JUDGE: Hon. Judge Kenneth J. Fitzpatrick, Chief Judge
THE CLERK: All rise. Ramsey County District Court is again in session,
the
Honorable Kenneth J. Fitzpatrick now presiding.
(Jury enters the courtroom.)
THE CLERK: Please be seated.
THE COURT: Good morning.
(Collective "Good morning.")
MR. CIRESI: Thank you, Your Honor.
Good morning, ladies and gentlemen.
(Collective "Good morning.")
GEOFFREY C. BIBLE called as a witness, being previously
sworn, was
examined and testified as follows:
BY MR. CIRESI:
Q. Good morning, Mr. Bible.
A. Good morning, Mr. Ciresi.
Q. Sir, you'll recall that over the last day and
a half I've asked you
some questions concerning the effect that higher cigarette prices would
have on teen-agers. Do you recall those questions?
A. Yes, I recall them, yes.
Q. And it is a fact, is it not, sir, that Philip
Morris tracked
information with regard to what effect higher prices would have on
teen-agers?
A. I think you showed me some documents yesterday
that suggested that.
Q. Okay.
A. Am I right?
Q. Well I showed you a document when we recessed
regarding Philip
Morris's lobbying in the state of Minnesota to restrict youth access,
lobbying against those bills which would have raised taxes. Do you
recall
that one?
A. Well other than that, I don't know that Philip
Morris has tracked
the issue of cigarette prices and youth.
Q. So the only awareness you have of tracking excise
taxes is where
Philip Morris, through The Tobacco Institute, fought increases in tobacco
taxes which would have restricted youth access; correct?
A. No, I don't think that's right. I was responding
to your earlier
question of youth and excise taxes. I think you asked me --
Your first question, could you repeat that, please?
Q. Do you want me to go back to the first one this
morning?
A. Yes. That's what I was trying to address.
Q. All right. The first one this morning was you're
aware that we have
discussed whether or not increase in taxes on cigarettes would curtail
youth access.
A. I believe that would certainly happen, yes.
Q. And you're aware that Philip Morris has fought
increases in
cigarette excise taxes.
A. Yes, we have, because we think they're regressive.
Q. Now can you direct your attention to Exhibit
10560, which would be
in book one, sir.
*2 A. Yes.
Q. Do you have that, sir?
A. Yes, I do.
Q. You see that's a September 17, 1981 memorandum
from Mr. Johnston to
Mr. Daniel of Philip Morris U.S.A.?
A. Yes.
MR. CIRESI: Your Honor, we'd offer Exhibit 10560.
MR. BLEAKLEY: No objection.
THE COURT: Court will receive 10560.
BY MR. CIRESI:
Q. You see in the upper hand -- right-hand corner
it's dated September
17th, 1981?
A. Yes.
Q. And it involves teen-age smoking and the federal
excise tax on
cigarettes; correct?
A. Yes.
Q. And Mr. Johnston here is reporting to Mr. Daniel
regarding a study
that he made on a National Bureau of Economic Research working paper
entitled "The Effect of Government Regulation on Teenage Smoking;"
correct?
A. Yes.
Q. And in that report the authors examined the impact
on teen-age
smoking of the excise tax on cigarettes, the FCC Fairness Doctrine,
i.e.,
the anti- smoking commercials, and the cigarette advertising ban; correct?
A. Yes.
Q. And he reports that this is by far the best study
he had read
concerning the effects of anti-smoking commercials and the only study
that
he knew of that attempts to determine the price elasticity of cigarettes
among different groups; correct?
A. That's what it says.
Q. Now sir, he also reports that because of the
quality of the work,
the prestige and objectivity of the National Bureau of Economic Research,
and the fact that the excise tax on cigarettes has not changed in nearly
30
years, he felt that Philip Morris needed to take seriously their statement
that if future reductions in youth smoking are desired, an increase
in the
federal excise tax is a potent policy to accomplish this goal; correct?
A. Yes, that's what it says.
Q. And as you just testified, Philip Morris has
fought those excise
taxes; correct?
A. Yes, we -- we have, because we think it's unfair
to select a
particular group of society to impose taxes upon.
Q. Now if you go over to page two --
A. Yes.
Q. Have you reviewed this document, sir?
A. No. It means nothing to me, sir. I've not seen
this before.
Q. Okay. If you go over to page two, the first full
paragraph, Mr.
Johnston references the fact that the best estimate based on most
researchers, himself included, is that the price elasticity of cigarettes
is about minus 0.4; correct?
A. Yes, that's what it says.
Q. And you understand what that means; don't you?
A. Yes, I do.
Q. That means that a 10 percent increase in the
retail price of a
cigarette will cause a decline of about four percent in cigarette sales.
A. That's what it means.
Q. Okay. So when we see price elasticity minus 0.4,
that means that if
you raise it 10 percent, it goes down four percent in sales.
A. That's the theory.
Q. All right. And he reports here that "Many of
us have hypothesized
that price elasticities are different for different demographic or
socioeconomic groups...;" correct?
A. That's what he says, yes.
*3 Q. And that the price increases would have less
impact on the higher
income groups; correct?
A. Yes.
Q. And you agreed with that yesterday; didn't you?
A. I'm not sure if I did, but I certainly agree
with it.
Q. Okay. And it also -- price increases would also
have less effect on
the older and therefore more habituated smokers than on other smokers;
correct?
A. That's what it says, yes.
Q. Because they can't quit; correct?
A. I wouldn't say that, sir.
Q. That's what he's saying; correct?
A. That's what he says, sir, yes.
Q. Now in the next paragraph it also talks about
the anti- smoking
commercials; correct?
A. In which paragraph?
Q. The next paragraph.
A. Yes.
Q. And here he talks about what has been the effect
of publicity that
has come out regarding the health effects of smoking; correct?
A. Well could I read it, please?
Q. Certainly.
A. Sir, how did you describe it, please?
Q. He describes here what effect publicity regarding
the health effects
of smoking has had on sales of cigarettes.
A. Yes, that's right.
Q. And he states that the authors in this National
Bureau of Economic
Study had concluded that anti-smoking commercials represented a shock
to
the underlying upward trend in teen-age smoking in the mid-1960s and
early
seventies, particularly in the first year in which they were aired,
but
that the trend reasserted itself the following year, although teen-age
smoking remained at a lower level than would have been the case in
the
absence of anti- smoking commercials; correct?
A. That's what it says, yes.
Q. And essentially what he's saying there is when
all these
anti-smoking commercials went on TV --
And you're familiar with the Fairness Doctrine;
correct?
A. The Fairness Doctrine?
Q. Yes.
A. No, I'm not, sir.
Q. You're not.
Are you aware that in 1970 or '71, that there were
anti- smoking ads
put on --
A. No, I'm not.
Q. -- TV?
A. I was not with Philip Morris in those days.
Q. Well what Mr. Johnston is reporting here is that
when anti-smoking
commercials were on TV, the trend -- upward trend of teen-age smoking
went
down; correct?
A. Well that's what the report says, I think; isn't
it? He's -- he's
quoting the authors of the report.
Q. Right.
A. Right.
Q. And the authors of the report further reported
that in the next year
of the anti-smoking commercials, the trend of teen- age smoking continued
to go up, but at a lower rate; correct? Or lower level.
A. That's right.
Q. And he says this is consistent with his own findings
that he made on
behalf of Philip Morris; correct?
A. Well he says it's consistent with my findings.
I don't know if he
made them on behalf of Philip Morris. He certainly worked for Philip
Morris.
Q. Well you'd assume he was doing it on behalf of
Philip Morris.
A. I would assume that, yes.
Q. He was discharging his duties and responsibilities
as an employee of
Philip Morris; correct?
*4 A. Well I don't know if that is correct, because
I don't think one
of his responsibilities would have been to track teen-age smoking,
sir.
Q. Well you weren't there; isn't that right?
A. I was not there, sir. I was in Europe.
Q. But he was tracking teen-age smokers according
to his words; right?
A. From what he says there, yes, that's right.
Q. Is this another document that you're ashamed
of?
A. This document?
Q. Yes.
A. No, I'm not ashamed of this. It seems to me that
he's reporting on
something that is a report, a government report.
Q. Let's go on to see what he says.
"This is consistent with my findings that random
shocks, such as the
report of the Royal College of Physicians and Surgeons, the Readers
Digest
articles, and the reports of the Surgeon General, have brief effects,
and
that sales subsequently resume the upward trend, but more slowly and
from a
lower base." Do you see that?
A. Yes.
Q. And so he's saying that is what he found on behalf
of Philip Morris;
correct?
A. Well that's what he found.
Q. Then he goes back and he says, "The authors also
conclude that the
cigarette advertising ban had a relatively minor effect in discouraging
teenage smoking." Correct?
A. That's what he says, yes.
Q. And that's the ban of any cigarette ads on TV;
isn't it, sir?
A. I don't know.
Q. Okay. That's not referring to whether or not
Philip Morris would
have taken some of its 15.9 billion dollars of money that is spent
on
marketing, promotion and advertising, and put anti-smoking ads on TV
for
teen-agers. He's not referring to that; is he?
A. Well that was in 1983-'4; wasn't it, sir?
Q. That was 1983 to 1994, yes.
A. I think this is 1981, isn't it?
Q. Well did Philip Morris spend money on marketing,
advertising and
promotion prior to 1983?
A. I expect so.
Q. Billions of dollars; right?
A. I don't know.
Q. And they never took any of that money and put
ads on TV urging teen-
agers not to smoke because of the diseases they might contract as a
result
of it; did they?
A. I don't know if they did, sir.
Q. Are you aware of Philip Morris ever putting such
an ad on TV?
A. On TV?
Q. Yes.
A. Nothing comes to my mind. But I wasn't here in
those days, sir, so I
can't say "yes" or "no."
Q. Now if we go on to the next paragraph, Mr. Johnston
reports that
there's a greater impact of price increases on teen- agers --
A. Could you show me where that is, please?
Q. Well if I could finish my question.
A. Thank you. But I don't --
I find it difficult to follow you when you can't
lead me to where it is
that I should be reading.
Q. Well let me ask a question, --
A. Okay.
Q. -- then I'll direct you. Okay?
In the next paragraph, Mr. Bible, does Mr. Johnston
report on the
greater effect that a price increase has on teen-agers as contrasted
with
older smokers? Could you take a look at the next paragraph starting
with
the language "the most important finding...."
*5 A. Okay.
A. Yes. Could you repeat your question, please?
Q. In this paragraph, does he report on the fact
that price increases
have a greater impact on teen-agers than it does on the average smoker?
A. Yes, he does.
Q. And what he says is, "The most important finding,
and the one of
greatest significance to the company, is their calculation of the price
elasticity of cigarettes among teenagers." Is that right?
A. Yes, he does. He goes on to say, also, that he
also found that
smoking by young adults 20 to 24 is much more responsive to price.
Q. Well let's go point by point here. Right now
I'm on the first point.
"The most important finding, and the one of greatest
significance to
the company, is their calculation of the price elasticity of cigarettes
among teenagers." Correct?
A. Yes.
Q. Now, he's saying that it's the greatest significance
to Philip
Morris; correct?
A. And -- the one of greatest significance to the
company, yes.
Q. And he's referring to teen-agers; correct?
A. Is the price elasticity of cigarettes among teen-agers,
correct.
Q. And he's talking about the price of cigarettes
that teen- agers
would have to pay; correct?
A. Yes, that would be my assumption.
Q. Now are you ashamed of the document?
A. Well I'm embarrassed by it.
Q. You're embarrassed by it.
A. Hmm.
Q. Is this another anomaly?
A. Sir, I don't know. I think we've used that word
on five or six
occasions, maybe three or four occasions. It's something that I've
not seen
in my career at Philip Morris. We do not market cigarettes to teen-agers,
I
can tell you that. I never have. And if this is one of five or six,
I would
say it's certainly an anomaly.
Q. All right. Is your answer yes?
A. Yes, it is.
Q. Thank you.
Now Mr. Johnston goes on, "They calculate that the
smoking
participation elasticity is minus 1.2, which means that a ten percent
increase in the price of cigarettes would lead to a decline of 12 percent
in the number of teenagers who would otherwise begin to smoke." Correct,
sir?
A. Yes, that's what it says.
Q. So it's a three-fold greater impact on teen-agers
than on the older
smokers; correct?
A. On those older smokers --
On the average, I think the .4 he referred to, that's
correct. I think
that's the average of the whole universe; isn't it, the .4?
Q. That's for smokers.
A. All smokers, yes.
Q. Correct. So it's a three-fold increase; correct,
sir?
A. Yes.
Q. He even says, "This is in contrast to the aforementioned
minus 0.4
elasticity for the total smoking population;" correct?
A. Yes. That's my point, the total smoking population.
Q. And then he goes on to say that even among 20-
to 24- year-olds,
they're much more responsive to price than smoking by older adults;
correct?
A. Yes, he does.
Q. And he says that again is consistent with the
hypothesis mentioned
above; correct?
A. Yes, he does.
Q. And the hypothesis mentioned above is that the
older you get, the
more hooked you are on the cigarettes; isn't that correct?
*6 A. I wouldn't form that conclusion, no.
Q. Well he --
Let me use his words. I apologize. More habituated;
correct?
A. I don't think he said that either.
Q. He didn't.
A. Huh-uh.
Q. Well right up above in the first paragraph, --
A. Uh-huh.
Q. -- halfway through, --
A. Uh-huh.
Q. -- "Many of us have hypothesized that price elasticities
are
different for different demographic or socioeconomic groups, e.g.,
that
price increases would have less effect on the higher income groups
and on
the older and therefore more habituated smokers, than on other smokers."
Isn't that what he said?
A. That means to me that people -- "more habituated"
means that you
have a smoking habit.
Q. And that's what he was referring to, then, down
below; correct, sir?
A. Yes, he was, I think.
Q. Now if you go on to the next page, page three,
and look at the first
paragraph, in the middle of that paragraph he talks about the fact
that
"Among teenagers the prevalence of cigarette smoking is highly correlated
with income (from either allowances or working) while there was no
similar
correlation between smoking prevalence and income among adults." Correct,
sir?
A. Yes, correct.
Q. And this whole document is talking about teen-age
smoking and the
federal excise tax on cigarettes; isn't it? That's the title of it.
A. Yes, that's the title of it. That's commenting
on a report by the
National Bureau of Economic Research.
Q. And on his own figures; correct?
A. He told --
He mentions his own findings, yes.
Q. Yes. And if we go to the next paragraph, Mr.
Bible, --
A. Uh-huh.
Q. -- he's talking about cross-elasticities; correct?
A. The next paragraph?
Q. On page three.
A. Uh-huh. Yes, he is.
Q. Okay. And you would --
You know what cross-elasticities are?
A. No, I'm not completely familiar with that term.
Q. Well isn't that a product that someone might
substitute for the
product in question based upon price points?
A. I don't know, but it could be.
Q. You've never heard of the term "cross- elasticity?"
A. No, I've not.
Q. In your 20 some years with Philip Morris, you've
never heard such
term?
A. No, I have not. Not to my memory, sir.
Q. Can you look at the middle of that paragraph.
A. Uh-huh.
Q. "I think it is more than coincidental" --
Do you see that language?
A. Yes, I do. I see it there.
Q. -- "that the sharpest declines in smoking prevalence
among teenage
males occurred in 1979 and 1980, the years in which the price of gasoline
rose most sharply." Do you see that?
A. Yes.
Q. "When it comes to a choice between smoking cigarettes
or cruising
around in his car, the average teenage male would probably choose the
latter." Correct?
A. Yes.
Q. "If this cross-elasticity between cigarettes
and gasoline is,
indeed, related to the decline in smoking prevalence among teenagers,
we
would expect to see some moderation in the rate of decline in smoking
among
boys when the 1981 data becomes available." Correct?
*7 A. Yes, correct.
Q. So again Mr. Johnston is looking at teen-age
males; correct?
A. Yes, he is.
I don't see, though, that he's talking about marketing
cigarettes to
teen- agers.
Q. Well we've seen other documents about that; haven't
we, sir?
A. No, I haven't.
Q. You haven't?
A. Not marketing, not marketing to them, no.
Q. The last two -- two days you haven't?
A. I've seen surveys, but I've not seen any documents
that show we
market cigarettes to children.
Q. Oh. All the documents you've seen, didn't you
think they had
anything to do with marketing, tracking how much the market share of
Marlboro is in the under 17, talking about teen-agers and why they
smoke,
going up to the board of directors, none of that had to do with marketing;
is that what you're saying?
A. Well I've not seen any evidence that we've marketed
them, so that's
what I'm saying.
Q. So you're saying none of that had to do with
marketing.
A. No, I -- I don't know what it was to do with,
but certainly it was
capturing information. I said yesterday I was ashamed of that.
Q. Ah. Maybe it was just as you said, since the
board likes to have
provocateurs, too, they were just sort of speculating on teen-agers;
is
that what it was?
A. Well I think you said that, and I said maybe
they are provocateurs
from time to time.
Q. Yeah. So maybe that's what they were doing, just
being provocateurs
and speculating?
A. Could be.
Q. If we go, sir, into the last paragraph, "In any
event, and for
whatever reason, it is clear that the price has a pronounced effect
on the
smoking prevalence of teenagers, and that the goals of reducing teenage
smoking and balancing the budget would both be served by increasing
the
federal excise tax on cigarettes." Do you see that?
A. Yes, I see that.
Q. And if we go over to the next page, sir, the
last paragraph, first
part, Mr. Johnston also reports, "It is worth noting that government
actions designed to reduce smoking in the late sixties and early seventies
served to moderate an underlying upward trend in teenage smoking, while
any
government action taken now will accelerate its present downward trend."
Do
you see that?
A. Yes, I do.
Q. Now, as we go through that paragraph, we see
Mr. Johnston talking
about what effect will occur on sales of the product; doesn't he?
A. Well may I read it?
Q. You may.
A. Yes, I've read it.
Q. And he's talking about the effect of excise taxes
on teen-agers,
too; isn't he?
A. Yes, it refers to that.
Q. Yes. Let's -- let's read that. "Given a price
elasticity of minus
0.4 for total cigarette sales and minus 1.2 for teenage smoking
participation, a 25 percent increase in the excise tax could be expected
to
reduce industry sales to about 1.2 percent below what would be expected
in
the absence of such an increase, and to reduce the number of teenage
smokers to 3.5 to 4 percent below the number that would otherwise be
expected. The almost certainty of improved economic conditions, lower
inflation rates, and increasing discretionary incomes over the next
few
years, however, should serve to moderate the adverse effect of sales
of an
excise tax increase. We can never look with equanimity on increases
in the
excise tax, but because of demographic trends and the improved economic
outlook an increase at this time would probably be less harmful than
it
would have been at any other time in the past decade." Correct, sir?
*8 A. That's what it says, yes.
Q. He's reporting on sales to teen-agers; correct?
A. He's reporting upon, I think, all sales in the
cigarette industry,
and one aspect of that was the element of teen-age smoking.
Q. Teen-age sales; correct?
A. He talks about "and to reduce the number of teenage
smokers to 3.5
percent to 4 percent below the number that would otherwise be expected."
Q. Be expected by whom, sir?
A. By the company, I would anticipate.
Q. By the company.
A. Uh-huh.
Q. Your company; correct?
A. And probably the whole industry.
Q. Well I'm just talking right now about your company.
Correct?
A. Well, sir, I'm not -- I didn't write this --
this. I'm trying to
interpret what he wrote. I'm not sure what he meant when he wrote this.
Q. Well if he didn't mean your company alone, then
he meant your
company and the entire industry.
A. Oh, I'm not denying that he worked for Philip
Morris and this was
probably addressed to people in Philip Morris, yes.
Q. Thank you.
Now is that the type of thing Philip Morris should
be doing?
A. What is that, sir?
Q. What Mr. Johnston was doing right here.
A. Well he's reporting upon a report.
Q. On teen-agers. Is that what they should be doing?
A. Well it's a report, "The Effect of Government
Regulation on Teenage
Smoking." So he's reporting upon that. And if teen-agers smoke, then
clearly he's commenting upon that.
Q. He's talking --
A. It doesn't evidence that we were marketing cigarettes
to teen-agers,
sir.
Q. So you don't think that had anything to do with
the fact that Philip
Morris was marketing to teen-agers.
A. No, I don't.
Q. Okay. Can you direct your attention to Exhibit
10560.
Excuse me. Sorry. 11591.
A. Yes, I have that.
Q. Now this is another memorandum by Mr. Johnston;
correct?
A. Yes.
Q. Six years later; correct?
A. Yes.
Q. Sent to Mr. Zoler, director of marketing research;
correct?
A. Well I'm not sure what his job was.
Q. Well will you accept that that's what his title
was, sir?
A. Yes.
Q. And if you look on the last page, you see the
carbon copy to all
those individuals?
A. Yes.
Q. Do you know any of them?
A. I'd know two or three, probably. Or knew them.
Q. Do you know Mr. Gee?
A. I met Mr. Gee, yes.
Q. And what was his position?
A. I'm not sure. He could have been working in market
research or
product research at some time, but I'm not sure what his job was at
that
time.
Q. Was he a director?
A. I don't believe so.
Q. Is he an executive?
A. In 1987, I don't know that he would have been
an executive.
Q. He became an executive; didn't he?
A. He became an executive? I have no memory of that,
sir.
Q. Mr. Goldfarb, do you know him?
A. No, I don't know him.
Q. Ken Houghton, do you know him?
A. Yes, I did know him. He was at one point head
of the research and
development.
Q. Head of research and development.
*9 A. Uh-huh.
Q. Carolyn Levy, do you know her?
A. Yes, I do know her.
Q. And what was her position?
A. Well she today works in, I think, marketing research
for Philip
Morris U.S.A.
Q. Okay. And "marketing" means marketing of cigarettes;
correct?
A. Yes, clearly.
Q. And Leo Meyer, do you know Mr. Meyer?
A. No, I do not.
Q. Karen Miller, do you know Karen Miller?
A. No, I've never heard of her.
Q. John Tindall?
A. I said yesterday I had met John years ago.
MR. CIRESI: Your Honor, we'd offer Exhibit 11591.
MR. BLEAKLEY: No objection.
THE COURT: Court will receive 11591.
BY MR. CIRESI:
Q. Now this is September 3rd, 1987; correct, sir?
A. Yes, it is.
Q. That's about six years after the previous memo
that we just saw.
A. Yes.
Q. And the subject again is "Handling an excise
tax increase." Correct?
A. Correct.
Q. Let's work our way through this memo.
Have you read this before?
A. No.
Q. You haven't. Okay.
Let's take a look at the first paragraph. You see
that Mr. Johnston is
reporting on the fact that he's been asked for his views as to how
we
should pass on the price increase in the event of a increase in the
excise
tax?
A. Yes, I do.
Q. Okay. And that means that someone at Philip Morris
asked him for his
opinions; correct?
A. I expect so, yes.
Q. And usually superiors ask the people that work
with them for their
opinions; correct?
A. Not necessarily. It could be anybody.
Q. All right. Well --
A. He doesn't say who it is, so I can't speculate
on who it is.
Q. Well do you know --
You don't know if Mr. Zoler, I guess, was the director
of marketing
research at that time; do you?
A. Well you said he was.
Q. And if he was, would you assume that he was a
superior to Mr.
Johnston?
A. Well I don't know what Mr. Johnston's job was.
Q. All right.
A. I'm not being a quibbler, but it doesn't say
I've been asked by you
for my views, it says I've been asked for my views. So I don't know
who
asked him for his views.
Q. I don't want to quibble either, sir.
A. Thank you.
Q. Thank you.
It says here, "Pass on the increase in one fell
swoop...;" correct?
A. That's what it says.
Q. "...and make it clear to smokers that the government
is solely
responsible for the price increase, advertise to that effect, and suggest
that people stock up to avoid the price increase, and recommend they
--
that they refrigerate their cigarettes to preserve their freshness;"
correct?
