V.
PHILIP MORRIS, INC., ET. AL., DEFENDANTS.
TOPIC: TRIAL TRANSCRIPT
TRANSCRIPT OF PROCEEDINGS
DOCKET-NUMBER: C1-94-8565
VENUE: Minnesota District
Court, Second Judicial District, Ramsey County.
YEAR: March
5, 1998
A.M. Session
JUDGE: Hon. Judge Kenneth J. Fitzpatrick, Chief Judge
TEXT:
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.")
THE COURT: Counsel.
MR. CIRESI: Thank you, Your Honor.
Good morning, ladies and gentlemen.
(Collective "Good morning.")
MR. CIRESI: Your Honor, first of all, I'd like to
correct an exhibit number from yesterday. The last exhibit, which was the
article by Drs. Kessler, Koop and Lundgren, I incorrectly stated that it
was Exhibit 24346, it should be Exhibit 24376.
THE COURT: All right. The exhibit --
MR. CIRESI: Excuse me, it's the other way around.
I said 24376 yesterday, it should be 24346. Thank you, Ms. Walburn.
THE COURT: Yes. I think the exhibit has already
been remarked. It will show that.
MR. CIRESI: Thank you, Your Honor.
Your Honor, the plaintiffs would call for cross-examination
an adverse witness pursuant to Rule 611(c), Mr. Andrew Schindler.
THE CLERK: Mr. Schindler, will you please rise.
(Witness sworn.)
THE CLERK: Please state your name and spell your
last name.
THE WITNESS: Andrew J. Schindler, S-c-h-i-n-d-l-e-r.
THE CLERK: Thank you. Please have a seat.
THE COURT: Is that on?
THE REPORTER: Put your mike on, please.
THE WITNESS: Okay.
MR. CIRESI: All set?
THE WITNESS: Yup.
ANDREW J. SCHINDLER called as a witness, being first
duly sworn, was examined and testified as follows:
BY MR. CIRESI:
Q. Permit me to introduce myself, Mr. Schindler.
My name is Mike Ciresi and I'm one of the lawyers representing the state
of Minnesota and Blue Cross and Blue Shield.
A. Yes, sir.
Q. Sir, you are the present president and CEO of
RJR Tobacco Company?
A. Yes, I am.
Q. Okay. And I'd like to visit with you a little
bit about your history with RJR Tobacco.
A. Sure.
Q. You started with the company in 1974?
A. Yes, I did.
Q. And at that time you were performing a human
resource function?
A. Yes, I was.
Q. And you held that position until approximately
1976.
A. Yes. And that first position was with R. J. Reynolds
Industries or RJR Industries, which is the holding company.
Q. Okay. That would be the parent company --
*2 A. Yes.
Q. -- of RJR Tobacco.
A. Right. It's RJR Nabisco today. Then it was RJR
Industries.
Q. All right. Thank you.
And from 1976 to 1978 you were the national manager
of sales personnel; correct?
A. Yes, in the tobacco company.
Q. All right. And you moved back to the tobacco
company at that point.
A. That was my first job at the tobacco company.
Q. All right. And you held that position, I said,
until 1978; correct?
A. Yes, that's correct.
Q. Then you went back to RJR Industries as manager
of organizational development, and you held that position for approximately
three months?
A. No, it was a year and three months.
Q. A year and three months.
A. Yes.
Q. In 1979, then, you went back to RJR Tobacco;
correct?
A. That's correct.
Q. And you were director of organizational development
there; correct?
A. Yes, sir.
Q. You held that position till 1981?
A. Till around October of 1981.
Q. Then you became plant manager of an RJR tobacco
plant in Winston-Salem, North Carolina?
A. Yes, sir.
Q. And you held that position till approximately
1986?
A. Yes, till end of 1986.
Q. You then became a Nabisco director of manufacturing;
correct?
A. That's correct.
Q. Would that be back with the parent company then?
A. No, that was with Nabisco Foods, the food subsidiary
of RJR Nabisco.
Q. All right. So RJR Nabisco has a food operation
in addition to a tobacco operation; correct?
A. Yes.
Q. So in 1981 -- excuse me, 1986, you became a director
of manufacturing in the food division.
A. Well it was --
I started work there in January of 1987.
Q. And you held that position until sometime in
1988?
A. Yes. In October of 1988 I returned to the tobacco
company as the vice- president of personnel.
Q. And you held that position as vice-president
of personnel until approximately July of 1989 when you became senior vice-
president of manufacturing, engineering and quality assurance?
A. Yes, that's correct.
Q. You held that position until approximately 1994;
correct?
A. Yes, but what --
During that period from July of 1989 till May or
June of '94, I picked up additional responsibilities in the operations
side. Our packaging division, our tobacco processing, our distribution
functions became added to the ones you just listed, and I became the executive
VP of operations.
Q. Okay. So that was --
A. It was during that period.
Q. During that five-year period.
A. Five-year period, yes, sir.
Q. And by saying that you were in charge of those
operations, you had people reporting to you during that period of time
regarding those specific functions you just described?
A. Yes. Yes, sir.
Q. And then in June of 1994 you became the president
and chief operating officer of RJR Tobacco Company; correct?
A. Yes. Yes, sir.
Q. And then finally in July of 1995 you assumed
the position of chief executive officer of RJR Tobacco Company.
*3 A. Yes, sir.
Q. And you continued as president of the company;
correct?
A. Yes, sir.
Q. And do you hold those two positions today, sir?
A. Yes, sir.
Q. Now as the president and CEO, you have full responsibility
for domestic tobacco operations; right?
A. Yes, I do.
Q. And you report to Steven Goldstone, who is the
CEO of RJR Nabisco; correct?
A. Yes, sir.
Q. You're a direct report to him; correct?
A. Yes, sir.
Q. And one of your core responsibilities is to ensure
the short- and long- term profitability of RJR Tabasco -- Tobacco Company;
correct?
A. That is certainly one of my responsibilities.
Q. Now you also have duties to customers; correct?
A. I have duties to customers, to employees, to
people in the community where we operate,. --
Q. You have --
A. -- and the shareholders.
Q. You also have duties to shareholders; correct,
sir?
A. Yes, sir.
Q. And you have duties to the public health; correct?
A. Yes, I do.
Q. And would you agree that you can't place profit
above the public health?
A. I would agree with that, yes, sir.
Q. Health is your paramount responsibility; is it
not?
A. I have a paramount personal responsibility on
the health- related act -- you know, to the product with customers, I have
paramount responsibility to employees that work in our plants and so forth
with regard to safety and health in the work environment, and I think --
believe likewise with the community that we operate in, to assure that
we operate our manufacturing facilities in a
way that we comply with environmental laws and all of those issues so
that we don't put somebody at risk in the community. I think all of those
issues related to health and safety with those different constituencies
are relevant.
Q. And you would agree that the obligation and duty
of public health is your paramount responsibility as the CEO and president
of RJR Tobacco Company.
