TOPIC: TRIAL TRANSCRIPT
TRANSCRIPT OF PROCEEDINGS
DOCKET-NUMBER: C1-94-8565
VENUE: Minnesota District Court, Second Judicial District, Ramsey County.
YEAR: March 2, 1998
 A.M. Session

JUDGE: Hon. Judge Kenneth J. Fitzpatrick, Chief Judge

TEXT:

 THE CLERK: All rise, Ramsey County District Court is now in session, the Honorable Kenneth J. Fitzpatrick presiding.
 (Jury enters the courtroom.)

 THE CLERK: You may be seated.
 THE COURT: Good morning.
 (Collective "Good morning.")
 MR. CIRESI: Your Honor, the plaintiffs will call James J. Morgan for cross- examination pursuant to Rule 611(c) of the Rules of Evidence. He is the former president of Philip Morris. It will be by videotape deposition.
 THE COURT: All right.
 (Videotape played.)
 MR. CIRESI: Your Honor, there's an objection from page 100, line three to 116, line 19, as being outside the scope and contrary to the court's order. It's a counter-designation at that point.
 MR. GARNICK: Your Honor, beginning on page 116, which is the plaintiffs' designated, the questions relate to marketing and impact on -- possible impact on youth. I think that's about half of the total discussion which begins on 100. And especially when one gets to page 108, line 14, I think it's virtually the same subject matter.
 MR. CIRESI: Your Honor, different subject matters are raised. We did not get into advertising yet, we're only dealing with marketing later on. We have not even started our examination of him and this designation was interposed.
 THE COURT: You may answer the question.
 (Videotape continued to be played.)

 MR. CIRESI: Your Honor, Exhibit 681 is Trial Exhibit 3072, and we offer 3072.
 MR. GARNICK: No objection.
 THE COURT: Court will receive 3072.
 (Videotape continued to be played.)
 MR. CIRESI: Your Honor, the next document that is referred to in the deposition is Exhibit 148, it is Trial Exhibit 2557, and we would offer 2557.
 MR. GARNICK: No objection.
 THE COURT: Court will receive 2557.
 (Videotape continued to be played.)
 MR. CIRESI: Your Honor, Exhibit 146 in the transcript is being offered as Trial Exhibit 2555.
 MR. GARNICK: No objection.
 THE COURT: Court will receive 2555.
 (Videotape continued to be played.)
 MR. CIRESI: Your Honor, the next exhibit in the transcript is 355, it's already been admitted as Exhibit 11808, 11808.
 THE COURT: 355 will be referred to as 11808.
 (Videotape continued to be played.)
 MR. CIRESI: Your Honor, the balance is the defendants' designation and we objected to it as being outside the scope.

 *2 MR. GARNICK: Your Honor, we will withdraw the designation.
 THE COURT: We'll take a short recess then.
 THE CLERK: Court stands in recess.
 (Recess taken.)
 THE CLERK: All rise. Court is again in session.
 (Jury enters the courtroom.)
 THE CLERK: Please be seated.
 THE COURT: Counsel.
 MR. CIRESI: Thank you, Your Honor. The plaintiffs call for cross- examination pursuant to Rule 611 Geoffrey Bible.
 (Witness sworn.)
 THE CLERK: Will you please state your name for the record.
 THE WITNESS: Geoff Bible.
 THE CLERK: And you may be seated.
 GEOFFREY C. BIBLE called as a witness, being first duly sworn, was examined and testified as follows:
BY MR. CIRESI:
 Q. Good morning, Mr. Bible.
 A. Good morning, sir.
 MR. CIRESI: Good morning, ladies and gentlemen of the jury.
 (Collective "Good morning.")

 Q. Sir, you and I have not met before.
 A. No, not to my knowledge.
 Q. And you are presently the chief executive officer of Philip Morris Companies?
 A. Yes.
 Q. How long have you been the chief executive officer, sir?
 A. Since June 1994, so that's about three and a half years.
 Q. How long have you been with Philip Morris Companies or its predecessors?
 A. A total of 24 years.
 Q. Have you been there consecutively throughout the entire 24-year period?
 A. No, I have not.
 Q. What else have you done during the course of those 24 years, sir?
 A. Well in 1968 I joined Philip Morris, and then in 1970 I left and I worked with an Australian financial services group for six years. I rejoined Philip Morris in 1976 in Europe.
 Q. So you were gone for --
 A. Six years.
 Q. -- six years.
 A. Yeah.
 Q. So other than that six years, you've been at Philip Morris the entire time; correct?

 A. Yes, that's correct.
 Q. Okay. And originally you were born in Australia?
 A. I was born in Australia. I was raised in Australia.
 Q. All right. And you became an American citizen, I think, in 1994; correct?
 A. That's right, sir.
 Q. Now sir, Philip Morris Companies has a number of various operating companies within it; correct?
 A. Yes.
 Q. It has a tobacco business obviously; correct?
 A. Yes.
 Q. Has a food business?
 A. Yes.
 Q. Has a beer business?
 A. Yes.
 Q. And it has a financial services business.
 A. Yes.
 Q. And can you direct your attention, please, to Exhibit 20153, which will be in Exhibit -- or in book two in front of you.
 Let me tell you this, Mr. Bible, during the course of our examination I'll be referring to documents in those books, and it's either volume one or two.

All right?
 A. So it's now volume two?
 Q. Volume two.
 A. Thank you.
 And what was the reference, please?
 Q. 20153. It's about halfway through, sir.
 A. Yes.
 Q. That is the 1996 annual report for Philip Morris Companies, Incorporated?
 A. Yes.
 Q. The 1997 annual report is not yet completed; correct?
 A. No, it's not yet published.
 *3 Q. When will that be published, sir?
 A. I'd have thought in the coming weeks.
 Q. In the coming week?
 A. Coming weeks.
 Q. Weeks.
 A. Hmm.
 Q. Now at the end of 1996 Philip Morris Companies had had operating revenues of approximately six -- 88 billion dollars; is that correct?
 A. No, that wouldn't be right.

 Q. It's 68 billion?
 A. That would be more like it, right. Let me just see if I can read it here so --
 Operating revenues, 68 billion dollars, yes.
 Q. Okay. 68.9 billion dollars.
 A. Right.
 Q. Now of that, the domestic tobacco operation in the United States --
 Which is called Philip Morris U.S.A.; correct?
 A. Yes.
 Q. -- that did approximately 12,462,000,000 dollars; correct?
 A. Correct.
 Q. And the international tobacco business did approximately 24 billion dollars; correct?
 A. Correct.
 Q. And in the United States, on the 12 billion, you had operating income of about 4.2 billion dollars; correct?
 A. Yes.
 Q. About one-third of the revenues; correct?
 A. Yes. That would be approximate, uh-huh.
 Q. And for the international operations you did about four billion in operating income on revenues of 24 billion dollars; correct?

 A. Yes, that's correct.
 Q. And the food operations had operating income of about 2.5 billion?
 A. The domestic food operations, yes.
 Q. Okay. And the international food operations had operating income of about 1.3 billion.
 A. Yes.
 Q. Now the net earnings per share -- or net earnings, excuse me, for the entire corporation for the fiscal year ending 1996 was 6.3 billion; correct?
 A. Correct.
 Q. And that was the earnings per share of about $7.68?
 A. Correct.
 Q. That was about an 18 percent increase over the previous year.
 A. Correct.
 Q. And your operating cash flow during the year was about 7.7 billion dollars; correct?
 A. Well I can't see that here, but that would be approximate, yes. I can't --
 Can you point me to that number?
 In any event, it would be of that order.
 Q. About that order. All right.
 And do you recall that the assets that the company owned as of the end of

1996 were about 54.8 billion dollars?
 A. Well I don't have it exactly in my head, but it would be approximately that number, yes.
 Should be in here, actually.
 Q. Actually, sir, if you look at the bottom --
 A. Yeah. 54.8, there it is.
 Q. Now can you direct your attention, sir, to what is page two, right after the financial highlights. It's got your picture on it.
 A. Yes.
 Q. Now in the annual reports you generally have a short letter to the shareholders; correct?
 A. Yes.
 Q. And starting on page two is that letter; correct, sir?
 A. That's correct, yes.
 Q. And you represent to the shareholders that 1996 was one of the best years ever at Philip Morris; correct?
 A. Yes.
 Q. The net earnings that we just mentioned were 6.3 billion, which were up 15.1 percent over the previous year; correct?
 *4 A. Yes.
 Q. And earnings per share soared 18 percent that year; correct?

 A. Yes.
 Q. And the operating cash flow hit 7.7 billion; correct?
 A. Yes.
 Q. And you point out that from 1986 through 1996, your earnings per share have grown at an average of 17.4 percent a year; correct?
 A. Yes.
 Q. And you point out that that remarkable growth had been driven by the company's ability to accomplish its first goal, to increase earnings by growing our businesses; correct?
 A. Correct.
 Q. That is the first goal of Philip Morris Companies; correct?
 A. Our first business goal, that's correct.
 Q. That is your first business goal of Philip Morris U.S.A., the tobacco company; correct?
 A. That would be our first business goal of each of our businesses, sir.
 Q. And you talk here about the brand images and brand names that you have within the family of products of Philip Morris; correct?
 A. Yes, further down I do. I talk about 68 brands, yes.
 Q. And the one you point out is the universal symbol of business success, the Marlboro cigarette; correct?
 A. Well I recall that. I don't quite see it here, but I do recall referring

to that.
 Q. It's in the second paragraph there, sir. Do you see it?
 A. Yes, I do. Sorry.
 MR. CIRESI: Your Honor, we're going to offer Exhibit 20153.
 MR. BLEAKLEY: No objection, Your Honor.
 THE COURT: Court will receive 20153.
BY MR. CIRESI:
 Q. Now in this year, sir, 1996, you had shipped more cigarettes domestically than you ever had before in the history of the company; correct?
 A. I think that's correct, yes.
 Q. And last year, 1997, did you ship more than you had in 1996?
 A. I think we did.
 May I have a glass of water, please?
 Q. Any time you want one, sir.
 A. Thank you very much.
 In 1997, yes, I think we had the highest shipments we've had.
 Q. So that annual report is not out yet, but that would show that your cigarettes shipped domestically in the United States increased even more than 1996; correct?
 A. Yes, it should show that.
 Q. Now in the annual report in 1996, you also talk about meeting public

policy challenges, and if you could turn to a couple of pages forward, sir.
 A. Yes.
 Q. It says we're fighting for our rights and the rights of our consumers. Do you see that?
 A. Ah --
 Q. On the left-hand side.
 A. Oh, yes, right. Sorry.
 Q. Now was one of the rights of your consumers to have a safe product?
 A. I think one of the rights of our consumers is to have a good product.
 Q. That's not what I asked, sir. Is one of the rights of your consumers to have a safe product?
 A. I would say yes.
 Q. And that includes all your products; correct, sir?
 A. Yes.
 Q. Now as the CEO, you have a compensation package with the company; correct?
 A. Yes, I do.
 Q. And that compensation package is tied, in part, to the profits that the company will make; correct?
 A. Yes.
 Q. And by "the company," I mean all of its businesses; correct?

 *5 A. Yes.
 Q. That includes the tobacco business; correct?
 A. Yes.
 Q. And in 1995 your salary and bonus was, what, 2.65 million?
 A. Well I don't remember exactly, but that --
 It would be in that area, yes.
 MR. CIRESI: May I approach, Your Honor?
 Q. Just to refresh your recollection, Mr. Bible, I'll just hand you a couple printouts from the Wall Street Journal to help you remember what your income was if you forget.
 MR. BLEAKLEY: Could we have copies of that, Your Honor, before it's shown to the witness?
 MR. CIRESI: May I approach again?
 I just had one. It's only to refresh his recollection. I'm not going to offer it, Your Honor.
 MR. BLEAKLEY: I'd still like to see it before --
 THE COURT: Well show it to counsel first, please.
 MR. CIRESI: Mr. Bible, I'll have to ask for it back for a minute.
 Thanks.
 (Document shown to Mr. Bleakley and then
 returned to the witness.)

BY MR. CIRESI:
 Q. Now in 1995 your salary and bonus was what, 2.85 million or 2.65 million?
 A. 2.65.
 Q. Okay. And were you also awarded shares of stock?
 A. Yes, I was awarded some shares of stock.
 Q. That would be 140,000 shares of stock?
 A. Well they were options to buy shares at a predetermined price.
 Q. And the value of those was about 2.1 million?
 A. It's always very hard to place a value on them. They're a very --
 There are a number of models used. The simple model I use is the difference between the price at which they're granted to me and what the market price is. When they're awarded to you, it's generally the market price of that day, so it depends what happens to the share price thereafter. And I don't recall the price at which these were given to me in 1995. I think the share price would have been less than it is today, in any event.
 Q. Did you have to pay for them?
 A. No. I generally keep my options --
 They have a life of 10 years, and generally I keep my options until the 10- year expiration period and then I will exercise at that point in time.
 Q. And the hope is that the market will be higher; correct?