A. Yes.
Q. And the reason for that is that they wanted to
emphasize that point
or we'd get a lot of beetle complaints; correct?
A. That's what it says.
Q. Then he goes on to state, "Then when people exhaust
their supply and
go to the store to buy more, they will be less likely to remember what
they
last paid and will be less likely to suffer from 'sticker shock.' As
a
result, they should be less likely to use the price increase as an
incentive to stop smoking or reduce their consumption;" correct?
*10 A. That's what it says, yes.
Q. Then he goes on to talk about what happened back
in 1982 when there
were price increases; correct?
A. Yes.
Q. And he said that Philip Morris had increased
prices five times
between February of '82 and January of '83; correct?
A. Correct.
Q. And that at that time the customers could legitimately
blame the
manufacturers for the price increase; correct?
A. Well let me read that.
Q. Sure.
A. That's what it says, yes.
Q. Then he goes on to state, "While price increases
of this magnitude
might have been tolerated during the rapid escalation and the overall
inflation rate between 1977 and '81, the increases in the price of
cigarettes in '82 and '83 was made even more dramatic by the fact that
the
overall rate of inflation was slowing considerably. You may recall
from the
article I sent to you that Jeffery Harris of MIT calculated, on the
basis
of the Lewin and Coate data, that the 1982-83 round of price increases
caused two million adults to quit smoking and prevented 600,000 teenagers
from starting to smoke." Correct?
A. That's what it says, yes.
Q. And then he goes on to say what impact that had
on Philip Morris;
doesn't he?
A. Well let me read.
Q. Certainly.
A. Yes, he does, yes.
Q. He says, "Those teenagers are now 18 to 21 years
old, and since
about 70 percent of 18- to 21-year-olds and 35 percent of older smokers
smoke a PM brand, this means that 700,000 of those adult quitters had
been
PM smokers...;" correct?
A. Correct.
Q. "...and 420,000 of the non-starters," i.e., the
teen- agers, "would
have been Philip Morris smokers;" correct?
A. That's correct.
Q. And then he goes on to say, "Thus, if Harris
is right, we were hit
disproportionately hard. We don't need that -- to have that happen
again."
Correct?
A. Yes, that's correct.
Q. And he's talking about the teen-age smokers or
potential smokers who
didn't start; isn't he?
A. That's what he's saying, yes.
Q. Have you seen this document before?
A. Have I seen this document before?
Q. Yes.
A. No. I said I had not seen this document before.
Q. Is this one you're ashamed of?
A. Yes, I'm embarrassed by that.
Q. Are you ashamed of it?
A. Well I'm embarrassed. I don't see the distinction
between the two,
frankly.
Q. Oh. So embarrassed and ashamed is the same.
A. To me.
Q. Shouldn't have been done?
A. I don't think we should have been commenting
on matters like that. I
think that's poor.
Q. Violating the duty that you have to the public?
A. I don't know that this letter is violating the
duty we had to the
public, sir. This doesn't say that we're marketing cigarettes. He was
simply saying that those teen-age smokers who might have started did
not
start.
Q. He said we were hit disproportionately hard and
we don't need to
have that happen again. Isn't that what he's saying?
A. Well I don't like that.
Q. Well do you think these types of memos were circulating
around
Philip Morris because people had idle curiosity about what teen-agers
may
or may not do, sir?
*11 A. No, I don't. I don't know why they were circulating
around
Philip Morris, sir.
Q. Just no idea; right?
A. No, I don't. But I'm embarrassed by them. In
1982, for example, I
was in Australia.
Q. Well, the company is still responsible for its
actions whether you
were in Australia or Europe or Istanbul; right?
A. Certainly the company does, but I thought you
asked me personally.
Q. You want to distance yourself from the company
in that respect?
MR. BLEAKLEY: Objection, Your Honor.
A. No, I don't. I'm very proud of my company.
MR. BLEAKLEY: That's argumentative.
THE COURT: Sustained.
MR. CIRESI: May I approach, Your Honor?
(Document handed to the
witness.)
Q. Mr. Bible, I've handed you what has been marked
as 24143, a Philip
Morris document which has been produced in this litigation entitled
"REASONS FOR CONSIDERING CAMEL AS A SERIOUS COMPETITOR." Do you see
that?
A. Yes.
MR. CIRESI: Your Honor, we'd offer Exhibit 24143.
MR. BLEAKLEY: Was this document predesignated?
MR. CIRESI: Yes, it was.
MR. BLEAKLEY: Excuse me, Your Honor, I'm just having
trouble locating
it.
No objection.
THE COURT: Court will receive 24143.
BY MR. CIRESI:
Q. Now on the top it says "REASONS FOR CONSIDERING
CAMEL AS A SERIOUS
COMPETITOR." Correct?
A. Yes.
Q. Now sir, you would agree that there has been
increased scrutiny of
the tobacco industry with regard to whether they've been selling cigarettes
to teen-agers; correct?
A. Yes.
Q. And do you know if, as a result of that increased
scrutiny, people
within Philip Morris use code names for teen- agers?
A. I have no idea of that, sir.
Q. Now --
A. Again, that would really surprise me. I've not
heard of that ever.
Q. All right. Can you go to the second page, sir.
A. Uh-huh. The first page after the cover you mean?
Q. Yes. It says "CAMEL IS BECOMING YOUNGER." Do
you see that?
A. Yes.
Q. And it says "CAMEL HAS REMAINED AT A 4 PERCENT
SHARE OF SMOKERS
SINCE 1980. HOWEVER, IT HAS UNDERGONE A SUBSTANTIAL SHIFT IN ITS AGE
PROFILE. IN THE PAST FOUR YEARS, THE PERCENTAGE OF CAMEL SMOKERS WHO
ARE 18
TO 24 YEARS OLD ALMOST DOUBLED - 12 PERCENT IN '86 VERSUS 21 PERCENT
IN
1990." Do you see that?
A. Yes.
Q. And if you go on to the next page, you'll see
a Camel age profile.
And do you see there where it says "12 -- 12 months ending July 1990?"
A. Yes, I do.
Q. So would it be fair to state that this document
was sometime after
July of 1990?
A. Yes, that's fair.
Q. All right. If you go back to the previous page
then, sir. Do you
know when Camel started -- excuse me.
Do you know when RJR started its Joe Camel campaign?
A. No, I don't know exactly. But if I had to guess,
I'd say about ten
years ago.
Q. '88.
A. Okay. Well, close.
Q. On the 75th anniversary of the Camel cigarette?
A. Well I didn't reconcile the two, sir.
Q. Now the document goes on to state that there's
"THREE DIFFERENT
FACTORS HAD CONTRIBUTED TO THIS PHENOMENON." Do you see that?
*12 A. Yes.
Q. "GROWTH AMONG YOUNG SMOKERS." Do you see that?
A. Yes.
Q. And "BETWEEN '86 AND '90, CAMEL GREW," and then
it's got 18-to-24
age group and 18-to-21 age group, and then "6 SMOKER SHARE POINTS AMONG
YOUNG ADULTS." Do you see that?
A. Yes, I do.
Q. What are young adults?
A. Well I would describe young adults as between
18 and 24.
Q. Well they have that up there. It says "5 SMOKER
SHARE POINTS AMONG
18 TO 24."
A. Yes, you're right.
Q. Then it says "4 SMOKER SHARE POINTS AMONG 18
TO 21."
A. That's correct.
Q. And then ""6 SMOKER SHARE POINTS AMONG YOUNG
ADULTS."
A. Well I don't know what that means.
Q. Okay. Can you go on to the next page.
A. Yes.
Q. And do you --
Let's deal with the 18 months ending July 1990.
Do you see that?
A. I see "12 months ending July 1990."
Q. I'm sorry, "12 months ending July 1990."
Now if we go down that column, we see 18 to 24.
A. Yes.
Q. Twenty-one percent; correct?
A. Yes.
Q. Now I looked at this and I got a little confused,
and my adding may
have been wrong, and maybe you can help me. I looked at 18 to 24, there's
two columns there, 18 to 21 and 22 to 24; correct?
A. Yes.
Q. And if you add 14 and seven, you get 21 percent;
right?
A. That's right.
Q. What's Y.A.?
A. Well I don't know, but it would seem to me to
mean young adults.
Q. Well if I add 14 and seven, I get 21.
A. That's right.
Q. If I subtract seven from 14, I get seven.
Do you think young adults is under the age of 18,
sir?
A. I have no idea, sir. I don't know what it means.
Q. Isn't it a fact that Philip Morris uses the term
"young adults"
internally to refer to teen-agers?
A. Absolutely not. I've never heard that in my life.
Q. You've never heard it.
A. I've never heard that in my life and I reject
that.
Q. Have you ever seen this document?
A. No, I've not seen this document.
Q. Have you ever asked whether the term "young adults"
is used
internally in Philip Morris to mean teen-agers?
A. No, I've never needed to, because we would know
18 to 24 is what we
described, in anything I've seen, as young adult smokers.
Q. Sir, if you add up the 21 percent and then go
gown the age groups,
26 percent for 25 to 34, and all the way down, don't you get a hundred
percent?
A. Well let me -- can I do the add?
I get 129 actually, so let me do it again.
Q. Well you can't repeat the first 21 there, sir.
A. Yes, right.
In fact I get 109.
Q. Yeah. You get the young adults. Who's the young
adult?
A. I don't know. Young adults to me is 18 to 24,
sir. I can't explain
this.
Q. But you have never asked anyone in the marketing
department of
Philip Morris U.S.A., "Are we using the term 'young adults' to refer
to
teen-agers?"
A. No, I have asked --
I don't recall I've asked, but I've seen young adults
as described age
18 to 24. Categorically, I really mean that, categorically without
any
qualification, --
*13 Q. Sir --
A. -- so I have had no reason to ask anybody that
question.
Q. All right. Is your answer to my question no?
A. No, because I've had no reason to, sir.
Q. Well it's a simple question. Have you asked anyone
that question?
"Yes" or "no."
A. No.
Q. Thank you.
A. Good.
Q. Now does Philip Morris have a policy of hiding
research from public
health officials?
A. Not to my knowledge, sir.
Q. Can you direct your attention to Exhibit 2548.
A. Yes, I have that.
Q. And this is a letter to -- or a memo to Helmut
Wakeham; correct?
A. Yes.
Q. From Joseph F. Cullman III?
A. Yes.
Q. And again he's the former CEO and chairman of
the board.
A. Yes.
Q. Sits on the board as chairman emeritus today.
A. He's invited to board meetings, yes.
Q. By you.
A. Yes.
Q. And we see that carbon copies of this went to
George Weissman;
correct?
A. Yes.
Q. Do you know what his title was?
A. Then I don't know, no.
Q. You see that one went to Paul Smith?
A. Yes.
Q. He was the general counsel of the company?
A. I believe he was. I never met him.
Q. One went to Ross R. Millhiser; correct?
A. Yes.
Q. He was vice chairman of the company?
A. I don't know what he was at that time.
Q. Well he became the vice chairman; didn't he?
A. He did become the vice chairman, yes.
Q. And Clifford Goldsmith, he became the CEO?
A. He became the CEO of Philip Morris U.S.A., I
believe.
Q. Okay. The tobacco arm; correct?
A. The tobacco arm, yes.
Q. And in this Mr. Cullman is saying he enjoyed
the conversation that
he had last Thursday in Richmond with Mr. Wakeham; correct?
A. Yes.
Q. And he felt he had to clear the air somewhat
on the strong stand he
had taken in connection with certain kinds of research activities by
Philip
Morris; correct?
A. Yes.
Q. Were those biological animal testing research?
A. I have no idea, sir, what it was.
Q. And he says that Mr. Wakeham had given him a
better understanding of
the rationale behind his position, and Mr. Cullman said "...I repeat
my
assurance to you that my position is not intransigent and that I am
willing
to discuss broad corporate policy in this area with you...;" correct?
A. Yes.
Q. And if we go down to the next paragraph --
Well before we go there, he says, "In the meantime,
I believe that our
present policy is the correct one and that the program you are carrying
out
in Boston is as far as we should go now." Do you see that?
A. Yes, I do.
Q. Do you have any idea what he's referring to there?
A. No, not -- not an idea, sir.
Q. Now he goes on in the next paragraph, "The possibility
of getting
answers to certain problems on a contractual basis in Europe appeals
to me
and I feel presents an opportunity that is relatively lacking in risk
and
unattractive repercussions in this country." Do you see that?
A. Yes, I do.
Q. Now that referred to animal research that Philip
Morris had agreed
with the other companies not to conduct in this country; isn't that
right?
*14 A. I have no idea, sir.
Q. Have you ever heard about that?
A. Heard about what?
Q. The gentlemen's agreement.
A. No, I've not heard about it, sir. I read about
it in the newspaper
once, I think, or some comment about it, but I -- I don't know anything
about it.
Q. Well when you read about it in the newspaper,
did you ask anybody to
see the documents that might --
A. No, I did not, sir, no.
Q. Didn't you have any curiosity and say, "Gee,
we had a gentlemen's
agreement not to do research into smoking and health? Maybe I ought
to look
into this?"
A. I may have curiosity, sir. As I said, I could
have spent the rest of
my life looking backwards to all of those things. I decided to look
forward.
Q. Well we're going to talk about how you looked
forward in a minute.
All right?
A. Thank you.
Q. But you didn't do that; did you, sir?
A. No, I did not.
Q. And in the next paragraph, sir, "I feel the influence
you have been
able to wield in connection with your activities on the Public Health
Service Cancer Task Force has been very important and we must be kept
informed on these activities." You see that?
A. Yes.
Q. Do you know if Philip Morris provided their internal
research to the
Public Health Service Cancer Task Force?
A. I have no idea.
Q. Well you know that last Friday was the first
time all of the
documents that were produced in Minnesota were ever made public; don't
you?
A. No, I don't know that. I believe some of those
in fact had been in
the public arena before.
Q. Is that what you said yesterday?
A. No, I didn't say it yesterday. I was told last
night that some of
them had been presented in cases, actually.
Q. Oh. How many, do you know?
A. I don't know.
Q. Handful?
A. I have no idea, sir.
Q. "I would like you to take a more positive position
with respect to
the activities of the CTR...." Now I know you just learned what the
CTR
was, but you know that's The Council for Tobacco Research; correct?
A. Yes, I do know that.
Q. Okay. And they were supposed to be doing research,
independent
research -- strike that. It's a misstatement.
They were supposed to be funding independent research;
correct?
A. That's my understanding.
Q. And he goes on to say, "I would like -- would
also like you to
continue to keep us fully informed on research developments that you
think
would help Philip Morris and the industry to counter the attacks being
launched against our products." Do you see that?
A. Yes, I do.
Q. Now those attacks related to the fact that cigarettes
cause disease;
correct?
A. I don't know what was happening then, sir.
Q. You have no idea?
A. No, I don't. I was in Europe at that time.
Q. Working for Philip Morris?
A. At that time I was, yes.
Q. And you just have no idea what was going on in
the United States; is
that right?
A. No, certainly I was not very familiar with what
-- what was
happening here. I'd just joined the company as a young man in those
days.
*15 Q. Just had no idea what was going on in the
United States; is that
right?
A. No, I did not have much idea what was going on
in the United States.
Q. Can you direct your attention to Exhibit 2554,
which is the next
exhibit. Now this is a document to Mr. Goldsmith; correct?
A. Yes.
Q. From Mr. Wakeham; correct?
A. Correct.
Q. Or Dr. Wakeham, excuse me.
And you recall that you testified you were familiar
with INBIFO;
correct?
A. Yes, I know of INBIFO.
Q. And do you see that this memo deals with whether
or not Philip
Morris should purchase INBIFO?
A. Well it says that somebody wishes to sell it.
Q. Okay. If you go down to the third paragraph,
sir.
A. Uh-huh.
Q. "Since we have a major program at INBIFO, and
since this is a locale
where we might do some of the things which we are reluctant to do in
this
country, I recommend that we acquire INBIFO either in toto or to the
extent
of controlling interest." Do you see that?
A. Yes, I do.
Q. Now what was Philip Morris reluctant to do in
this country?
A. I don't know.
Q. Were they reluctant to do research that might
show that smoking
causes disease?
A. I have no idea what they're talking about here,
sir.
Q. Were they reluctant to do that because then they'd
have to disclose
that information if it was here in the United States?
A. Well as I told you, I have no idea.
Q. Now Philip Morris did buy INBIFO; did it not?
A. I believe so, yes. We own it today.
Q. Can you go to Exhibit 2688.
A. Yes, I have it.
Q. Now can you see that this is a document from
Dr. Seligman to Mr. Max
Hausermann, Philip Morris Europe S.A.?
A. Yes.
Q. Okay. Do you know Dr. Max Hausermann?
A. I had met him, yes.
Q. And he was the head of research and development
at Philip Morris in
Europe?
A. I'm not sure that he was, but he certainly worked
in the research
and development department there.
Q. Okay. And Dr. Seligman was in charge of research
and development in
the United States; correct?
A. I believe he was at some time, yes.
Q. Okay. Dr. Seligman writes to Dr. Hausermann,
"Dear Max:
"I received a copy of Helmut Gaisch's March 24,
1997, letter to Jerry
Osmalov concerning pesticide residue analysis." Do you see that?
A. Yes.
Q. And do you know who Helmut Gaisch is?
A. I met him. He was in the R&D department in
Europe.
Q. Okay. And do you know who Jerry Osmalov is?
A. No, I don't remember that name at all.
Q. "As you were copied, you know that Helmut was
requesting that we
send samples directly to INBIFO." Do you see that?
A. Yes.
Q. So in other words, someone at INBIFO was requesting
Dr. Seligman
send something directly to INBIFO; correct?
A. That would seem to be the conclusion, yes.
Q. "This suggested procedure is in direct conflict
with our
communications from the New York office." Do you see that?
A. Yes.
Q. Now you're aware, are you not, that Philip Morris,
through its New
York executives, made a decision that there would be no lines of
communication between INBIFO and the United States?
*16 A. No, I'm not aware of that.
Q. No written lines of communication?
A. I'm not aware of that, sir.
Q. Would you look at the next sentence, sir. "We
have gone to great
pains to eliminate any written contract with INBIFO, and I would like
to
maintain this structure." Do you see that?
A. Yes, I do.
Q. "Therefore, I am advising Jerry Osmalov to continue
sending samples
to Neuchatel...."
What's Neuchatel?
A. It's -- it's a canton in Switzerland, and in
fact a town in that
canton.
Q. And that's where a subsidiary of Philip Morris
was headquartered;
correct?
A. That's where we have a manufacturing plant.
Q. "If this procedure is unacceptable to you, maybe
we should consider
a 'dummy' mailing address in Cologne for the receipt of samples."
Is that
correct?
A. That's what it says, yes.
Q. Does Philip Morris have a policy of setting up
dummy addresses?
A. Definitely not to my knowledge, sir.
Q. Did you ever see this document before?
A. No, I've not seen this document before.
Q. Are you ashamed of this document?
A. I'm embarrassed by it. I don't know the background
to it though.
Q. "The written analytical data will still have
to be routed through
FTR" --
And what's FTR?
A. That stands for Fabric de Tabac Reunies. I think
that means the
General Tobacco Company. That's the French for General Tobacco Company.
Q. Subsidiary of Philip Morris.
A. Yes. That's the tobacco plant in Neuchatel that
I just referred to.
Q. "The written analytical data will still have
to be routed through
FTR if we are to avoid direct contact with INBIFO and Philip Morris
U.S.A.
I'll leave it to you to decide which route you will follow."
Now does Philip Morris have a practice today of
setting up dummy
mailing addresses and sending information surreptitiously to these
addresses?
A. Absolutely not to my knowledge, sir. Absolutely
not. I would --
Q. To your knowledge.
A. To my knowledge. I can't expect to know everything
in the company,
but I can tell you categorically I have no idea of anything of that
happening in our company today. Anybody who did that today would be
fired
immediately.
Q. Be fired immediately.
A. Immediately.
Q. Because they're violating their duty to the public;
correct, sir?
A. Well because they're doing something I just think
is wrong.
Q. Wrong. And if they're --
If they've done something wrong, they should be
held accountable for
it; shouldn't they?
A. Well I think that's correct, they should be held
accountable for it.
Q. And --
A. But I don't know the background for this particular
case.
Q. And that would be particularly true if they were
setting up dummy
addresses and sending information that related to the public health
and
safety; wouldn't it?
A. Well I don't know if that's what this is relating
to.
Q. But if it did, that would be particularly true?
A. Well that's an assumption I'd have to make, and
I don't know if I
can make that assumption.
*17 Q. Have you ever asked?
A. Ever asked what, sir?
Q. Whether or not the gentlemen's agreement involved
setting up dummy
addresses in order to keep information regarding public safety from
the
public?
A. No, I have not asked that, because I didn't know
that's what was
claimed to have been done.
Q. Well did you see that was claimed in the paper
that you read when
you saw the gentlemen's agreement?
A. I can't recall that.
Q. That's what it was about; wasn't it, sir?
A. Well I can't recall that, sir. You know, I've
seen so much and read
so much, I can't recall everything.
Q. Well you said that --
You said you didn't know that's what was claimed
to have been done, but
before that you said you had read the paper where you read about a
gentlemen's agreement.
A. I read the mention of the term "gentlemen's agreement,"
yes.
Q. And the gentlemen's agreement that you read in
the paper referred to
the fact that there was an agreement among the companies not to do
research; correct?
A. Well let me explain, sir. I quite often don't
read full articles, I
read headlines, and sometimes if I feel that I have the time and it's
of
sufficient interest I would read the whole article. Often I'm very
busy and
I can't read the whole article.
Q. When did you see this article? While you were
CEO?
A. Oh, I can't recall. I think in the last couple
of years.
Q. Okay. So while you were CEO; correct?
A. Yes, that would be right, I think, yes.
Q. During the period of time that you understood
that it had been
reported that over 400,000 people a year die in this country as a result
of
smoking, during that period of time; correct?
A. Well that's what claims are made by the CDC.
Q. Yes.
A. Uh-huh.
Q. But you were aware of that during this period
of time; correct?
A. Aware of what, sir?
Q. That there had been reports that over 400,000
people, by the Centers
for Disease Control, they reported, that died every year in this country
as
a result of smoking.
A. Yes, I'm aware of those reports.
Q. And you were aware of those reports when you
read this article about
the gentlemen's agreement; correct?
A. Well I don't think I read the complete article,
Mr. Ciresi.
Q. I didn't ask you if you read the complete article.
A. Well you said when I read the article. I'm saying
I didn't read the
complete article to my memory.
Q. I don't want to quibble with you, sir.
A. Thank you.
Q. When you saw the article regarding the gentlemen's
agreement, you
were aware of the reports of 417,000 people a year dying; correct?
A. I was aware of the report by the CDC, yes.
Q. Now, you saw this article and you didn't have
-- using your words --
sufficient interest to make an inquiry?
A. I didn't say that, no. I said often I don't have
the time or
sometimes sufficient interest to read every article that appears in
the
newspaper.
Q. And when you saw that article, and having in
mind the number of
deaths reported to be caused by smoking, you didn't have sufficient
interest to read the entire article.
*18 A. Sir, I've seen so many accusations launched
and thrown at this
company, often I just don't bother to read them. And I --
Q. You didn't --
A. I don't know if I read that article or not, quite
frankly.
Q. So you just don't bother to read the accusations
that are made
against your company.
A. Well I find some of them so extreme and wrong
and inaccurate, I just
find it difficult to read every one.
Q. Well how would you know unless you read them
and did the
investigation as to whether or not they were right or wrong?
A. Because I've read enough of them in the past.
Q. But you didn't read this one.
A. I didn't --
I don't remember reading this one completely, sir.
I certainly remember
seeing the term.