A. I -- I believe with this product, and we're talking
about cigarettes here, given the risk of the product, that it is a paramount
responsibility.
Q. It is the paramount responsibility; is it not,
sir?
A. I would say it is the paramount responsibility.
However, I would like to add to that, Mr. Ciresi, that I feel a similar
paramount responsibility for the safety and health of our employees, and,
as I said before, people in the community in terms of how we comply with
environmental laws. So I feel a -- a responsibility for health-related
and safety-related issues for those three constituencies in the course
of doing my job.
Q. Fair enough. Fair enough. You have a paramount
responsibility to protect the public health, whether it's your employees,
your customers, or the community at large; correct?
A. Yes, sir.
Q. And you understand that duty; don't you?
A. Yes, sir.
Q. And you have a duty to tell your consumers all
that you know about the
dangers of your product; do you not?
A. I believe that I have a personal duty, personal
responsibility to be sure that people that use our products are aware of
the risk, are knowledgeable of the risk of those products.
*4 Q. Sir, my question was a little different. My
question is this: You understand you have a duty to tell the public all
that you know about the dangers of your product; correct? And by "you,"
I mean RJR Nabisco.
A. I -- I believe that I have a duty or a personal
duty and responsibility to be sure, to assure the people that use our products
are aware of those risks. And that they are aware of those risks, I believe
people are aware of the risks of this product.
Q. But sir, that wasn't my question.
A. Well I'm --
Q. Let me --
A. -- not following you.
Q. Let me restate it for you. You have a duty and
responsibility to let the public know everything that your company knows
about the dangers of the product; correct?
A. Well, I believe I have a responsibility to ensure
that people are aware of the risks of the product when used -- and if there's
something we know about the product --
When you say "everything that we know," I think everything
that we know that has a material impact on people's understanding of the
risk of this product. I mean if the --
In conducting my responsibilities as the CEO, I
would not want to be selling a product that had risk, that people were
not aware that this product had risk, and I --
Q. You wouldn't want --
A. -- feel it's a responsibility to make them aware
of those risks or to be sure they are aware of those risks.
Q. You wouldn't want to withhold information that
the company itself knew about the dangers of the product; would you?
A. I wouldn't want to withhold --
I wouldn't withhold information that had a material
impact on people's understanding of the risk of the product.
Q. The company should not withhold information that
it knows about the dangers of its product; correct?
A. I don't think the company should withhold information
about the risk of a product that is material to people's understanding
of the risk of the product.
Q. And if the company did that over 40 years, then
it wouldn't have discharged its duty to the public; correct?
A. If the company withheld information from the public
over, you know, this 40-year period that you're referring to, that was
material to people's understanding of the risk of cigarette smoking, then
I would say they had not met their duty, or somebody didn't meet their
duty.
Q. Well do you know if RJR over 40 years asked people,
"What's material in your mind?" You keep using the word "material." Did
R -- RJR ever make that inquiry through a survey of its customers?
A. Not that I know of.
Q. So it would be fair to state that the company,
if it is aware of dangers, it has to get that information out because consumers
may not know; isn't that right?
A. I think consumers of cigarette products, I think
everybody in America recognizes that cigarettes are -- have significant
health risk associated with them.
Q. That wasn't my question, sir.
A. Well then I'm sorry. I don't know what you're
saying.
*5 MR. CIRESI: We'll have the question read back.
Can I ask to have the question read back, please.
(Record read by the court reporter.)
A. I -- I believe the company should ensure -- I
mean I think it's my responsibility to ensure that people are aware of
the risk of this product.
Q. And --
A. And --
Q. Go ahead, sir.
A. And -- well, I mean that's -- that's how I feel.
I mean that's my personal responsibility of working in this business. It's
an ethical responsibility.
Q. And the company has the ethical responsibility
to get out what it knows about the dangers of its product when it knows
it; correct?
A. What do you mean by "dangers?" I mean everybody
knows that cigarettes have health risk. I --
Are you talking about something specific? I mean
--
Q. Dangers that the company knows about the product.
You don't understand "dangers," the term?
A. Well --
Q. Because if you don't, we can start breaking it
down, if you don't, sir.
A. Well I understand "dangers." Cigarettes are viewed
and understood to be risky, to be dangerous, to have health risks in our
-- you know, in everyone's mind, in my mind, in smokers' minds, the public
health people.
Q. When the company --
A. So I -- if people -- my view is that, if I could
give you an example --
Q. No, I just want to know if you can answer my
question. Okay?
A. The company has a responsibility, I have a responsibility
to ensure that people understand that this product is risky.
Q. Did the company --
A. So --
Q. -- have that responsibility in 1954?
A. Well I would -- you know, I wasn't --
You know, I was 10 years old in 1954. If -- if people
felt the product was risky, I think people in 1954 -- I'm judging this
from 43 years later -- would have had the responsibility to ensure that
people were aware, if they knew that or believed it, were aware that the
product was risky.
Q. Does that mean yes?
A. Yeah.
Q. Thank you.
Does the company have a duty not to make false statements
regarding its product?
A. Sure. I think a company should not make false
statements about its product. I wouldn't --
I have that responsibility not to make false statements.
Q. Does the company have a duty not to make false
promises regarding its product?
A. Yes, we should not make --
I should not make or allow to be made false promises
or claims about our products.
Q. And the company has that duty; correct, sir?
A. Yes, the company has that responsibility.
Q. Does the company have a duty not to make misrepresentations
regarding its product?
A. Yes.
Q. Does the company have a duty not to make misleading
statements regarding its product?
MR. WEBER: Objection, Your Honor, it's one of the
things he asked just a moment ago. Asked and answered.
THE COURT: No, you may answer that.
THE WITNESS: I'm sorry, am I supposed to answer?
THE COURT: Yes.
THE WITNESS: All right.
THE COURT: You may answer.
*6 A. Could you repeat the question?
Q. Sure.
Does the company have a duty not to make misleading
statements about its product?
A. The company has a duty not to make misleading
statements about its
product.
Q. Does the company have a duty not to engage in
deceptive practices regarding its product?
A. Yes, I believe the company has a duty not to
engage in deceptive practices about the product.
Q. And do you know if RJR over the years has made
statements about its products, and specifically cigarettes?
A. Over the years, made statements about the --
about cigarettes?
Q. Yes.
A. Well there's --
Yeah, of course it has. I mean it has made statements
about its cigarettes over the years, yes.
Q. Has it issued press releases regarding its cigarettes?
A. Yes.
Q. Has it issued advertisements regarding its cigarettes?
A. Yes, sir.
Q. Has it intended people to rely on those statements
that it's made to the public?
A. Yes, sir.
Q. Can you direct your attention, sir, to Exhibit
20156. And there's two volumes to your right there, Mr. Schindler, and
that would be in volume two.
A. That's 20156.
Q. 20156, correct.
A. Sure, uh-huh.
Q. Do you have it, sir?
A. Yes, sir.
Q. And that's the RJR Nabisco annual report for
1996?