 A. That would be my hope, yes, and I'd hope every other stockholder's hope.
 Q. And the value of shares on that day were about 2.1 million; correct?
 A. Yes. That -- that would be --
 Again, I think that's probably another fair characterization of it. They're -- they're really that day valueless to me because they were awarded to me in the sense that I could exercise an option to buy shares at that price, and that was the value of the shares those -- that day, so if I'd exercised that day I'd have made nothing out of it. So the value really was zero, but should the share price go up any time, then they would have a value then.
 Q. When you negotiated your compensation package, did you negotiate for stock options?
 A. I don't -- I don't negotiate my compensation package. It's determined by the compensation committee, which is made up of an independent group of our directors, of our board of directors, and they tell me what my compensation is each year.
 *6 Q. So they simply tell you what your compensation will be each year; is that correct?
 A. Yes, that's right.
 Q. Okay. And you also got restricted stock options worth about 3.9 million dollars in that year; correct?
 A. Yes, that's right.

 Q. And you also had a long-term incentive program of 1.7 million dollars; correct?
 A. Yes. That's based over performance on a three-year period and it's payable every three years, depending upon the performance of the company.
 Q. Every three years you get a long-term incentive program that goes for the next three years, and it's based upon the performance of the company; correct?
 A. That's right.
 Q. The more money the company makes, the better off you become.
 A. Essentially, yes.
 Q. So the total compensation package in 1995 was about 10.35 million; correct?
 A. Well I don't quite get to that number. Let me just see.
 Q. Well you had 2.65 salary and bonus, shares of 2.1 million, 3.9 million in restricted stock, and 1.7 million in a long-term incentive program. So the potential value of the compensation package in that year was over 10 million dollars; correct?
 A. Well I'm not going to quibble with you, sir, but as I tried to explain, the shares that you talk about really had no value, so that's 2.1 million dollars.
 Q. Oh. Okay. If you don't exercise them, we'll take two million off. So

it's a little over eight million dollars; correct?
 A. Correct.
 Q. Thank you.
 Now in 1996 your salary and bonus was 2.85 million dollars; is that correct?
 A. Yes.
 Q. And you also had options extended to you that year; correct?
 A. Yes.
 Q. And you also had restricted stock options granted to you that year; correct?
 A. Yes, I did, that's right.
 Q. And the total stock options granted to you that year had a value, whether you exercised them or not, of about 5.7 million; correct?
 A. That's what was said here, yes.
 Q. So the total compensation package in 1996 would have been about 8.5 million; correct?
 A. Using your definition, yes.
 Q. Yes.
 Now in 1997 you had a simple -- similar compensation package?
 A. Well not quite similar. I didn't receive any restricted stock, to the best of my knowledge, so that wasn't there, and my salary, I think, went up in

July 1997 somewhat, and my bonus was slightly higher.
 Q. Okay. And what -- what was your salary in 1997, sir?
 A. I think it was 1.5 million dollars.
 Q. And what was your profit sharing that year?
 A. My bonus was 1.9 million dollars, I think.
 Q. Okay. So those two were 3.4 --
 A. 3.4.
 Q. -- million.
 A. Yes.
 Q. Okay. And did you have stock options in 1997?
 A. Yes. I was awarded a million stock options in 1997.
 Q. I'm sorry?
 A. A million stock options in 1997.
 Q. A million shares?
 A. A million options to --
 I don't want to quibble over this, but there's quite a big difference between options and shares. It is an option to require a share at a predetermined -- a predetermined price.
 *7 Q. How many shares could you acquire, a million?
 A. If I were to exercise, it would be a million shares, yes.
 Q. Okay. So that would compare to the 200,000 shares that you got in '96;

correct?
 A. That's right, yes.
 Q. And to the 140,000 that you got in '95; correct?
 A. Exactly.
 Q. All right. Now sir, as the CEO of Philip Morris Companies, you report to the board of directors; correct?
 A. Yes.
 Q. The board of directors is the ultimate authority in the company; correct?
 A. Yes.
 Q. They have power to make decisions; correct?
 A. Yes.
 Q. They have the power to hire you; correct?
 A. Yes.
 Q. They have the power to fire you; correct?
 A. Yes.
 Q. They set the overall management of the company; correct?
 A. I'm not quite sure what you mean by that, when you say "the overall management."
 Q. Well they set the management team in place by selecting the CEO; do they not?

 A. Yes. I -- I would select the management team. They would select me.
 Q. They select you and you in turn select people who report to you; correct?
 A. Yes, that's right.
 Q. And you have the responsibility for the day-to-day executive decisions of the company; correct?
 A. Yes. I do have reporting to me a chief operating officer to whom the operating companies you mentioned earlier report to him, and he reports to me.
 Q. But ultimately, sir, as Harry Truman used to say, the buck stops in your office; correct?
 A. That's exactly right.
 Q. All right. You have to make the ultimate decisions of this company; correct?
 A. Yes.
 Q. And that also pertains to every issue regarding smoking and health; correct?
 A. I don't want to quibble about that either, but I would say that Philip Morris U.S. tobacco has its own management, Philip Morris International tobacco has its own management, and they run those businesses, and on issues of smoking and health they would formulate their own practice and policies. I would be aware of them. If I disagreed with them, I would certainly let them know and I

would urge them to be changed.
 Q. You have the power to change them; do you not?
 A. Yes, I do.
 Q. You have the power to make a decision what Philip Morris will say regarding smoking and health; don't you?
 A. Yes.
 Q. Now you understand that Philip Morris has duties to its customers; correct?
 A. Yes.
 Q. It has duties under the law; correct?
 A. Yes.
 Q. It has duties to the public health; correct?
 A. Yes.
 Q. It has duties to its shareholders; correct?
 A. Yes.
 Q. Has duties to its employees; fair?
 A. Yes.
 Q. Now it also has a duty to make money; correct?
 A. Yes.
 Q. But you can't set money above public health; can you?
 A. No, I don't think I'd set money above public health. I would say that,

in that respect, the duties that you outlined, I'd take them all as very serious responsibilities. I don't know that I'd raise one above the other. I think they're all very serious responsibilities.
 *8 Q. The first and foremost duty is to the health of your customers; is it not, sir?
 A. I would say one of the -- as I just said, I think, one of the most important responsibilities I have.
 Q. It is the most important responsibility; is it not, Mr. Bible?
 A. No, I'd say it is one of the most important responsibilities I have. As you outlined, I have responsibilities to my employees, to my stockholders, to my customers, to the community generally.
 Q. Are you saying that the duty to make money is equal to the duty of the health of your customers?
 A. I would say that all are equally important in the conduct of my job, but I place them all of the highest ranking.
 Q. So that you would place the duty to make money equal to the duty to the public health; is that what you're saying?
 A. I -- I would say -- I wouldn't quite put it that way. I would say that my duty to return reasonable return on my stockholders' investment in our company is as important as my duty to my consumers and to my customers and to my suppliers and to my employees.

 Q. So that the duty to return a reasonable investment to your shareholders is equal to your duty to the public health.
 A. That's how I see my job. I think they're all very important aspects of my job.
 Q. Now sir, if your product killed a hundred thousand people a year, would you still consider your duty to the investors to be equal to a product that killed a hundred thousand people a year? I just want you to assume that.
 A. Well it's an assumption that I really don't feel I want to make because I don't believe that my product does do that.
 Q. We'll get to that.
 I want you to assume that it does kill a hundred thousand people a year. Would your duty to the shareholders still be equal to the customers that were being killed by the product?
 A. Well sir, I expect that you're referring to the suggestion that cigarettes do that, and I don't know if cigarettes do that, so I find it very hard to make that assumption.
 Q. That wasn't my question.
 A. Uh-huh.
 Q. My question is make the assumption. And if they did kill a hundred thousand people, would your duty to the public health still be equal to your duty to your shareholders to make money?

 A. I would think if that were the case, I would reconsider my responsibilities. But again, it's an assumption that I don't feel I can make.
 Q. Okay. If they did kill, you would reassess your evaluation of your duties; is that correct?
 A. Well I would reassess many things, I think, sir.
 Q. Would you reassess the evaluation of your duties?
 A. That would be one thing I would do.
 Q. Now how many people would it have to kill before you got to the point where you would reassess those duties? How many?
 A. Well I -- I don't find that a very fair question, sir. I -- I can't assume something of that nature when it's not something I believe occurs.
 Q. How many would have to die from smoking before you would reassess your duties? One? A hundred? Five thousand? How many, sir?
 *9 A. Well sir, I don't know that anybody does, so I'm finding that a very hard assumption to make.
 Q. I didn't ask you that yet. We'll get to that.
 A. Okay.
 Q. How many would have to die from your products before you'd reassess your duty?
 A. I would have thought, if you're forcing me to say that somebody -- I have to assume somebody died, if one person died I would reassess my duties.

 Q. So if one person died from smoking, you would reassess your duties; is that correct?
 A. I would reassess my duties. I would look at all of my duties, yes.
 Q. Would you shut down the business if one person died?
 A. Yes. Well that question has actually been asked me before publicly in a deposition, and I had said at the time that perhaps I would because I would like to talk with the government about the matter because of the wide implications it would have. I subsequently concluded that probably that wouldn't be a very effective thing to do because there's quite a large supply of cigarettes in the supply line and that wouldn't have any impact, just closing down the plant for a short period of time.
 I frankly believe that most people in America, perhaps in the world even, believe that cigarettes are a risky product.
 Q. Sir, that's -- that's not what I asked you. Excuse me.
 A. And I don't -- and I will --
 May I complete?
 MR. BLEAKLEY: Your Honor, I object, he's interrupting the witness.
 MR. CIRESI: I did interrupt, because he --
 THE COURT: Please don't interrupt the witness.
 A. And I -- I believe that most people in America, most smokers, most people, and in fact most people in the world, recognize that cigarettes are a

risk factor, can cause damage, and I don't know if it became -- if people became aware, if there were some scientific proof that cigarettes were to kill people, that in fact the government would ban the product. I think one of the first things I would do would be to talk to the government to determine whether they, the federal government or the state governments, together, would like to ban the product. If they did, of course, I'd shut the -- I'd shut the plant.
 Q. Are you done? Are you done?
 A. Yes, I'm finished.
 Q. All right. Well now see if you can answer my question.
 If one person died as a result of your products, would you shut the business down?
 A. No. I just explained what I would do.
 Q. You would not. Okay.
 Now you did state under oath in August of 1997 that you would shut the business down; didn't you?
 A. Yes. And I just explained that I subsequently reflected upon that and I felt that that would not have much effect.
 Q. Because there were cigarettes in the pipeline?
 A. And I concluded, also, that I think that the more important feature would be to the government to determine whether the product should remain a legal product or not.

 Q. And the government through the Surgeon General, since 1964, has said that smoking causes disease; hasn't it?
 *10 A. I'm not sure since when. '64 I think is right, yes.
 Q. It causes all kinds of disease, correct, the government has said; isn't that right, sir?
 A. The government has claimed it causes certain diseases, yes.
 Q. Now do you believe that Philip Morris has a duty to market a safe product?
 A. I think we have a duty to market a product, if there are risk factors associated with it, that the public should be aware of those risk factors.
 Q. That's not what I asked you. Does it have a duty to market a safe product?
 A. Well I think they have a duty to make as safe a product as they possibly can.
 Q. And did Philip Morris have a duty to make as safe a product as it possibly could since 1954?
 A. I would say so, yes.
 Q. And if they didn't do that, they would have been violating that duty; correct, sir?
 A. If they did not do that, I think that's probably accurate to say.
 Q. And if they violated that duty to the public, then they should be held

accountable for the violation of that duty; correct?
 MR. BLEAKLEY: That's a legal question. It's argumentative, Your Honor.
 THE COURT: No, you may answer that.
 A. Could you repeat the question, please?
 Q. Sure.
 If they violated that duty, they should be held accountable for the violation of that duty; correct?
 A. Yes, I think they should be asked to explain why.
 Q. They should be held accountable; shouldn't they, sir?
 A. Yes.
 Q. Do you believe that Philip Morris has a duty to tell consumers what it knows about the risks of its product?
 A. Yes, I do.
 Q. It has had that duty since 1954; correct?
 A. Well I think it's had that duty since it manufactured cigarettes, yes.
 Q. Let's just stay with from 1954 up to today, sir.
 Had that duty; correct?
 A. Yes.
 Q. And if it violated that duty, it should be held accountable; correct?
 A. Yes, I agree with that.
 Q. And do you agree that Philip Morris had a duty not to make false

promises regarding its product?
 A. I certainly agree with that.
 Q. And if it violated that duty, it should be held accountable; shouldn't it?
 A. I think that's proper, yes.
 Q. And do you believe that Philip Morris had a duty not to make a misrepresentation about its products?
 A. Absolutely, yes, I do agree with that.
 Q. And you absolutely agree that if it violated that duty, it should be held accountable; correct, sir?
 A. I agree with that.
 Q. Do you believe that Philip Morris had a duty not to make misleading statements about its product?
 A. Yes.
 Q. And if it violated that duty, it should be held accountable; shouldn't it, sir?
 A. Yes, I agree.
 Q. Do you believe that Philip Morris had a duty not to make false statements about its product?
 A. Yes, I agree it should not make false statements.
 Q. And if it violated that duty, it should be held accountable; correct?