Q. Can you direct your attention to Exhibit 3708.
A. Yes, I have that.
Q. Now this is a letter from Mr. Dunn to Dr. Osdene;
correct?
A. Yes.
Q. November 3rd, 1977; correct?
A. Yes.
Q. "Proposed Study by Levy." Correct?
A. Yes.
Q. "I have given approval to Carolyn" -- or I --
I'm sorry, let me
restart.
"I have given Carolyn approval to proceed with this
study." Do you see
that?
A. Yes.
Q. Would that be Carolyn Levy?
A. I have no idea.
Q. "If she is able to demonstrate, as she anticipates,
no withdrawal
effects of nicotine, we will want to pursue this avenue with some vigor.
If, however, the results with nicotine are similar to those gotten
with
morphine and caffeine, we will want to bury it. Accordingly, there
are only
two copies of this memo, the one attached and the original which I
have."
Do you see that?
A. Yes, I do.
Q. Have you seen this before?
A. No, I've not seen this before.
Q. Has Philip Morris had a policy of burying research
that shows health
effects of smoking?
A. Certainly not to my knowledge, sir.
Q. Now you know Dr. Osdene testified here?
A. Yes, I do.
Q. Took the Fifth Amendment?
A. Yes, I -- I read that.
Q. You --
A. I, in fact, encouraged him not to.
Q. You encouraged him not to; didn't you?
A. Yes, I did.
Q. Did you grant him immunity from prosecution?
A. How can I do that?
Q. Couldn't do that; could you, sir? Could you?
A. How do I do that? I don't know how I do that.
Q. You couldn't; could you?
A. Of course I couldn't.
Q. No. But you said, "Go ahead, Dr. Osdene, you
testify. I urge you to
testify on behalf of the company;" didn't you?
A. I asked him to testify on behalf of the company
truthfully, yes.
Q. Do you think he's got a right to protect himself?
A. Of course he does.
Q. Are you ashamed of this document?
A. Yes, I am.
Q. Can you direct your attention to Exhibit 2501.
A. Oh, sorry. It was looking for 25001.
Q. 2501.
A. Sorry.
Yes, I have that.
Q. I know that may be a little difficult to read,
but these are
handwritten notes by Mr. Osdene. Have you seen these before?
A. Yes, I have seen these before. This was shown
to me at my deposition
in Florida.
*19 Q. It was.
A. Yes.
Q. Is that the first time you saw it?
A. Yes, it was.
Q. Number one, "Ship all documents to Cologne by
Tom." Do you see that?
A. Yes, I do.
Q. And that's Tom Osdene; correct?
A. Well I don't know, but it -- I think they told
me it was in my
deposition, and I believe that.
Q. Number two, "Keep in Cologne." Correct?
A. Yes.
Q. Number three, "Okay to phone and telex (these
will be destroyed)."
Correct?
A. Yes.
Q. By the way, what was in Cologne?
A. I think that's where INBIFO is.
Q. Ah.
A. I think you saw that in the letter you showed
me.
Q. Number four, "Please make a file cabinet -- available
a file
cabinet. Jim will put into shape." Do you see that?
A. Yes.
Q. And do you know if that's Mr. Charles?
A. I don't know.
Q. Are you aware that he testified here?
A. No, I'm not.
Q. If you go down to number five then, "We will
monitor in person every
two or three months." Do you see that?
A. Yes, I do.
Q. And do you know if Mr. Osdene went back and forth
between the U.S.
and Cologne to monitor some research that he was doing over there?
A. I have no idea.
Q. Did you ever ask him?
A. Did I ever ask?
Q. Yes.
A. No, I didn't know what Tom Osdene did.
Q. When you saw this memo last August, were you
ashamed?
A. Yes, I was very ashamed and distressed about
that.
Q. Very much ashamed.
A. Yes, I was ashamed.
Q. And in light of that shame, did you ask anyone
whether these things
were taking place?
A. Well I did actually ask if there were any documents
that were lost,
and I was told that there are -- the originals of all documents were
maintained at INBIFO.
Q. Right, at INBIFO.
A. Yes.
Q. Who told you --
Who told you that, sir?
A. Actually I'm not quite sure who it was that told
me because there
were quite a few people around, but I was talking to a number of people
and
they told me that the --it could have been outside counsel, actually
--
that the originals are all in INBIFO.
Q. Oh, your outside counsel told you that.
A. Yes, I -- it could have been. I can't remember
exactly who it was,
sir. If I could, I would tell you.
Q. "If important letters or documents" -- I'm reading
from number six
-- "If important letters or documents have to be sent, please
send to
home. I will act on them and destroy;" correct?
A. Yes.
Q. And that is the words of Dr. Osdene; correct?
A. Well we're assuming that, and I think that's
a fair assumption.
Q. That's the person you urged to testify and not
take the Fifth
Amendment.
A. That's absolutely right.
Q. Now you say that you want to look forward; correct?
A. Correct.
Q. It's not what you said in 1994; did you?
A. In 1994? No, I had just gotten my job in June
of 94, I think it was,
sir.
Q. And what you said in 1994 is, "We're not going
to be anybody's
punching bag;" didn't you?
A. Yes, I said that.
*20 Q. And you said, "When you are right and you
fight, you win;"
correct?
A. That's what I said.
Q. And you declared an all-out war on tobacco's
enemies; didn't you?
A. I believe I could have said that.
Q. Yes. And you unleashed a barrage of legal attacks
in newspapers ads;
didn't you, sir?
A. I'm not so sure about that. I certainly was active,
though, yes.
Q. Yes. And it was after all of these documents
came out that you
decided you were going to go to Congress and attempt to get an overall
settlement; isn't it?
A. That's not correct.
Q. When did the documents start coming out in this
case, sir?
A. I don't know.
Q. When did you go to Congress?
A. When did I go to Congress?
Q. When did you first go to Congress and ask for
some relief?
A. Well we agreed with the states attorneys generals
in June of 1997,
and we talked with members of the White House, and we then have been
trying
to have that agreement legislated into law.
Q. So you went to Congress after 19 -- June of 1997;
correct?
A. No, we didn't go to Congress in June of 1997,
but after that, June
of ' 97.
Q. That's what I said, you went to Congress after
June of 1997;
correct?
A. Correct.
Q. And this lawsuit started in August of 1994. Are
you aware of that?
A. No, I'm not.
Q. And are you aware that all the documents were
being produced during
that almost three-year period here in the state of Minnesota?
A. Well I thought they were being produced in 1996
or '7. I've
forgotten.
Q. And you're aware that the Minnesota select documents
were then
provided to all the attorneys general across the country pursuant to
protective orders; weren't you, sir?
A. No, I'm not aware of that.
Q. Nobody ever told you that?
A. Well they may have, but I'm not aware of them
now.
Q. Just forgot; right, sir?
A. Sir, I have a lot to remember.
Q. I'm sure you do.
A. If I was told that, I don't remember today.
MR. CIRESI: Thank you. I have no further questions,
Mr. Bible.
THE COURT: We'll recess at this time.
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. BLEAKLEY: Thank you, Your Honor.
BY MR. BLEAKLEY:
Q. Good morning, Mr. Bible.
A. Good morning, Mr. Bleakley.
MR. BLEAKLEY: Good morning, ladies and gentlemen.
(Collective "Good morning.")
Q. You and I do know each other; don't we, Mr. Bible?
A. Yes, we do, sir.
Q. You are the chairman and chief executive officer
of Philip -- Philip
Morris Companies; is that right?
A. That's correct, sir.
Q. And you've been the chairman and chief executive
officer since when?
A. Well I was appointed chief executive officer
in June 1994, and
chairman at the end of January 1995.
Q. So there was a period there of several months
when there was another
chairman?
*21 A. Yes, for a period of seven months. And he
retired, and I was
appointed chairman upon his retirement.
Q. Tell us a little bit -- tell the ladies and gentlemen
of the jury a
little bit, if you would, about the structure of Philip Morris Companies
and its operating companies or divisions or subsidiaries.
A. Right. Well Philip Morris Companies is the largest
consumer package
products company in the world, and it has -- it is a holding company,
and
underneath it it has five operating companies, each of which manufactures,
markets and sells different types of consumer products. The five companies
are Philip Morris U.S.A., domestic cigarette operation called Philip
Morris
U.S.A., Philip Morris International, which markets, manufactures and
sells
cigarettes around the world outside of the United States, Miller Beer,
which is the second biggest beer company in the United States, Kraft
Foods
North America, which is the largest food company in North America,
and
Kraft Foods International, which is the largest U.S. international
food
company. There is then, besides that, a small capital corporation.
Q. What's the name of that capital corporation?
A. That's called Philip Morris Capital Corporation.
Q. And what does it do?
A. It invests in equipment which it leases back
to proprietors, such as
airlines or governments that might wish to lease power plants or Coast
Guard ships, for example. So it leverages itself, buys equipment, and
then
leases that equipment back to other entities.
Q. Is that a large business or a small --
A. No, it's a small business. It would represent
a very small part of
the income of Philip Morris.
Q. Now Philip Morris U.S.A. is one of the operating
companies under the
Philip Morris Companies holding company; is that correct?
A. Yes, it's one of the five operating companies
we call them, uh-huh.
Q. And Philip Morris U.S.A., is that the defendant
in this case?
A. Philip Morris U.S.A. Inc. is the defendant in
this case, the
domestic tobacco company, yes.
Q. Does Philip Morris U.S.A. have its own chief
executive, CEO?
A. Yes, it has its own chief executive and senior
executives that
report to him, such as the manufacturing plant, sales, marketing, research
and development. And the CEO of that company, just as -- as the CEO
of each
of the other four operating companies, all report in to a chief operating
officer, and he reports to me.
Q. Who is the chief operating officer?
A. Mr. William Webb.
Q. And who currently is the CEO of Philip Morris
U.S.A.?
A. Mr. Michael Szymansyk.
Q. And is that what his title is, CEO, or is he
president and CEO?
A. He's president --
I think he's president and chief executive officer.
Q. And is Mr. Szymansyk responsible for the day-to-day
operations of
Philip Morris?
A. Yes. For Philip Morris U.S.A., he is the officer
responsible for all
of those activities of that company.
Q. And that's basically the domestic tobacco company?
*22 A. The domestic tobacco company, yes.
Q. What about the Philip Morris Research Center
down in Richmond,
Virginia, what -- what -- where does that fall in this organization?
A. That is in Richmond. That's where we have our
largest cigarette
manufacturing plant here in the United States. We have another large
one,
nearly as big, in Cabarrus in North Carolina. And the research and
development center is located in Richmond, Virginia, where the biggest
manufacturing plant is, and that reports in to the head of manufacturing
and R&D operations. He reports to Mr. Szymansyk.
Q. The Philip Morris Research Center in Richmond
reports to Mr.
Szymansyk?
A. That's right, yes.
Q. Now how long has Mr. Szymansyk been the CEO of
Philip Morris U.S.A.?
A. He was appointed the CEO -- I think it was in
November when Mr.
Morgan retired.
Q. So Mr. Szymansyk was preceded as CEO of Philip
Morris U.S.A. by Mr.
James Morgan; is that right?
A. Mr. James Morgan, yes.
Q. Is that the same James Morgan whose deposition
we saw up on the
screen here a few days ago?
A. That's right, sir, it is.
Q. And he retired?
A. He retired in November, yes. I think it was November.
October,
November.
Q. Just a few months ago.
A. Just a few months ago, yes.
Q. Now let's go back in -- in time and review the
-- each of the
positions that you've held with the Philip Morris organization during
your
career. When did you first go to work for Philip Morris?
A. I joined Philip Morris in Europe in October 1968.
Q. And what was the job that you -- you had at that
time?
A. My title was the manager of finance at Philip
Morris Europe.
Q. Of Philip Morris Europe?
A. Yes. It was a very small entity then. We hardly
had any business in
Europe at that time.
Q. And what did you do in that -- in that job?
A. My main function was to assist the senior executives
of the company
there to acquire other companies, to see if we could build our position
in
Europe.
Q. And how long did you hold that job?
A. I held that job for about two and a half years.
I left Philip Morris
in June 1970, so -- well nearly two years.
Q. So you worked at Philip Morris Europe for about
two years and then
you left the entire Philip Morris organization?
A. Yes, I left the entire Philip Morris organization.
I joined an
Australian investment banking company in Switzerland.
Q. Where were you located when you were with Philip
Morris Europe?
A. I was located in Lausanne, Switzerland.
Q. And was that the headquarters of Philip Morris?
A. That was the headquarters of Philip Morris Europe.
Q. And what was the position you had at the time
you left Philip Morris
Europe?
A. I was still manager of finance.
Q. For Philip Morris Europe.
A. For Philip Morris Europe, yes.
Q. Did you have anything to do with the domestic
tobacco operations in
the United States in that position?
A. No. Nothing, no. The companies --
It was a division then. No, quite distinct.
*23 Q. And how long were you gone from Philip Morris?
A. Six years. I returned in June 1976.
Q. And were you in Switzerland during this entire
six-year period?
A. Yes, I was.
Q. And what did you do for that company?
A. I worked with an Australian investment banking
firm, and they were
headquartered in Sydney, in Australia, where I grew up, and I used
-- I was
responsible for their activities across Europe, raising money for their
clients on loans. And also they had stock brokering activities, and
we took
orders from investors in Europe who wished to invest in Australian
equities.
Q. Did you have anything whatsoever to do with Philip
Morris during
that six-year period?
A. Nothing to my knowledge, sir.
Q. Did you have anything to do with the cigarette
or tobacco business
during that six-year period?
A. Not to my knowledge, no, sir. I was working with
the Australian
company.
Q. Okay. And you returned to Philip Morris in 1976?
A. In June 1976, yes.
Q. And where? Where did you come back to Philip
Morris and in what
position?
A. I was appointed the director of planning, Philip
Morris Europe.
Q. You were still with Philip Morris Europe.
A. In 1976 --
Well when I came back in June '76, yes, I was still
with Philip Morris
Europe, is my memory.
Q. And what were your duties and responsibilities
as director of
planning?
A. The company was still fairly small and growing,
and we were trying
to develop a more sophisticated means of planning our activities ahead,
so
my main function was to try to help people develop their plans for
investment across Europe, Middle East and Africa. And so my main role
was
that, helping them put together a future -- a future, forward-looking
plan,
and looking for acquisitions that we might think were suitable to our
business.
Q. What kinds of plans? Well let -- let me -- strike
that question.
Did you make any acquisitions as part of your activities
during that
period of time?
A. No, I don't think we did. I was there from June
'76 until October
'78. We did a lot of work in looking for non-tobacco companies. We
were
seeing if we could find companies we could invest in apart from tobacco,
but nothing ever came of those studies while I was there.
Q. And in 1978 did you move to a different position?
A. Yes. I was appointed vice-president of Philip
Morris International,
and I relocated to New York.
Q. And how long were you in New York?
A. I was sent to Australia in May 1981, so about
two and a half years.
Q. And you were vice-president of what in New York?
A. Well I -- I didn't have a title. My responsibilities,
though, were
coordinating our business in Canada. We had a cigarette business in
Canada.
And I was made responsible in New York for our wine and cigarette
operations in Australia, and I was appointed head of 7-Up International.
We
had acquired 7- Up, which is a soft-drink company, a few years before
that,
and they had a fairly sizable international business, so I was placed
in
charge of that also, running those three businesses out of New York.
*24 Q. Now during the time when you were -- after
you returned to PM
Europe and held the position that you held there in planning and then
in
New York, did you have any responsibilities for the domestic tobacco
business in the United States?
A. No, I had none, sir.
Q. All right. Now in 1981, is it, that you --
A. Yes.
Q. -- went to Australia?
A. I think it was May '81 I returned to Australia.
Q. Okay. And how long were you there and what was
your job in
Australia?
A. I was there for nearly three years, and my job
was managing director
of Philip Morris Australia, which was a publicly listed company in
those
days. There were public investors. We were the majority shareholder,
controlled it. And I was managing director of the holding company,
which
had two operating subsidiaries; one was the cigarette company and one
was a
wine company.
Q. Cigarette company in Australia?
A. In Australia, yes.
Q. Did it sell cigarettes only in Australia?
A. It -- mainly. It exported very small quantities
to some of the
Pacific islands and New Zealand.
Q. But basically in that part of the world.
A. Basically in that part of the world, yes.
Q. Not in the United States?
A. No, absolutely not, no.
Q. And you said there was a wine company?
A. There was a wine company. We had, I think, the
largest wine company
in Australia at the time.
Q. And you had responsibility for that as well?
A. Yes. That reported to me.
Q. What does the term "managing director" mean?
A. "Managing director" means you are the chief executive
officer. That
is a term more used in the English parts of the world, such as England
and
in the commonwealth countries such as Australia, New Zealand, Malaysia,
Singapore.
Q. So it's essentially the equivalent of what we
call a CEO?
A. Yes, that's -- that's -- that's correct.
Q. Okay. And I take it you had no responsibility
for the domestic
tobacco business of the United States during that period; is that right?
A. No, I had none whatsoever, sir.
Q. All right. 1983, where did you go and what did
you do?
A. I returned to United States, I think it was in
February 1984, and I
was appointed executive vice-president of Philip Morris International,
responsible in New York for our European and Canadian operations.
Q. And what were your duties and responsibilities
in that position?
A. Right. Well by then the European business had
grown and we had
fairly extensive businesses in Europe, in the Middle East, in Africa
and in
Scandanavia, and we had a fairly sizable business in Canada, although
we
were the smallest, I think, of the three -- three companies in Canada.
And
I had in Europe two regional heads reporting to me, one ran essentially
the
markets that were in what's today called the European Union, because
they
had a common trade agreement, and another head of operations of what
was
called the Eastern European/Middle East/ Africa region. So these two
people
ran those two regions and reported to me. And then there was a managing
director of a company called Benson & Hedges in Canada, which was
our
cigarette company in Canada, and he reported to me.
*25 Q. And how long did you hold this job?
A. For a little over three years, I think, from
1984 to 1987.
Q. Was Philip Morris International located in New
York?
A. Yes, the headquarters of Philip Morris International
were in New
York and are in New York.
Q. Okay. And what --
During this period 1984 to 1987, did you have any
duties or
responsibilities or involvement in the domestic tobacco business in
the
United States?
A. No, none whatsoever, sir. Entirely international
was all.
Q. All right. 1987, what position did you assume?
A. I was appointed president of Philip Morris International.
Q. And what did you do as president of Philip Morris
International?
A. Well in those days, to the best of my memory,
we had five regions
around the world, the two that I just mentioned, the European Union
and the
Eastern Europe/Middle East/Africa region, we had a Latin American region,
a
Canadian region, and then Asian Australia region, Asia Pacific region,
so
there were five regions, and each of those regions had a chief executive
that ran those operations in each of those regions and they reported
to me.
I also had a staff in New York that reported to me on matters such
as human
resources, planning, finance.
Q. Did --
During this period was Philip Morris International
in businesses other
than tobacco?
A. We still had the wine company in Australia, I
think, but I think
7-Up had been sold before I became the CEO and president of Philip
Morris
International. We may have had something in Latin America. Nothing
comes to
mind. I think it was pretty much entirely tobacco.
Q. When --
What position did you assume next; that is, after
being president of
Philip Morris International?
A. I was appointed president and chief administrative
officer of Kraft
Foods in Chicago.
Q. When was that?
A. That was February 1990.
Q. So you moved from New York to Chicago?
A. Yes, I went to Chicago.
Q. And how long did you hold that position?
A. I held that position for about 16 months. That
was February 1990
till about, I think, May 1991.
Q. Now during the time that you were president and
CEO of Philip Morris
International, did you have any involvement in the domestic tobacco
business in the United States?
A. No, none whatsoever, sir.
Q. And during the time when you were with Kraft
in Chicago, did you
have any involvement in the domestic tobacco business?
A. No, none whatsoever.
Q. And Kraft is not a tobacco company.
A. Kraft is a food company, and the international
part of the Kraft
operations was reporting in to the Kraft North American business, so
it was
one unit at that time. It subsequently split into two, domestic and
international.
Q. And what happened after your 16 months as CEO
with Kraft?
A. I returned to New York and I was appointed executive
vice-president
of Philip Morris Companies International, and my responsibilities then
became the chief executive for all of our international tobacco business
on
all of our international food business.
*26 Q. But not the tobacco business in the United
States?
A. No, not --
I had no connection with that at all, sir.
Q. And how long did you have that job?
A. That would have been from around May -- April
or May 1991 through, I
guess, June 1994.
Q. And in June 1994 --
A. I was appointed chief executive officer of Philip
Morris.
Q. Is it fair to say that until June 1994 you had
never had any
involvement or duties or responsibilities having to do with the domestic
cigarette or tobacco business in the United States?
A. Let me back up. My memory slipped. In --
Q. Forgot one?
A. Yeah.
Q. Okay.
A. In -- I think it was April 1993, a little over
a year before I was
made chief executive officer, my job changed and I was appointed executive
vice- president of Philip Morris Companies, the holding company,
responsible for worldwide tobacco.
Q. Okay. And what --
A. And at that point in time, may I say, both the
international
cigarette business and the domestic cigarette business reported to
me.
Q. And to whom did you report during that time?
A. I reported to the president and chief operating
officer of Philip
Morris Companies.
Q. And that was?
A. Mr. Bill Murray.
Q. Okay. The same Mr. Murray to whom you reported
after you became CEO
of Philip Morris Companies.
A. That's right.
Q. Okay. So is it fair to say that prior to 1993,
rather than 1994, you
had no duties or responsibilities or involvement in the domestic tobacco
or
cigarette business in the United States?
A. That's accurate, sir, yes.
Q. And during the period prior to 1993, did you
ever have occasion to
review marketing plans and domestic advertising in the United States
for
cigarettes?
A. No. I -- I would have seen some advertising from
time to time
because we had common advertising for some brands, but I was never
part of
any of the activities.
Q. Now let's go back to the period before you joined
Philip Morris in
Australia.
I take it you grew up -- you were born and raised
in Australia; right?
A. Yes, I was born in the country, in Canberra,
in Australia, and
during the war we moved up to Sydney and I was raised essentially in
Sydney.
Q. Canberra is the capital?
A. Canberra is the capital of the country, yes.
Q. And how old were you when you moved to Sydney?
A. I guess I was about five or six years of age.
Q. And did you go to school in Sydney then?
A. Yes, I went to school in Sydney.
Q. And I know you don't call it high school in Australia,
but did you
go to the equivalent of high school in Australia?
A. I did. I went to a Christian Brothers School
in Sydney and I was
raised there, but I didn't complete my high school education. I had
to
leave school.
Q. How old were you when you left school?
A. I was 14.
Q. And why did you have to leave school?
A. Well my father passed away, and he owned a retail
store at that
time, and my mother had to enter hospital that week, and I was the
only one
available to run the store. I'd been working in my father's store since
I
was a youngster. So I had to run the store. And I ran the store probably
for about eight months, and I tried by night school to continue my
high
school studies unsuccessfully, and then when my mother recovered her
health
and then she could run the store, I got a job in an accounting office.
And
that was in January 1953.
*27 Q. In an accounting office?
A. An accounting office, yes.
Q. What kind of a store was it that you -- that
your father had?
A. A retail store. The one that my father owned
when he passed away was
what we call in my country a milk bar, and prior to that he had owned
a
series of like mixed businesses, general grocery type stores.
Q. But the one that you worked in when you were
14 years old --
A. Was a milk bar.
Q. -- was a milk bar. And you actually ran that
store at the age of 14?
A. Yes, I ran that store at 14.
Q. Now did you --
Have you ever or did you ever or have you ever received
the high school
diploma?
A. No, I haven't.
Q. Now you said you went to work when you -- when
your mother recovered
and went back to running the store again?
A. Yes.
Q. You took another job then. You didn't go back
to school; is that
right?