A. Yes, sir.
MR. CIRESI: Your Honor, we would offer Exhibit 20156.
MR. WEBER: No objection, Your Honor.
THE COURT: Court will receive 20156.
(Discussion off the record.)
BY MR. CIRESI:
Q. Do you have it, sir?
A. I'm on 20156, the RJR Nabisco annual report.
Q. All right. Can you direct your attention, then,
to page one of that report. It's entitled "Company Descriptions."
A. Yes, sir.
Q. Now in 1996 RJR was the second largest tobacco
company in the United States, manufacturing one of every four cigarettes
sold in the domestic market?
A. Yes, sir.
Q. Does that position hold today?
A. Yes, sir.
Q. Is the 1997 annual report completed yet, sir?
A. It wasn't as far as I know as I left last week,
or -- yeah. Last Friday it wasn't, I don't believe. It's close to being
produced, but --
Q. And you've been here since Monday?
A. No, since Sunday.
Q. Sunday. All right.
Did you have an opportunity to watch Mr. Bible's
testimony?
A. I watched about the first 15 minutes or so to
just get a feel for what the courtroom looked like and what you looked
like, Mr. Ciresi. You know, that was it.
Q. Okay.
A. It was about 15 or 20 minutes.
Q. Did you watch it by video at any other time?
A. It was -- it was on video, --
Q. Ah.
A. -- that 15 or 20 minutes in the office downstairs.
Q. All right. Now sir, can you direct your attention
to the second page of the annual report.
A. Yes, sir.
Q. And in 1996, the sales of RJR Nabisco were approximately
17 billion
dollars?
A. Yes, sir.
Q. Did that increase in 1997?
A. It --
Just a little bit, if at all. We're still essentially
in that 17-billion- dollar range.
*7 Q. Okay. And the tobacco sales in that year were
eight billion one hundred seventy-four million; right?
A. Yes. That's total international and domestic.
Q. And the operating income for RJR Nabisco was
two billion two hundred fifty-two million; correct?
A. Yes, sir.
Q. And of that operating income, approximately 82
percent, or one billion eight hundred forty-five million came from tobacco;
right?
A. Yes, from the combined worldwide tobacco operations.
Q. Did the tobacco operating income increase in
1997?
A. Yes, it did.
Q. Do you know what it increased to in 1997?
A. Ah --
Q. And I'm not asking you for an exact amount, but
approximately, sir.
A. Well, you know, to tell you the truth, I'm not
sure that the operating
income increased. Our -- I typically deal with a term we call -- the
one above it, operate company contribution. The domestic company's operating
company contribution increased in 1997 from one billion four hundred fifty
million in 1996 to one billion five hundred ten million in 1997. Because
this is a combined tobacco operations, I am not sure about what happened
to the international business's operating income in this context. Okay?
Q. Fair -- fair enough.
A. But I can get that for you, but I just --
Q. That's all right.
A. I don't like ad libbing off the top of my head
on these things.
Q. In 1996, then, of the 1.8 billion in operating
income, I think you just said, --
A. Yes.
Q. -- 1.456 of that operating income --
A. No, now we're back to operating income. Of the
-- there is a difference. I was talking about the above line. I don't mean
to make this complicated, but the above section was operating company contribution.
Okay. Of the 1.845 billion in operating income, the domestic company's
share of that is about a billion -- billion eighty-four million, something
like that.
Q. Okay.
A. Yeah.
Q. Let me see, then, if we have this straight. With
regard to the operating company contribution of the 2.253 billion in 1996,
1.456 billion --
A. Yeah, five --
Q. Sir, let me finish. All right?
A. I'm sorry.
Q. The 1.456 billion came from the domestic tobacco
company; correct?
A. Yes.
Q. Okay. And of the operating income of one billion
eight hundred forty- five million in 1996, approximately one billion eighty-four
million --
A. Yes.
Q. -- came from the domestic operations?
A. Yes, sir.
Q. And your income is in part tied to the operation
of the domestic company; correct?
A. Yes, sir.
Q. Now in --
At the end of 1996, RJR Nabisco had approximately
31,289,000,000 in assets; correct?
A. Yes, sir.
Q. Now sir, you are familiar with the Frank Statement;
are you not?
A. Yes, sir.
Q. And the first time you became aware of that was
in the summer of 1997.
A. No, no, it was -- it would have been somewhere
in the summer or early fall of '96.
Q. '96?
A. Yes, sir.
Q. What occasioned your knowledge of the Frank Statement?
*8 A. Well I began to become involved in the --
in the litigation, and in the -- that process I -- that's when I became
aware of the Frank Statement.
Q. Do you know who brought it to your attention?
A. It was, you know, with -- with my lawyers.
Q. If you could go to Exhibit 14145, sir.
A. Yes, sir.
Q. That is the Frank Statement; correct?
A. Yes, it is.
Q. Now does RJR Tobacco Company have a mission statement?
A. We have a -- a strategy statement. I'm not --
You know, our business strategy we define as to
be a strong number two. I'm not -- in the context of "mission statement,"
I'm not sure what you mean.
Q. By a strong number two, you mean you want to
be a strong number two in your various business segments; correct?
A. Well in our domestic tobacco business.
Q. Now I'm talking about a mission statement, what
principles that the company stands for. Is there any such mission statement?
A. I -- I have not instituted a mission statement
in the context that you are discussing, and I -- you know, I don't --
Q. Was there a mission statement in existence when
you took over as CEO of the company?
A. I don't remember one --
Q. Okay.
A. -- at the time.
Q. After you took over and you became aware of the
Frank Statement, did you issue a mission statement incorporating the principles
of the Frank Statement?
A. No, I didn't.
Q. Now you understand that RJR in 1954 made representations
to the public through the Frank Statement; don't you?
A. Yes, sir.
Q. And one of those representations is that the
company accepted an interest in people's health as a basic responsibility,
paramount to every other consideration in its business; correct?
A. Yes, sir.
Q. It also told the public that it believed that
the products it made were not injurious to the health; correct?
A. Yes, sir. That's what the Frank Statement says.
Q. That was a representation to the public; correct?
A. I believe so. I mean that's what they said in
the Frank Statement.
Q. And have you become aware, during the course
of your tenure as president and after you became aware of the Frank Statement,
that this was published throughout the United States?
A. Yes. As I became aware of this, it's my understanding
that it, as I recall, ran in something like 188 cities or around the United
States for a day or so back in 1954.
Q. And in that Frank Statement RJR also represented
to the public that it always has and always will cooperate closely with
those whose task it is to safeguard the public health; correct?
A. I -- I assume that's right. You're reading this
and it sounds like what I remember, but I'm not reading along with you.
Q. I'm sorry, sir. If you look to the first column
and you look right at the end of the first column.
A. Okay. Yes, sir. I've got it.
Q. "We always have and always will cooperate closely
with those whose task it is to safeguard the public health." Do you see
that?
*9 A. Yes, sir.