 A. Yes, I agree with that.
 Q. You realize that Philip Morris has a duty not to knowingly misrepresent the quality of its product; correct?
 *11 A. Yes, I agree with that.
 Q. And if it violated that duty, it should be held accountable; correct?
 A. Yes.
 Q. Now Philip Morris over the course of 1954 to the present time has placed ads in the newspapers and in various journals and periodicals about its products; correct?
 A. Yes, I believe so.
 Q. It's issued press releases about it; correct?
 A. I believe so. I should say that I was overseas a great part of my career with Philip Morris, but I've been back here probably for the past decade or so, so I can talk of that period.
 Q. Well you know that the corporation, sir, since 1954, has made press releases and public statements regarding its product; don't you?
 A. I can certainly talk about the time that I've been involved in the company, particularly since I've been back in the United States.
 Q. Well we're talking about a period from 1954 up to today in this lawsuit. Do you understand that?
 A. Well I understand what you're saying, yes, certainly.

 Q. Okay.
 A. But I cannot say that I do know what they've been doing since 1954, because I was at school, I think, in 1954 and just started work.
 Q. So was I.
 But you would assume that they were making statements in the press about their products; wouldn't you?
 MR. BLEAKLEY: Your Honor, --
 A. No, I wouldn't assume that.
 Q. You wouldn't.
 MR. BLEAKLEY: -- I object to the form of the question.
 THE COURT: Sustained.
 Q. Have you looked at statements they have made over the years?
 A. I can't say I've looked at statements. I've seen some. Certainly since the time that I've been responsible for the business I've looked at them.
 Q. You've seen the Frank Statement; correct?
 A. I have seen it, yes.
 Q. First time you saw the Frank Statement was when you testified in front of Congress; correct?
 A. Yes. I --
 Actually I had seen an excerpt of it at the 1994 congressional hearing.
 Q. And that was the very first time you saw the Frank Statement in a

congressional hearing; correct?
 A. That's quite right, yes.
 Q. And it was provided to you by a congressman; is that right?
 A. Not provided to me. In fact he had it as an exhibit at the hearing.
 Q. Your lawyers didn't provide it to you; did they?
 A. No. No. But I should add that I had not been involved in the tobacco operations of America until that time.
 Q. Your lawyers didn't provide that to you; correct?
 A. No, my lawyers didn't provide anything to me.
 Q. Nobody from the tobacco operations at Philip Morris provided that to you; correct?
 A. No, but I -- I really would like to -- to amplify. I had just become responsible for the tobacco operations in the United States. Prior to that my entire responsibilities were our international business outside the United States.
 Q. Well --
 A. So I was not familiar. And I really do have to emphasize that I was not familiar with the activities in the United States.
 Q. Sir, did you educate yourself about the activities of the company when you took over as CEO?
 *12 A. When I took over as CEO, I can tell you exactly what I did. When

I took over as CEO, I concluded I could do one of two things, --
 Q. Sir --
 A. -- I could spend the rest of my life looking backwards to examine what had gone on for the last 40 years, or try and do something to resolve the issues that have been confronting us.
 Q. Sir, did you attempt to educate yourself about the history of the company when you became CEO? "Yes" or "no."
 A. Which part of the history, sir, are you referring to?
 Q. The tobacco history of the company. Did you attempt to do that?
 A. I'm really not quite sure what you mean, "the tobacco history." That's a long time.
 Q. Yes.
 A. Well I will explain --
 Q. Did you did you attempt to familiarize yourself with the history of tobacco sold by Philip Morris when you became CEO? "Yes" or "no."
 A. No. The answer is no.
 Q. Okay.
 A. I decided to spend my time looking forward, trying to resolve the issues that are confronting us.
 Q. Now when Philip Morris issues press releases or public statements, do they intend them to be accurate?

 A. Certainly.
 Q. Do they intend the public to rely on them?
 A. Certainly.
 Q. Do they intend the consumers to rely on them?
 A. Yes.
 Q. To they intend the public health authorities to rely on them?
 A. Yes.
 Q. Now you say you took over as CEO in 1994; is that right?
 A. June '94, yes.
 Q. And you said you wanted to look forward. Is that what you said?
 A. That's exactly what I said.
 Q. And one of the things you did is you called all the lawyers together; correct?
 A. No. When you say one of the things I did, called all the lawyers together, I had a meeting with some lawyers.
 Q. Yeah. You had a special meeting of all your inside and outside counsel and you asked them, over half a day, questions regarding their courtroom tactics; correct?
 A. No. Actually you refresh my memory. I certainly did call together our counsel. That was one of the things that I was very anxious to get a handle on, to try to understand the litigation that was confronting us, the magnitude of

it, and what it was we were doing about it. So I certainly did have a meeting, yes, I did.
 Q. And you also prepared an annual statement for 1994; didn't you?
 A. I'm not quite sure what you mean.
 Q. A -- well that was a poor question.
 You prepared a letter to the shareholders to be included in the annual statement; did you not, sir?
 A. In the annual report.
 Q. Yes.
 A. In our '94 annual report, yes. That would have been published around March of 1995.
 Q. Okay. Can you turn to Exhibit 17624. It's in volume two, sir.
 A. Yes, I have it.
 Q. That's the 1994 annual report that was published around March of 1995?
 A. It's not a very good copy.
 Yes, it's 1994.
 MR. CIRESI: Your Honor, we'd offer Exhibit 17624.
 MR. BLEAKLEY: No objection.
 THE COURT: Court will receive 17624.
BY MR. CIRESI:
 *13 Q. Now can you direct your attention, sir, to the Bates number --

and by "Bates number" I mean -- you'll see them on the right-hand side, the last three digits 452. That's your dear shareholder letter.
 A. Yes.
 Q. Now this is --
 These are your words; correct?
 A. Yes, they are my words.
 Q. And you signed this on February 24th, 1995; correct?
 A. Yes.
 Q. Now at the beginning you start out by telling the shareholders you're delighted to tell them that on balance, '94 was a very good year for Philip Morris; correct?
 A. Yes.
 Q. It was a year of continued robust growth; correct?
 A. Yes.
 Q. It was a year where there was challenge and change as a new management team worked vigorously to defend the company against outside threats; correct?
 A. Yes.
 Q. Now the FDA at that time was looking to regulate tobacco as a drug; wasn't it?
 A. Yes.
 Q. And that was one of the outside threats that you were referring to here;

isn't it?
 A. Well yes, most certainly, because they -- they were anxious to ban the product under that role.
 Q. Sir, was that one of the threats you were looking at?
 A. Yes.
 Q. And the FDA is discharged with the responsibility to protect the public health; correct?
 A. I believe that would be one of their charges, yes.
 Q. Now you then set forth here that net earnings were up 17.4 percent, earnings per share were up 19 percent, operating revenues were up, annual dividend rate was up, operating cash flow is up; correct?
 A. Yes.
 Q. And right below that you state, "The immediate priorities were clear: continue to grow profitably, reward shareholders with higher returns, and work to overcome obstacles that inhibit our success." Correct?
 A. Well I haven't quite found that. Can you just direct me to it, please?
 Q. Sure. It's right under the bullet points of the revenues and cash flows going up, and you're talking about what Bill Murray --
 A. Ah, yes. I see, yes. Thank you.
 Q. And you see overcome the obstacles?
 A. Yes.

 Q. And that overcoming of the obstacle was going to be a top priority for you; wasn't it, in that year?
 A. It was very important to me, yes.
 Q. In fact you called it a top priority; did you not?
 A. Where did I call it that, sir?
 Q. Well if you go on a couple pages where you see defending your company.
 A. Uh-huh. Well I won't dispute it in any event.
 Q. Okay.
 A. It was very important to me.
 Q. All right. If you could go back, then, to growing the business.
 A. Uh-huh.
 Q. You state right after growing our business, "Our one all- consuming ambition is to create wealth for the owners of Philip Morris." Is that correct?
 A. That's correct.
 Q. You don't say there our equal all-consuming ambitions is to create wealth and protect the public health; do you?
 A. Well I think that's taken for granted by most companies, by any company.
 Q. Did you say that, sir?
 A. No, I didn't say that, sir. I didn't see a need to say that.
 *14 Q. And the one all-consuming ambition was to create wealth, which was your paramount consideration; isn't that right?

 A. It was one of my most important considerations, sir.
 Q. That's not what you say. You don't say this is one of my most important, you say it's your one all- consuming --
 A. Ambition.
 Q. -- ambition. Isn't that right?
 A. Ambition, yes, sir.
 Q. And you point out that tobacco was firing on all cylinders, setting new records in the U.S. and achieving outstanding growth in international markets; don't you?
 A. Yes.
 Q. And you point out that in the domestic tobacco business, you adopted a pricing strategy for Marlboro cigarettes; didn't you?
 A. I can't find that. Could you --
 Q. Right at the bottom.
 A. Ah, yes. I see that, uh-huh.
 Q. Do you recall doing that?
 A. Most definitely.
 Q. And that was lowering of the price; wasn't it?
 A. Yes. That was referred to as Marlboro Friday. It was quite a significant event.
 Q. And the price was lowered how much, sir?

 A. To my memory, about 40 cents a pack.
 Q. Forty cents a pack.
 A. Yes.
 Q. And the volume of sales went up dramatically; didn't it?
 A. Thereafter, yes.
 Q. Yes.
 A. Sales recovered. They'd come down significantly and we recovered.
 Q. They went up significantly; didn't they?
 A. They came down and went up.
 Q. And you're aware, are you not, that based on market studies done by Philip Morris, that price is a very sensitive issue for teen-agers who smoke.
 A. I'm not aware of that. I'm aware that price of any product is -- is something that's extremely important.
 Q. Is it more important for those who have less money?
 A. Price?
 Q. Yes.
 A. Yes.
 Q. Would you agree with me that it's fair to assume that, on balance, teen- agers have less money than those people who are adults and in the working world?
 A. Yes, I would say that's accurate.

 Q. And did you couple this reduction of price with a promotion campaign?
 A. We certainly announced that we had reduced the price quite forcibly, yes.
 Q. But did you have consumer incentive promotion campaigns coupled with that reduction in price?
 A. Not to my knowledge.
 Q. Well --
 A. To the best of my memory, we reduced the price by 40 cents a pack and we had a very significant promotional campaign or advertising campaign to make that aware to the public.
 Q. Right. So you had a tremendous advertising campaign to make the public aware of that; is that right?
 A. We had a significant campaign. In fact, I don't think we needed to do quite as much as we did because it was such a -- an item of news.
 Q. Didn't you just say you had a tremendous advertising campaign?
 A. Well "significant" I should have said.
 Q. You should have said "significant."
 A. I should have said "significant," yes.
 Q. All right. Now let's see what you said to the shareholders. "In our domestic tobacco business, our pricing strategy for Marlboro cigarettes, coupled with two enormously successful consumer incentive programs, reversed

previous share losses" --
 *15 A. That's right.
 Q. -- "and, in 1994, catapulted our best-selling brand to its highest retail share ever." Correct?
 A. That's right.
 Q. So you did couple the pricing decrease with some consumer incentive programs for Marlboro; --
 A. Well --
 Q. -- didn't you?
 A. Well let me explain if I may. I don't think there were conjointly. My memory was that we lowered the price, and then subsequently we conducted a promotion, which was what we call the continuity program of Marlboro gear. So when you said "coupled," the impression I got was that you meant we did them together. I don't think we did do them together, but I think we did them in that year. One followed the other.
 Q. Well I just used your words.
 A. Well --
 Q. "Coupled with two enormously successful consumer incentives "--
 A. I think that --
 Q. Excuse me.
 A. -- that was during the course of the year. Excuse me.