A. No, I didn't go back to school.
Q. You took a job in an accounting firm?
A. In an accounting firm, yes.
Q. And how old were you then?
A. Well I was only 15.
Q. And what kind of job did you have in the accounting
firm?
A. I joined as office boy. That was the term used
for the youngest
entrant into the office. It was a very small office of about 20 people
in
total. And your job, then, is in fact a very interesting job, it was
delivering the mail, emptying the wastepaper basket, making the tea,
doing
the banking, generally learning how life functions in businesses, because
most of the clients were small companies or individuals in different
types
of businesses, and you'd be doing the small functions such as banking
for
them, or in those days you had to get an overseas tax clearance from
Australia if you wanted to travel abroad to demonstrate that you'd
paid
your taxes before you could buy a plane ticket to leave the country,
so I
would have to go to the tax office and file those forms. I used to
file
forms for stamp duties and companies' statutory documents that had
to be
filed. So the purpose of the year of that training is to give you some
exposure to how the commercial life works.
After that year -- and you go to night school to
study accounting,
which I did. And then after that first year, they then began to expose
you
to bookkeeping and would teach you how to write up books, and then
you
would move into auditing, so you'd visit other firms and conduct with
a
senior audits of companies that were clients. And throughout the course
of
those years my responsibilities grew and I finally got my degree as
what's
called in my country a chartered accountant, it's like a CPA in this
country.
Q. So despite the fact that you don't -- you never
received the
equivalent of a high school diploma, you did eventually get this degree
or
diploma in chartered accounting?
A. Yes, that's right, sir.
Q. Is that like the CPA or certified public accountant
here?
A. Yes, that -- that is the highest degree in accounting
you can get in
my country.
Q. And when was that? When did you get that diploma?
*28 A. That was 1958.
Q. Okay. So you worked in the accounting firm from
when until 1958?
A. 1953, January '53 until October '59 actually.
I left that firm a
year later.
Q. Was that in Sydney?
A. That was in Sydney, yes.
Q. Okay. What did you do in 1959?
A. I went overseas and joined a refugee organization
in the Middle
East.
Q. All right.
A. And I was there for about five years.
Q. Where was that?
A. That was headquartered in Lebanon, Beirut. I
spent probably a year
there, and about six months in Syria, about six months in the Gaza
Strip,
about two and a half years in Amman in Jordan, which was the last job
I had
with that organization.
Q. What was the name of the organization?
A. It was called UNRWA, the United Nations Relief
and Works Agency for
Palestinian refugees.
Q. And what did you do?
A. I was -- I started out there as an internal auditor,
and I used to
travel around, and thus I was in Lebanon for some time, then I moved
to
Syria and then to the Gaza Strip. And then for the last two and a half
years I was the chief financial officer of the organization in Amman,
Jordan, where the largest number of refugees were.
Q. What did you do as chief financial officer?
A. We had a large budget which the United Nations
gave for the refugee
organization, and they had a wide number of schools, a couple of vocational
training centers, one in Jerusalem, one in Ramallah, and a teacher
training
college in -- I've just forgotten the name now, I think Kalandia, and
they
had an extremely large range of elementary and secondary schooling
facilities which was entirely financed by this organization to educate
the
refugee children. They had hospitals and clinics.
The basic function of the organization was to provide
food, shelter,
education and health services to the refugees, and my job was to control
the financial aspects of this organization in Jordan.
Q. And when did you leave that position?
A. I left that position in August 1964.
Q. And what did you do next?
A. I then joined the International Labor Office
in Geneva.
Q. And how long were you there?
A. I was there a year.
Q. What did you do for the International Labor Office
in Geneva?
A. I was a chief budget officer at the ILO for a
year.
Q. And what was that organization?
A. The International Labor Office is an organ of
the United Nations,
and they had various programs where they worked with government agencies,
representatives of employers and representatives of employees such
as
unions, to try to find common ground on many different areas that affect
the work place. And they had seminars and meetings, and they developed
the
position and then they attempt to codify what they would believe to
be an
appropriate code of practice into different countries' laws.
Q. And how --
A. Like, for example, I remember one -- one seminar
I worked on was the
maximum number of bricks a bricklayer can carry in a day. Now that
was a
safety standard. That was a very significant activity. But there were
conclusions drawn, and then they would try to encourage countries to
codify
that, those findings and standards into their law.
*29 Q. And you held this position for 16 months;
is it?
A. Well no, a little over a year.
Q. I'm sorry, for a little over a year.
A. Uh-huh.
Q. Okay. What was the next position, the next job
you had after that?
A. I was then offered a job by ESSO Mediterranean
Africa in Geneva, and
I was there for two years as a financial analyst, and I was then promoted
to manager of finance.
Q. And where were you then?
A. In Geneva in Switzerland.
Q. Still in Geneva?
A. Yes.
Q. So you lived in Geneva for several years.
A. Yes, I did.
Q. ESSO is what we Americans think of as Exxon?
A. That's right. They changed the name around when
I was there, yes.
Q. All right. And how long did you have that job?
A. I had that job for two years, when I was offered
a job by Philip
Morris, and that's when I joined Philip Morris in 1968.
Q. Did you get married during this period of time?
A. I did, yes. I met my wife on my way back to Australia
actually. I
decided to return to Australia from the Middle East, met my wife, fell
in
love, married her, and we settled in Geneva.
Q. And is your wife here in the courtroom?
A. My wife is here in the courtroom.
Q. Okay. You went to work for Philip Morris then
in nineteen sixty --
sorry, but I'm not remembering these dates.
A. October '68.
Q. October '68. And except for the six-year hitch
--
A. Uh-huh.
Q. -- or six-year departure in the meantime, you
worked for one or
another of Philip Morris organizations ever since.
A. That's right, sir, yes.
Q. Okay. Let me go back for a moment to the five
operating companies.
You said that Philip Morris was the largest -- make sure I use the
right
term -- the largest package consumer goods company. Is that -- was
that
right?
A. In the world, yes.
Q. In the world.
What do you mean by that?
A. By the largest package consumer goods company?
Well, consumer goods
are things that people consume. By "package," that differentiates it
between, say, refrigerators, lawnmowers, things of that nature. So
generally packaged goods would be things like food stuffs, cigarettes,
beverages.
Q. It does include the food business, doesn't it,
--
A. It does include the food business.
Q. -- of Philip Morris?
What are some of the products that Kraft makes?
Are there any that are
familiar with -- would be familiar to the jury?
A. That Kraft makes?
Yes. Kraft is the biggest food company in Australia
-- in -- in the
United States, by a long shot. It's the manufacturer and marketer of
brands
such as Jell-O, Maxwell House, Philadelphia Cheese, Oscar Mayer bacon,
frankfurters, Altoids I see here, Toblerone chocolates, Digiorno Pizzas,
Kraft Salad Dressing, Miracle Whip Mayonnaise. There's a huge -- Post
Cereal is another one of the trademarks and brands.
Q. And you said, of course, that Miller Brewing
Company is - -
Where does Miller rank among the beer companies?
A. Miller is number two in the U.S.A. and number
three in the world.
*30 Q. Number three in the world?
A. Number three in the world, yes.
Q. And is Philip Morris a large taxpayer?
A. Philip Morris is the largest taxpayer in the
United States.
MR. CIRESI: Excuse me. Your Honor, I'm going to
object to this as
totally irrelevant.
THE COURT: Sustained.
Q. Now tell us, what are your duties and responsibilities
as the
chairman and CEO of Philip Morris Companies?
A. Well in the organization structure we have, I
have a chief operating
officer who reports to me who runs the five operating companies I mentioned
earlier, the two food companies, the two tobacco companies, and the
beer
company. I have a chief financial officer to whom the Philip Morris
Capital
Corporation reports, that's the company that does the purchasing and
leaseback of equipment; I have an executive vice-president -- a senior
vice- president of human resources reporting to me; a senior vice-
president of manufacturing reports to me; senior vice-president of
strategy
and planning who reports in to me; the general counsel and corporate
affairs report in to me. That's at the corporate level.
My day-to-day duties require me to, A, make sure
that I'm reporting to
the board of directors, with whom we meet generally monthly. We have
a
number of committees, probably half a dozen committees that are part
of the
board. I'm chairman of the finance committee, I'm also chairman of
the
contributions policy committee, I'm chairman of the diversity committee,
which is a big function at Philip Morris. The chief operating officer,
who
runs the five operating companies, reports to me, and he comes to me
with
issues of significance from time to time. And each month I have a meeting
with all of the operating officers and what I call my senior management
team, which is held monthly, and that includes all of my staff plus
the
five operating heads of the operating companies.
It is my job to establish policy on most major corporate
issues, and so
the staff people who report to me and have functions such as, say,
human
resources, the senior vice-president for human resources has a task
of
establishing salary policy with each of the human resources heads of
the
operating companies, salary conditions, conditions of employment, diversity
policy and practices.
I review each quarter the budgets for each of the
operating companies
with the chief operating officer. We have an original budget which
is
planned for the forthcoming year. That is updated three times during
the
course of the year, so on four occasions of the year I go through all
of
those budgets for each of the companies.
I review with the board every month the activities
of the company and
generally bring them up to date on the business of the company and
matters
pertaining to the company. I sit on each of the committees I mentioned
to
you.
I travel abroad quite a bit because we have about
100,000 employees
around the world. We manufacture and market and sell our products in
nearly
200 countries around the world. It's very important for me to see these
people from time to time for me to understand exactly what is going
on, if
I can, in each of our businesses, and for the staff to see me is --
is very
important. So I spend a good part of my time traveling to keep abreast
of
the business.
*31 Oh, I could probably go on.
Q. Well let me ask you a couple of questions then.
A. Certainly.
Q. You said you had a hundred -- hundred thousand
employees abroad; is
that right?
A. We have 155,000 employees, I think, nearly a
hundred thousand of
whom would be overseas, outside the United States.
Q. So that's 50 some thousand employees in the United
States?
A. It's 50 or 60 thousand, I think, here in the
United States.
Q. How many shareholders does Philip Morris have?
A. Well I don't know, because the -- the information
is a little bit
difficult to gather because many shareholders or investors invest in
Philip
Morris through mutual funds or pension funds, but I would say there
could
be some 50 million shareholders of Philip Morris. I just don't know.
Q. Fifty or 15?
A. Fifty million, because of the investments held
through mutual funds
and pension funds.
Q. What do you mean when you say you review the
budgets of your various
operating companies? What does that involve?
A. Oh, well, when an operating company is developing
its plans for the
forthcoming year, it will estimate what its sales are going to be,
it will
do forecasts of the consumption of its products, it will establish
targets
or goals that they feel they can meet and ought meet to grow the company,
they'll associate with that the manufacturing requirements, the staffing
requirements to be able to achieve those goals, they will advise us
of the
capital expenditures needed to build plants and equip plants to meet
the
goals of the sales, and they will show the targeted profitability for
the
company for the coming year and the returns and cash flow, and so I
generally go through their presentation and comment if I feel appropriate.
Q. What involvement, if any, do you have in human
resources?
A. Quite significant. We -- we have a compensation
committee of the
board which is composed of entirely independent directors of the board,
that's non- -- non-executives of Philip Morris, and I attend that each
month. I'm invited to attend it for part of the meeting.
The senior vice-president of human resources at
Philip Morris helps to
develop our salary plans, our bonus plans, our grading plans for grading
employees, our appraisal and performance forms and methods of doing
that,
he's very important to the diversity policies that we develop in the
company and establish in the company, so I work quite closely with
him on
each of those matters.
Q. Well let me ask you a question or two about the
board of directors.
How many directors are there on Philip Morris's
board?
A. I think we have 15 now.
Q. And how many of those are Philip Morris employees
and how many are
not Philip Morris employees?
A. Two are employees, including me, and 13 are independent
non-employees.
Q. And what kinds of people are these that are on
the board of
directors?
A. Generally I'd say there are seven or eight chief
executive officers
of leading public companies in the United States. We have one academic
--
two academics, a retired Secretary of Defense. Essentially they're
businessmen, with a couple of people from the corporate governance
area,
too.
*32 Q. What do you mean by "corporate governance?"
A. Corporate governance, it's a field that's becoming
more and more
aware. It requires companies to conduct themselves ethically, to ensure,
also, independence of the company's board of directors as much as possible
from the executives of the company so the stockholders do have independent
people representing the stockholders on the board of directors, and
that
the board of directors is not unduly influenced from inside the company.
Q. Do you report to the board of directors?
A. Yes, I report to the board of directors.
Q. And how often does the board of directors meet?
A. We now meet nine times a year for monthly meetings,
we have an
annual general meeting, and we have an off-site two- or three-day annual
strategy meeting. Eleven meetings of the board. But there are many
committee meetings around those.
Q. Do you attend all of the meetings of the board
of directors?
A. Yes. I'm the chairman and I chair the meetings.
Q. We've heard references during this trial to annual
meetings. Can you
explain to the ladies and gentlemen of the jury what an annual meeting
is.
A. Yes. The company is owned by stockholders who
all have investments
in the company, and they have a right to vote on matters that come
before
the annual general meeting, and that is, each year each company has
to call
its stockholders together, invite their stockholders to come and meet
with
the company where we take them through our results for the year, our
operating results for the year. Generally -- certainly at our general
meeting and most general meetings -- you have resolutions submitted
by
stockholders on different issues. The board of directors is appointed
by
the stockholders at the annual general meeting. The resolutions which
are
put before the general meeting are voted upon. That would include,
for
example, the appointment of the external auditors that audit the company's
books of account and report upon their financial performance for the
year.
We get a fairly good attendance to our -- to our
annual general
meetings. It's conducted in Richmond. We have probably over a thousand
people attend that meeting each year.
Q. We've also heard references to something called
an annual report.
What is that?
A. The annual report is -- again, it's another document
required to be
produced and issued to stockholders. It shows the financial results
for the
year, the financial condition of the company for the year. I write
a letter
to shareholders which I include in that. It has the auditor's report
confirming the accuracy or otherwise of the balance sheet and income
statement which is included in the annual report.
Q. Is that done in connection with the annual meeting,
the annual
report?
A. It's issued some six weeks or so ahead of the
annual general
meeting, along with a proxy statement which accompanies invitation
for
stockholders to attend the meeting or to vote at the meeting by proxy.
So
the --
*33 Q. Sorry, I interrupted you.
A. The annual report would come out -- well I expect,
for example, the
1997 annual report should be published and released sometime in the
next
two weeks, I would have thought.
Q. And then you'll have an annual meeting of shareholders
after that?
A. Yes. That will be towards the end of April.
Q. And what is a proxy statement?
A. A proxy statement is where a stockholder, who
may not be able to
come to -- physically to the annual general meeting, can write in and
vote
upon each of the resolutions that are being placed before the meeting.
For
example, this year we'll be having our board of directors nominated
for
reappointment, and each shareholder is given the opportunity to vote
upon
each of those, for example, by mail, and mail that in.
Q. And are you personally involved in the preparation
of the annual
statement -- I mean the annual report?
A. Yes, I am, inasmuch as the letter to shareholders
and the layout and
content of the report I'm interested in. I like to see it's a good
production and that my letter is -- is one of confidence and optimism,
and
to reflect accurately the condition of the -- the financial condition
of
the company.
Q. And you participate, I take it, in the annual
meeting then.
A. Yes, I chair the annual meeting.
Q. And that's in addition to the approximately eleven
meetings a year
that you have with your board of directors; is that right?
A. Well we have nine board meetings --
Q. Sorry.
A. -- plus the annual general meeting and an off-site
planning meeting.
Q. Okay.
A. Strategy meeting.
Q. Eleven total.
A. Eleven altogether, plus a lot of committee meetings.
Q. Okay. Now you said that -- I think you said,
correct me if I'm
wrong, that there were three --
Well let me strike that. Start over again.
How many committees are there on the board of directors?
A. I think there are six formal committees for the
board of directors,
and three or four informal committees that the board approves. But
they are
made up of employees, such as the diversity policy committee, diversity
and
affirmative action, where one outside director actually sits on the
-- the
committee, but the main committee is made up of about 20 senior executives
from each of our operating companies and staff functions, and I chair
that
meeting.
Q. I think you said there were three committees
that you chair; is that
right?
A. Yes. There's the finance committee, the diversity
committee, and the
executive committee.
Q. Say that again. Finance committee, the diversity
committee --
A. And the executive committee of the board.
Q. You mentioned a contributions committee.
A. Oh, yes. I also chair that, so there's four.
The contributions
policy committee.
Q. Okay. What is the --
What do you mean by "diversity?" What does "diversity"
committee?
A. The diversity committee --
MR. CIRESI: Excuse me, Your Honor. I'm going to
object. This is really
irrelevant to this lawsuit.
*34 MR. BLEAKLEY: Your Honor, Mr. Ciresi has made
a great point during
this testimony for the last three days about punitive damages and the
character of the company and the character of Mr. Bible, and I think
we're
entitled to explore that on direct examination.
MR. CIRESI: Your Honor, that's not a factor under
the Minnesota
statute, whether they have a diversity committee or not.
THE COURT: Seems to me a little -- little remote.
I hope you're not
going to spend too much time on it, counsel.
MR. BLEAKLEY: I'm sorry, I didn't hear you, Your
Honor.
THE COURT: It seems a little remote. I don't think
you should spend too
much time on it.
MR. BLEAKLEY: I won't. I promise I won't spend much
time on it,
especially as we approach lunch break.
THE COURT: Especially, yes.
(Laughter.)
BY MR. BLEAKLEY:
Q. I think -- I think we have all received our admonition,
so be very
brief in describing the diversity committee.
A. I shall, sir, yes. It is a committee where we
try to establish
standards to ensure that we can meet our goals for proper employment
and
promotion and advancement of all ethnic groups in the company, and
females
and males, and also for the conduct, a code of conduct as to how all
employees should behave in the conduct of their jobs.
Q. Okay. And the finance committee, you're the chairman
of the finance
committee?
A. Yes, I am, I'm the chairman of the finance committee.
That meets
four times a year. And that committee essentially reviews the finances
of
the company, its cash flow, its capability of paying dividends, its
capability of paying for capital expenditures necessary to keep the
business running, for example.
Q. Does that committee take up a lot of your time?
A. Yes, it would take up a day a month.
Q. And the other one, I think, was the -- was it
called the
contributions committee?
A. The corporate contributions policy committee,
yes.
Q. What's that?
A. Philip Morris is perhaps the biggest contributor
to charitable
causes in the United States, and we meet, I think, four times a year
to
consider applications that are made to us or to consider decisions
we make
to make contributions to various charities. It's a very significant
body; I
take it very seriously. It takes a lot of my time. And we have changed
the
policy under my direction to focus more money in the area of hunger.
Because we are the biggest food company in the United States, we think
we
can help enormously there. And particularly in the area of battered
wives
and children.
Q. Now have we left anything out? Are there any
other duties and
responsibilities or any other significant demands on your time as CEO
of
the company?
THE COURT: Excuse me, counsel, before you go ahead.
I would just remind
everybody that we want to keep the volume of our voices up so that
the jury
is able to hear what is being testified to, so I just mention that
to
emphasize that.
MR. BLEAKLEY: Sorry. Am I letting mine drop?
*35 THE COURT: Well sometimes voices drop and the
jury doesn't quite
hear the question, or sometimes the answer, or sometimes the judge.
So I'm
just reminding all of us that we want to make sure the jury hears what
we
have to say. Okay?
MR. BLEAKLEY: Yes, sir. I apologize if I let mine
drop. I know I do
sometimes.
BY MR. BLEAKLEY:
Q. Let's see, where were we? What was the last question?
Oh, I know
what it was. It was whether or not there are any other important,
significant duties and responsibilities that you have as CEO that you
haven't described here for us.
A. No. It's very hard to describe in a general sense
what goes on all
day. There are always issues arising almost every moment of the day
that
take up quite a lot of your time. But by and large I think I've --
I've
described the essential parts of my daily activities.
Q. Is the --
The board of directors appoints the chairman; is
that correct?
A. Yes, and the board of directors is appointed
by the stockholders.
Q. And are you appointed or reappointed on a kind
of periodic basis?
A. Yes, I'm reappointed at the annual general meeting.
Q. So you have a -- in fact a one-year term?
A. Actually I should back up on that. I think I'm
chairman until such
time as I'm removed, and I could be removed either by the board or
by the
stockholders not voting to reappoint me as a director at the annual
general
meeting.
Q. And may we assume that you're going to stand
for reappointment or
re- election this year?
A. Yes, I am standing for re-election.
Q. As chairman and CEO?
A. Well as a director.
Q. Director.
A. And then the board will need to determine whether
they want to
remove me as chairman and CEO, or let me continue my role.
Q. Okay. Now let me ask you this: When you became
the CEO of Philip
Morris Companies in 1994, what did you see as the biggest major challenges
before you?
A. In June 1994. Well we'd just come off the back
of what was called
Marlboro Friday, that was April 1993, when I'd been made head of worldwide
tobacco, so our domestic tobacco business was in a state of recovery,
and
that had been a very important event to the company, so I was keeping
my
eye on that.
Q. Let me -- let me stop you right there --
A. Hmm.
Q. -- because there have been some questions about
Marlboro Friday
during this trial. What exactly was Marlboro Friday?
A. Marlboro Friday was a Friday in 1993, in fact
I think it was April 1
-- I could be wrong, but I think it was April 1, 1993 - - and it was
a day
on which Philip Morris U.S.A., the cigarette company, announced the
reduction in the price, the retail selling price of Marlboro by
approximately 40 cents a pack. The reason for that was that there had
been
a very intense price war going on between the tobacco companies here
in the
United States, and Marlboro had been losing market share, and we saw
that
cigarette companies were being -- were placing lower and lower price
cigarettes on the market and our cigarettes were being out-priced.
So we
felt the only corrective action we could take to prevent the erosion
of our
market share was to reduce prices. So that happened in April 1993.
It was a
monumentous event, it hit the stock price of the company very hard,
and
there was a lot of controversy over whether that was the right thing
to do
or not to do by many people in the investment world and public analysts
generally. So that was April '93. I was appointed in June 1994 as CEO.
So
as I said, I was keeping my eye on that matter.
*36 In February, I think it was, in 1994, some four
months before my
appointment, there had been, I think, a testimony by Dr. Kessler of
the FDA
essentially asserting jurisdiction over the tobacco industry by the
FDA.
There had been some fairly negative, in fact libelous coverage by
television on Philip Morris and tobacco companies. There was a very
significant congressional hearing in April, just before I was appointed
CEO. There had been a number of lawsuits being filed.
We -- we traditionally have a number of individual
lawsuits against the
company, the cigarette company that is, and what we found -- or what
I
found when I was appointed CEO was that we'd been getting more lawsuits
of
a different nature. State attorneys general had started filing lawsuits
against the company to recover Medicaid costs they felt had been spent
on
sicknesses or alleged to have been caused by smoking. Then there were
class
actions that were being filed against the company. So I sensed a growing
number of lawsuits that were being filed.
There was much more media cover -- coverage around
the tobacco
companies than there had been in the few years I'd been back in the
United
States, and a lot of that was concern about youth smoking, which had
become
a sort of touchstone or a lightning rod, and my general sense was that
there was growing public concern about the tobacco companies.
Q. What -- what do you mean, "growing public concern
about the tobacco
companies?"
A. Well I think a lot of allegations had been made
about the tobacco
companies. In fact, I would have thought that people were considering
us to
be a rogue industry, that we were not regulated, that we were marketing
cigarettes to youth, that we were not acting responsibly, and I was
concerned by that. And so when I got my job, I found myself surrounded
by a
variety of issues.
Q. Now why were you concerned about these things?
A. Why was I concerned? Well I felt that many of
these things could
harm our company and our investors significantly, not to mention our
employees and our suppliers. I think there are maybe two million jobs
in
the United States dependent upon the tobacco industry, and I think
that has
a very important economic impact.
Q. Now you mentioned youth smoking. What did you
understand the issue
surrounding youth smoking to be when you assumed your duties?