Q. Okay.
A. That's what it says.
Q. And you understood that representation was made
in 1954; correct?
A. Yes, sir.
Q. Now RJR Tobacco Company or RJR Nabisco has never
revoked these representations; have they?
A. No, sir, not that I know of.
Q. You've never seen any printed publication prepared
and distributed by RJR which said we revoke the Frank Statement.
A. No, sir.
Q. These --
A. I've never seen that.
Q. These duties and representations to the public
remain right up to today; don't they, sir?
A. Yes. This statement's never been revoked, so
this --
No. As -- as you already asked me, this statement
has never been revoked.
Q. Now sir, can you direct your attention to Exhibit
18 -- excuse me, 13334.
MR. CIRESI: And maybe we'll take a short recess,
Your Honor?
THE COURT: We'll take a short recess.
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: Mr. Ciresi, if I may give a constructive
suggestion, you are dropping your voice once in a while, and particularly
when you speak in terms of millions versus billions, and it may make a
difference, so it's been suggested that that be enunciated clearly.
MR. CIRESI: I will do that, Your Honor. I'm sorry.
THE COURT: Thank you.
MR. CIRESI: I apologize to the jury.
BY MR. CIRESI:
Q. Mr. Schindler, can you direct your attention
to Exhibit 12464.
A. Oh, I'm sorry, I'm --
Q. It would be in volume one, sir. I'm sorry. I
should have told you that.
A. I'm in the wrong book.
12464.
Q. Correct.
Now sir, you would agree that RJR should not be
marketing to youth; correct?
A. Absolutely. We don't market to youth.
Q. Has an absolute duty not to market to youth;
correct?
A. Yes, sir.
Q. Board of directors shouldn't be talking about
marketing to youth; correct?
A. I don't believe so. I mean we should --
We do not market to youth. I've been with this company
almost 24 years. I've never seen a marketing process or plan directed at
under-age smokers.
Q. You've been with the company since 1974; correct?
A. Yes, sir.
Q. When in 1974?
A. May of '74.
Q. So that during that period of time, the board
of directors certainly should not be talking about marketing to youth;
correct?
A. Since all of my experience with this company
and its policy not to market to youth, it would seem to me, by my judgment
sitting here today, or looking at anything related to youth marketing was
not a right thing to do. I sure wouldn't be talking to our board of directors
about marketing cigarettes to under-age smokers or analyzing under-age
smokers because the policy of the company, rigorously followed and enforced,
is not to do that, and it's been that way since I've been with this company.
Q. And that's May of 1974; correct?
A. Yes, sir.
*10 Q. And that should have been the policy of the
company all the way back to 1954; correct?
A. What policy are you -- are you referring to,
sir?
Q. Not to market to youth.
A. That was the policy of the company in -- I'm
sorry. Did you say back to '54?
Q. Correct.
A. Well my experiences with the company, from '74
forward, in my almost 24 years with the company I never heard anybody talking
about marketing plans directed at under-age smokers or marketing to under-age.
Q. Can you answer my question?
A. I don't know what's going on in 1954. To me,
you wouldn't -- as far back as you want to go, you shouldn't be marketing
cigarettes to people that are 14 years old, or youth, because of the risks
of the product.
Q. So the answer is yes, then; correct?
A. Yes.
Q. Thank you.
Now can you direct your attention to Exhibit 13334.
Excuse me. I'm sorry. It's 12464. You have that
in front of you, sir.
A. Oh, yes, sir.
Q. Now that's an RJR interoffice memorandum; correct?
A. Yes, sir.
Q. And that's --
The subject of that document is "CIGARETTE CONCEPT
TO ASSURE RJR A LARGER SEGMENT OF THE YOUTH MARKET." Correct?
A. Yes, sir.
Q. From Frank C. Colby, a senior scientist; correct?
A. Yes, sir. That's what it says.
Q. To R. A. Blevins, Jr., director of marketing
and planning; correct?
A. Yes, sir.
Q. High people in the company; correct?
A. I -- I don't know where they rank in the company
when you say "high people." These were not senior executives, if that's
what you're implying.
Q. Well one is --
A. They weren't vice-presidents. They weren't reporting
to the CEOs, to my knowledge.
Q. Well they were a --
For example, Mr. Colby, a senior scientist; correct?
A. Yes. I -- that's my understanding.
Q. And Mr. Blevins was the director of marketing
and planning; correct?
A. Yes.
Q. And he would report up through the chain all
the way to the board of
directors; correct?
A. Well I'm not sure I understand that.
Q. Well --
A. He didn't report to the board of directors. He
reported to somebody who probably reported to somebody who reported to
the operating head of the domestic tobacco company who reported to somebody
in the RJR Industries. So if -- if Mr. Blevins reported to the board of
directors on that concept, I suppose everybody in the company reports to
the board of directors.
Q. Well they do; don't they, sir?
A. I -- I've never really thought about it that
way.
Q. Well the board gets its information from the
company coming up from the bottom with regard to what's going on in the
operating units.
A. Well yes, sir.
Q. Okay. And if there's a number of levels of management,
they get information from the people down below them that are gathering
the information and operating certain departments; correct?
A. Information does come up from inside the organization.
Q. And it goes to the next level, and then if somebody
above that requested it, it goes up to that level; correct?
*11 A. Yes, sir.
Q. Sort of like the chain of command in the military,
isn't it, sir?
A. I'm very familiar with the chain of command in
the military.
Q. I know you are. You served our country; did you
not?
A. Served in Viet Nam.
Q. Yes?
A. Four years in the Army.
Q. So you are familiar with the chain of command;
are you not?
A. Yes, sir.
Q. And it goes right to the top; doesn't it, sir?
A. Yes, sir.
Q. And in the case of the military, it goes to the
President of the United States; does it not?
A. Yes, sir.
Q. And ultimately the top is responsible; isn't
that right, sir?
A. Yes, sir.
Q. Now if you look at Exhibit 12464, do you see
that Dr. Colby makes the following statement in the summary. "It is suggested
to develop a new RJR youth appeal brand based upon the concept of going
back -- at least halfway -- to the technological design of the Winston
and other filter cigarettes of the 1950's." Do you see that?
A. Yes, sir.
Q. Do you know what he meant by "a youth appeal
brand?"
A. No, sir.
Q. And if you look down, about halfway down, Mr.
Schindler, you'll see that Dr. Colby starts talking about what he means
by going back halfway. Do you see that? "My suggested -- My suggestion
covers all these conditions?"
A. Yes, sir, I see that.
Q. Okay. "It is basically to go back as much as
possible - probably at least halfway - towards the old filter cigarettes,
the cigarettes of the fifties prior to the Surgeon General's report. These
cigarettes had the following three main characteristics as distinguished
from today's cigarettes." Do you see that?
A. Yes, sir.
Q. And then he talks about they delivered more flavor,
and he puts in parens "tar;" correct?