 Q. Excuse me. You have -- remember, I have to let you finish, you have to let me finish.
 A. Certainly.
 Q. Okay?
 What you said was "coupled with two enormously successful consumer incentive programs, reversed previous share losses;" correct?
 A. That's what it says. But I really was trying to explain what that meant.
 Q. And what you're saying is that the consumer incentive programs came a little bit after the price increase?
 A. That's my memory. I think that's how it happened. We reduced the price, I think, in April, then the program followed sometime later in the year.
 Q. Okay. Now what type of consumer incentive programs were they, Mr. Bible?
 A. My memory was it was a catalog where if you had bought packs of Marlboro, there were -- there's a little coupon on the side of each pack, and if you collected the coupons, you could then write in or send the coupons in, and depending on how many coupons you had, you qualified to receive certain types of gear.
 Q. And what kind of gear?
 A. Well I can't be quite all that accurate, but things like T-shirts or torches or jackets.
 Q. What size were the T-shirts and jackets?

 A. Well they would all -- all be in adult size.
 Q. Are you sure?
 A. Yes, I'm absolutely positive of that.
 Q. What sizes were they when you say they were all adult size?
 A. Adult size. Because I --
 Q. Well what size was that, sir?
 A. I don't know exactly, but I can tell you this, that the people who run Philip Morris U.S.A. have a policy that all items of clothing that are made as promotional items are made only in adult sizes, and I know they do that.
 Q. That's not what I asked you.
 A. Uh-huh.
 Q. I asked you if you knew what size they were at this time.
 A. I'm not sure what that means, actually.
 Q. Now when you looked through this dear shareholder letter, on the next page you talk about maximizing shareholder value; correct?
 A. Yes.
 Q. And really, if we look at the letter, it's -- it's divided into essentially four parts; correct?
 *16 A. Yes.
 Q. First part is growing the business, and that's where you have your one all-consuming ambition, to create wealth; correct?

 A. Yes.
 Q. The next one is to maximize shareholder value; correct?
 A. Yes.
 Q. Okay. And that talks about the tremendous cash flow generated by your businesses; correct?
 A. Well can you point me to that? I don't doubt that it says that, but --
 Yes, I -- I do see that. Okay.
 Q. And it gave you a range of options; correct?
 A. Uh-huh.
 Q. And that would be you could use it for dividend increases; correct?
 A. Yes.
 Q. Could use it for stock buybacks; correct?
 A. Yes.
 Q. You could use it for selective acquisitions and debt reduction; correct?
 A. Yes.
 Q. And that would increase return; correct?
 A. Yes.
 Q. Now this tremendous cash flow could have also been devoted to other purposes; could it not? Had you so decided.
 A. Such as?
 Q. Such as advertising to youth that they shouldn't smoke. Significant

monies. Could have done that; couldn't you?
 A. We had already introduced a program, I think, sir, in that year.
 Q. That's not what I asked you. The significant cash flows, instead of going to dividend increases, stock buybacks, selective acquisitions and debt reduction, that money could have been used to advertise to youth; couldn't it?
 A. It certainly could have been, yes.
 Q. That was an option that was available to you as the head of this company; wasn't it, sir?
 A. It certainly was, yes.
 Q. Now the next section is defending the company; correct?
 A. Uh-huh, yes. Correct.
 Q. And there you talk about the threat of FDA regulation; correct?
 A. Yes, I see that.
 Q. You talk about congressional hearings; correct?
 A. Yes.
 Q. You talk about negative media coverage; correct?
 A. Well I don't see --
 Oh, yes, I do see that. Yes.
 Q. And you're talking about litigation; correct?
 A. Yes.
 Q. And you state that in the legal arena you're going to commit all the

resources necessary to defend the company from new forms of litigation, making sure we have better firepower than our foes, no matter how formidable; correct?
 A. Yes, that's correct.
 Q. And in the very first paragraph of this defending your company you say you're going to protect the investment, our business and employees, and the rights of consumers to enjoy our products are all top priorities for this management team; correct?
 A. Yes.
 Q. And by "this management team," you were talking about your management team; correct?
 A. Yes. The management --
 Q. Now --
 A. -- team of Philip Morris, yes.
 Q. Now in 1994, when you took over, did you go to the CTR and say, "I want to meet with all of the eminent scientists of the Scientific Advisory Board to see if they believe smoking causes disease?" Did you do that?
 A. No, I did not do that. The responsibility of the CTR was the responsibility of Philip Morris U.S.A. The chief executive officer of Philip Morris U.S.A., I think, is on the board of the CTR, and that was one of his duties. And I relied upon him for that.
 *17 Q. You just relied on him.

 A. I did, yes.
 Q. Did you ask him, this man you relied on, "Have you asked all of the scientists that are on the Scientific Advisory Board of the CTR whether smoking causes disease?"
 A. No, I have not asked him that, no.
 Q. You've not asked him that to this day; have you?
 A. No, I have not.
 Q. Did you ask the president of Philip Morris U.S.A., "Can you find out what all of the grantees who have received money from the CTR think on the issue of whether smoking causes disease?" Did you ask him that?
 A. No, I've not asked him that, but I've asked my chief scientist that question.
 Q. You've asked your chief scientist to ask the CTR to survey all of their scientists to see what they think?
 A. No, I've not asked her that. I've asked her her point of view on cigarette smoking and disease.
 Q. And is that Cathy Ellis?
 A. Yes, that's Dr. Cathy Ellis.
 Q. Dr. Cathy Ellis. Well we'll get to her a little bit later, sir. I now want to know what you did when you took over this company when you said you wanted to look forward and not look backward.

 Did you say to the head of Philip Morris U.S.A., "Let's commission a blue ribbon panel of scientists in the United States and let them tell us whether smoking causes disease?" Did you do that?
 A. No, I did not do that.
 Q. Did --
 A. Ah --
 Q. Did you go to your fellow CEOs and say, "Let us join together and get a blue ribbon panel of scientists to tell us does smoking cause disease?" Did you do that?
 A. No, I did not do that, because I really felt that everybody in the world believes smoking causes disease.
 Q. You don't; do you, sir?
 A. I don't know.
 Q. Yeah. But you just said everybody in the world believes it. Everybody but Mr. Bible; is that right?
 A. Well I don't know. There may be others who agree with me.
 Q. Well how about Dr. Glenn, the head of the CTR, do you know if he agrees with you or not?
 A. No. I've not spoken to Dr. Glenn.
 Q. How about Mr. Merryman, do you know if he agrees with you or not?
 A. I've not spoken to Mr. Merryman.

 Q. Have you read Mr. Merryman's testimony in this case?
 A. No, I've not.
 Q. Have you read Dr. Glenn's testimony in this case?
 A. No, I've not.
 Q. Do you know how many children have started to smoke over the last 50 years in this country?
 A. No, I have no idea.
 Q. Do you know how many have died as a result of smoking?
 A. How many people have died?
 Q. Died.
 A. I don't know if anybody has died. I just don't know, no.
 Q. And you haven't asked your head of Philip Morris U.S.A., "Let's go to the CTR and get the top scientists and find out." You haven't; have you, sir?
 A. But I think the CTR was already conducting research of that nature. I thought it was -- CTR's job was to use funds to direct monies towards smoking- and-health research.
 Q. Have you ever looked at what they did?
 A. No. I told you I'd been at my job a short time, and I was very new to this situation, and I concluded I had one of two courses to follow. One was to look backwards. I could have spent the rest of my life looking backwards. I -- the other was to look forward. And I have spent the last three or four years

doing my utmost to try to find a resolution to the issues surrounding this industry, particularly youth smoking.
 *18 Q. Sir, in the four years that you've been CEO and you wanted to look forward, have you had a concern whether or not people are dying from your product? "Yes" or "no."
 A. Well of course I've been concerned about it.
 Q. All right. Now in light of that concern, have you said to anybody who has authority within your company or the industry, "Let's get a blue ribbon committee of renowned scientists in the United States or the world and let them tell us whether smoking causes disease?" Have you done that?
 A. No, I've not done that. But I believe it's being done by the federal government and I believe other countries around the world have done the same thing, and I believe the results of that research is very well known.
 Q. But you don't accept it. You still say it doesn't cause it. Your company says smoking doesn't cause disease; don't you?
 MR. BLEAKLEY: Objection, Your Honor, no one has testified to that. That is a statement of counsel.
 THE COURT: Counsel, counsel, do you have a legal objection?
 MR. BLEAKLEY: I have an objection to that.
 THE COURT: And what's your objection?
 MR. BLEAKLEY: The lawyer is testifying.

 THE COURT: You may answer the question.
 MR. CIRESI: Can you answer the question?
 THE WITNESS: Could you repeat the question, please.
 MR. CIRESI: May I have the question back, Mr. Stirewalt.
 (Record read by the court reporter.)
 A. I say I don't know. I just don't know. It may, but I don't know.
 Q. Has your company said publicly smoking causes disease?
 A. Our company has said that cigarette smoking may cause disease --
 Q. No, --
 A. -- but we don't know.
 Q. -- that's not what I asked you. Has your company said smoking causes disease?
 A. Not to my knowledge, no.
 Q. Do you know that the World Health Organization says that smoking causes disease?
 A. Yes.
 Q. Do you know that the AMA says that smoking causes disease?
 A. Yes.
 Q. Do you know that the American Cancer Society says that smoking causes disease?
 A. (Coughing) Excuse me.

 Yes, I do.
 Q. Do you know that the American Lung Association says that smoking causes disease?
 A. Yes, I do.
 Q. Do you know that the Surgeon General since 1964 has said that smoking causes a variety of diseases?
 A. Yes. Yes, I'm aware of that.
 Q. Are you aware of any reputable scientific organization anywhere in the world that says that smoking doesn't cause disease?
 A. No, I am not.
 Q. Not a one.
 A. Not a one.
 Q. Is that right?
 A. No, sir, I'm not.
 Q. Sir, in this four-part letter to the shareholders, where is your commitment to the public health? Where do you state we are committed to the public health?
 A. Well I -- I've not read this. I would need to read it. But my -- my sense is it's probably not included here. It's a letter to stockholders, generally informing them of the performance of the company throughout the course of the year.

 Q. Don't you think the shareholders might want to know whether or not your company is committed to the public health?
 *19 A. They may do. I think they feel that we are committed to the public health.
 Q. Not a word about the public health in your letter to the shareholders when you took over this company; is there, sir?
 A. Well --
 There is not. And there's not a word about many things, actually.
 Q. Where in this letter do you say that you're going to cooperate with public health authorities?
 A. Well I don't think it's there, without reading it.
 Q. Can you direct your attention to Exhibit 14145.
 THE COURT: Counsel, do you expect to be going for a while yet?
 MR. CIRESI: I do, Your Honor.
 THE COURT: Maybe we should recess for lunch.
 We'll recess, reconvene at 2:00 o'clock.
 THE CLERK: Court stands in recess.
 (Recess taken.)

*1 TITLE: STATE OF MINNESOTA AND BLUE CROSS AND BLUE SHIELD OF MINNESOTA, PLAINTIFFS, V. PHILIP MORRIS, INC., ET. AL., DEFENDANTS.
TOPIC: TRIAL TRANSCRIPT
 TRANSCRIPT OF PROCEEDINGS
DOCKET-NUMBER: C1-94-8565
VENUE: Minnesota District Court, Second Judicial District, Ramsey County.
YEAR: March 2, 1998
 P.M. Session

JUDGE: Hon. Judge Kenneth J. Fitzpatrick, Chief Judge

TEXT:

AFTERNOON SESSION.

 THE CLERK: All rise. Court is again in session.

 (Jury enters the courtroom.)
 THE CLERK: Please be seated.
 THE COURT: Counsel.
 MR. CIRESI: Thank you, Your Honor.
 Good afternoon, ladies and gentlemen.
 (Collective "Good afternoon.")
BY MR. CIRESI:
 Q. Good afternoon, Mr. Bible.
 A. Good afternoon, sir.
 Q. Can you direct your attention to Exhibit 14145 in volume two. Sir, that's the Frank Statement to smokers?
 A. Yes.
 Q. And I believe earlier you testified that you first saw that when you were in Congress in 1994; is that correct?
 A. I don't think I saw the whole statement, I saw excerpts of it. That's my best recollection.
 Q. Did you ask for the whole statement at that time?
 A. No, I didn't.
 Q. Did you ask for it after that time?
 A. No, I didn't.
 Q. Have you ever looked at the whole statement?