A. Well I was able to observe a growing sense that
cigarette companies
were marketing cigarettes to youth and to young people, and that society
was very concerned about this. The media was writing a lot about it.
And
that really troubled me very much indeed.
Q. Why did that trouble you?
A. Well, I was very much of the view that we should
not be marketing
cigarettes to children, I was of the view we did not market cigarettes
to
children, yet here we were accused of marketing cigarettes to children.
I
think the general belief was that we did market cigarettes to children.
I
felt that was unfair.
Q. Was --
*37 Now was this litigation that you described,
these attorneys general
suits and class actions, of a different character than the kind of
litigation that the company had faced in the past?
A. Well yes. I'm not a lawyer, but my understanding
is that in the past
we had generally had individual lawsuits filed against the companies.
That
is where an individual would bring a lawsuit for alleged harm. Then
we
found that law firms got together and filed what's called a class action,
which covers a great number of people's claims, and they'd filed those.
And
then state attorneys general -- and I've forgotten when the first case
came
up, but it was around the time, I think, that I was appointed CEO --
had
begun to file lawsuits under what was seen to be a novel method at
that
time.
Q. And why were you concerned about these?
A. Well they were pretty significant and they were
claiming large sums
of money, and it occurred to me that the sums of monies involved were
going
to be beyond the capacity of the company to pay if we had a judgment
against us.
Q. And you mentioned Dr. Kessler of the FDA -- I
don't want to
characterize your testimony, but I think you said asserting jurisdiction;
is that right?
A. I think that's what he was attempting to do,
yes.
Q. And why was Philip Morris concerned about the
possibility of the FDA
asserting jurisdiction?
A. Well my understanding of the FDA rules at the
time were that they
would be forced to ban the product under what is called the safe and
efficacy rule that they have, that they cannot allow a product, as
I
understand it, to be marketed if it cannot be shown to be safe and
efficacious.
Q. So you were concerned that the FDA might ban
cigarettes?
A. Yes, that's what I was concerned about.
Q. Now you were shown an annual report, a 1994 annual
report, I believe
it is, by Mr. Ciresi, in which you talked about fighting the lawsuits
that
were before you.
A. Yes.
Q. And did that have to do -- anything to do with
your concerns about
-- about the future and what the major challenges were to you?
A. When I wrote the shareholders letter, that report?
Q. Yes.
A. Yes, I was concerned at the time about that,
yes.
Q. And as Mr. Ciresi pointed out in his questioning,
you said you were
going to fight those suits.
A. Yes, I did.
Q. Now as you --
And did you consult with your executives and your
colleagues at Philip
Morris about these challenges, what you saw to be challenges of the
company?
A. Yes. Yes, I did, certainly.
Q. And what if anything did you decide as CEO of
Philip Morris
corporations to try to do?
A. Well that was very complicated and I found it
a very intense and
difficult period. I had a new job, it was a large job and with a lot
of
responsibility and a lot of people's livelihood involved, and I thought
to
myself and I talked to executives and I wondered what I could do to
try to
improve the situation that I met when I got my job, which I've just
described to you. I think as I defined the situation, we had a lot
of
growing litigation, we had a large business to keep running because
we have
a lot of stockholders and investors, employees and other people dependent
upon the company. And I was trying to figure out, well, I've been with
this
company something like 20 odd years, the last 10 years or so I've been
living in the United States, and although I was not part of the United
States tobacco company, I saw on occasions the growing concern about
cigarette smoking and youth smoking, I was aware that there was litigation;
pretty well every year there would be a case or two, and I concluded
--
with my executives, but I concluded that there has to be a better way
than
what the past was and what the current future held given the explosion,
I
would describe, of things that were happening around the industry and
our
company. So I wondered whether there was a better route and was there
some
way that we could try to satisfy all of the constituencies that were
concerned about the company; i.e., those who were suing us, the states
attorneys generals, the people who were behind the class actions,
individual litigants, the public's societal concern about tobacco,
the FDA
who wanted to regulate tobacco. There was concern in Congress about
the
issue. The tobacco growers are very concerned about the future for
tobacco
growing; there are over 100,000 families, I think, dependent upon that.
So
all of those concerns formed me -- formed my conclusion that there
has to
be a better way of trying to resolve these issues. But at the same
time I
had to fight these lawsuits that were still coming at us.
*38 So I felt that what I should do is try and run
a parallel track;
firstly, defend ourselves as robustly as we can in the lawsuits, and
secondly, find a better way to resolve the issues that were growing.
Q. And what if anything did you decide to try to
do to resolve this
situation?
A. Well what I did, I consulted with my general
counsel and in-house
counsel and outside counsel to get a better understanding of the issues.
(Coughing) Excuse me. I'm not a lawyer and I'm not that well versed
in the
law. And I then met with my board of directors to seek their guidance
and
counsel on the -- on the matter, and I decided that it would make a
lot of
sense if we could make touch, first of all, with the people who were
suing
us, and in parallel I worked with Philip Morris U.S.A. to see what
they
could do to address the concern of youth marketing and youth smoking.
So what we did there in that respect was to come
out with what we
called a triple A program that was Action Against Access, where Philip
Morris of its own accord took initiatives to attempt to prevent young
people having access to cigarettes. Our view was if kids couldn't get
cigarettes, kids couldn't smoke cigarettes, so we introduced a program
called Access -- Action Against Access. And we undertook a number of
other
steps voluntarily, such as we ceased sampling, we ceased distributing
cigarettes through the mail, and other actions that we took. So we
undertook that program the following year. That was '95.
In '96 we undertook another program, together with
U.S. Tobacco
Company, which makes smokeless tobacco, and that was a program which
went
even further than the Access program I just described to you, and was
promoting legislation to cover a great number of other things that
could be
done to attempt to contain the youth smoking issue. So we were doing
those,
and in parallel I was meeting with my counsel to see if we --
Q. Let me stop you there if I can --
A. Thank you.
Q. -- because I want to ask you a question or two
about these programs.
The first of these -- well I can't remember which came first. You said
--
A. Action Against Access. That was May '95 I think.
Q. Now is that a program that Philip Morris adopted
on its own without
-- I mean this wasn't part of any kind of a settlement or anything?
A. No. It was a totally voluntary program which
we felt was
appropriate. As I said, we -- we thought that if kids could not buy
cigarettes, then they couldn't smoke cigarettes. That was the thrust
behind
the program.
Q. And what are the essential elements of the Action
Against Access
program?
A. Well the most important element is that we went
through an education
program with retailers encouraging them not to sell cigarettes to young
people, and we advised them that if they were convicted of such, that
we
would withdraw our merchandising allowances to them after giving them
a
first warning. That was the most important.
The second one was we ceased sampling cigarettes,
which had been a
practice.
*39 Q. What is sampling cigarettes?
A. It's where you would offer smokers one of your
brands if they were
smoking another brand, for example, to get them to try your brand and
see
if you could switch them from the brand that they're smoking to your
--
your competitors' brand to your brand. Or sampling perhaps a new product
to
a smoker that they've not tried before and you were trying to launch
into
the marketplace. So we ceased that activity.
Q. Why did you cease that activity?
A. Because there was -- there was concern that it
was difficult to
distinguish between young people and young adults, teen-agers and young
adults, and there was concern that that may be a means by which teen-agers
could get cigarettes, and we wanted to eliminate that concern as much
as we
could.
Q. And --
A. So we just abolished it.
Q. You did that voluntarily?
A. Voluntarily.
Q. No conditions?
A. No, no conditions.
Q. And then you said something about mail, about
--
A. Yes.
Q. -- sending cigarettes through the mail.
A. We ceased sending cigarettes through the mail.
Often we send
products to consumers on our mailing lists through the mail in certain
promotional programs, and we ceased doing that.
Q. And why did you stop doing that?
A. Well, it was a little unclear that you could
get absolute certainty
about the age claims being made by the individuals to whom the cigarettes
were being sent. We'd always asked for verification that recipients
were 21
years and older, and we wanted to eliminate concern that they just
could go
to under- age people.
Q. This decision to stop sending cigarettes through
the mail was a
voluntary decision by Philip Morris?
A. Yes. Totally voluntary decision.
Q. And you mentioned some legislation that you sponsored
jointly with
-- was it U.S. Tobacco?
A. U.S. Tobacco.
Q. Who is U.S. Tobacco?
A. U.S. Tobacco Company is, I think, the largest
manufacturer of
smokeless tobacco, chewing tobacco, in the United States.
Q. Like snuff and --
A. Yes.
Q. Red Man?
A. I think that's the brand, yes. Yes.
Q. Okay.
A. And so we joined with them in an effort to try
to develop even
stronger programs, which we alone could not do, which would require
legislation such as licensing retailers to sell cigarettes, controls
at
vending machines, for example, things that would require legislation.
So we
put forward the program, but we were unable to get enough support in
the
legislatures to get it converted into legislation.
Q. You mean in the state legislatures around the
country?
A. State and federal.
MR. BLEAKLEY: Your Honor, I'm about to start a new
subject. This would
be an appropriate time for a lunch break.
THE COURT: We'll recess.
MR. BLEAKLEY: Okay.
THE COURT: We'll recess for lunch, reconvene at
2:00 o'clock.
MR. BLEAKLEY: Thank you.
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. BLEAKLEY: Thank you, Your Honor.
BY MR. BLEAKLEY:
Q. Before the lunch break, Mr. Bible, we were talking
about some of the
actions that Philip Morris has taken voluntarily in the last two or
three
years in the area of youth smoking. I want to go back for a moment
now to
the question that I asked you which was when you described the major
challenges that were facing Philip Morris when you became CEO and what
you
tried to do about a long- term resolution to these problems. Do you
recall
that?
A. Yes, I do, sir.
Q. Now when you decided that Philip Morris needed
to try to come to a
long- term solution to the problems which you described, including
litigation and potential FDA regulation and public perception and the
like,
how did you -- did --
Let me ask you this first: Did the fact that documents
were going to
come out in the course of some of this litigation play any role in
your
decision to try to seek a global solution to these problems?
MR. CIRESI: Objection, it's leading, Your Honor.
THE COURT: It is leading, counsel.
Q. Would you explain once again what the considerations
were that led
you to decide that you needed to try to arrive at a global solution?
MR. CIRESI: Objection, asked and answered.
THE COURT: No, you may answer that.
A. Yes, sir. When I arrived at my job as CEO in
June of 1994, I was
very conscious of the swirling public perception about the tobacco
industry, the growing litigation, the concern among society about youth
smoking. Many members of Congress were concerned about that also. And
I
felt that we had a commitment to our company, our investors, our employees,
and all those people who depended upon our industry for their livelihoods
to try to find a better solution than that which we'd been following
for
the prior 40 years, as far as I could establish, and so I turned my
mind to
that.
Q. You mentioned some of the attorneys general suits
that had been
brought against Philip Morris.
A. Yes, that's right.
Q. Can you tell me which was the first of these
Attorney General
actions that was brought against Philip Morris, the first in time,
by what
state?
*2 A. To my recollection, the first state was Mississippi.
Q. And who was the Attorney General on that case?
A. That's Attorney General Moore.
Q. Attorney General Michael Moore?
A. Michael Moore, yes.
Q. And he brought the first such action?
A. That's my recollection, sir, yes.
Q. Okay. Now having decided that you needed to come
to some kind of
global resolution of all these problems, how did you decide to go about
trying to accomplish that?
A. Well I talked with my senior executives over
the ensuing six months.
I became chairman then in January 1995, and I had talked with some
of the
members of my board, I'd met with some outside counsel to the company,
and
we concluded that there may be an alternative route to that of the
past and
that perhaps we should try to formulate some means of resolving each
of the
issues that seemed to be troubling everybody, such as youth smoking,
regulation of the tobacco industry, the litigation. Could we resolve
that
in some way other than 40 more years of courtroom battles?
And we met and we finally concluded, I think --
sometime in 1996 I
think it was, that we should try to take some positive steps to make
something happen.
Q. And how did you think, if at all, that could
be accomplished?
A. Well I thought that that could best be accomplished
by federal
legislation. From all of the advice that I had received, that that
would be
the most effective way of trying to achieve what we thought would be
the
best solution.
Q. And why did you think the federal legislation
was the best way to
accomplish all of these objectives?
A. Well one of the things that seemed to be required
was some controls
over regulating the tobacco industry. We believed that Congress was
the
appropriate body to determine the future of the tobacco industry, and
if
regulation were to be determined, then Congress should be the body
that
determined that.
We believed that in order to achieve some resolution,
we would need to
concede some of our marketing activities, and we felt that it would
be
appropriate that that would be encapsulated in federal legislation
so it
was uniform across the country. I think that this was a national issue
for
society that deserved the attention of the national -- the highest
national
forum, which is Congress. So those were generally the -- the conclusions
that I came to.
I also felt, I should add, that if we needed to
find some solution to
the litigation, that that would require some form of federal solution.
Q. And what happened next? What did you do -- did
you do to try to
accomplish this?
A. Well I think it was probably late '96, second
half of '96, early
'97, we attempted to explore ways to feel out how we could best go
about
this. We got some advice from the White House, who understood what
we were
trying to do --
MR. CIRESI: Your Honor, I'm going to object to the
reference as
hearsay. Move that it be stricken.
THE COURT: That will be stricken.
*3 MR. BLEAKLEY: Your Honor, I have not asked for
nor will elicit
hearsay. I asked him what he did in order to try to achieve this.
THE COURT: His response was hearsay. It will be
stricken.
Ask another question, counsel.
BY MR. BLEAKLEY:
Q. What else did you do to attempt to accomplish
this?
A. We then made contact with some attorneys general,
state attorneys
general, and members of the public health community, and legal
representatives of some groups that were suing us in class actions.
Q. And what came about as a result of those discussions?
A. We -- we met with them, I think it was in April
1997, in Washington,
and we decided to start negotiating some form of resolution along the
lines
I described to try to resolve the various issues which I think I've
just
described. And that took about three months and concluded after long,
hard
negotiations with all parties -- which reached an impasse on several
occasions -- in an agreement which was signed on June 20, 1997 between
the
state attorneys generals -- a majority of state attorneys generals,
some
representatives of the public health officials, and representatives
of some
class action suits that were filed against us, and the tobacco companies.
Q. Was the Attorney General of the state of Mississippi
one of those
with whom you negotiated?
A. Yes. I would define him as the -- the lead negotiator.
Q. And did you reach an agreement with these people?
A. We did. We reached an agreement ultimately about
three months after
we commenced negotiations, and that was reached, I think, on June 20.
Q. And that's what is referred to sometimes as the
national resolution;
is that correct?
A. That's correct, sir.
Q. All right. I'm going to come back to that in
a moment.
But let me ask you this: What has happened to this
agreement, this
national resolution, since you entered into an agreement with these
attorneys general and public health officials and representatives?
A. Well my best description as to what has happened
is that it has been
picked up by many members of Congress. There have been -- (clearing
throat)
please excuse me -- there have been many committee hearings in both
houses
of Congress. I've testified at some of those, many experts have testified
at some of those, trying to, I imagine, get input from all various
segments
of society and professions, and the proposed resolution is moving forward.
I believe there have been a number of bills presented and some, I believe,
are moving to markup fairly soon. So there's been a lot of debate in
Congress about it.
Q. Now you said "bills." What do you mean by "bills?"
Do you mean
proposed legislation?
A. Proposed legislation, yes. I'm sorry.
Q. Has any legislation incorporating the terms of
the national
resolution been introduced?
A. Yes, I believe that Senator McCain has introduced
a bill which
fairly closely follows the proposed resolution. He has added a provision,
I
believe, to accommodate an economic impact that might be felt by tobacco
growers, because if the proposed resolution were enacted into law,
it would
result in less cigarettes being sold, less tobacco being grown, and
the
growers would be impacted. So he's made provision for that in his proposed
bill.
*4 Q. Have other bills or proposed legislation been
introduced
different from what's in the national legislation?
A. Yes, I believe so. I believe Senator Jeffords
has a bill, I think. I
think there's a -- a task force that was formed in the Senate by Senator
Conrad that was established to look at the proposed resolution which
we
signed and see if they feel any amendment should be made to it. And
they
have made amendments to it, I believe. And I think he's moving forward
with
proposed legislation based on the report of the Conrad committee, I
think.
Q. And those bills are now under consideration by
the United States
Congress; is that right?
A. That's my understanding, sir, yes.
Q. And you said there have been hearings, public
hearings at which
people have testified?
A. Yes, there have been many.
Q. And have you personally testified?
A. Yes, I've personally testified at two.
Q. Have other representatives of the cigarette industry
testified?
A. Yes, they have.
Q. Public health officials testified?
A. Yes, they have.
Q. And other interested parties?
A. Yes. Other interested parties, yes.
Q. Have some of the attorneys general testified?
A. Yes, I believe many of them have.
Q. So what's going to happen to this legislation
now? What is your
understanding of what's going to happen?
MR. CIRESI: Well objection, that calls for rank
speculation on the part
of this witness.
THE COURT: Sustained.
MR. BLEAKLEY: I did not mean whether it's going
to be passed or not,
Your Honor, I just meant what the next step was in the process.
A. The next step in the process, this is an election
year and --
MR. CIRESI: Well, Your Honor --
MR. BLEAKLEY: Just -- just say what you understand
the next step in the
process will be, --
MR. CIRESI: Excuse me.
MR. BLEAKLEY: -- not what's going to actually happen.
MR. CIRESI: Excuse me. May I make an objection?
It's irrelevant.
THE COURT: Counsel, where are you going with this?
MR. BLEAKLEY: All I want to establish is what the
current status of the
legislation is, that is all.
THE COURT: I think he stated what the current status
is. I believe your
question calls for what's going to happen in the future, and probably
not a
lot of us can forecast that.
MR. BLEAKLEY: Okay. I'll move on.
BY MR. BLEAKLEY:
Q. Now let me show you, Mr. Bible, what has been
marked --
MR. BLEAKLEY: May I approach, Your Honor?
THE COURT: Go ahead.
Q. -- has been marked as Plaintiffs' Exhibit 24291.
MR. BLEAKLEY: I'll get a copy of that for Your Honor.
(Document handed to the witness and the court.)
Q. Do you have what's been marked as Exhibit 24291
before you?
A. Yes, I do, sir.
Q. Would you --
Can you tell us what this document is?
A. It's a Form 8-K filed by RJR Nabisco Holdings
Corporation, dated
June 20, 1997.
Q. And does it include the national resolution negotiated
with the
attorneys general?
*5 MR. CIRESI: I'm going to object to the form of
the question, it
assumes facts not in evidence. And there is no agreement, there's a
proposed agreement.
THE COURT: Rephrase the question, counsel.
Q. Does it include -- well it does --
MR. BLEAKLEY: It is an agreement with the attorneys
general with whom
it was negotiated. It hasn't yet been passed as legislation.
THE COURT: Counsel, we really don't want your testimony.
Would you
rephrase the question to the witness.
Q. Can you tell me what is included within the Form
8-K of R. J.
Reynolds?
A. Yes. It's the proposed resolution which we signed
with the states
attorneys general on June 20.
Q. And is that the document that we've been talking
about here?
A. Yes, it is.
MR. BLEAKLEY: We'd move the admission of Plaintiffs'
Exhibit 24291.
MR. CIRESI: No objection, Your Honor.
THE COURT: Court will receive 24291.
BY MR. BLEAKLEY:
Q. Now let me ask you to describe in your own words
the essential
elements of this resolution.
MR. CIRESI: Objection, Your Honor. It calls for
speculation on his
part.
THE COURT: Well I think he can give his -- his version
or his
interpretation.
THE WITNESS: I'm sorry, Your Honor?
THE COURT: Go ahead.
THE WITNESS: Thank you.
A. The proposed resolution we signed with the states
attorneys generals
and other parties virtually falls into what I would call two buckets,
one
bucket is where we undertake to give up many of our marketing activities
and constitutional rights and submit ourselves to regulation from the
FDA
--
MR. CIRESI: Your Honor -- excuse me, Mr. Bible.
Your Honor, I'm going
to object to this narrative type where he's talking about constitutional
rights unless they want to qualify him as a lawyer as to what is
constitutional and what is not.
THE COURT: Yeah. I don't think that's appropriate
and that answer will
be stricken. Why don't you re-ask the question --
MR. BLEAKLEY: Okay.
THE COURT: -- to avoid getting his version of what
his constitutional
rights are.
MR. BLEAKLEY: We'll leave out the constitution.
THE COURT: All right.
Q. Answer the question, but without commenting on
your constitutional
rights.
A. All right. We will be submitting ourselves to
FDA regulation. We
shall be subject to marketing restrictions; for example, there will
be no
more billboards that will be seen outside in the United States at all,
there will be no more stadia signs, there will be no more taxi-top
signs,
there will be no signs in stores that could be pointing outwards. There
will be no sponsorship of events at all by tobacco companies. There
will be
no branded items with cigarette brands on items, promotional items.
We
shall be subjected to what's called a look-back provision which means
that
we need to hit certain targets over a period of five, seven and 10
years
whereby youth smoking, that is, teen- age smoking, is reduced by 30
percent
after five years, 50 percent after seven years and 60 percent after
10
years. If we -- if youth smoking is not reduced by -- to those targets,
we
are subjected to a penalty of 80 million dollars a year for each point
by
which we miss the target.
*6 We'll be putting new warning labels on packs
that will occupy 25
percent of the face of the pack, at the top of the pack, and they will
be
black on white or white on black. I don't quite remember each of the
warnings, but I do have a note of them here if I could read them to
you.
The new warning labels will read cigarettes are addictive, tobacco
can harm
your children, cigarettes can cause fatal lung disease, cigarettes
cause
cancer, cigarettes cause strokes and heart disease, smoking during
pregnancy can harm your baby, smoking can kill you, tobacco causes
fatal
lung disease in non-smokers, quitting smoking now greatly reduces serious
risk to your health.
In addition to that, we'll be disclosing all of
our health research
going forward with the FDA, 100 percent. All research will be conducted
and
will be shared with them.
There will be a billion dollars a year set aside
each year for funding
cessation programs, smoking cessation programs, if people wish to undertake
those. We'll be -- we'll be paying --
MR. CIRESI: Your Honor -- excuse me, Mr. Bible.
If he's going to
testify from a sheet of paper, can we mark that as an exhibit --
THE WITNESS: Sure.
MR. CIRESI: -- and have it entered into evidence?
THE COURT: Mark the paper, please.
MR. BLEAKLEY: What is our next exhibit number?
We'll mark this as 25006. Is that what this says?
MR. CIRESI: That's correct.
MR. BLEAKLEY: Mark that as Exhibit 25006, a document
entitled "Proposed
Resolution."
A. There will be payments made by the tobacco industry
totaling 368
billion dollars over 25 years and into perpetuity.
Q. What do you mean "into perpetuity?"
A. That's forever. So each year we'll continue to
make a payment.
Q. The 368 billion is for the first 25?
A. It's for the first 25 years, yes. And then each
year thereafter
there will be a significant sum paid to the government and the states.
We will be dissolving The Tobacco Institute and
also The Council for
Tobacco Research will be dissolved. We'll be subject to a comprehensive
system of enforcement on everything we do in our manufacturing and
marketing practices and subject to serious penalties in the event that
we
should breach any of those. And there will be -- 25 billion dollars
of the
368 billion dollars shall be set aside for public health research.
Then under the agreement there will be civil liability
protection --
Q. Before you -- before you get to the civil liability
protection, let
me ask you a couple of other questions.
First, is there anything in the resolution dealing
with prices,
cigarette prices?
A. Yes, there is. The sums of money that are being
paid over, we are
obliged under the agreement to pass those through in the cigarette
pack
prices to the consumer.
Q. Would that be a part of the legislation if enacted?
A. Under the proposed resolution, if it were enacted,
that would be.