A. Yes, sir.
Q. Okay. Flavor comes from tar; correct?
A. Yes, sir.
Q. And then he says, "They delivered more 'enjoyment'
or 'kicks' (nicotine)," do you see that?
A. That's what he says.
Q. And the kicks come from nicotine; correct?
A. That's what he says.
Q. Do you deny that?
A. I've never used the term "kicks."
Q. Do you deny it?
A. Deny what, sir?
Q. That the kick comes from nicotine in the cigarette.
A. I -- I'm not sure --
I'm a smoker and I don't know what you mean by "kick."
Q. All right. So you have no idea what that means.
A. Well he's -- he's using a slang expression here
to define nicotine. You're asking me if I, I guess, if -- if I believe
that cigarettes are all about kick. He refers to tar as flavor. Nicotine
is part of the flavor package in a cigarette. And I smoke cigarettes all
the time and I'm not sure what we're talking about here with kick.
Q. So you don't --
A. I don't know what Dr. Colby means.
Q. All right. Fair enough. You just don't know what
that means; is that right?
A. I don't know what Dr. Colby means in this document.
Q. See down at the bottom he also states, "Still,
with an old style filter, any desired additional nicotine 'kick' could
be easily obtained through pH regulation?" Do you see that?
*12 A. No. You lost me.
Q. Last paragraph.
A. Okay. "In my judgment...," in that paragraph?
Q. That paragraph, last sentence.
A. Okay. Oh, yes, sir, I got it.
Q. Do you know what he was talking about there?
A. Well I think what he's talking about is that
cigarettes back in the fifties had more -- and this whole thing had more
tar and nicotine than the cigarettes that were being made in the seventies.
Q. Do you know what he's talking about in the last
sentence where he says, "Still, with an old style filter, any desired
additional nicotine 'kick' could be easily obtained through pH regulation?"
A. It is -- well what I've learned through --
You're talking about the pH piece, which I didn't
frankly see in the first reading. Is --
What I've learned through these documents as I became
involved in this -- in this litigation, something I hadn't known of before,
the people back in this time -- I guess Dr. Colby had some theory that
you could increase nicotine delivery through the use of ammonia affecting
pH. Is that what you're talking about?
Q. Well I wasn't talking about nicotine delivery.
Do you know what nicotine
delivery is as opposed to the form of nicotine? If you do, tell me.
If you don't, just say I don't know.
A. Well my understanding of nicotine delivery is
-- or is what you absorb in your -- in your body when you take a drag on
a cigarette.
Q. Okay. So that's your understanding of nicotine
delivery; is that right, sir, what you absorb in your body?
A. Well what -- yeah.
Q. Do you have any understanding whether the form
of the nicotine plays any role in the amount absorbed in your body, even
though delivery may be the same?
A. We're going to get to the limits of my scientific
knowledge here real quick, but I understand in the -- in nicotine, there's
something called bound nicotine and something called free nicotine.
Q. Okay. Is that the extent?
A. Well, it's getting close.
Q. All right. But you do know the terms "bound"
and "free" nicotine.
A. Yeah, I've learned those terms as I became exposed
to these documents over the last -- well really since the fall of last
year.
Q. Now if you go to the next page of this document,
"To summarize, it should be easy to develop, within a relatively few weeks,
these new youth- appeal cigarettes for market testing for which the following
advertising claims could be unequivocally proven: They will deliver more
flavor, more enjoyment,
and more puffs for the money than any large selling cigarette on the
market, or for that matter, than any other cigarette now on the market."
Do you see that?
A. Yes, sir.
Q. Do you know if RJR altered the nicotine in its
product and went after the youth market?
A. To my knowledge, we have never altered the nicotine
in the product and gone after the youth market. I've been with this company
24 years, have worked in sales, have worked in manufacturing, been the
CEO -- president/CEO for almost four years, I have never even heard anybody
talking about proposing marketing processes or plans to get to the youth
market. And -- and altering nicotine for that purpose, I've never heard
of such a thing until I started seeing these documents.
*13 Q. Oh. Have you looked at the documents?
A. Have I looked at the documents?
Q. Yes.
A. I have seen certainly some of these documents
in the course of my deposition for this case with Mr. O'Fallon, and in
the course of preparation for this testimony.
Q. Did you review documents since you arrived on
Sunday?
A. Yes, sir.
Q. Okay. Can you direct your attention, then, to
Exhibit 12493, which is
the next exhibit in your book. This is a presentation to the board of
directors, sir, --
A. Yes, sir.
Q. -- on September 30th, 1994.
A. '74.
Q. '74, excuse me.
You were with the company at that time approximately,
what, four months?
A. Yeah, about four months.
Q. Have you seen this document before?
A. Yes, I have.
Q. Can you direct your attention to the page which
has "1975 MARKETING PLANS PRESENTATION, HILTON HEAD, September 30, 1974."
Do you see that?
A. Yes, sir.
Q. "Objective in 1975." That's chart one; correct?
A. Yes, sir.
Q. And what this is is a presentation that was made
to RJR's board of directors at Hilton Head Island in September of 1974;
correct?
A. That's my understanding.
Q. And chart one for the objective in 1975 says,
"Our paramount marketing objective in 1975 and ensuing years is to re-
establish RJR's share of marketing growth in the domestic cigarette industry."
Correct?
A. Yes, sir, that's what it says.
Q. At that point in time RJR's share of the domestic
cigarette industry was diminishing; correct?
A. Going back in time here. I think --
I'm not sure that it was diminishing. RJR was still
at that time the number one tobacco company in terms of share. I believe
the share was flat. I don't know at that point it was diminishing in total.
I think it was basically flat, as I recall.
Q. Okay. It was flat and RJR was not capturing a
greater share of the market; is that a fair statement?
A. It wasn't growing and, for example, Philip Morris
was.
Q. Yes. Philip Morris was, with its Marlboro brand;
correct?
A. Certainly Marlboro, and I believe perhaps some
other brands at this point. But certainly Marlboro.
Q. Certainly Marlboro was the engine or the fuel
to the growth of Philip Morris. You know that as a cigarette person; don't
you?
A. Sure. It's a great brand.
Q. And at the board of directors meeting, chart
two showed opportunity areas; correct?
A. Yes, sir.
Q. And the board of directors was told that RJR
was going to speak to four
key opportunity areas to accomplish growth in the domestic cigarette
industry; correct?
A. Yes, sir.
Q. And the number one opportunity area was to increase
our young adult franchise; correct?
A. That's what it says.
Q. And they defined young adult; correct?
A. Are you talking about in the paragraph below,
14 to 24?
Q. Yes, I am.
A. Yes.
Q. "First, let's look at the growing importance
of the young adult in the cigarette market. In 1960 this young adult market,
the 14-to-24 age group, represented 21 percent of the population." Do you
see that?
*14 A. Yes, sir.
Q. And it was being reported to the board that this
age group was growing -- of growing importance; correct?
A. Yes, sir.
Q. And these are all -- strike that.
There are a number of age groups here below the
age of 18; aren't there, sir?
