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