Q. Now is there anything in the resolution dealing
with environmental
tobacco smoke?
*7 A. Yes, there is. There are nationwide standards
established on
public smoking restrictions, that I believe can be amended by the states.
Q. I'm sorry, I interrupted you. You started to
describe the civil
liability. Is that what you called it, civil liability?
A. Yes, limited civil liability protection. Under
the proposed
resolution all addiction class actions are being settled, but no future
class actions can be brought. It settles all states attorneys general
cases, of those who signed. There will be no aggregation of claims
for
trial, but it permits aggregation for -- aggregation for discovery.
It
establishes a document depository --
MR. CIRESI: Your Honor --
A. -- for everyone --
MR. CIRESI: Excuse me, Mr. Bible. At this point
he obviously doesn't
know what's in it because he's reading. We're going to object and resort
only to the document. The document speaks for itself at this point,
Your
Honor.
MR. BLEAKLEY: Well Your Honor, I think he does have
personal knowledge.
He's using this as a refresher. There are a lot of provisions in the
agreement.
THE COURT: He doesn't seem --
He seems to be reading the document, which is an
improper use of the
document.
MR. BLEAKLEY: I move the admission of the exhibit.
I can't remember the
number.
MR. CIRESI: 25066.
MR. BLEAKLEY: 25066. Move the admission of the document.
MR. CIRESI: The summary?
MR. BLEAKLEY: Yes. Exhibit 25006.
MR. CIRESI: We object. We thought it was being used
to refresh his
recollection, and he's reading from it. The document is in evidence
now,
the settlement, Your Honor, which is Exhibit 24291. So we object to
the --
the exhibit that was used to refresh his recollection.
MR. BLEAKLEY: Your Honor, could we have a side-bar
on this briefly?
THE COURT: Sure.
MR. BLEAKLEY: Thank you.
BY MR. BLEAKLEY:
Q. Mr. Bible, I'm going to ask you to put aside
the document we just
marked as an exhibit --
A. I have.
Q. -- and try to answer as best you can from your
personal recollection
some of the questions that I have put to you or will put to you. Okay?
A. Certainly.
Q. Thank you.
Now, try to explain from your own recollection what
the -- what you
have described as the civil liability provisions of the proposed resolution
are.
A. Yes. My understanding of the civil liability
protections are that we
should be setting aside every year five billion dollars for individual
--
individuals who wish to bring lawsuits against the company, and should
they
succeed and get a judgment, then it would be paid out of the five billion
dollars. In the event that any individual judgment exceeded a million
dollars and the five billion dollars was all absorbed in that one year,
then any judgments exceeding a million dollars would roll over into
the
next year and would be paid in the succeeding year. So -- and then
the five
billion dollars would be available the following year, and the same
procedure would follow. And that would be the case every year thereafter.
*8 At the same time there would be no more class
actions that would be
brought. There would be settled punitive damages for all past actions
of
the companies. The 368 billion dollars would settle all compensatory
and
class- action claims of the past. There will be punitive damages permitted
going forward, is my understanding.
I believe that individuals who wish to sue may be
able -- or will be
allowed to aggregate their -- their claims for pretrial motions and
for
discovery.
Nothing else comes to my mind just now, sir.
Q. What if anything would it do with the attorneys
generals cases that
you talked about earlier?
A. Well they would be settled under the proposed
resolution also, yes.
Q. And is there any provision in the national resolution
for what
happens to documents?
A. Yes. There is a provision in the national resolution
that a
depository -- a depository would be set up, I believe it's in Washington,
and all the documents on smoking and health would be deposited in that
depository and would be available to the public, to everybody. And
to the
extent that there are any privileged documents that are classified
as
attorney-client privileged, then a three-court -- three-judge panel
would
be established, it would be an independent -- independently appointed
three-judge panel, and that three-judge panel would determine whether
any
of those documents are appropriately classified as attorney-client
privileged or not, and if they were not, then they, too, would be placed
in
the depository, and if they were, then they would not be placed in
the
depository.
Q. Of this 368 billion dollars that would be paid
out over the first 25
years, is there a breakdown of what's going to happen to that money?
A. Yes, there is a breakdown. I don't have it completely
in my mind,
but my understanding is that in the first year the sum that is paid
is
eight and a half billion dollars, it rises to 9.5, then I think 11.5
billion dollars in the third year, I think 13.5 billion in the fourth
year
and 15 billion dollars in the fifth year, based on cigarette volumes
today.
It is allocated, I think, as to roughly half to the states and the
other
half is divided up into, I believe, smoking cessation programs, 25
billion
dollars is going into public health research, half a billion dollars
a
year, 500 million dollars a year will be devoted to anti-youth smoking
advertising, certainly not under our control but by the public health
officials. Those come to my mind. There may be others, but I don't
remember
them just now, sir.
Q. Now since you entered into this -- excuse me,
the industry entered
into this agreement with the attorneys general, what has happened to
the
various state attorneys general cases that were going on around the
country?
A. There were three cases that had what I would
call early trial dates,
they were Mississippi, Florida and Texas, and those cases have each
been
settled between the tobacco companies and those states.
Q. And what has happened to those cases?
*9 A. They've been settled and they're now dropped.
Q. And how were they settled?
A. We paid a sum of money to each state and the
lawsuit was then
dropped, I suppose is the layman's term that I would use.
Q. Were they in accordance with the national resolution
or settlement?
A. Yes, they followed very closely the national
-- the proposed
national resolution, yes.
Q. Did you say one of those was Mississippi?
A. Mississippi was the first, to my recollection.
Q. But it's been settled?
A. That's been settled, yes.
Q. And that's Attorney General Moore?
A. Attorney General Michael Moore, yes.
Q. Now let me ask you to go back for a second to
the list that you made
up of the various terms and ask you whether or not there are -- just
on the
front page, if you would, on the advertising and marketing restrictions
--
A. Am I allowed to look at this?
Q. You can look, and if there's something you forgot,
you can tell us.
A. Oh, I see. Thank you.
Yes, I forgot the access provisions, which are very
important.
Q. What are they?
A. The access provisions require that a cigarette
shall be sold only to
18- year-olds -- people of 18 years or older. That all transactions
must be
face- to-face. That no cigarette packs or dispensers will be within
reach
of any customer. In fact, they will all be behind the counter and not
within reach. I think the retailers need to display a sign. In fact,
I
believe they have those signs up today. All vending machines would
be
banned throughout the country; they'll all disappear. And all retailers
would be required to be licensing -- licensed to sell cigarettes.
I think that covers most of the requirements. Should
I look to see if
there was anything else?
Q. Yes, please.
A. Oh, yes, one final point that I forgot, and that
is that we have
agreed with the states attorneys generals and the public health officials
that we shall disengage further in any public debate on the issues
of
addiction and causation. The public health officials felt that the
tobacco
companies had obstructed the message that the public health officials
wished to convey to the American people, and we agreed that we would
no
longer debate the issues of addiction and causation, and we shall no
longer
engage in public debate on that matter. We shall remove ourselves
completely from the forum and allow the public health officials to
convey
that message totally unobstructed, and we shall only engage in debate
in
order to defend our position in a courtroom or forums such as that
nature.
Q. Has the industry, have the defendants, has Philip
Morris, entered
into a settlement with the state of Minnesota in its attorneys general
--
attorney general case?
A. No, we've not, sir.
Q. Do you know why?
MR. CIRESI: Well, Your Honor, I'm going to object
to that. It's
irrelevant.
THE COURT: Sustained.
BY MR. BLEAKLEY:
Q. Now, why did Philip Morris, why did you as chief
executive officer
of Philip Morris decide to enter an agreement of this kind with all
of
these provisions?
*10 A. Well, sir, as I expressed a little earlier,
when I aggregated
the concerns that I had been able to assimilate, I was very worried
about
the future of the industry and my company and all the constituents
who are
dependent upon my company. I was very concerned about the issue of
youth
smoking and I recognized that the American population saw it as a senior
societal issue, it needed to be resolved, it should be resolved, we
wanted
it resolved. I think the question about smoking had become a major
societal
issue in general, and I felt that the most senior body in the country
should determine whether 50 million Americans should be allowed to
continue
to smoke or not, and that if we could find some way of putting all
of these
things together in some satisfactory resolution, we could resolve all
of
the issues that were confronting us and the American society, then
it would
certainly establish a base point for us to move forward, for certainly
Philip Morris to continue to be a viable entity as we move forward,
for the
investors who have their investments in our company to feel satisfied
that
their investments were not at risk, and generally, as far as I am
concerned, to allow Philip Morris to join the table of corporate
citizenship where I think it truly belongs.
Q. Have you given any thought to what you as the
CEO of Philip Morris
will do if this national resolution -- resolution is not incorporated
into
federal legislation?
MR. CIRESI: Objection, irrelevant.
THE COURT: Sustained.
Q. Now let me turn to another subject, Mr. Bible.
Is Philip Morris engaged in efforts to develop new
products, new
cigarette products today?
A. Yes, we are.
MR. CIRESI: Object -- excuse me, Mr. Bible. Objection,
Your Honor. If
it relates to matters after August of 1994, no discovery was allowed.
THE COURT: You'll have to rephrase that question,
counsel, - -
MR. BLEAKLEY: All right.
THE COURT: -- to comply with the order of the court.
MR. BLEAKLEY: I'll rephrase that.
BY MR. BLEAKLEY:
Q. Since --
Well let me ask you this, sir: Are you familiar
with a product called
Next?
A. Yes, I am.
Q. And what was Next? What is Next? What was Next?
A. Well Next was a cigarette that we produced and
marketed essentially
with no nicotine. We got it as low as you could possibly make it, with
virtually no nicotine.
Q. And what did you do with this product after you
developed it?
A. We developed it and we placed it in test market,
if I remember. I
was not involved in the U.S. tobacco company at that time, but I remember
that it was put into test market and did -- did not succeed.
Q. Do you know how much of an investment Philip
Morris put into the
development of Next?
A. Well my best recollection is approximately 300
million dollars.
Q. Did Philip Morris erect a plant in which to manufacture
this
cigarette?
A. Yes. We constructed a plant, which we shut down
and mothballed.
Q. The plant is in mothballs today?
*11 A. I believe it's in mothballs, yes.
Q. And can you tell us what Accord is?
A. Yes.
MR. CIRESI: Objection, Your Honor, there's been
no discovery on Accord
after 1994, and I asked him about that issue at page --
THE COURT: Counsel, counsel, --
MR. CIRESI: I'm sorry.
THE COURT: -- just state your legal objection, please.
MR. CIRESI: Objection, Your Honor, it's outside
the scope of discovery.
THE COURT: Okay. You'll have to rephrase the question,
counsel.
BY MR. BLEAKLEY:
Q. After the Next product failed, did Philip Morris
proceed to try to
develop other new products?
A. Yes, we did.
Q. And what new products did it try to develop?
A. We tried to develop a product which is called
Accord, which is
currently in home consumer testing.
MR. CIRESI: Your Honor, again I'm going to object
unless we have a time
period, and --
(sidebar)
BY MR. BLEAKLEY:
Q. Can you describe very briefly --
THE COURT: Counsel, you have a problem there.
MR. BLEAKLEY: I turned one on but not the other.
Sorry.
Q. Within the constraints that I gave you, Mr. Bible,
can you tell us
very briefly what Accord is.
A. Yes. It is a cigarette which is heated rather
than lit, which, when
smoked, will produce eight puffs, the same as a regular cigarette normally,
and has a very significant reduction in many of the constituents in
smoke
that are considered to be harmful.
Q. And what is the status of the Accord project
right now?
A. It is currently in home consumer test where we
test it with a
limited number of individuals to see if they -- how they react to it.
Q. It hasn't been placed on the open market for
sale yet?
A. No, not yet.
Q. Do you remember yesterday when Mr. Ciresi asked
you whether or not
you had ever instructed Philip Morris Research Center to develop a
cancer-free cigarette? Do you remember that question?
A. Yes, I recall that question.
Q. And you said you hadn't.
A. That's right, sir.
Q. Why haven't you?
A. Well first of all, I didn't run Philip Morris
U.S.A., and I felt
that they had a very vigorous and highly intellectual and capable group
of
people down there who, as far as I know, are permanently searching
for ways
to improve our product. I'd have thought if they could produce anything
like that they would have produced it by now. And also, I would have
thought that other than the other 100 or so companies around the world
that
produce cigarettes, they would have also done the same thing.
Q. Mr. Ciresi also asked you some questions about
a substance called
benzpyrene. Do you remember that?
A. Yes, I do.
Q. Has Philip Morris been able to reduce the amount
of benzpyrene in
cigarettes?
MR. CIRESI: Objection, Your Honor, no foundation.
THE COURT: You'll have to lay some foundation.
Q. Do you know what, if anything, Philip Morris
has done to reduce
compounds considered to be risky in cigarettes?
*12 A. Yes. We have --
Q. Let me lay the foundation according to the judge's
instruction.
A. Okay.
Q. Okay. How do you know that?
A. Oh. I know that from being a smoker myself and
understanding
cigarettes, that over the last 40 years or so the tar and nicotine
deliveries of cigarettes have come down by roughly 50 percent, and
tar is
the measure of particulate matter in cigarettes, and benzopyrene is
a
particulate matter.
Q. Mr. Ciresi also asked you some questions about
whether other
substances identified as carcinogens -- he asked you some questions
about
that. Do you remember that?
A. Yes, he did. Uh-huh.
Q. Has Philip Morris been able to reduce the quantities
of other
carcinogens in tobacco smoke?
A. That I don't know. I'd have thought that the
reduction in tar would
have had some impact.
MR. CIRESI: Your Honor -- excuse me, Mr. Bible,
I'm sorry. He said he
doesn't know, so, Your Honor, I move to strike the answer.
THE COURT: After the words "I don't know," it will
be stricken.
BY MR. BLEAKLEY:
Q. A few moments ago when you were describing the
terms of the national
resolution, you said that -- I don't want to characterize your testimony,
but you said that you agreed that Philip Morris would refrain or stay
out
of the public debate. Do you remember that?
A. Yes, I do.
Q. Has Philip Morris --
Does Philip Morris have a position today, in March
of 1998, on the
issue of causation?
A. Yes, it does.
Q. Does Philip Morris today have a position on addiction?
A. Yes, it does.
Q. What is Philip Morris's position today on addiction
and what is it
on causation?
A. Well I have it -- a copy of it here with me which
I need to read,
because I -- I can't remember it all, sir.
MR. CIRESI: Your Honor, this is just a form to give
a speech put
together by someone else. I'm going to object to the form of the question.
THE COURT: Sustained.
Q. Without using the document, would you please
tell the ladies and
gentlemen of the jury, to the best of your recollection, what is Philip
Morris's position today.
A. Yes. Well on causation, our position today is
that we recognize that
there is a substantial body of evidence that believes that cigarette
smoking causes diseases such as lung cancer, and that we at Philip
Morris
recognize that, but we also have stated publicly that we also recognize
that there is a very strong statistical relationship between cigarette
smoking and the many harmful diseases, such as lung cancer, but that
the
link that I think I mentioned earlier in my testimony has not yet been
established, but it is indeed a very strong statistical relationship
between cigarette smoking and certain diseases. In recognition of that
--
we do realize that there is a difference of opinion between us, but
in
recognition of that, we will disengage from the debate on whether the
public health officials' message can be conveyed to the American public.
We
shall no longer contest that, except in the courtroom or other forum
where
we feel that is necessary, of that nature.
*13 Q. And has that position been stated publicly?
A. That's been stated publicly, and I stated it
before the
congressional committee where I testified, yes.
Q. And that's the position that Philip Morris takes
today in this case;
is that correct?
A. Yes, that's right, sir.
Q. And there's no difference between the position
that Philip Morris is
taking public -- here publicly or in the United States Congress?
A. No, certainly not.
MR. CIRESI: Excuse me, Mr. Bible. Objection, Your
Honor, it's leading.
THE COURT: Yeah, you're starting to lead the witness,
counsel.
MR. BLEAKLEY: I'm sorry.
THE COURT: Please rephrase.
MR. BLEAKLEY: Should I do it again even though he
answered the
question, Your Honor? I'll be glad to, or just move on.
THE COURT: Well do you want his answer stricken?
MR. BLEAKLEY: No.
THE COURT: Okay.
MR. BLEAKLEY: Okay.
THE COURT: Move on.
BY MR. BLEAKLEY:
Q. Is there a difference between Philip Morris's
position on causation
here today in this courtroom and the position that it's taking publicly
to
the public?
A. No, there is no difference in the position. We've
said publicly that
we will disengage from the debate, and the only time we'll reserve
the
right to debate the issue is where we need to defend ourselves in the
courtroom or other similar forum.
Q. You adhere to the position you just stated here
in this courtroom
today?
A. Absolutely, sir.
Q. Now with respect to addiction, what is Philip
Morris's position
today with respect to addiction?
A. Well we have said that cigarette smoking is mildly
pharmacological,
that under certain definitions it is addictive. It's a word that has
been
used, in our opinion, somewhat loosely over many years. In 1964, I
think,
the Surgeon General defined smoking as habit forming. We accept that
definition. In 1988, I think it is, the Surgeon General described it
as
addictive. We do not subscribe to that definition. We believe that
that
definition lacks some -- some objective criteria such as the markers
of
intoxication or withdrawal symptoms.
Nevertheless, we have said that we shall disengage
from the public
debate on the matter of addiction, that we believe that the public
health
officials should be free to convey their message to the public of America
freely and unobstructed, and we shall certainly in no way, other than
the
courtroom, defend our position -- well we'll defend our position, but
we
shall in no way whatsoever obstruct the conveyance of the public health
officials' message.
Q. Now has that position been stated publicly?
A. Yes, it has been.
Q. Has it been released to the public?
A. I'm not so sure if it's been released to the
public. It was -- I
gave that in my testimony both before the Senate and the House.
Q. Is there any difference between the position
that you've taken
before the Senate and the House and the position you are taking here
today?
A. No, sir, they're -- they're the same.
*14 Q. Mr. Ciresi asked you some questions this
morning about Dr. Tom
Osdene. Do you remember those?
A. Yes, I do.
Q. And you know Dr. Osdene?
A. I've met him on a number of -- a few occasions
I would say.
Q. And you said this morning that you asked Dr.
Osdene to testify; is
that correct?
A. Yes, I did.
MR. BLEAKLEY: May I approach, Your Honor?
(Document handed to the
witness.)
Q. I'm going to show you what have been marked as
Exhibit CE001177 and
00 -- CE001178 and ask you if you can identify those documents.
A. Yes.
Q. First, could you identify 001177.
A. Yes. That is -- that is a letter from me to Mr.
Nields, who I
understand was the attorney for Dr. Osdene.
Q. And what is 001178?
A. That is a letter which I have wrotten -- I wrote
to Dr. Osdene
asking him to testify fully and truthfully at the deposition.
MR. BLEAKLEY: Your Honor, move the admission of
001177 and 001178.
MR. CIRESI: They're irrelevant and self-serving
statements, Your Honor.
THE COURT: Well it's not irrelevant, but they're
certainly
self-serving.
Sustained.
BY MR. BLEAKLEY:
Q. Why did you ask Dr. Osdene to come and testify
in this case?
A. Because I thought it was very important that
he testify truthfully
and fully to all the facts that he's aware of at Philip Morris.
Q. Why did you think that was important?
A. I thought it would be -- it would not be nice
at all if he took the
Fifth Amendment, which I believed he was going to do, because it would
appear that he had something to conceal, and I didn't want that impression
to be made.
MR. CIRESI: Your Honor, I'm going to object to the
last portion as non-
responsive, move that it be stricken.
THE COURT: Yeah, the last portion of the answer
will be stricken with
regard to "something to conceal," and that will be stricken. The jury
is
instructed to disregard that.
BY MR. BLEAKLEY:
Q. This morning Mr. Ciresi showed you a document
--
Do you still have those exhibit binders there?
A. Yes, I do.
Q. -- showed you a document, Exhibit 10560.
A. Yes, I have that.
Q. Do you remember that document?
A. Yes, I do.
Q. And in that document Mr. Johnson -- Johnston,
Mr. Myron Johnston --
You remember that document?
A. Yes, I do.
A. -- said that an increased -- in his opinion,
that an increase in
prices or excise taxes would decrease demand, do you remember that?
A. Yes, I remember that.
Q. Do you agree that an increase in cigarette prices
can affect demand?
A. Yes, I do.
Q. Has Philip Morris made any projections of what
the effect will be on
demand for cigarettes if the price increases that are a part of the
national resolution are adopted?
A. Yes, it has.
MR. CIRESI: Excuse me, sir. Objection, Your Honor,
it's irrelevant and
outside discovery unless they have produced that to us. We haven't
seen it.
THE COURT: Is there something --
Is there any document or anything, counsel?
*15 MR. BLEAKLEY: No document. They have made estimates
of what's going
to happen to overall demand if prices go up, and it's consistent with
the
document that Mr. Ciresi put in this morning.
MR. CIRESI: Well, Your Honor, if they've done something
post-'94, then
we would be entitled to get it so we can cross- examine on it. That's
our
objection.
THE COURT: All right. Sustained.
BY MR. BLEAKLEY:
Q. Let me ask you this, Mr. Bible: Whether or not
this national
resolution becomes law, is it Philip Morris's intention to continue
to try
to make and market the best and safest cigarettes possible?
A. Yes, it is.
MR. BLEAKLEY: I have nothing further.
THE COURT: Should we take a short recess?
MR. CIRESI: Fine, Your Honor.
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.
Good afternoon, ladies and gentlemen.
(Collective "Good afternoon.")
BY MR. CIRESI:
Q. Good afternoon, Mr. Bible.
A. Good afternoon, Mr. Ciresi.
Q. Now I want to go back and make sure we have the
chronology of events
regarding when you became CEO, what your position was at that time,
when
state suits started, and when the settlement came about. All right?
A. Yes.
Q. Now you became CEO, sir, in -- was it June of
1994?
A. Yes, that's right. Uh-huh.
Q. In June of 1994; correct?
A. That's right.
Q. Now the Mississippi case was started in April
of 1994; wasn't it?
A. I don't recall exactly the date, but that sounds
about right.
Q. And this lawsuit was started in August of 1994.
A. I don't remember the date exactly, but I remember
it was one of the
early ones, yes.
Q. Now do you know how many state lawsuits there
were as of the end of
1996?
A. End of '96. I would --
No, I don't know.
Q. Does five ring a bell?
A. It doesn't ring a bell. If I had to guess, I
would have said about
seven, something of that nature.
Q. Very few; correct?
A. Very few out of 50 or 40. Quite a lot to me.
Q. Now the Mississippi suit, you said that was the
first one. That's
correct; correct?
A. Yes.
Q. Do you know what the nature of the complaint
was in the Mississippi
suit?
A. No, I've forgotten. I know it was a Medicaid
case.
Q. It was only on equitable grounds; correct?
A. I don't recall that, sir. I'm not a lawyer.
Q. Do you know that Minnesota was the first lawsuit
brought by a state
that alleged antitrust violations, consumer fraud violations, equitable
grounds and common tort claims? Do you know that?
A. No, I don't, sir.
Q. Nobody's ever told you that?
A. Oh, they may have, but I don't recall those terms
because they're
legal terms that I'm not that familiar with.
Q. Now we do know that on February 24th, 1995, you
made public
statements about what your corporation was going to do; correct?
*16 A. Yes, that's right.
Q. And you were going to fight, fight, fight; weren't
you?
A. That's what I said, yes. I should fight for my
company.
Q. You're not going to be anybody's punching bag;
correct?
A. That's right.
Q. When you're right you fight, and you win; correct?
A. Correct.
Q. And you put those sentiments into your shareholders'
letter;
correct?
A. Correct.
Q. Can you go to Exhibit 17624, your annual report.
A. Yes, I have that.
Q. Now this was about six months after the filing
of the Minnesota
suit; correct?