A. Yes, sir.
Q. You'd agree that a youth is 14 years old; wouldn't
you?
A. Yes, sir.
Q. Fifteen years old?
A. Yes, sir.
Q. Sixteen years old?
A. Yes, sir.
Q. Seventeen years old?
A. Yes, sir.
Q. Eighteen years old?
A. Eighteen? You can go in the Army and fight in
Iraq; I don't call you a youth.
Q. He's not a youth at that point.
A. I think you're a young adult. You're old enough
to buy the product by the laws today at 18, you're old enough to go in
the military. You -- you're not 14 when you're 18.
Q. Okay. And you're not 17 and eleven months when
you're 18; correct?
A. Well that's true.
Q. And do you think 18-year-olds influence 17-year-olds?
A. I imagine they do.
Q. Do you think 19-year-olds influence 17-year-olds?
A. I imagine they might, yes.
Q. They're called peers; aren't they?
A. You -- you could call them peers. I mean --
Q. Now in this report, chart three says "Young Population
Skew." Do you see that?
A. Yes, sir.
Q. "As seen by this chart, they will represent 27
percent of the population in 1975. They represent tomorrow's cigarette
business. As this" --
A. Yes, sir. Yes, sir.
Q. "As this 14-to-24 age group matures, they will
account for a key share of the total cigarette volume -- for at least the
next 25 years." Correct?
A. That's what it says.
Q. So that would take us up to 1999, or next year;
correct, sir?
A. Yes, sir.
Q. And at that point those 14- to 24-year-olds would
be, what, 39 to 49 years old next year?
A. Yes, sir.
Q. And what's being discussed here with the board
is that if you get people when they're young, they develop brand loyalty
by and large; don't they, sir?
A. I don't --
I wasn't at the board meeting. I see this outline.
I don't know what they discussed at this board meeting. If you want to
know what they discussed at
this board meeting, I think you should probably be talking to somebody
that was there.
Q. Well if we had to take every person that wrote
all the memos and all the board members, sir, we'd be here for two years.
MR. WEBER: Let me object to the commentary of counsel,
Your Honor. It's not a question.
THE COURT: The objection is sustained.
BY MR. CIRESI:
Q. How many board members were there?
A. Back then?
Q. Yes.
A. I have no idea.
Q. How many employees of the company were there?
A. Oh, back in '74, I don't know, probably 16 thousand
or so. I'm guessing. I was only with the company four months at this point
in time.
Q. How many of those individuals that were there
wrote memos and received memos that we've seen in this case, if you know?
A. I have no idea.
Q. Do you know how long it would take to try this
lawsuit if we didn't take in the top people in the companies and had to
bring in every employee who wrote every document?
*15 MR. WEBER: Objection, Your Honor, it's argumentative
and irrelevant.
THE COURT: No, you may answer that.
THE WITNESS: I should answer?
A. I have no idea how long it would take.
Q. Long time; wouldn't it, sir?
A. I think it would take a long time.
Q. And you are the chief executive officer of this
company and responsible for it; aren't you?
A. Yes, sir.
Q. Can you go on to the next page.
And you do acknowledge that, from this document,
board members were discussing 14- to 24-year-olds; don't you, sir?
A. If this was presented to the board, then they
-- and they saw -- and these were slides, I would assume they saw this.
But I don't know what was presented to this board. If this actually was
presented, then they saw 14 to 24 being discussed.
Q. That would be wrong.
A. In my opinion.
Q. It would be a violation of their duty to the
public; correct?
A. I don't know if you mean "duty" in a legal sense,
but -- I don't know about that, but I think if you have a policy which
this company has always had
not to market cigarettes to people that are 14 and 15 and under the
legal age, so forth, then you shouldn't be discussing 14-year-olds in any
way.
Q. Shouldn't be discussing marketing plans for 14-
to 24- year-olds; should you?
A. Well I haven't seen a marketing plan here.
Q. I just asked you the question. Should you be
marketing -- discussing marketing plans?
A. No, absolutely not.
Q. That would be a violation of the corporation's
duty; wouldn't it?
A. It's -- the company --
People shouldn't be discussing, in my opinion --
certainly doesn't happen today, it hasn't happened in the 10 years of being
at the executive level, or I've never seen it in my 20 some years - - they
shouldn't be discussing cigarettes and 14-year-olds in any way, shape or
form relative to marketing, in my opinion.
Q. Shouldn't be selling to 14- to 24-year-olds;
correct?
A. We market cigarettes. We don't own retail outlets.
I do not believe cigarettes should be sold to people under the legal age
to buy the product. Absolutely I don't believe that they should be sold.
Q. Company shouldn't have marketing plans that are
directed to those people; correct?
A. We don't have marketing plans directed to people
under the legal age to buy the product.
Q. Well let's see what the documents show, sir.
We go on to page two, chart four, "PM & B&W
Share By Age." Do you see that?
A. Yes, sir.
Q. That would be Philip Morris and Brown & Williamson;
correct?
A. I hate to do -- where --
What page are you on? You're on chart four; right?
Q. I am indeed.
A. Okay. I was already over in the paragraph; you
were reading the -- under the chart four. All right. B&W -- "PM &
B&W Share By Age."
Q. That would refer to Philip Morris and Brown &
Williamson; correct?
A. Yes. Yes, sir.
Q. Now the text reads as follows: "Both Philip Morris
and Brown & Williamson, and particularly their fast growing major brands,
Marlboro and Kool, have shown unusual strength among these younger smokers.
In the 14-to-24 year age category, Philip Morris has a 38 percent share
and Brown & Williamson a 21 percent share. Both companies have significantly
lower shares in the remaining age categories."
*16 Now have I read that correctly, sir?
A. Yes, sir.
Q. Now what is being reported here to the board is
an analysis that was conducted by RJR people with regard to the age segment
14 to 24; correct?
A. Yes, sir.
Q. In the next paragraph, "With strong young adult
franchises" --
And that was defined as 14 to 24; correct?
A. Yes, sir.
Q. -- "and high cigarette brand loyalties, this
suggests continued growth for Philip Morris and B&W as their smokers
mature." Do you see that?
A. Yes, sir.
Q. And what's being referred to there is brand loyalty;
correct, sir?
A. Yes, sir.
Q. And you're familiar with the concept of brand
loyalty; aren't you?
A. Yes, sir.
Q. RJR attempts to get brand loyalty in its smokers;
doesn't it?
A. Yes. Everybody that sells a product attempts
to get brand loyalty.
Q. And the younger you get them to be loyal to your
brand, the more probable that they will remain loyal over a period of time;
correct?
A. There's a theory if you can get somebody from
18 to 24 to, you know, adopt your brand, become as we would call a franchise
smoker, that they would -- it would be more likely that they will be smoking
the brand when they're, you know, 30 or 31.
Q. And you call those people franchise smokers; correct?
A. It's a term that's used to describe people that
claim your brand as their usual brand.