 A. No, I haven't.
 Q. So today is the first time you're going to look at the entire Frank Statement; is that right?
 A. That's correct, sir, yes.
 Q. Didn't you have curiosity as to what representation your company made to the American public back in 1954?
 A. Well I'd heard comments about it and I'd seen an excerpt in Congress, but frankly, as I said early in my testimony, I really am focused on the future and not the past.
 Q. Ah, the future and not the past.
 How many people in this country today have lung cancer or chronic obstructive pulmonary disease and are sitting in their homes suffering as a result of smoking who got that disease from your product over the course of the last 30 years? Do you know how many?
 A. No. I'd have no idea, sir.
 Q. Do you think they're concerned about their future?
 A. Oh, I'd have thought they're very concerned, yes.
 Q. Do you think think maybe they're concerned about how it is they got that way?
 A. Yes, I would expect so.
 Q. Do you think the CEO of the company who may have put them in that

condition has an obligation to look at the history of the company in order to chart the future of the company?
 A. If you're referring to my looking back at the Frank Statement in order to chart the future for the company, I really think I knew enough about the assertion in the Frank Statement to help me formulate my views on how I should chart the future.
 *2 Q. You did.
 Did you look back to see whether your company lied in the past to the American public?
 A. I didn't do that.
 Q. Did you look back and see whether your company misrepresented to the American public in the past?
 A. No, I didn't do that.
 Q. Did you look back to see whether your company knew for over 40 years that smoking caused lung cancer?
 A. No, I didn't do that because I didn't believe Philip Morris knew that smoking caused lung cancer for the past 40 years.
 Q. Can you look to Exhibit 11028, please.
 A. That's in the other book, is it?
 Q. It's in volume one, sir.
 Do you see that that's a report on a visit to the United States and Canada

between April 17th and May 12th, 1958, by three gentlemen, Mr. Bentley, Mr. Felton and Mr. Reid?
 A. Well three persons.
 Q. Three people, yes.
 A. Yes.
 Q. And can you turn to the next page, sir. Do you see the itinerary?
 A. Yes.
 Q. And do you see the companies and institutions that those individuals visited?
 A. Yes.
 Q. And is one of those companies Philip Morris in Richmond, Virginia?
 A. Yes.
 Q. And that's your Philip Morris; correct?
 A. Well I can think of no others, sir. Yes.
 Q. And they visited Mr. Seligman, do you see that?
 A. Yes.
 Q. And Mr. O'Keefe, do you see that?
 A. Yes.
 Q. And you know that Mr. O'Keefe was the head of your research and development --
 A. No, I --

 Q. -- at that time?
 A. No, I don't know that.
 Q. Do you know that Mr. Seligman -- or Dr. Seligman came on to be the head of research and development?
 A. I recall that, uh-huh.
 Q. You heard about him this morning when you were viewing Mr. Morgan's deposition; didn't you?
 A. I heard his name, yes.
 Q. Is that the first time you heard his name?
 A. No. I'd heard his name.
 Q. Okay. So you knew he had been the head of research and development at Philip Morris; didn't you?
 A. Yes, I think I did. I've never met him.
 Q. And you recognize the other institutions and companies on this page?
 A. Well I can read --
 Some of them I recognize. Others I didn't, I'm not familiar with.
 Q. Certainly you're familiar with The American Tobacco Company.
 A. Yes, I am.
 Q. You're familiar with the Medical College of Virginia?
 A. Well I'm not familiar with it, but I presume it exists, yes.
 Q. Are you aware of Duke University?

 A. Yes, I have heard of Duke University.
 Q. Certainly you're aware of Liggett & Myers.
 A. Yes, I am.
 Q. Are you aware of A. D. Little?
 A. Yes. I know of them.
 Q. And you're aware of the TIRC, which became the CTR; correct?
 A. Well actually I didn't know that.
 Q. You didn't know that.
 A. No.
 Q. You didn't know The Council for Tobacco Research was formerly known as TIRC?
 A. No, I didn't know that.
 Q. Nobody's ever told you that.
 A. Not to my knowledge certainly.
 Q. Are you familiar with Roswell Park Memorial Institute in Buffalo?
 *3 A. No, I've never heard of that.
 Q. Are you familiar with Yale University?
 A. Well yes, I've heard of Yale University.
 Q. Are you familiar with the Biological Research Institute in Cambridge?
 A. No, I'm not.
 Q. Are you familiar with Roscoe Jackson Laboratory in Bar Harbor?

 A. No, I'm not.
 Q. Familiar with the National Cancer Institute in Bethesda, Maryland?
 A. I've heard the name, but I didn't know where it was located.
 Q. Are you familiar with Johns Hopkins Hospital in Baltimore?
 A. Yes, I've heard of that.
 Q. Are you familiar with New York University?
 A. Yes, I am.
 Q. Are you familiar with Sloan-Kettering Institute in New York?
 A. Yes. Yes, I am.
 Q. Leading cancer institute; correct?
 A. Well it is a leading. I'm not -- I don't know it is the leading.
 Q. A leading cancer institute?
 A. Absolutely, yes.
 Q. Now can you go to the next page, sir. Do you see on page two that these three individuals were seeking information on certain issues?
 A. Yes, I can read that.
 Q. And one of them was the extent to which it is accepted that smoke -- cigarette smoke causes lung cancer. Do you see that?
 A. Yes, I read that.
 Q. Now if you go down to the first paragraph, "'CAUSATION' OF LUNG CANCER," do you see that?

 A. Yes, I see that.
 Q. "With one exception (H.S.N. Greene)" --
 Now he was the individual at Yale. Do you remember that from the previous page?
 A. Well no, I didn't remember that, but I'll accept it.
 Q. All right.
 -- "the individuals whom we met believe that smoking causes lung cancer, if by 'causation' we mean any chain of events which leads finally to lung cancer and which involves smoking as an indispensable link. In the U.S.A. only Berkson apparently is now prepared to doubt the statistical evidence, and his reasoning is nowhere thought to be sound. Hueper of the National Cancer Institute accepts that cigarette smoke is capable of causing lung cancer but believes that as compared with other environmental carcinogens the contribution of smoking to the total mortality from lung cancer is being greatly exaggerated."
 Do you see that, sir?
 A. Yes, I see that.
 Q. Now two of the individuals whom they met on that day were the people from the research and development department of Philip Morris Company; correct?
 A. On that day?
 Q. On that trip. Excuse me.
 A. On that trip.

 Q. Yeah.
 A. That's right, yes.
 Q. And they are not excepted from this statement; are they?
 A. That's the conclusion that I would draw, yes.
 Q. Have you ever seen this document before?
 A. No, I have not seen this document.
 Q. One of the reasons I asked you whether you looked into the history of your company is because, by looking into the history of a company, you can find out what they knew at given points in time. Would you agree with that?
 A. That's highly likely, yes.
 Q. Okay. It's not only highly likely, it's probably a certainty; isn't it, sir?
 *4 A. Well it would depend, I guess.
 Q. And you can look back and see what they knew at a given point in time; correct?
 A. That --
 I think that again is highly likely, yes.
 Q. And you can see, then, what they did with that information; correct?
 A. You should be able to.
 Q. You can see whether or not they disclosed that information; correct?
 A. Well you should be able to, yes.

 Q. And by doing that you can determine and ascertain whether or not they complied with the duty that you talked about earlier; can't you?
 A. That you raised with me. Yes, you should be able to, uh- huh.
 Q. And you have never asked anyone in your company to put together all of the documentation regarding the cause of lung cancer and what the company knew at given points in time for you to review it; have you?
 A. No, I have not done that. But I explained to you why this morning, I think, why I have not done that.
 Q. You've never asked anybody in your company to do that; have you?
 A. I've not asked anybody to compile a history along the lines that you suggested, no, I have not.
 Q. And because you haven't asked, you don't know if anybody ever has; do you?
 A. No, I don't know if anybody has asked exactly that.
 Q. Nobody's ever told you they've ever done that; have they?
 A. No, nobody's ever told me that, no. I think that's right.
 Q. Dr. Cathy Ellis has never told you that; has she?
 A. No. I've never asked her that and she's never told me that, to the best of my knowledge.
 Q. So as you sit here today, what you're testifying to to the court and to the jury is that you don't know what the history of the company is with regard

to whether it knew smoking caused lung cancer.
 A. Well I could elaborate upon it a little bit if you'd let me.
 Q. Well your lawyer will have the opportunity to ask you all kinds of questions. I just want to know whether or not you can answer my question, sir.
 A. Well could you repeat the question?
 MR. CIRESI: Certainly. Could we have the question back, please.
 (Record read by the court reporter.)
 A. I think that's a fair assessment of my position, yes.
 Q. And you do know that from 1954 right up to today, Philip Morris has never ever said smoking causes lung cancer.
 A. I think that's a fair, accurate description. We have made our position very clear on it.
 Q. Can you turn to the last two pages of this document, sir. Down at the bottom you see where it says "CONCLUSIONS?"
 A. Yes.
 Q. Number one, "Although there remains some doubt as to the proportion of the total lung cancer mortality which can fairly be attributed to smoking, scientific opinion in U.S.A. does not now seriously doubt that the statistical correlation is real and reflects a cause-and-effect relationship." Do you see that?
 A. Yes, I read that.

 Q. And that's in 1958; correct?
 A. Actually I'm battling to find the date.
 Q. First page.
 A. Yeah. Here we are, right, '58.
 *5 Q. Forty years, almost to the day; isn't that correct?
 A. That's correct.
 Q. And if you go on to the second -- next page, you'll see the following statement, sir, at number three: "The direct carcinogenicity of smoke condensate to animal tissue, which is consistent with direct causation, is now fully confirmed but the evidence so far obtained makes it unlikely that this activity is due to any single 'carcinogen' in smoke;" correct?
 A. Well that's what it says. Could I read it again to try to take it in, because it's --
 Q. Certainly.
 A. -- a bit complicated.
 That's what it says, yes.
 Q. Now, you know that there are many carcinogens in cigarette smoke; correct?
 A. Yes, I think there are. I think -- I --
 I don't know how many.
 Q. You don't remember how many.

 A. No, I don't.
 Q. Do you know if any of them is a super carcinogen?
 A. I've never heard that term before.
 Q. Have you talked to your doctors at the company about the number of carcinogens in cigarette smoke?
 A. Yes, I have, but I've just forgotten the number, quite frankly.
 Q. Have you asked them whether there was any super carcinogen?
 A. I've never heard the term to ask them, so --
 Q. And did they tell you that the direct carcinogenicity of smoke condensate to animal tissue is consistent with direct causation?
 A. No, no, they have not. This --
 This was a report, I think, developed by B.A.T; was it not?
 Q. Yes.
 A. So --
 Q. A tobacco company; correct?
 A. Yes, but not Philip Morris.
 Q. Yes. But they came over, they visited Philip Morris; correct?
 A. Yes. But Philip Morris didn't write this paper, I don't think.
 Q. Do you think these people were lying?
 A. I don't know what they were doing. But I can't really testify to what they were writing here.

 Q. Do you have any reason to believe they were lying?
 A. I have no reason to believe they were lying at all.
 Q. Do you have any reason to believe that they were other than saying the truth when they were reporting on what they observed and listened to when they were in the United States?
 A. No, I have no reason to believe that at all. I think all I'm trying to say is this was not a document that Philip Morris scientists wrote.
 Q. Did anybody tell you that these people were not telling the truth?
 A. I've never heard of these people before, sir.
 Q. Did anybody provide you with a document which said these people were not telling the truth?
 A. No. I've never heard of these people before.
 Q. Now you know if Philip Morris, for the last 40 years, has eliminated any of the carcinogens in its tobacco smoke?
 A. Not to my knowledge, no.
 Q. Never. Not one. Correct?
 A. I think because they don't know how to.
 Q. Pardon me?
 A. I think because they don't know how to.
 Q. They don't know how to.
 A. That would be my understanding.

 Q. Have you taken a full-page ad in the paper, Wall Street Journal or anyplace, telling the consuming public, "We have carcinogens in our tobacco smoke and we don't know how to remove them?"
 *6 A. No. But I think that's widely understood by the general public. The Surgeon General I think has reported upon that.
 Q. But do you accept the Surgeon General on that?
 A. I accept the Surgeon General's report on that, yes.
 Q. Oh, you do. But you don't accept it on causation; right?
 A. Well I think I reserve the right to disagree.
 Q. But you agree with him on the fact that there are carcinogens in tobacco smoke.
 A. Yes, I do.
 Q. Now my question was different. Have you ever, the company, ever taken out full-page ads and say, "We have carcinogens in our tobacco smoke and we don't know how to get rid them?"
 A. No, we have not.
 Q. Now you will agree that if a company makes a statement about having carcinogens in its product, that that has more impact upon the public than whether some doctor or somebody else made it; wouldn't you?
 A. Could you repeat the question again, please?
 Q. Sure.