A. Yes, that's right.
Q. And if we could go to the defending our company
--
THE COURT: Counsel, I kind of miss the opportunity
of watching you.
MR. CIRESI: Oh, I'm sorry, Your Honor.
THE COURT: I wonder -- I wonder if we could --
(Laughter.)
THE COURT: I wonder if we could move that back a
little bit so --
MR. CIRESI: That would be fine, Your Honor. I apologize.
THE COURT: -- I can view you in action.
(Easel moved by Mr. Ciresi.)
THE COURT: Thank you.
MR. CIRESI: My apologies, Your Honor.
BY MR. CIRESI:
Q. May we first go to "Growing our Business." "Growing
our Business."
A. Yes, I have that.
Q. All right. Now first of all, you, as we've gone
over before, at this
time, February 24th, 1995, you said your one all- consuming ambition
was to
create wealth for the owners of Philip Morris; correct?
A. Yes, that's right.
Q. That's February 24th, 1995. Wealth.
How many shares of stock did you own in Philip Morris
on that day?
A. Well I don't remember, but I would have thought
some 30 or 40
thousand shares, something of that nature.
Q. Thirty or 40 thousand shares.
What was the share price?
A. February 24, 1995? I don't remember, sir.
Q. Do you remember, if we jump ahead a little bit
to the day this
settlement was announced in June of 1997, how many shares you owned?
A. June 1997?
Q. Yes.
A. Yes. I think I would have owned about 78 thousand
shares. Close to
that.
Q. Seventy-eight thousand shares.
A. I think so, yes.
Q. And how many options did you have at that time?
A. At that time? I would have had about --
What was the date again?
Q. Day of the settlement, June 20th, 1997. Proposed
settlement.
A. Well I would have owned, I think, about 2.8 million.
Q. 2.8 million.
A. I think.
Q. When the settlement was announced, this settlement,
what happened to
the stock of Philip Morris?
A. I think it went up, then it went down.
Q. It went up over three points; didn't it?
A. I don't remember that. I -- it went up, but I
don't remember how
much.
Q. Yes. And three points with over two million shares,
that would be
about six million dollars; correct?
A. That's the right mathematics.
Q. Yes. And how much did the market value capitalization
rate of that
corporation go up on that day that this settlement was announced?
A. Well if it was three dollars, and I'm not sure
that it was, if it
was three dollars, the company has 2.4 billion shares outstanding,
so that
would be 7.2 billion dollars.
*17 Q. So in one day, with the announcement of this
so-called proposed
settlement, the stock -- or the worth of the company went up 7.2 billion;
is that right?
A. That's right, if three dollars was the right
number, sir.
Q. Well if it's two dollars --
A. Sure. Well that's -- that's a 33 percent reduction.
Q. Still not a bad increase; is it, sir?
A. Yes, it's a good increase. It subsequently came
down, though, I'd
have to remind you.
Q. Went up on the announcement of this settlement;
didn't it?
A. I think it went down the next day.
Q. Sir, it went up on the announcement of this settlement.
A. That's right.
Q. Thank you.
And your goal, as stated in your February 24th,
1995 annual statement,
was to our one all-consuming ambition is to create wealth for the owners
of
Philip Morris; correct?
A. That's what I said there, yes. That's right.
Q. And then you had another section which talked
about maximizing
shareholder value; correct?
A. Yes, that's right.
Q. And then you had another section which dealt
with defending our
company; correct?
A. That's right.
Q. And that's the one where you said we're going
to go on the offensive
to vindicate our rights; correct?
A. Well let me see that.
Q. Right at the bottom, sir. You'll recall we went
over that yesterday.
A. You're quite right, yes.
Q. Now things changed between June of 1994 when
you took over and when
you decided to try to negotiate a settlement with certain attorneys
general; didn't you? Didn't it?
A. June '94?
Q. June of 1994 when you took over as CEO and the
day that you decided
to enter into a settlement with certain attorneys general, things changed;
didn't they?
A. Which things, sir?
Q. Course of litigation changed for one; didn't
it, sir?
A. Yes, I said that.
Q. Okay. The documents, 30 million here in Minnesota,
started coming
out; didn't they, sir?
A. I believe they came out in -- I'm not sure, but
I think in 1996 or
'97. I said that, I think, yesterday to you.
Q. And you fought those documents in this state
up to the Minnesota
Supreme Court and indeed up to the United States Supreme Court; didn't
you?
MR. BLEAKLEY: Objection, Your Honor, that's irrelevant
and prejudicial.
THE COURT: No, you may answer that.
Q. Didn't you, sir?
A. Well if you're telling me we did, I'll believe
you, sir.
Q. You don't know?
A. I'm not that familiar.
Q. Do you know that you went to the Minnesota Supreme
Court -- let me
strike that.
Do you know you went to the Minnesota Court of Appeals
and lost, you
went to the Minnesota Supreme Court and lost, and you went to the United
States Supreme Court and lost? Nobody told you that?
A. Sir, there have been so many cases that frankly
I can't keep track
of them all, and if you're telling me that that's what happened, I
shall
assume that's what happened.
Q. Tell me one other attorney general other than
Attorney General Skip
Humphrey that took you to the United States Supreme Court on these
cases.
*18 MR. BLEAKLEY: Objection, Your Honor.
Q. On these cases.
MR. BLEAKLEY: Same objection.
THE COURT: Well you may answer if you know.
A. I don't know of any, sir. I -- I just don't know
if there were or
not.
Q. Tell me one other state that you have set up
a depository pursuant
to the request of the lawyers representing that state as you have in
Minnesota. One other state.
A. I don't -- I don't know of any.
Q. There's none; is there, sir?
A. I don't know, sir.
Q. Well you would know if you put 700 people to
work for nine months
setting up a depository in another state; wouldn't you?
A. Well I -- I would know I'd have thought, but
I just don't know. I'd
have thought somebody would have told me that, but I don't know. But
I'll
assume if you're telling me that's the case, that is the case.
Q. And you took this action right here to the state
of Minnesota trying
to get the case thrown out; didn't you?
MR. BLEAKLEY: Same objection, Your Honor.
A. Took which action, sir? Sorry.
Q. This case. You took this case to the Minnesota
Supreme Court to try
to get it dismissed; didn't you?
A. Well I'd expect that's what we would have done,
yes.
Q. And you lost; correct?
A. I guess we did if we're here today.
Q. You guess we did if you're here today; is that
what you just said?
A. That's what I said.
MR. BLEAKLEY: Same objection, Your Honor.
THE COURT: You may answer if you know.
Q. And that took place between your fighting statements
of February of
1995 and the proposed settlement with some attorneys general in 1997;
correct, sir?
A. What took place, sir?
Q. You lost in the Minnesota Supreme Court trying
to get the case
thrown out.
A. Well I don't know the date, but if you're telling
me that's right,
I'll -- I shall assume you're right.
Q. Now when you were giving your rendition of issues
that you said led
you to conclude you should enter into a negotiation, you didn't mention
the
health of the smokers. Do you remember that?
A. I don't recall if I did, sir, no. Oh, excuse
me.
Q. May I approach, Your Honor?
You don't remember if you did.
A. I think I said that I was concerned by the consensus
of the health
authorities, and that's why they were at the negotiating table with
us.
Q. The health authorities weren't at the negotiating
table with you.
That's just flat-out false; isn't it, sir?
A. My understanding was that we had representatives
of the health
organizations at the negotiating table, sir.
Q. One person representing one organization; isn't
that correct?
A. Well I know he was there, but I thought he was
also representing
others.
Q. You did.
A. Yes, I did.
Q. The settlement has been roundly criticized by
leading organizations
in this country which deal with the public health; correct?
A. Yes, I'm aware of that.
Q. The American Medical Association; correct?
A. Yes, I believe they have.
Q. The American Lung Association; correct?
*19 A. Yes, I know they have.
Q. The American Heart Association; correct?
A. I don't know about that.
Q. The American Cancer Society; correct?
A. I believe so.
Q. And numerous senators and congressmen and even
the White House have
criticized this settlement, proposed settlement --
MR. BLEAKLEY: Object.
Q. -- with certain attorneys general; correct?
MR. BLEAKLEY: Objection, Your Honor, this is getting
very argumentative
and it's also not relevant.
THE COURT: No, you opened the door, counsel.
Q. Isn't that right, sir?
A. I'm not familiar that the White House has criticized
it, sir. I
thought the president actually had a press meeting and thought that
there
were some very good elements in it and set out some principles that
he'd
like to see included.
Q. Yeah. And he set out some principles that weren't
very good, like
immunity; correct?
MR. BLEAKLEY: Objection, Your Honor, this is getting
argumentative
again. And I was barred from asking any questions about the White House.
THE COURT: Okay. Sustained.
BY MR. CIRESI:
Q. Now when you said you were concerned about certain
things, here's
what you said, sir:
"Why was I concerned? Well, I felt that many of
these things could harm
our company and our investors significantly, not to mention our employees
and our suppliers. I think there are maybe two million jobs in the
U.S.
dependent upon the tobacco industry, and I think that has a very important
economic impact." Do you remember that answer?
A. Yes, I do.
Q. Not a word about the victims of your company's
conduct; correct?
A. I think that I went on to talk about youth smoking
also, that I was
concerned about youth smoking. I think I also went on to say that I
was
very concerned about the public perception of the tobacco industry,
and
that bothered me. I thought that was a very big societal problem.
Q. Yes.
A. I believe I said that.
Q. The public perception. What about the people
who are dying from your
product? What about those people? You didn't mention them; did you?
A. Well, sir, if there are people who are ill and
they are smokers and
they are adult smokers, I believe they've taken the free choice to
smoke
cigarettes. There are 50 million adult smokers in America today.
Q. You said earlier in your testimony that if people
were addicted,
their choice was limited.
A. You asked me that. I did say that, yes.
Q. You did say that.
A. If they were addicted.
Q. Yes.
Yesterday as I walked out of the courtroom, Mr.
Bible --
Did you see the children in the courtroom yesterday?
A. No, I didn't.
Q. Yesterday I walked out and somebody asked me
to ask you a question.
I'm going to ask you the question. The question is this: Having in
mind
that you acknowledged under oath that nicotine is a poison and having
in
mind that you acknowledged under oath that nicotine is addictive, why
do
you sell a poisonous and addictive product? Can you answer that?
*20 A. I don't believe that a cigarette is poisonous,
sir.
Q. That's your answer?
A. That is my answer, yes.
Q. Now let's go back to what took place between
1995 and 1997. In 1995,
if there were no lawsuits brought by the attorneys general, all the
documents that have come out wouldn't have come out; isn't that correct?
A. I don't know.
Q. Well you do know that they came out in this lawsuit
in this state
because the Attorney General of this state brought his action. You
do know
that.
A. I do know they're out here, yes, sir.
Q. Yes. And those had never been out before, as
you said earlier in
your testimony.
A. That's right, sir.
Q. And you could have --
A. In fact I should -- may I --
I believe some of them had in fact been in the public
arena before.
Q. Some.
A. Yes.
Q. Very few; correct?
A. I don't know.
Q. And they came out in another lawsuit; isn't that
right?
A. I believe so, yes.
Q. Okay. Now if there weren't the lawsuits, then,
all this information
that Congress has demanded be made public wouldn't even be known; would
it?
A. Which information is that, sir?
Q. The information in your company documents which
show what you and
all these other defendants have known for the last 40 years, sir.
MR. CORRIGAN: Object to the form of the question
with respect to B.A.T
Industries, Your Honor.
MR. CIRESI: I'll amend it.
No, I will not amend it, Your Honor. It includes
B.A.T Industries. They
may not be a manufacturing defendant, but they're a defendant and their
documents have been produced.
MR. CORRIGAN: Your Honor, the company wasn't even
in existence at the
time period he's talking about.
THE COURT: Okay. You may answer the question.
THE WITNESS: Could you repeat the question, Mr.
Ciresi?
MR. CIRESI: May I have it back.
(Record read by the court
reporter.)
A. Well I don't know. They may have been or they
may not have been, but
they've certainly been made public now.
Q. They certainly have.
When you became CEO in June of 1994, did you say,
"Open up the vaults,
get the documents out?" Did you say that?
A. No, I did not.
Q. Did you say, "Let's tell everybody what we've
known for the last 40
years?" Did you say that?
A. No, I did not. I've told you what I --
Q. Did you?
A. No, I did not. I told you what I have done.
Q. Did you do it in 1995?
A. What, sir?
Q. Say, "Let's open up the vaults and let the fresh
air in and let
people see what we knew for the last 40 years." Did you do that?
A. No, I did not.
Q. Did you do it in 1996?
A. No.
Q. Did you do it in 1997?
A. No. I did it in 1998.
Q. You've only done it in 1998 when you went to
Congress asking for
some things; correct?
A. I did it in 1998.
Q. Yes, when you went to Congress asking for certain
things; correct?
A. I told Congress I would release the documents.
Q. And you wanted certain things from Congress;
didn't you?
*21 A. Well I wasn't asking Congress anything. I
was -- I think that I
urged them to enact the proposed resolution into legislation.
Q. And you were asking for certain things for your
company to protect
its wealth; weren't you?
A. Yes, I'm asking for civil liability limitations
in the proposed
resolution.
Q. And this Action Against Access, did you suggest
that be done in
1994?
A. That was done in 1995. It took us a bit of time
to figure out what
it was we could do, and we figured it out and we did it, I think, in
May
1995.
Q. After the lawsuits; correct?
A. Well that's right, yes. But I don't think there
was any connection
between the two.
Q. You never did it in the 40 years before that.
Your company, sir.
A. Yes, sir. I was appointed in -- as the CEO in
June '94, and we did
it in May '95.
Q. Yes. Your company never did it before this lawsuit
was brought;
correct?
A. I'm not contesting that. I'm telling you what
I did when I became
CEO.
Q. Now the ceasing of the sampling of cigarettes,
that was in 1995; is
that right?
A. That was part of Action Against Access, yes.
Q. Never did that before this lawsuit; did you?
A. No, sir, I did it as soon as I could sensibly
do something when I
was in my new position.
Q. The ceasing of the mailing of cigarettes, you
never did that before
this lawsuit was filed; did you?
A. No, but I did it in 1995.
Q. After the lawsuit; correct, sir?
A. I didn't see any connection between the two,
frankly.
Q. You didn't.
A. No, I didn't.
Q. Now can you turn, sir, to --
By the way, you said you entered into a settlement
with some attorneys
general; correct?
A. Yes.
Q. Not all the attorneys general of this country
support that; do they?
A. Excuse me?
Q. Not all the attorneys general of this country
support that; do they?
A. No, I believe that 36 support it.
Q. Do you know what Wisconsin thinks about the settlement?
A. No, I don't.
Q. Do you know what Michigan thinks about the settlement?
A. Michigan? No, I don't.
Q. Do you know what Missouri thinks about the settlement?
A. No, I don't.
Q. Do you know what Utah thinks about the settlement?
A. No, I don't.
Q. Do you know what Maryland thinks about the settlement?
A. Maryland? No, I don't.
Q. Do you know what Iowa thinks about the settlement?
A. No, I don't.
Q. Now you negotiated, you said, with Mr. Moore,
the Attorney General
of Mississippi, and some lawyers who had class actions; is that right?
A. That's right. That's my memory of the group,
yes.
Q. Did they represent any clients whatsoever?
A. I believe so. I believe they filed class actions,
yes.
Q. Tell me where a class action was certified. Name
me one.
A. I believe a class action was certified in Philadelphia.
Q. In Philadelphia?
A. I believe so, yes. I could have that wrong.
Q. For personal injury people?
A. I'm not sure.
Q. Ah.
*22 A. Could be wrong.
Q. Can you think of any other place where a class
action was certified?
A. Where it was certified? There are a couple of
others that have been
certified. They don't come to my mind just now. There was a class action
certified in Florida, the Broin case. I think the Engel case in Florida
was
also certified.
Q. The Broin case, that wasn't part of this settlement,
sir.
A. No, that -- that case continued and was settled.
Q. Yeah. That was a separate case. That lawyer didn't
want anything to
do with your settlement; did he?
MR. BLEAKLEY: Objection, Your Honor, it's getting
argumentative. He's
testifying. He's giving opinions of other people, and he doesn't have
any
more basis for it than I do.
THE COURT: Well I think it's a legitimate inquiry.
The witness made a
statement. He can inquire about it.
Q. Was the Broin class settlement part of this proposed
national
resolution?
A. No, it was not.
Q. And the lawyer for that class action opposed
this; didn't he?
A. I don't know.
Q. And he did have a class certified; isn't that
right?
A. Yes, I just said that to you.
Q. Now can you direct your attention, sir, to Exhibit
17624, which is
the settlement -- proposed settlement, excuse me. I'm sorry, it's Exhibit
24291. 24291.
A. Yes, I have it.
Q. Now can you go to --
A. It's in fact a Form 8-K for R. J. Reynolds.
Q. Well it has the settlement; isn't that right?
A. Yes. I think it does, yes.
Q. Counsel pointed that out to you, Mr. Bleakley;
correct?
A. Yes. That was a different document he gave me.
Q. This is it, 24291.
A. Well I didn't know it was the same number. Excuse
me.
Q. Now could you go to the page, it's about five
or six in.
A. Does it have --
Q. It's got some signatures on it. "CASTANO PLAINTIFFS
LITIGATION
COMMITTEE." Do you see that?
A. Yes.
Q. Do you know what that is?
A. I beg your pardon?
Q. Do you know who those are?
A. These people?
Q. Yes.
A. I would have met two of them, I think, sir.
Q. All right. Now Mr. Coale, he didn't have any
class action certified;
did he?
A. I don't know.
Q. Mr. Chesley, he didn't have any class action
certified; did he?
A. I don't know. I think they're involved in the
Castano class action
that was decertified by -- that was in the federal court. But I remember
they were filing class actions -- they probably had to file the state
class
actions.
Q. Ah.
A. Maybe. I'm not sure of that.
Q. The Castano class action which was filed where,
in New Orleans?
A. Yes, I think it was.
Q. And that was decertified by the Fifth Circuit
Court of Appeals;
correct?
A. Well I'm not sure who decertified it, but it
was decertified.
Q. Right. And it said that those folks couldn't
represent all these
people; didn't it?
A. It was decertified, but I think that they then
refiled the case in
many states.
Q. And none of those state actions, to your knowledge,
were ever
certified; were they, sir?
*23 A. Have yet been certified.
Q. Right. Isn't that right?
A. Have yet been, to the best of my knowledge. I'm
not certain about
that.
Q. So these individual plaintiffs' lawyers that
your people were
negotiating with didn't represent any class that had been certified;
isn't
that right?
A. None that had been certified. They'd certainly
filed cases.
Q. Now nobody authorized Mr. Moore to negotiate
on behalf of the state
of Minnesota, to your knowledge; did they?
A. Not to my knowledge. I don't think he represented
that he did.
Q. So you're not representing that Mr. Moore negotiated
on behalf of
every state in this union; are you?
A. No, I'm not. I don't think I have either.
Q. Now you said that the negotiations took place
in Washington?
A. Sir, I attended the original negotiation meeting.
It was the first
time we'd met with the parties we negotiated with, and that was in
Washington. I then did not participate any further in the negotiations
with
the other parties, but negotiating teams were put in place and they
met
frequently in many places, I think.
Q. So you didn't really negotiate any agreement
yourself; did you, sir?
A. No, personally I did not.
Q. You just met with a few lawyers and said we're
interested in doing a
deal; correct?
A. I think that's oversimplifying it, Mr. Ciresi.
Q. How long did the meeting take?
A. Which meeting?
Q. The meeting with these lawyers.
A. Which meeting?
Q. The meeting with the lawyers that you met with
in Washington.
A. Oh, I met with state AGs in Washington, I met
with lawyers, and I
met with the representative of the health organization.
Q. There was one meeting; correct?
A. One meeting?
Q. How long were you there?
A. I was there for probably about half an hour.
It was the initial
meeting that took place to make contact.
Q. Okay. One-half hour.
A. That I was present, yes.
Q. And that's the only time you were present ever
in any of the
negotiations; isn't that right, sir?
A. That's right. Yes, we had great, full teams of
negotiators, and they
did too.
Q. Well --
You said you had great teams; is that right?
A. Yes.
Q. Did a great job for you; correct?
A. No. I mean sizable teams, sir.
Q. Sizable.
Let's take a look, sir, at the civil liability section
and see what --
what it is --
A. Uh-huh.
Q. -- this proposed settlement provides for. We've
written on the
bottom page numbers so we could get to it a little quicker.
A. Uh-huh.
Q. Could you turn to page 28.
A. Yes, I have it.
Q. Now the first thing you said is that there were
two buckets, I think
you said. Is that what you said?
A. Yes, I used those words.
Q. And you were submitting to the FDA; is that what
you said?
A. Yes, I said that we would be regulated by the
FDA under the proposed
resolution.
Q. The FDA had already asserted jurisdiction over
you; hadn't it?
A. That was being appealed in the courts, I think,
sir.
*24 Q. Well I know you were fighting it, but they
had already asserted
jurisdiction over you; correct?
A. Yes. And we -- we concluded that was illegal
and we fought that in
the courts.
Q. Well, but they had asserted jurisdiction over
you.
A. They had.
Q. Right?
A. That's right.
Q. There's been a preliminary decision in that case;
correct?
A. There has, and it's on appeal.
Q. Yes. And you lost; correct?
A. They lost one, we lost one.
Q. You lost contesting the assertion of jurisdiction
to regulate the
product; correct?
A. That's right. And they lost the right to restrict
our advertising.
Q. Now, if we look at the civil liabilities, sir,
you wanted certain
types of immunity; correct?
A. Not immunity I don't think, sir.
Q. Well let's see if that's what it is. First of
all "General," do you
see that?
A. Yes.
Q. "Present Attorney General actions (or similar
actions brought by or
on behalf of any governmental entity), parens patriae" --
That means as the parent of the citizens; correct?
A. I don't know.
Q. -- "and class actions are legislatively settled;"
correct?
A. Yes.
Q. So you wanted this proposed settlement to settle
everything that was
out there; correct?
A. That's right.
Q. And in fact when you first met with these attorneys
general and
people who purported to represent individuals, you also said you wanted
criminal immunity; didn't you?
A. I don't recall that.
Q. Do you deny that?
A. I don't deny that, but I don't recall it. I didn't
ask for that.
Q. Well your lawyers did; didn't they, sir?
A. I don't know, sir.
Q. Didn't you instruct them to?
A. I did not.
Q. You also state here, "All 'addiction'/ dependence
claims are
settled...." Is that right?
A. That's what it says, yes.
Q. So that if this purported settlement were ever
enacted in the terms
of this agreement, any person in this country who felt they were addicted
as a result of your products, their claim was settled; isn't that right?
A. Their claim was settled, I think, as it says
here, under a class
action basis. They could take their claim forward as -- as an individual.
Q. Their claim was settled without ever having an
ability to bring
their claim with their own lawyer; isn't that right?
A. Ah --
Q. That's what you wanted to do.
A. Under a class action?
Q. Yes.
A. Uh-huh, that's right.
Q. Isn't that right?
A. That's right. But they could then bring their
lawsuit as an
individual.
Q. They can't. Their claim is settled, sir. All
addiction/dependence
claims are settled. Do you see that?
A. Yes, I do see that.
Q. That's what was being proposed; correct?
A. And all other personal injury claims are reserved.
Q. Right. But they couldn't allege that they were
addicted in those
cases; could they?
A. That's what that says, yes.
Q. Yes. So in other words, your companies wanted
to be relieved of any
liability for addiction or dependence claims.
*25 A. Under the proposed resolution, if I remember
correctly, I think
a billion dollars was being set aside for smoking cessation programs
--
Q. Ah.
A. -- per year.
Q. We'll talk about that, sir. But you wanted to
be relieved of all
addiction/dependence claims; correct?
