC, the Attorneys-General of 46 states and their teams have gathered for a huge press conference and victory party. One by one, you see, the states all joined in with Moore's suit, until it became an unstoppable singularity of lawyers.

Faced with this war on all fronts, the tobacco companies petitioned the US Congress for a legislative settlement. In a deal that will be finalised by November the next year, they agree to pay $368.5 billion (£281 billion) to states over the following 25 years, to cover medical costs for cigarette-related illnesses. For context, the next-biggest payout in US legal history, the Enron Scam Settlement, is $7 billion (£5.4 billion).

As the glasses clink and Moore gives a rousing speech from the balcony, the chatter is of his own run for Congress.

Yet, as time passes, it appears the tobacco companies aren't so devastated by their defeat. Perhaps the truth neither party wants to acknowledge is that they think they've gotten off lightly.

After decades of war in the courts, these companies no longer have to worry about class-action lawsuits, or state Medicaid cases: they have certainty, they can budget. Now, the total value of individual awards is capped at $5 billion (£3.8 billion) a year.

They have started to stop youth marketing, they've put bans on outdoor billboards, plus restrictions on sports marketing and events, and agreed to pour further billions into propagandising against themselves.

But the Tobacco Master Agreement also effectively creates a cartel. In a compromise with the legal teams, the 29 companies that sign up are able to prevent cut-price competitor cigarettes from flooding the market. The financial stress means putting up their prices by an average of 64 cents a pack (in 2018 dollars). But who pays that surcharge when you have an addictive product? The customer – often poor, often old.

Somewhere, out-of-sight, perhaps other glasses are clinking – and cigars unwrapping.

2008. A Public Golf Course. New York.

What happens next is an object lesson in what happens when you throw a big pot of cash at Big Government. Less than 3 percent of the states' total windfall is spent on smoking-related diseases. Instead, the money is mostly turned to general outgoings: in New York State, $700,000 (£537,000) goes on a public golf course's sprinkler system, $24 million (£18 million) on a county jail and an office building. In 2016, the State Of Tobacco Control report gives 80 percent of states a failing grade – for spending less than 50 percent of the recommended amount on tobacco prevention.

It gets worse. Having a cookie jar to raid seems to go particularly badly for America's short-sighted state legislators. Twelve states sell the family silver off cheap to plug holes in their budget, by creating Tobacco Bonds, effectively pawning off the rights to their future payments.

After all, the Tobacco Master Agreement was free money – money that didn't have to come from new taxes – and what legislator doesn't love that? In annual budget deadlocks between Republicans and Democrats, the low-hanging fruit for compromise often turns out to be the ripping open of their Tobacco Agreement payments.

But because that revenue stream depends on the future value of tobacco sales, financial institutions prove reluctant buyers of the Tobacco Bonds, so they have to be sold at big discounts, often only 40 percent of their face value.

Worse than that, several states also decide that they also want their cake-and-to-eat-it, so they sell the rights to a future payment to take the money now.

These are called CABs: Capital Appreciation Bonds. With CABs, no payments are required until they mature, often in 40 years or more. In the meantime, the interest compounds into a huge sum. Michigan, for instance, will have to pay back more than 1,800 times the amount it borrowed.

Twelve states issue $22 billion (£16.8 billion) in bonds, and in exchange they receive only $573 million (£440 million) in cash. With interest, that means they will have to repay $67 billion (£51 billion). Imagine borrowing £200,000 to buy a house today; your children would have to pay back £234 million in 50 years.

It's a bit like smoking: pleasure now, cancer later. Call it the circle of life? Or maybe "the figure-of-eight of human stupidity"? Economists would call it: "a high temporal discounting rate", which sounds much less scary, and also tastes better mentholated.

December 2010. Lakeland Drive, Jackson, Mississippi. 2AM.

Mike Moore dashes into his nephew's house, starts screaming in his ears, splashes him with iced water and pinches him as his respiratory system wobbles towards collapse. Thirty years old, 250 pounds, his face is pasty, his chest covered in vomit. His fiancée stands weeping over him.

It's fentanyl, of course.

Mike Moore's new crusade has a personal dimension. In December of 2017, after his nephew's non-fatal overdose, the former Attorney General announces he will be taking on the drug companies that, he claims, wrongfully marketed powerful opioids to consumers who could hardly know the world of trouble they were getting themselves into.

The same arguments, the same hi-octane class action tactics as 20 years ago – only, this time, zeroing in on Purdue, the company that markets OxyContin, the Google of prescription opioids.

Can lightning strike twice? We’re about to find out.

December 2017. A Private Hospital. London.

Tony Garrett, Chair of Imperial Tobacco during the Operation Berkshire era, and light smoker of his own brand, Embassy cigarettes, finally, at long, long last, dies.

He was 99.

RIP Tony.

@gavhaynes

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