 You would agree that when a company makes a statement about the carcinogens in its product, that has much more impact upon the consuming public than if some third party does.
 A. I think that's a fair comment, yes.
 Q. If I told you and asked you to assume that Dr. Glenn from the CTR testified to the same thing, you'd agree with him; correct?
 A. Did he say the same as I said?
 Q. Yes.
 A. Yes, I'd agree with him.
 Q. So that if all these companies, including yours, would have taken out ads telling the American public what you knew internally, that would have a greater impact than what some third party might do; wouldn't it?
 A. What we knew and what had been published in the Surgeon General's report, that's what you mean?
 Q. No, what you knew.
 A. Yes. I agree with you, yes.
 Q. Now sir, did Philip Morris ever tell the public that they'd take out carcinogens if they found them?
 A. Oh, I don't know about that. I have no recollection of that, sir.
 Q. Do you know Joseph Cullman III?
 A. Yes, I do.

 Q. Sits on your board as a chairman emeritus; doesn't he?
 A. That's right.
 Q. You invite him to board meetings; don't you?
 A. Yes, I do.
 Q. He holds in excess of a hundred million dollars of stock in the company; doesn't he?
 A. I don't know.
 Q. Well you know the major shareholders of your company; don't you, sir?
 A. I do know the major shareholders, but I didn't know that Joseph Cullman was one of the major shareholders.
 Q. You know he's a substantial shareholder in the company.
 A. Well frankly I don't know, but I do know he has shares, and I would have thought he would have quite a few, but frankly, I don't know how many.
 Q. You invite him, then, to sit in on board meetings; correct?
 A. Absolutely, yes.
 Q. He was the former chairman and CEO of the company; correct?
 A. Yes.
 Q. Can you turn to Exhibit 10492, please, which would be in volume one. This is a transcript from Face the Nation, produced by Philip Morris in this case, regarding an interview of Joseph Cullman III, chairman of the board, Philip Morris Inc. Do you see that, sir?

 *7 A. Yes, I do.
 MR. CIRESI: Your Honor, we'd offer Exhibit 10492 pursuant to 903(6), 803(16), and 801(d)(2).
 MR. BLEAKLEY: No objection.
 THE COURT: Court will receive 10492.
BY MR. CIRESI:
 Q. Now sir, can you turn to page four. And if you want to take a look at any other part of the interview, please let me know and you can take a look at it.
 I'm interested in Mr. Cullman's response on page four, about the middle of the page where it says, "We are very concerned...."
 A. Uh-huh.
 Q. "...also very concerned...." Do you see that?
 A. Yes.
 Q. "We are also very concerned about the charges leveled against our product, and we are anxious to do whatever we can to clear the air in this matter. We happen to be optimistic about the future, and we happen to feel that this is a great industry, and that this industry can face the future with confidence because when, as, and if any ingredient in cigarette smoke is identified as being injurious to human health, we are confident that we can eliminate that ingredient." Do you see that?

 A. Yes, I do.
 Q. Now that's the CEO, chairman of the board of Philip Morris making that representation; correct?
 A. Yes. Yes. Correct.
 Q. And you just said you can't eliminate them; didn't you?
 A. I don't know that we've been able to eliminate what you talked about.
 Q. You just said we can't eliminate them; didn't you?
 A. Well yes, I think that is what I said, yes.
 Q. And what Mr. Cullman said on January 3rd, 1971 was false; wasn't it?
 A. Well I think he said we are confident that we can eliminate.
 Q. Well that doesn't --
 Don't you take that to mean we can eliminate them?
 A. Well I think he was hoping that he could.
 Q. Ah. Did he say we are hoping we can?
 A. No, he said we are confident.
 Q. And he intended the American public to rely on that, didn't he?
 A. Well I would expect so, yes.
 Q. He said it; correct?
 A. He said it, yes. That was some 20 years ago, and I think time since has shown that we're unable to.
 Q. Well, do you know if Philip Morris has known for 40 years that they

couldn't eliminate carcinogens that they knew were in their product?
 A. Well I don't know if we've known that for 40 years.
 Q. You wouldn't know that unless you looked at the history; would you, sir?
 A. Well that's probably a fair comment, yes.
 Q. Could we go back to the Frank Statement.
 A. Could you remind me which that is, sir?
 Q. Certainly. 14145.
 A. That is in the other book.
 Q. It is indeed, sir. Volume two.
 A. Okay.
 Q. I want to take you through it since you've never read it before. Can you look in the first column. Now first of all, a frank statement, that's meant to be an honest statement; correct?
 A. I would agree.
 Q. A candid statement; correct?
 A. Yes.
 Q. A statement that the industry, including your company, intended consumers to rely on; correct?
 A. Yes.
 Q. And in the first paragraph -- or I'm sorry, in the first column toward the bottom, do you see down there, "We accept an interest in people's health as

a basic responsibility, paramount to every other consideration in our business?" See that?
 *8 A. Yes, I -- I can read that.
 Q. Now if you had known about that in 1994, would you still have put in your 1994 annual report that your one all-consuming ambition was to create wealth for your shareholders?
 A. Well it's a little hard for me to answer that in the abstract. You know, I have learned about that element of this statement, of the Frank Statement, because I think that was part of what I saw at the congressional hearing in 1994, and I've thought a bit about that since I had my job and, you know, a lot of times past, and I don't doubt the sincerity of what people meant when they made this statement, but it seems to me that a lot has transpired in the meantime -- as you pointed out, it's 44 years ago -- and during that time the Surgeon General's reports have come out, I think it was in 1964 the Surgeon General told the American public that he thought cigarette smoking caused cancer, and then subsequent reports, as you pointed out, dealt with cigarette smoking. I think in 1969 warning labels were placed on cigarette packs and Congress mandated that. And I think a lot of information has become what I would call general public knowledge about cigarette smoking.
 In fact I doubt, as I think I said earlier in my testimony this morning, that there's hardly a subject that's been more talked about than cigarette

smoking and the risks of cigarette smoking. And we ourselves have changed our position as much as we've said that cigarette smoking is a significant risk factor in many diseases.
 Q. Is that your answer?
 A. Yes, that's my answer.
 Q. Well is your answer, then, no?
 My question is pretty simple, and let me repeat it for you. If you had known about the Frank Statement when you wrote your letter to the shareholders, would you have put in the letter to shareholders, "Our one all-consuming ambition is to create wealth?" Would you have written that?
 A. I think that I would have thought about it. It's a bit hard for me to say now what I would have written. Because I look at the annual report as being an annual report to our stockholders who are looking generally to the economic performance of the company throughout the course of the year, and I don't know if I would have used that language exactly.
 But I doubt that I would have chosen that vehicle if I was going to say something about this particular statement.
 Q. Do you believe that because the Surgeon General said cigarette causes disease, which you don't accept, that the company no longer has as its paramount responsibility an interest in people's health, paramount to every other consideration in its business? Is that what you're saying?

 A. No. What I'm saying is that I believe that's one of the most serious responsibilities I have, among many others.
 Q. One of the most. I know that's what you're saying.
 In 1954, though, a representation was made to the American public; wasn't it, sir?
 A. Yes.
 Q. And that representation was we accept an interest in people's health as a basic responsibility, paramount to every other consideration in our business; correct?
 *9 A. That's right.
 Q. That means number one; doesn't it?
 A. Yes. Paramount, I would say, does mean number one, yes.
 Q. And when it says number one to every other consideration, that means over dividends; correct?
 A. Yes, it would be. It would --
 I would say paramount means number one to every consideration. But to answer your question, I today see it as being one of the most serious responsibilities I have, --
 Q. I didn't ask you that.
 A. -- among many others.
 Q. It means number one over buying back stock; doesn't it?

 A. Yes.
 Q. It means number one over any other consideration that would be in that company; correct?
 A. You mean back in 1954?
 Q. Yes.
 A. Yes.
 Q. Now has the company ever retracted that statement? And if so, tell me where.
 A. No, it has not, to my knowledge. It may have, but it has not to my knowledge.
 Q. When you became aware of it, you didn't retract it; did you?
 A. No, but I explained why.
 Q. Excuse me. You didn't retract it.
 A. No, I did not retract it.
 Q. You haven't instructed anybody to retract it; have you?
 A. No, I have not.
 Q. Another representation that was made was: "We believe the products we make are not injurious to health." Do you see that?
 A. Yes, I do see that.
 Q. Is cancer injurious to health?
 A. Oh, very much so.

 Q. Is chronic obstructive pulmonary disease injurious to health?
 A. Yes.
 Q. Is coronary heart disease injurious to health?
 A. Yes.
 Q. When did the company retract this statement?
 A. Not to my knowledge.
 Q. Never; correct?
 A. No, I -- I don't have any knowledge of it being retracted. I think we have warning labels on our cigarette packs that were mandated by Congress.
 Q. You don't have warnings. Those are warnings mandated by the government; correct?
 A. But they're on every pack we make.
 Q. But you wouldn't put them on if the government didn't mandate it; would you?
 A. Well I don't know. They are on there now.
 Q. You wouldn't put it on; would you, sir?
 A. I don't know, sir.
 Q. You know that you only put on warnings as they are required in any country that you operate; isn't that right?
 A. They're mandated by the government.
 Q. Yeah. You don't put on any greater warning; do you?

 A. Sir, we are required by the government to put exactly those warnings on and nothing else.
 Q. You never put on any greater warning; do you?
 A. Sir, we are required by law to put exactly that wording on. We can't put on any greater wording.
 Q. Do you know what Liggett puts on its labels today?
 A. I beg your pardon?
 Q. Do you know what Liggett puts on its warnings?
 A. Which labels?
 Q. Of its cigarettes.
 A. Which cigarettes?
 Q. That Liggett manufactures. Do you know what they put on?
 A. No.
 Q. Do you know if their warnings go beyond the warnings that you have?
 A. Well I know that they put new warnings on some of their cigarettes that were as a result of the settlement agreement they made with some attorneys general, I believe, --
 *10 Q. Right.
 A. -- and class action lawyers.
 Q. And they go beyond the warnings that you have; correct, sir?
 A. They are different and they do go beyond, yes.

 Q. Yes. And the government allowed them to do that; didn't they?
 A. You -- you were saying around the world. I was really telling you that is not right, what you were saying.
 Q. I see.
 A. Yes.
 Q. In the United States, sir.
 A. In the United States we're required to put those warnings on, and they're on the packs.
 Q. And you can put greater warnings on; can't you?
 A. Yes, we could if we so desired, yes.
 Q. And you've never so desired; have you?
 A. We have not changed those warnings, no.
 Q. And --
 Because you've never so desired. Your words; correct?
 A. That's quite right.
 Q. Those weren't my words; were they?
 A. No, they were my words.
 Q. All right. Now the next representation that your company made was: "We have -- always have and always will cooperate closely with those whose safeguard -- whose task it is to safeguard the public health." Correct?
 A. Yes.

 Q. Never retracted that; have you?
 A. Well I would challenge that, actually.
 Q. Sir, have you ever retracted that statement? And by "you" I mean your company.
 A. I find a very close line. And if I could explain, you could determine yourself whether we have retracted it or not, because I find it difficult to answer.
 Q. I just want to know if you've -- if you've gone out and said we retract the statement we made. It's no longer operative. Have you said that?
 A. Well --
 Q. I'm not --
 A. -- perhaps I'll have -- perhaps I'll have a chance to explain later. I don't believe we have retracted that exact statement, no.
 Q. And the FDA is one of the institutions in this country whose duty it is to safeguard the public health; correct?
 A. Yes.
 Q. And you're fighting the FDA; aren't you?
 A. We have a lawsuit with the FDA.
 Q. And you're fighting whether you want to be regulated as a drug; correct?
 A. There are a number of issues at stake.
 Q. That's an issue; isn't it, sir?