A. We were settling them.
Q. Next, "Third-party payor (and similar) actions
pending as of 6/9/97
are not settled, but governed by provisions regarding past conduct
as set
forth in Section B below;" correct?
A. That's what it says, sir, yes.
Q. Now that would mean that any union, pension fund,
mutual fund,
anybody who wanted to bring a claim after June 6, 1997, and who didn't
know
you were negotiating with a few folks, couldn't bring a claim after
that
date; isn't that right?
A. Well they would be governed by the provisions
in Section B below,
which I need to read, sir.
Q. Well no, no. Read that again. "Third-party payor
(and similar)
actions pending as of 6/9/97 are not settled...." I'm asking about
the ones
that weren't pending as of June 9th, 1997.
A. Oh, I see.
Q. All those unions, pension funds, health plans,
they were all out the
window, too; weren't they?
A. They'd been settled by the payment under the
proposed resolution,
that's right.
Q. Who represented them?
A. The state -- state attorneys general.
Q. What state attorney general ever told you they
were representing
third- party payors?
A. I don't --
Q. Name me one.
A. I don't know, sir.
Q. Nobody represented them at this table; did they?
A. Not to my knowledge.
Q. No.
A. I thought the state attorneys general had authority.
Q. But you wanted to throw their claims out; didn't
you?
A. We were settling those, I thought, sir.
Q. Now we move down, "Provisions as to Civil Liability
for Past
Conduct." Correct?
A. Yes.
Q. This is the conduct over 40 years that we've
been talking about in
this lawsuit; correct?
A. Yes. That would include that.
Q. Now number one, "All punitive damage claims are
resolved as part of
the overall settlement. No punitive damage -- damages in individual
tort
actions." Is that right?
A. Yes, that's right.
Q. So everything was wiped out for the last 40 years;
correct, sir?
A. Yes, sir, by the sum payment of the settlement.
Q. And the sums that would be paid under the settlement
would be paid
on the backs of the smokers; correct?
A. Yes. That was insisted upon by the other side.
The health
organization, the state attorneys general insisted upon that, said
that the
price of the cigarettes would go up and the volume would go down.
Q. You'd pass on all 368 billion dollars to the
people you've addicted.
A. We were required to pass it on, sir, yes.
Q. Well that's what the language says, but that's
what you wanted;
isn't that right, sir?
A. Sir, this agreement says that it will be passed
on.
Q. Yes.
A. And we would pass it on.
Q. And you negotiated that agreement, and by "you"
I mean your lawyers;
isn't that right?
*26 A. My company helped negotiate the agreement.
Q. Yes.
A. Uh-huh.
Q. No class joinder. Do you see the next one, sir?
"Individual trials
only, no class actions, joinder, aggregations, consolidations,
extrapolations or other devices to resolve cases other than on the
basis of
individual trials, without defendant's consent." Is that right?
A. That's what it says, yes.
Q. So if one person who now couldn't bring an addiction
claim wanted to
bring a claim against your 68-billion-dollar corporation, they would
have
to go it alone; correct?
A. They would bring an individual claim, that's
right.
Q. Yes. And of course they could muster all the
resources that they
could individually against your company; isn't that right?
A. Well many people have sued the tobacco industry
individually, and
there's no lack of lawyers who wish to represent them, either, to the
best
of my knowledge.
Q. And you know, sir, that what your company and
others have said about
them; don't you?
A. Tell me, please.
Q. I will. RJR paraphrased Patton and said, "The
way we won all these
lawsuits was to make the other poor son-of-a-bitch spend all of his
money
and not by RJR spending its." Are you aware of that?
A. No, I'm not aware of that.
MR. BLEAKLEY: Objection, Your Honor, this is getting
extremely
argumentative.
THE COURT: He asked counsel for the quote and he
received it.
Q. You do know, though, sir, that you said on February
24th, 1995, that
we've never settled a lawsuit. You do know that; don't you?
A. Yes, I did say that.
Q. Now if you go down to number four, it provides
as follows: "Provided
that the five negotiating companies enter into the Protocol: Protocol
manufacturers to enter into joint sharing agreement for civil liability.
Protocol manufacturers not jointly and severally liable for liability
of
non- Protocol manufacturers." Do you know what that means?
A. It would seem to me that manufacturers of cigarettes
who had not
signed this agreement would be non-protocol manufacturers.
Q. And so that if all of you conspired over 40 years
and someone didn't
sign this agreement, the rest of you who signed it wouldn't be responsible
for the other one who didn't sign it; correct?
MR. BLEAKLEY: Objection, Your Honor, argumentative,
403.
THE COURT: Yeah. Rephrase that, counsel.
Q. Sir, if one found that all of you had conspired
together over 40
years and one or more of you did not sign the agreement, the person
who
brought the suit could only recover against those who signed the protocol
agreement; correct?
A. I can't follow that, sir. I'm sorry.
Q. Just can't answer that; is that right?
A. No, I just don't quite understand it.
Q. This was another immunity provision for you;
wasn't it?
A. I don't know that I'd describe it that way. We
were paying a lot of
money to settle a lawsuit -- lawsuits.
Q. Your customers are paying the money to settle
the lawsuit; aren't
they?
*27 A. Sir, our volumes will decline significantly,
and that is why the
other parties insisted that the price should be passed on in the package
of
cigarettes.
Q. And if the volume goes down, the price that you're
going to pay goes
down; doesn't it? Right off the base year.
A. The price of what?
Q. The price of the settlement. That was also negotiated;
wasn't it?
A. I don't get you. If the price goes down, our
profits go down, sir.
Q. Sir, if your volume of cigarettes go down, then
the amount you pay
under this settlement goes down.
A. Oh, yes. It's volume-related, yes.
Q. It's volume-related.
A. That's quite right, yes.
Q. So if the price goes up, the volume goes down,
it's not going to be
368 billion dollars; is it?
A. It depends how much the volume goes down. But
that's what the other
party insisted upon, sir.
Q. You mean the attorney generals that you negotiated
with said, "Ah,
Mr. Bible -- Mr. Bible's lawyers, we want to let you get off the hook,
so
we'll let you pay less money if the volume goes down for all your past
conduct."
A. They recognized and they felt it was very important
that the price
of the cigarettes go up, particularly since that would put them more
out of
reach of youngsters being able to buy them. They also recognized that
that
would mean the volume would go down.
Q. Well, they could have insisted, if they were
hard bargainers, that
even if the price goes down -- or excuse me, the volume goes down,
you
should pay for your past conduct; couldn't they?
A. Well then there would be no tobacco companies
left. They would be
bankrupt.
Q. Well you'd be bankrupt.
What happens in bankruptcy, Mr. Bible?
A. Well I'm not familiar with it, sir.
Q. You're not?
A. And if the business goes out -- goes out of business,
and in this
particular case I'd anticipate smokers would not stop smoking, I would
anticipate, if there are no cigarettes available here, you'd have
contraband coming into the country.
Q. Well let's talk a little bit what happens in
bankruptcy, since
you've speculated about it.
A. Uh-huh.
Q. Now when you started these companies, they were
just tobacco
companies; correct?
A. I didn't start them, sir.
Q. Well when the companies were started, they were
tobacco companies;
correct?
A. When our company started, it was a tobacco company.
Q. And then it bought other businesses from other
businesses; correct?
A. Yes, we bought and sold many businesses.
Q. Right. And you still are doing that today; aren't
you?
A. Not today. We bought some -- I think the last
big company we bought
was about five or 10 years ago.
Q. All right. So you could sell what you have today;
couldn't you?
A. Yes, we could.
Q. You could sell the food group; couldn't you?
A. Yes, we could. We don't want to.
Q. I know you don't want to. But you could sell
the food group;
couldn't you?
A. Yes, we could.
Q. You could sell the Miller Beer group; couldn't
you?
*28 A. Yes, we could.
Q. You could take all that money that you get and
you could use it to
settle the cases; couldn't you?
A. That money would be available for whatever use
it would be needed
for, sir.
Q. Yeah. And one of the things it could be available
for was to pay
appropriate amounts to those who are found to have been damaged by
your
conduct; correct?
A. Well as I understand, the defendant in this case
is Philip Morris
U.S. tobacco company. It doesn't own any food company, sir.
Q. Well that's another thing that you negotiated
here, or your people
negotiated. Only the manufacturing companies would be responsible,
not the
parents; correct?
A. Yes. They make the cigarettes.
Q. So that the parent company which owns other companies
bought on the
strength of the tobacco business wouldn't have to worry about those
companies being exposed to damages if this settlement went through;
correct?
A. I explained to you yesterday, I think, that the
tobacco companies
didn't buy the food companies. They were bought by funds borrowed which
the
holding company borrowed.
Q. Yeah. On the strength, sir, of the tobacco business.
That's where
the business started; correct?
A. The business started there. The monies were borrowed
from banks to
buy the food companies, and I believe the banks looked at the assets
we
were buying, sir.
Q. And they also look at the strength of the person
who is buying it;
don't they?
A. I have no doubt that they do.
Q. None at all; do you, sir?
You've been in finance a long time; isn't that right?
A. I have, yes.
Q. And they look, banks look --
A. I'm not a banker, but I know banks look at the
assets of the
company, sir.
Q. Thank you.
And the assets of the company were tobacco assets
when you started
buying companies; correct?
A. Yes, that's right.
Q. And that provision that you can't sue the parent
is right over on
page 29; isn't it?
A. I don't know. Can you point me to it?
Q. Sure. If you go over to page 29, the next page.
A. Well I'm on page 29 now, I think.
Q. And you see "Defendants-- a.?"
A. Yes, I do.
Q. "Actions may be maintained only against manufacturing
companies,
their successors and assigns...;" isn't that right?
A. Yes, that's what it says.
Q. Now the 368 billion dollars is going to be paid
by the smokers. You
also get a tax deduction for it; don't you?
A. We collect the money and pay it over to the government,
yes.
Q. So you're going to get a tax deduction; correct?
A. No, we -- we collect a dollar, we pay over a
dollar.
Q. Do you know if punitive damages are deductible?
A. I understand punitive damages are deductible.
Q. You think they are?
A. I believe they are.
Q. Okay. Now when you were negotiating this, your
lobbyists also snuck
through Congress a 50-billion-dollar tax credit; didn't they?
MR. BLEAKLEY: Objection. Objection to the characterization.
MR. CIRESI: Well I will -- I will restate it, sir.
*29 THE COURT: Restate it, counsel.
BY MR. CIRESI:
Q. During the time this was negotiated, your lobbyists
arranged for a
50- billion-dollar tax credit for your companies; didn't they?
A. My lobbyists?
Q. The tobacco industry's lobbyists.
A. Certainly not Philip Morris.
Q. You weren't going to benefit by that?
A. I beg your pardon?
Q. You weren't going to benefit by that 50-billion-dollar
--
A. We would have, but I can tell you Philip Morris
had nothing to do
that, to the best of my knowledge, sir.
Q. To the best of your knowledge.
A. Yes.
Q. Who did it, sir?
A. I don't know.
Q. Was it R. J. Reynolds?
A. I don't know.
Q. Was it Brown & Williamson?
A. I don't know.
Q. Was it --
A. But I -- I was asked in Congress that question
and I testified that
we did not do it.
Q. Was it American Tobacco?
A. I have no idea, sir.
Q. Was it Lorillard? Was it Lorillard?
A. I don't know.
Q. Well haven't you gone around to the other CEOs
and said, "Who did
this?"
A. No, I have not.
Q. Did it come out of the air?
A. No, I didn't -- I --
I don't know where it came from, but I -- I understand
it was rescinded
very shortly thereafter.
Q. When it was found out it was rescinded; correct?
A. But I understood that the legislation had been
signed by all the
relevant parties.
Q. Pardon me?
A. I understood that the legislation had been signed
or the bill had
been signed by the relevant parties.
Q. By the relevant parties?
A. Yes.
Q. What do you mean by that?
A. Well the Congress and the White House.
Q. And it was found out that there was this provision
that was going to
grant your industry a 50-billion-dollar credit; isn't that right?
A. Well it was in there.
Q. Yes. It's out now; isn't it?
A. Sir, I had nothing to do with that.
Q. Sir, it's out now; isn't it?
A. Yes, it was taken out. It was in and it was taken
out. But it was
certainly not to my knowledge.
Q. When it was found out --
When it was found out and disclosed, action was
taken; correct?
A. Yes, that's right.
Q. Action was taken by Congress; correct?
A. Yes.
Q. Now we have seen here in this case documents
coming out; correct?
A. Yes.
Q. I'm over here, sir. Is there somebody you were
looking at?
A. No, sir.
Q. Okay. Now there's documents coming out in this
case; correct?
A. Yes.
Q. And actions being taken in this case with regard
to those documents;
correct?
A. Which actions, sir?
Q. We're looking at and seeing what your company
knew over 40 years;
correct?
A. Well I believe you are, yes.
Q. And you've seen many of them for the first time
as you testified to;
isn't that right?
A. Yes, that's right.
Q. Where in this settlement agreement does it talk
about nicotine?
A. I don't know that it does, sir. I think the FDA
regulation role
discusses nicotine.
Q. Tried to curtail the FDA's authority to regulate
nicotine; didn't
you, sir?
*30 A. We, I think, placed in here certain elements
or conditions,
because under the FDA rule they have the right to ban the product,
and we
felt that would be inappropriate, that that's Congress's right.
Q. You also built in here in this negotiation issues
-- or excuse me,
clauses regarding how nicotine should be reduced or not reduced; isn't
that
right?
A. I think we've built in here that nicotine would
be reduced within
three years, and that it could only be reduced within the next nine
years,
I think, if it could be demonstrated that the product could be commercially
feasible, technologically feasible and would not lead to contraband.
Q. Well, sir, it is well known that you can -- you
can eliminate almost
all nicotine, so it is commercially feasible; isn't it?
A. We know it's -- that's technologically --
Q. Technically feasible; isn't that right?
A. It is technologically feasible.
Q. You testified to that yesterday; didn't you?
A. I --
Sir, you used the wrong word, not me.
Q. Oh.
A. I'm saying it's technologically feasible, but
I said yesterday and
again today it was commercially unfeasible.
Q. Okay. But it is technologically feasible; correct?
A. Absolutely. We built a plant and spent over 300
million dollars.
Q. You talked to Mr. Bleakley about that; correct?
A. He raised the matter with me, yes.
Q. So that nicotine can be almost entirely eliminated
in cigarettes;
can't it, sir?
A. Uh-huh.
Q. Now the FDA right now has unfettered authority
to regulate nicotine;
doesn't it?
A. Under the rule that's being appealed in court.
Q. It does have it right now; doesn't it, sir?
A. I believe it does.
Q. Now, who gave authority to Mr. Moore, an attorney
general from the
state of Mississippi, to negotiate on behalf of the federal government
to
curtail a federal agency's authority and power to protect the public
health?
A. Well I don't believe he was negotiating on behalf
of the federal
government. I think he was negotiating on behalf of the states attorneys
generals.
Q. He wasn't negotiating on behalf of the state
of Minnesota.
A. No, but the states he's representing.
Q. And he only represents Mississippi; correct?
A. Well I believe he was negotiating for other states,
too.
Q. Do you know what state he had authority to negotiate
on behalf of?
A. No, I don't. I believe there were numbers of
them negotiating
together, sir.
Q. Now who gave any of those people the authority
to negotiate on
behalf of the federal government to curtail the authority of the Food
and
Drug Administration to regulate nicotine? Who?
A. I don't believe he represented he had that authority.
This was
proposed -- this agreement is proposed legislation, sir.
Q. And you know that Dr. Koop, the former Surgeon
General, has roundly
criticized this.
A. Yes, I know he has.
Q. You've read what he's said about it; haven't
you?
A. I've read some of the things he said about it.
*31 MR. CIRESI: May I approach, Your Honor?
THE COURT: Yes.
MR. BLEAKLEY: Your Honor, may we have a side-bar
on this?
MR. CIRESI: May I approach, Your Honor?
(Document handed to the
witness.)
BY MR. CIRESI:
Q. Mr. Bible, I've handed you what has been marked
as Exhibit 24376. Do
you see that, sir?
A. Yes, I do.
Q. It's an editorial published in the Journal of
the American Medical
Association. Do you see that?
A. Yes, I do.
Q. "Reinventing American Tobacco Policy, Sounding
the Medical Community
Voice." Do you see that?
A. Yes, I do.
Q. And it's written by C. Everett Koop, M.D. Do
you know who he is?
A. Yes, I do.
Q. Former Surgeon General of the United States;
correct?
A. Yes, that's right.
Q. David C. Kessler, M.D. Do you know who he is?
A. Yes.
Q. Former head of the Food and Drug Administration?
A. Yes.
Q. George Lundberg, M.D., do you know who he is?
A. No, I don't.
Q. He's with the Journal of the American Medical
Association.
You've read this; have you not?
A. No, I have not read this.
Q. You know that this was designated as one of the
documents?
A. No, I don't know that.
Q. You don't.
A. No, I don't.
Q. Now you do know that Dr. Koop has roundly criticized
this proposed
settlement; don't you?
A. I think he's been quite critical of it. I think
he would like a
settlement, but he's been critical of this one. That's my understanding.
Q. And you know that Dr. Kessler has roundly criticized
this; don't
you?
A. Again, I think he's been critical of this, but
that he would like a
settlement.
Q. He doesn't want a settlement anywhere near the
terms of this
proposed settlement; does he?
A. He's been critical of this, I believe, yes.
Q. And so has Dr. Koop; hasn't he, sir?
A. He has been, yes.
Q. And so has Dr. Lundberg of the American Medical
Association; isn't
that correct, sir?
A. That's correct.
I should say that I believe Dr. Kessler felt that,
when he promulgated
the FDA rules, that he thought that that would reduce youth smoking
significantly, I think by 50 percent, and in fact the proposals in
this
resolution go far more than the proposals in the FDA rule.
Q. Why don't you direct your attention, then, to
the last page. We'll
see what Dr. Kessler says.
MR. CIRESI: We'd offer Exhibit, Your Honor, 27346
under rule 803(24).
MR. BLEAKLEY: I've stated my objection, Your Honor.
THE COURT: All right. That will be allowed into
evidence.
BY MR. CIRESI:
Q. Title is "Reinventing American Tobacco Policy."
Do you see that?
A. You said go to page -- the last page?
Q. Well I wanted to get the title first.
A. Oh, I'm sorry.
Q. Do you see it?
A. Yes.
Q. "Reinventing American Tobacco Policy?"
A. Yes, I do.
Q. Okay. And in the beginning it states. "1998 may
be the most
important moment in the history of the tobacco wars, a moment when
America
chooses between a path toward social repair or one toward irrevocable
public loss. Winston Churchill said, 'Americans can be counted upon
to do
the right thing -- after trying everything else."' Do you see that?
*32 A. Yes, I do.
Q. Can you turn to the last page.
A. Yes.
Q. And do you see there in the first column the
following statements by
Drs. Kessler, Koop and Lundberg: "Basically, the tobacco industry seeks
three fundamental refuges. First, it seeks to protect itself from
accountability for past, present, and future wrongdoing. Second, it
seems
to diminish or weaken individual and group access to the fundamental
right
of due process. Third, it seeks to limit federal agencies from having
oversight and regulatory authority. It also seeks, through 'the
settlement,' to obtain a measure of social respectability -- to be
seen as
a responsible member of the business world rather than a group of corporate
renegades that operate outside the bounds of social norms. The extent
that
the tobacco industry has gone to secure special privilege and protect
itself, individually and collectively, from liability from past and
future
health effects from tobacco use has raised a red flag in the public
health
community. With such a glaring difference between what is right and
wrong
for the public, Congress should have little difficulty in choosing
a course
that contains no deals and no trades. We support tobacco legislation
by
Congress, but we are opposed to granting any concessions to the tobacco
industry."
Do you see that, sir?
A. Yes, I do.
Q. And do you know, sir, that that is also Attorney
General Skip
Humphrey's position?
A. Which position, sir?
Q. That was stated right there by Drs. Kessler,
Koop and Lundberg. Do
you know that?
A. Well, I didn't know that, but --
Q. You know that he's standing with them; don't
you, sir?
A. Yes, I know that he has --
I don't know if he's standing with them, he didn't
sign this, but I'll
accept, if that's what you're saying, that that is correct.
Q. He's standing with them in supporting this proposed
or purported
settlement; isn't he?
A. In supporting it?
Q. In --
A. Opposing it.
Q. -- opposing it.
A. Well yes, he certainly is.
MR. CIRESI: Thank you, sir, I have no further questions.
MR. BLEAKLEY: I just have a very few questions.
I don't know whether
I'm on or not.
THE REPORTER: You're on.
BY MR. BLEAKLEY:
Q. Is Attorney General Michael Moore of Mississippi
the only Attorney
General of a state in the United States who signed this agreement?
A. No, there are others who signed it, sir.
Q. Is he the only attorney general of any state
in the United States
who supports this agreement?
A. No. I believe 36 state attorneys general support
it.
Q. The attorney general of Florida, for example,
was part of the
negotiations of this settlement; isn't that correct?
A. That's correct, sir, yes.
Q. What about the attorney general of Texas?
A. Yes, I believe he was.
Q. Was Attorney General Humphrey in any way excluded
from the
negotiations?
A. No, not to my knowledge.
Q. In fact, if this national resolution is adopted
by Congress, would
the state of Minnesota participate?
*33 MR. CIRESI: Your Honor, I'm going to object
to this. Number one,
it's leading, and it's irrelevant.
THE COURT: I think that's an objectionable question,
counsel. You'll
have to rephrase that.
MR. BLEAKLEY: I'm sorry, Your Honor, I didn't hear.
THE COURT: You'll have to rephrase the question.
Q. If the national resolution is adopted in the
federal legislation,
would the state of Minnesota receive any funds?
MR. CIRESI: Objection.
A. Yes, I believe they would.
MR. CIRESI: Excuse me, sir. Objection, it's irrelevant
-- irrelevant
and speculative because we don't know what the resolution will be.
THE COURT: Sustained.
Q. If the national resolution is adopted by the
Congress and enacted
into legislation, will the profits of the tobacco companies decline?
A. Yes, they will.
MR. CIRESI: Objection -- excuse me, sir. Objection,
Your Honor, that's
rank speculation.
THE COURT: Well I'll let you answer that.
A. Yes, they will, sir.
Q. And why is that?
A. Because the volumes will decline quite significantly
as the prices
go up.
Q. Now is this national resolution currently being
debated in the
United States Congress?
A. Yes, it is.
Q. To the best of your knowledge, is everyone who
has views on any side
of the issue being given the opportunity to express their views?
A. Yes. I think a wide range of views is being obtained
by a wide
number of committees.
Q. And who ultimately will make the decision about
the extent of FDA
regulation?
A. Congress, I believe.
Q. The President of the United States?
A. That's the President of the United States, yes.
Q. It won't be Attorney General Michael Moore of
Mississippi?
A. No, sir.
MR. BLEAKLEY: Excuse me a moment. Could I consult
with counsel for just
a second?
(Discussion off the record.)
MR. BLEAKLEY: Nothing further, Your Honor.
MR. CIRESI: I have just one question, Your Honor.
MR. BLEAKLEY: Your Honor, we had a rule in this
case of two per side.
THE COURT: You may step down.
MR. BLEAKLEY: Thank you, Your Honor.
THE COURT: You don't have to, but you may step down.
THE WITNESS: I may step down?
(Laughter.)
THE WITNESS: Thank you very much, Your Honor.
THE COURT: Do you want to go home?
MR. CIRESI: I think the jury might want to.
THE COURT: We'll take a vote.
All right, we'll recess at this time.
(A juror raises her hand.)
THE COURT: You don't get a vote.
(Laughter.)
THE COURT: We'll recess, reconvene tomorrow morning
at 9:30.
THE CLERK: Court stands in recess.
(Recess taken.)