Q. And if you get them early -- and let's just use
your age of 18. If on that magical day that they turn 18 you get them and
keep them, that produces a tremendous amount of sales over the lifetime
of that smoker; correct?
A. Produce sales for whatever product they smoked
as long as they chose to be smokers.
Q. And RJR looks at those types of projections,
getting people early -- and use your magical date of age 18 -- and keeping
them over a long period of time to project out the types of revenues you
can expect.
MR. WEBER: Object to the argumentative nature of
"magical date of 18," Your Honor. It's not proper in a question.
THE COURT: Oh, you may answer that.
A. I have never seen an analysis or projection that
you are referring to here.
Q. But you would agree, even though you've never
seen such an analysis, that it is important to the company to get franchise
smokers; correct, sir?
A. Sure, the -- I mean that -- that applies to McDonald's,
that applies to my product that is sold to the public. The more loyal somebody
is to your particular brand, the stronger your brand is.
Q. All right. Now let's see what else the board was
discussing.
By the way, with regard --
MR. WEBER: Object to counsel's -- let me object
to counsel's commentary, Your Honor. It should just be questions.
THE COURT: Well I think he's just introducing the
next question. I don't -- I think it's fair.
Q. Sir, can you go to chart five, which is the next
chart that was put up for the board for discussion.
A. Yes, sir.
Q. "In sharp contrast, our company line shows a
pattern of relatively even strength among all age groups and strength in
the 25 and older categories, where we exceed both competitors." Correct?
*17 A. Yes, sir.
Q. And what was being discussed there is that RJR
at this point in time was the number one cigarette seller and it had a
lot of the older smokers; didn't it?
A. That's what that seems to be saying, yes, sir.
Q. And that's consistent with your knowledge of
the history of the company at that time; correct?
A. Yes, sir.
Q. Now do you think it was appropriate for the board
to be discussing all
age categories, including the 14- to 24-year-olds?
A. No, I don't. If in fact this was being discussed
by the board, I don't think it's appropriate.
Q. And the board's, again, the highest level of
the company; correct?
A. Yes.
Q. Now if you go on to chart number six --
Well let me ask you something before -- before we
go on to that, Mr. Schindler. You said earlier that RJR has a duty not
to sell to youth; correct?
A. Yes. I feel a very strong personal ethical duty
not to be marketing cigarettes to people under the legal age of the product
because the product has risk, and people -- young people are incapable
of -- of making a judgment given that risk of that product. I think it's
-- it's wrong to do that and we haven't done it. I have no knowledge that
we've ever done it.
Q. So if the board was discussing selling to 14-year-olds,
15-year-olds, 16-year-olds, 17-year-olds, all the way up to the age of
18, they would have been acting unethically in your judgment.
A. They were discussing, based on what I've seen
here, what we've been going through, they've -- they've been -- somebody
was presenting them an analysis -- analysis of brand choices of people
between the ages of 14 and 24. That's what they were doing. I don't see
any here -- anything here that singles out 14 as opposed to 24. But this
is -- but 14- to 15-year-olds, their --
This is an analysis of brand choice. This -- I haven't
seen anything here yet that says, "Here's the marketing plan, board of
directors, that we're going to follow, and here's the advertising and promotion
and the packaging design and the product design that we have tested with
14-year-olds that we're going to roll out, and this is how we are going
to get a bigger share of 14- to 16- year- olds." I haven't seen that anywhere
in here. What I see is an analysis of brands that people between the ages
of 14 and 24 were smoking at this time.
Q. Are you done?
A. Yes.
Q. Okay. Why don't you turn back to the first page.
I'll just read it for you. "Our paramount marketing objective in 1975"
- -
I'll just stop there. "Paramount," does that mean
number one?
A. Yes.
Q. Okay. Number one objective in 1975 from a marketing
standpoint; correct, sir?
A. That's what it says.
Q. "...and ensuing years is to re-establish RJR's
share of marketing growth in the domestic cigarette industry." Correct?
A. That's what it says.
Q. And then it says in order to accomplish that
marketing objective, there are four key opportunity areas, and one was
to increase the young adult
franchise; correct?
*18 A. Yes, sir.
Q. And the adult -- young adult franchise is defined
as 14 to 24; correct?
A. In this --
Yes. In this document it is, yes.
Q. So 14-year-olds, 15-year-olds, 16-year-olds and
17-year- olds, all the way up to the year date of age 18, would be included
in that marketing objective; correct, sir?
A. The way this document is stated, yes. That's
what it says.
Q. And if RJR was doing that, that was unethical,
in your terms; correct?
A. If -- if people in the company acted upon this
and literally developed marketing plans at people under the legal age to
buy the product, they were acting illegally.
Q. Illegally.
A. Or not ill -- I'm sorry, unethically.
Q. Well they were also acting illegally.
A. Well illegally, too, if you're under-age. And
--
Q. And inappropriately; correct?
A. Well certainly.
Q. Because children, as you said, are incapable
of making the choice; correct?
A. I think they have --
Yeah. I think it's a choice that they're not capable
of making.
Q. And that would be particularly true if the product
that they had to make a choice on addicted them; wouldn't it?
A. Well I'm --
The product has health risks, --
Q. That's not what I asked.
A. -- and if you smoke cigarettes it can become
a habit, can be difficult to quit that habit, and young people shouldn't
be smoking cigarettes.
Q. That would be particularly true if young people
were addicted because it would impair their choice; correct?
A. If somebody smokes cigarettes and --
Yeah, there's the habit-forming nature of cigarettes,
and they can be difficult for people to quit. Yes, that's part of that
issue, in addition to the health risk.
Q. Now if we can go back, sir, to the page we were
on. It's page two.
A. Okay.
Q. We were at chart five. Do you recall that?
A. Yes, sir.
Q. In chart five the board was having reported to
it the relative strength of RJR products along all age groups; correct?
A. Yes, sir.
Q. And all age groups includes 14-, 15-, 16- and
17-year- olds all the way up to age 18; correct?
A. I -- I don't know. I guess that's what that means.
Q. And chart six then says "Share By Age, Winston
& Salem." Who makes those cigarettes?
A. We do. R. J. Reynolds Tobacco Company makes Winston
and Salem.
Q. And they did in 1975; correct, sir?
A. Yes, sir.
Q. And Marlboro and Kool, who made those cigarettes?
A. Marlboro was made by Philip Morris, and Kool
was made by B&W, Brown & Williamson.
Q. The same two companies that were described up
in chart four about their particularly fast-growing major brands, Marlboro
and Kool; correct?
A. Yes, sir.
Q. And particularly in the age 14 to 24 category;
correct?
A. Yes, sir.
Q. So in chart six, RJR's relative market position
was being compared to Marlboro and Kool, the cigarettes of Philip Morris
and B&W respectively; correct?
A. Yes, sir.
Q. And sir, the board is being told what RJR's share
was of the children's market there; wasn't it?