 A. That is one of them.
 Q. And what you're concerned about is whether or not nicotine will be mandated to be removed from cigarettes; isn't that right?
 A. No. I would cast it differently.
 Q. Is one of the issues you're concerned about the regulation of nicotine?
 A. No, not really. I would say partially.
 Q. Partially.
 A. Hmm.
 Q. And you don't want nicotine to be ratcheted down; do you?
 A. Well that's rather a complicated question. I'll explain it to you. Today there are products that have the lowest level of nicotine that you can get a cigarette down to, so to say that we don't want the levels of nicotine ratcheted down really isn't accurate because products with extraordinary low levels, the minimal amount of nicotine in a cigarette, are available on the market today. In fact we actually produced a cigarette with no nicotine. So --
 *11 Q. Did it sell?
 A. No, it didn't sell. The smoke was rejected.
 Q. Did it sell at first?
 A. What do you mean?
 Q. Just what I said. When you put it on the market, did it sell?
 A. No, it didn't sell. I said that. It didn't sell.

 Q. No, no. When you first put it on the market, did it sell?
 A. Well I think people bought it and tried it and then stopped buying it.
 Q. Didn't go back to it; correct?
 A. That's right.
 Q. And what level of nicotine was in there?
 A. Well it was about .01. It was effectively zero. You can't quite get to zero, the scientists tell me.
 Q. But you can get down to .01; can't you?
 A. Yes. And we have a product down there.
 Q. Didn't capture much of the market; did it?
 A. No, it didn't, regrettably. We spent a lot of money developing it. Three hundred million dollars.
 Q. Three hundred million dollars.
 A. Three hundred million dollars.
 Q. Over how many years?
 A. Well I would be guessing, but I'd say approximately two or three years. The plant, which we had to shut down and mothball, was probably two hundred million dollars.
 Q. And do you know if there was any pharmacological reaction to that nicotine cigarette?
 A. I have no idea.

 Q. Did you do any tests on that?
 A. I don't know.
 Q. Now the Frank Statement arose out of an alarm in the industry back in the 1950s; didn't it, sir?
 A. I have no idea, sir.
 Q. You have no idea?
 A. No idea, no. In 1954 I was battling away in Australia to survive, so I don't know what happened.
 Q. Don't know.
 Can you direct your attention to Exhibit 18904. Do you have that, sir?
 A. Yes, I do.
 Q. This is a Hill & Knowlton memorandum. Have you seen this before?
 A. No, I have no memory of this at all.
 Q. Did you --
 A. Not sure.
 Q. -- get an opportunity to review any of the documents that we gave notice we were going to discuss with you?
 A. No.
 MR. BLEAKLEY: Objection, Your Honor. Whether he reviewed any document designated on Saturday by Mr. Ciresi is not relevant. He's either seen it or he hasn't seen it.

 THE COURT: No, it's relevant. That's the purpose of the designation.
 MR. BLEAKLEY: But it's not testimony. Mr. Ciresi supplied these documents on Saturday, over 150 of them. Whether or not Mr. Bible has had a chance to review all of those is not evidence.
 THE COURT: It's relevant to determine whether or not he's had notice that these were going to be -- he was going to be questioned on these.
 Proceed with the questioning, Mr. Ciresi.
BY MR. CIRESI:
 Q. Did you have an opportunity to review any of the documents that we gave notice of, sir?
 A. I don't think I did review any of them, sir.
 Q. Were any documents provided to you to review?
 A. Provided to me?
 Q. Yes.
 A. I -- I don't think so.
 Q. Now I'll represent to you that this is a document from Hill & Knowlton. Do you know who Hill & Knowlton is?
 A. Yes, I do. I've never met them, but I know who they are.
 *12 Q. They're an advertising agency; correct?
 A. I thought they were a public relations agency.
 Q. Public relations agency.

 Do you know if they worked for the tobacco industry back in the 1950s?
 A. No, I have no idea.
 Q. I'm going to represent to you, sir, that they did represent the tobacco industry back in the 1950s. Let me ask you this: In your 20 some years in the tobacco industry, have you learned that in the 1950s there were medical articles published which raised the issue of smoking causing lung cancer?
 A. No, I have no knowledge of any medical papers that were issued. I -- I do recall the Reader's Digest, I think, printing an article, which I've never read.
 Q. And did the Reader's Digest article pertain to medical studies that had been published regarding smoking and lung cancer?
 A. I don't know. I've never read that article.
 Q. Well let me direct your attention to this article -- or this document, 18904, which is a Hill & Knowlton document. I want to ask you some questions about it.
 Can you direct your attention to the page which has the Bates numbers 494. You know who the research directors are in companies, correct, such as yours? And I don't mean the individual names, I mean the title.
 A. Yes, I do.
 Q. Now let me read this to you. "The attitude of the men we must directly deal with in the industry is at once interesting, and important for us to

understand. This is why notes on the four interviews with 'research directors' are given at some length. You'll get from them real -- little real information about lung cancer, pro or con; but you'll find some mighty interesting opinions. One of the men said, 'It's fortunate for us that cigarettes are a habit they can't break.' said another: 'Boy! wouldn't it be wonderful if our company was first to produce a cancer free cigarette. What we could do to the competition!"
 Now sir, have you directed any of your researchers to research a cancer- free cigarette?
 A. (Coughing) Excuse me.
 I haven't, but I -- I don't know what other activities may have gone in our -- in our research and development area. But I do not believe that cigarette smoking causes cancer. I think it's a significant risk. I don't know what exact research work has been conducted, sir.
 Q. If you had --
 If I came to you and I said, "Mr. Bible, I've got a cancer- free cigarette," would you ask your research department to take a look at it?
 A. By that do you mean that the carcinogens you're referring to earlier were not present in the cigarette?
 Q. Yeah. They wouldn't cause cancer. They had no cancer- producing agents in them. Would you tell your research department, "Say, talk to that Ciresi

fellow, see what he has?"
 A. Well if you were the person --
 (Laughter.)
 Q. Well put me aside. Put me aside.
 A. I thought that was what you just said.
 Q. I know you wouldn't listen to me.
 THE COURT: Let's not get too personal here.
 (Laughter.)
 *13 A. If somebody -- and I --
 I think, if I understand your question, if somebody were to come to me and say that we have found that we've been able to exclude the carcinogens -- I think they are animal carcinogens, actually -- in cigarette smoke, that they could exclude that, I would be delighted, yes.
 Q. You'd be delighted. You'd be delighted because you could sell a cigarette that wouldn't cause cancer.
 A. No, I'd sell a cigarette, I think, around which I could say that there were less risks associated with smoking it.
 Q. That wouldn't cause cancer, correct?
 A. Well I don't --
 Q. If it was cancer-free.
 A. I --

 Q. Isn't that right?
 A. May I answer?
 Q. Absolutely.
 A. As I said, I don't know if cigarette smoking does cause cancer. I know it is a very significant risk factor, and I've said that frequently and I've said it publicly. If there is anything in a cigarette which is considered to be by the scientists risky and it could be taken out, as I said, I would be delighted.
 Q. Okay. But you have never instructed your company, with the 6.7 billion dollars in cash flow, to research that. You've never done that, sir.
 A. To research what, sir?
 Q. A cancer-free cigarette. Have you?
 A. I've never asked anybody to research a cancer-free cigarette.
 Q. You've never directed anybody to do so; have you?
 A. No, I have not.
 Q. If you had such a cigarette, would you market it?
 A. If I had a cigarette along the lines I just described where somebody had said to me that we have now developed a cigarette and it's free of animal carcinogens, I would certainly look at it, and if it were a cigarette that people would like to smoke, I'd be delighted to market it.
 Q. And because you haven't directed anybody to research that issue, with

all the resources that your powerful company has, you don't know whether it can be done; do you?
 A. Well I think I should back up a little and say that when I say I have not directed anybody to do it, that doesn't mean that others have not been working on trying to develop a cigarette where they could exclude animal carcinogens. I do not know the complete nature of the research and development work that has been done by Philip Morris, but I do know that we do considerable research, and I think one of the things we'd like to do, very much so, is to eliminate as many risks and all risks associated with cigarette smoking.
 Q. That's not what I asked you.
 A. Well could you ask me your question again, please.
 MR. CIRESI: Certainly. Can I have the question back, please.
 (Record read by the court reporter.)
 A. Oh. Well I have not done that, but Philip Morris U.S.A. may have.
 Q. Sir, that wasn't my question either.
 A. Uh-huh.
 Q. Because you haven't directed anybody to do it, you don't know whether it can be done; do you, of your own knowledge?
 A. I don't know, no. I'm not a scientist either, sir.
 Q. And you've never asked that question; have you?
 *14 A. Which question?

 Q. Whether it can be done. Because you haven't asked anybody to do it.
 A. I haven't asked it, but perhaps Philip Morris U.S.A., which is the cigarette operating company, has, and they are responsible for the research and development.
 Q. That's not what I asked. I only asked whether you have. You haven't; have you?
 A. I have not.
 Q. Thank you.
 Now sir, in the exhibit in front of you, 18904, can you go on to the next page, page three. Do you see there where it's stated, halfway through the page, "There is only one problem -- confidence, and how to establish it; public assurance, and how to create it -- in a perhaps long interim when scientific doubts must remain." Do you see that?
 A. Yes, I do.
 Q. Now --
 A. (Coughing) Excuse me.
 Q. -- do you know whether back in 1954 the cigarette industry wanted to undertake a public relations campaign in order to establish public assurance and confidence? Do you know?
 A. No, I don't know.
 Q. In your mind scientific doubts still remain; correct?

 A. In my mind, yes.
 Q. Can you go on to the next page. "The very first problem is to establish some public confidence in the industry's leaders themselves, so the public will believe their assertions of their own interest in the public health." Do you see that?
 A. Yes, I do.
 Q. And what that means is that --
 The issue being addressed was to have the public believe the tobacco industry's leaders, that those leaders had an interest in the public health; correct?
 A. Bit hard for me to interpret, quite frankly. I -- I can understand the first part of the sentence.
 Q. Let me read it for you again.
 Well you go ahead, read it.
 A. Could you ask your question again, please?
 Q. Sure.
 What is being reported here is that something had to be done to make the public believe the leaders of the industry regarding their assertions of their interest in the public's health; correct?
 A. Yes, I think that's a fair characterization, yes.
 Q. All right. And today you've testified that you have a concern about the

public health; correct?
 A. Yes.
 Q. Those are your words; correct?
 A. Yes. They are my words, yes, that's right.
 Q. Now if we go down to problem two of this --
 A. Problem two.
 Q. In this document.
 A. Problem two, yes.
 Q. "To reassure the public, and still instinctive fears, in this interim when definitive facts for giving complete assurance are still lacking; when scientific doubts must remain; and when new 'unfavorable' information can emerge from some laboratory at any time, to act as a bomb shell on the whole tobacco industry -- if it has meanwhile tried to pooh-pooh the unfavorable finding to date." Do you see that?
 A. Yes, I do.
 Q. Now again, you believe today that there's still scientific doubt; correct?
 A. Yes, I do.
 Q. And you know today that unfavorable information emerges constantly regarding the diseases caused by smoking; don't you?
 *15 A. Unfavorable --

 Q. Unfavorable information. To the -- to the industry.
 A. Yes, that's -- that's right. Uh-huh.
 Q. And despite that unfavorable information that comes out from laboratories and medical institutions across the world, you still deny causation. You. Correct?
 A. Me personally?
 Q. Yes.
 A. Yes. I have said that I don't know if cigarette smoking causes lung cancer or other diseases that are associated with it. I just don't know. But I have said also that I'm going to disengage from that debate. Publicly I've said that.
 Q. If you go on to the next page, sir, "The fact is, of course, that no one who has been a heavy smoker is going to benefit himself now by falling into a panic, and eliminating the pleasure and comfort of cigarettes. He might just as well go on enjoying his smoke in this interim while research pursues the facts, with full assurance that if any cancer-causing agent is ever really found in tobacco, the manufacturers will quickly find a way to eliminate it." Is that right?
 A. That's what it says, yes.
 Q. Now you do know from your testimony that cancer-causing agents were found in tobacco; correct?

 A. I believe animal carcinogens -- animal carcinogens were found in tobacco smoke, yes.
 Q. You keep saying "animal."
 A. Well I believe that's the only way it can be designed or -- or can be established, is through animal testing.
 Q. What about all the people who have been smoking and develop lung cancer? How about that laboratory that's right out there in the public, sir?
 A. What about it, sir?
 Q. Isn't that a laboratory that shows that those carcinogens can cause cancer in human beings?
 A. Well that is why I said that I don't know, because to the best of my understanding there's been no mechanism established that demonstrates the biological link between cigarette smoking and lung cancer.
 Q. Well how would you conduct such a study? Take somebody's lung and take the tar condensate and put it on their lung and see if a cancer develops? Is that what you would do?
 A. No. I'm told that in fact the medical way of creating certainty about something is through animal studies, and I understand that animal studies have not been conclusive.
 Q. Have you read the documents in this case -- or you haven't. You haven't read the documents in this case; have you?

 A. In this case?
 Q. Yes.
 A. No, I have not.
 Q. So you don't know if Philip Morris found reliable animal studies for inhalation 20, 30 years ago, 10 years ago. You don't know that; do you?
 A. I would have thought, if they had, I would have heard about it.
 Q. You should have been told about it; correct?
 A. I would have heard about it, I think, yes.
 Q. You should have been told about it; correct?
 A. Well I've been at my job four years. I would have thought over the last 30 my predecessors would have been told about it.
 Q. What about you? Should you have been told about it?
 *16 A. Well in the last four years I certainly should have been told about it. Nobody has. And I don't know of any research that's been conducted that establishes what I just said.
 Q. Okay. But if there was any such research, you should have been told about it; correct?
 A. Well in my period as being CEO and chairman of three and a half years, yes.
 Q. Now let's go on in this document, sir. Problem three, "How to validate this message of assurance. The men talked to in the cigarette companies tend

to:
 "(a) Think occasionally in terms of trying to 'smear' the personal responsibility, motives, judgments, or techniques of Wynder and others supporting him."
 Do you know who Wynder is?
 A. I don't think I do, no. I've heard his name, but I don't know.
 Q. Is he the scientist who did the mouse-painting studies back in the fifties?
 A. I don't know.
 Q. Do you think it would be appropriate to try to smear people who find that smoking causes cancer?
 A. No. I think that's terrible.
 Q. It's terrible.
 A. Terrible, yes.
 Q. If Philip Morris did it, that would have been terrible; correct?
 A. Well I would say it's terrible, yes.
 Q. It would have been inappropriate; correct?
 A. Inappropriate, yes.
 Q. A violation of their duty; correct?
 A. A violation of their duty?
 Q. Yes.

 A. Which duty was that, sir?
 Q. The duty to the public.
 A. Yes, I think that's a proper statement.
 Q. Now can you go down to 3.(c). "The men talked to in the cigarette companies tend to," and then it goes down to (c), "To overlook the fact that in this particular instance, the stakes for the public are even larger than for the tobacco manufacturers. (For the public, an issue touching the deepest of human fears and instincts is involved - the issues of uncontrollable disease and death. Hence cigarette companies might not be readily -- readily be forgiven, if their approach to this problem is stemmed only from their eagerness to protect their earnings, and if they twisted the research of medical scientists -- science (which seeks to save men) into a device to save stockholders. There is no precedent where a great industry has been forced to face such grave issues."
 Do you see that?
 A. Yes, I do see that.
 Q. Do you agree with that paragraph?
 A. Well I'm not trying to be difficult, please, but I -- I didn't quite identify your lead-in, so I couldn't quite get with the whole gist of the paragraph.
 Q. Well let me explain that. You'll see up there, "Problem 3."

 A. Yes.
 Q. It says "How to validate" --
 A. Oh, I see where you are.
 Q. -- "this message of assurance" --
 A. I see, yes.
 Q. Let me finish. Otherwise we have a record that's jumbled. Okay? So let me finish.
 A. All right.
 Q. "How to validate this message of assurance. The men talked to in the cigarette companies tend to," and then it lists a bunch of things, and (c) is one of them. Do you see it?
 A. Yes. Yes. Now I understand, yes.
 *17 Q. All right. Now do you agree with (c) that I just read?
 A. Yes, I think.
 Q. You would.
 A. I will agree with that. It doesn't sound very nice at all.
 Q. Would full --
 Pardon me?
 A. It doesn't sound very nice at all, it would seem to me.
 Q. If the companies did that; correct?
 A. If that's what they did, yes.

 Q. They would be violating their duties; correct?
 A. Well yes. But this was written by Hill & Knowlton; wasn't it?
 Q. I understand that. They would be violating their duties; correct, sir?
 A. Well that's one say of saying it, yes.
 Q. Well you would agree with that.
 A. Yes. I'm a little bit confused because, you know, one has a duty to run a company for stockholders, and I'm having a bit of difficulty relating this paragraph to duties that --
 This is what Hill & Knowlton were saying, and I'm having a bit of trouble absorbing it.
 Q. Well let's explore that a little. We'll go through it line by line.
 A. Hmm, good.
 Q. "To overlook the fact that in this particular instance, the stakes for the public are even larger than for the tobacco manufacturers." We'll start right here. Do you have a problem with that sentence?
 A. It says the men talked to in the cigarette companies tend to overlook this fact that in this particular instance the stakes for the public are even larger than for the tobacco --
 No, I get that.
 Q. You agree with that.
 A. I get that.

 Q. You get that.
 If someone is going to be diseased and die from a product, that's much more important than whether some shareholder makes a dividend; correct?
 A. Yes, sir.
 Q. You would agree with that; wouldn't you?
 A. I would agree with that, yes.
 Q. "For the public, an issue touching the deepest of human fears and instincts is involved - the issues of uncontrollable disease and death." Do you agree with that?
 A. Yes, I do agree with that.
 Q. So that if cigarettes were causing disease and death, that would touch the deepest of human fears and instincts; wouldn't it?
 A. Yes, I think that's a fair characterization.
 Q. And that would be particularly true the more death and disease that is caused; correct, sir?
 A. Well I think it would be any case. Whether it's less or more, it would touch the deepest of human fears and instincts. I would agree with that.
 Q. If it's just one death, is that what you're saying?
 A. I'm saying regardless of how many, I think it's very important.
 Q. So it's just one; correct?
 A. Just one it's important.

 Q. And if it's 400,000 a year, it's even much more; isn't it?
 A. Yes, I think it would be much more. I take one death very seriously.
 Q. "Hence cigarette companies might not be -- might not readily be forgiven if their approach to this problem is stemmed only from eagerness to protect their earnings, and if they twisted the research and medical science (which seeks to save men) into a device to save stockholders."
 *18 A. Hmm.
 Q. You'd agree with that.
 A. Yes, I would say I would agree with that, yes.
 Q. Okay. And last sentence, "There is no precedent where a great industry has been forced to face such grave issues." Would you agree with that?
 A. Well I don't know. I just don't know. This -- this was a grave matter, but I'm not an encyclopedia on every incident that every industry has faced throughout the lifetime of companies' activities, not just our company.
 Q. Do you know of any --
 I'm sorry, I cut you off there. What was the end part?
 A. Not just our company.
 Q. Do you know what other industry where it has been reported that over 400,000 people per year in the United States died from the product?
 A. No, I don't.
 Q. Any other industry?

 A. No, I don't know. I don't know of any other, but I don't pretend to be a historian. I don't know what other events have occurred, but I don't know. I'm not going to argue or quibble over it.
 Q. I'm not asking you if you're a historian, Mr. Bible, I just want to know if you know any company, any such industry.
 A. No, I don't.
 Q. Have you ever heard of any such industry?
 A. No. None comes to my mind.
 Q. Okay. Next paragraph. "In the past, industry has given little twists to the facts of science, to convert them into sales propoganda, without much risk. The cigarette industry has indeed been doing this for years. We can therefore readily understand its assumptions that the same techniques will work now, in devising propoganda. But it is highly important to note that the deep issues of life-and-death that are now involved make highly doubtful the question as to whether the familiar techniques can be relied upon - - relied on. The stakes are too large; the penalties for losing could be too great." Do you see that?
 A. I see that, yes.
 Q. Now sir, --
 A. (Coughing) Excuse me.
 Q. -- do you know whether the industry itself created problems, health problems, by twisting the facts?

 A. No, I have no idea of that, and I don't believe we would do that. Certainly not under my watch.
 Q. Well you see that this is being reported by Hill & Knowlton after meeting with the research directors of the companies; correct?
 A. Yes. That was a long time ago, and I don't --
 Was it a meeting of the research directors?
 Q. Yes.
 A. Does it say that here?
 Q. If you go back to page two, Bates number is 494, --
 A. Uh-huh.
 Q. -- talking about the meetings -- the interviews with the research directors at the top. Do you see that?
 A. Page two. It says, "The attitude of the men we must directly deal with in the industry" --
 Q. No, I'm sorry, sir. The Bates number 494 at the bottom.
 A. Oh, at the bottom. Uh-huh. Uh-huh.
 Q. And right at the top --
 A. Ah, yes, I do see that.
 Q. All right.
 A. I'm sorry, I apologize.
 Q. Now let's go back to the page we were on, 498. I want you to assume that

the industry was twisting the health facts.
 *19 A. What year was this, please, sir?
 Q. 1954, sir. Okay? I want you to assume that.
 A. Assume --
 Q. That they were twisting the facts.
 A. Well I have trouble assuming that.
 Q. I'm asking you to assume that for the purposes of my question. If they were, that would be a violation of their duty to the public; wouldn't it?
 A. Yes, it would be, if they were.
 Q. And --
 A. But I -- I have trouble assuming it. I would like to say that.
 Q. And do you see where it says "the stakes are too large; the penalties for losing could be too great?" Do you see that?
 A. I've just lost the again.
 Yes, I do see it.
 Q. Now you understand in this case the plaintiffs are asking for punitive damages; don't you?
 A. Yes, I do understand that.
 Q. Okay. Now if a company did twist the facts and lied to the American public, as you said, they should be held accountable; shouldn't they?
 A. Yes. I think that that is fair.

 Q. And when holding them accountable, you should look at the seriousness of the hazard that was created as a result of their conduct; shouldn't you?
 A. Well that would seem to be reasonable, yes.
 Q. You should also look at the profitability of that misconduct; shouldn't you?
 A. That I'm not so sure about, sir. My understanding of punitive damages is it's to -- it's -- it's a deterrent for future conduct; is it not?
 Q. And --
 A. I can give you a solemn undertaking, so long as I'm watching this company, these things won't happen.
 Q. Well --
 A. I can tell you that.
 Q. -- forgive me, sir, I haven't asked you for your solemn undertaking.
 A. Well I'd like to offer it. Thank you.
 Q. Have you looked --
 You haven't looked to see whether your predecessors gave solemn undertakings; have you?
 A. I explained why I have not and I think it's very sound reasoning.
 Q. You haven't, have you?
 A. No, I have not, and I think I feel quite justified in the reasoning.
 Q. Let me ask you this again: If they engaged in this type of conduct, that

Philip Morris did, the profitability of that misconduct should be taken into account; shouldn't it?
 MR. BLEAKLEY: Objection, Your Honor, asked and answered.
 THE COURT: I don't believe it's been answered. You may answer the question.
 THE WITNESS: Sorry. Could you repeat the question?
 MR. CIRESI: May I have it back, please, Mr. Stirewalt.
 (Record read by the court reporter.)
 A. Well firstly I would say that if Philip Morris did do it, and I don't know if they did, I -- I would be horrified if they did do that, then it would be a question -- I think your question is should you not take into consideration the profitability they made from such misrepresentation or --
 Q. Such conduct, yes.
 A. -- such conduct?
 Yes. I don't know how you'd ally the conduct to profitability, but I can -- I understand your point.
 Q. Sure. You know that Philip Morris from the tobacco profits has purchased food companies; hasn't it?
 *20 A. Philip Morris --
 No, I don't think that's right actually. I think the monies we used to buy our food companies was borrowed. That's why we have so much debt on our balance sheet today.

 Q. Really. What did you put to support that debt? Did they ask what -- what your company was, what its net worth was?
 A. I -- I didn't arrange the loan funding, so --
 The banks were -- I think were very happy to lend the money.
 Q. You're not unsophisticated in these matters; are you, Mr. Bible?
 A. I don't believe I am at all.
 Q. No. So when you went to borrow money from the bank, the bank looked at what business you were in; correct? And by "you," I mean Philip Morris.
 A. Sir, I think then I was in Europe, frankly. But I -- I -- I was not involved in the acquisition of these companies. I think what I'm telling you is when we bought those companies, we had huge debt offerings, and we borrowed monies and we bought the companies.
 Q. Sir, all I'm asking you is when you went and borrowed the money or issued debt, you had a tobacco business; correct?
 A. Absolutely.
 Q. That was the basis of the business; correct?
 A. No, I'd have thought --
 That's the basis of the business. But when you are borrowing money to buy something, I think a banker looks at what you're buying.
 Q. Sir, the business of Philip Morris was tobacco at the time you went to buy the food businesses. "Yes" or "no."

 A. No, it was tobacco and beer.
 Q. Tobacco and beer. All right.
 A. And wine.
 Q. Well let's back up.
 A. And wine.
 Q. And win