*19 A. Well it would be shown -- was showing data
here of a group of from 14 to 24, of which there are some age components
that I believe shouldn't be in that -- in that kind of analysis, yes.
Q. Fourteen, 15, --
A. Fifteen, 16.
Q. -- 16, 17, up to the age of 18; is that right?
A. Yes, sir.
Q. And it is the board of directors at Philip Morris
that approves overall marketing plans on an annual basis.
A. R. J. Reynolds.
Q. I'm sorry, RJR. Isn't that right?
A. The board of directors approves marketing plans?
Absolutely --
Q. The whole -- the overall.
A. Marketing plans?
Q. Yes.
A. Absolutely not.
Q. Doesn't.
A. Has absolutely nothing to do with the approval
of marketing plans.
Q. So there's no reporting function that goes up
to the board with regard
to what marketing objectives of the companies are in a given year?
A. I make presentations at board meetings on --
basically all the board meetings, and I do updates on the business. I will
do sort of -- we do a three- year strategic summary, we'll do an operating
plan and review, and then there will be quarterly updates, you know, volume
share, financial projections, and then discussions of brands, or, if appropriate,
of what activities, new campaign, ad campaign, if it seems appropriate
to show the board. But the board is briefed on the plans. They do not sit
in approval of the plans of my company.
Q. If the board had a presentation made to them
by you and you said, "Here's what we're going to do with 14, 15,
16, 17, 18, all the way up to 24, over the next three years," the board
could tell you, "Mr. Schindler, we're not going to market to those people."
I just want you to assume you did that. I know you say you didn't.
A. I -- I -- I will not assume I would do that.
I will not go with that theoretical question. I find the notion of that
personally offensive.
Q. Well then you would find the notion that whoever
presented this to the board personally offensive; is that right?
A. You asked me if the board has approval on our
marketing plans, and I say they -- I said they do not have approval on
our marketing plans.
Q. Sir, that wasn't my question. You would find
this presentation
personally offensive.
A. I would never do this. I --
If anybody came into my office suggesting -- which
I don't believe that does, by the way, but suggesting a specific -- or
-- or "Here, Andy, I have a marketing plan on how to increase our share
of market with 14-year-olds," they would be in serious trouble.
Q. Sir, can you answer my question? Do you find
this presentation to your board of directors in 1975 personally offensive?
Yes --
A. I --
Q. "Yes" or "no."
A. When I -- I --
Yes. I told you earlier that they --
Q. Thank you.
A. It's wrong to be talking about people that are
14, 15, 16 years old buying cigarettes.
Q. And the board at that time could have told whoever
made this presentation that will not be done, because the board has that
ultimate power; correct?
*20 A. Maybe they did. I have no idea, Mr. Ciresi.
I wasn't at this board meeting. I was with the company four months when
this --
Q. The board could have told that person that; correct?
A. They could have and they may have, for all I know.
Q. Did you do any investigation to see if they did?
A. Oh, on a board meeting in 19 --
Q. Yes.
A. -- 74?
No, I didn't.
Q. Now if you go on, then, in this chart six, what
is being represented to the board is that the two major brands of Winston
and Salem show comparative weakness among the younger smokers; isn't that
right?
A. Yes.
Q. And then at the bottom of that page it said,
"This suggests slow market share erosion for us in the years to come unless
the situation is corrected." Is that what it says, sir?
A. Uh-huh. Yes, sir.
Q. And what they're talking about is the franchise
smoker that you talked about; isn't that right?
A. I assume that's what they're talking about.
Q. If you go on to the next page, then, chart seven,
"Strategy."
"Thus, our strategy becomes clear for our established
brands." Do you see that?
A. Yes, sir.
Q. Number one, "Direct advertising appeal to the
younger smokers...." Do you see that?
A. Yes, sir.
Q. And the younger smokers were defined as 14, 15,
16, 17, all the way up to 24; correct?
A. Yes, sir.
Q. And they also say we still have to be true to
the brand's basic product attributes; correct?
A. Yes, sir.
Q. And we don't want to alienate the brand's current
franchise; correct?
A. Yes, sir.
Q. And the current franchise were the older smokers;
correct?
A. Well what -- whatever. It was the current franchise.
Q. And so then they went on to chart eight, "For
Winston, we've followed this strategy in developing the new 'candid' advertising
campaign which broke September 16." Correct?
A. That's what it says.
Q. Yes. Eight days before the meeting; correct?
A. Yes.
Q. And that strategy, the number one point of it,
was direct advertising appeal to the younger smokers, which included 14-,
15-, 16- and 17-year-olds;
correct, Mr. Schindler?
A. Yes, sir.
Q. So they --
A. That's what this --
Yeah.
Q. That's what it says; doesn't it?
A. Yes, sir.
Q. And they say about that advertising campaign,
candid advertising campaign, "It is especially designed to appeal to young
adults." Correct?
A. That's what it said.
Q. And those, again, are the 14-, 15-, 16- and 17-year-olds;
correct, sir?
A. That's what it says.
Q. And this is being presented to the board of directors;
correct?
A. That's my understanding.
Q. They're being advised what type of advertising
was instituted by this company on September 16th, 1974; correct?
A. That's --
Yes, that's what -- what's here.
Q. And here's what they say about that advertising.
"Simple straightforward copy;" correct?
A. Oh, yes, sir.
Q. "Believable people with character;" is that right?
*21 A. That's what it says.
Q. Is that young people?
A. I have no idea. I don't remember the -- I --
I have --
I really don't remember the campaign they're talking
about.
Q. Winston campaigns use young people in their ads?
A. No.
Q. Never did?
A. Not that I know of. Everybody that I know of
in the ads were at least, you know, 25 and older. I mean we -- I've never
seen --
Are you talking about 14-year-olds?
Q. Well let me ask you -- no, I --
You wouldn't be so obvious as to use 14-year-olds
in an ad; would you?
MR. WEBER: I object to the argumentative nature
of that, Your Honor.
MR. CIRESI: Well he asked, Your Honor.
THE COURT: Counsel, sustained.
Q. Did you ever see an ad by RJR which had a 48-year-old
person dying of chronic obstructive pulmonary disease with a Winston in
their hands saying, "These are really good for you?"
MR. WEBER: Objection, Your Honor.
Q. Did you ever see that?
A. No.
MR. WEBER: It's argumentative again.
THE COURT: Sustained.
Q. Did you ever see old people -- take my age old
-- 50 or above, dying from smoking-related diseases, on TV or in ads sponsored
by RJR saying, "This is really great for you?" Did you ever see that?
MR. WEBER: Objection, Your Honor, it's argumentative.
The same question as last time.
THE COURT: That sounds familiar, counsel. Sustained.
Q. "Believable people with character," that's what
you wanted to do; correct, sir?
A. Yes. Not --
That's what's being written here.
Q. "To appeal to young adults;" correct?
A. That's what it says.
Q. People that they could look to as peers and wanted
to emulate; correct?
A. I wasn't there. I -- I can't get into the mind
--
You're asking me to interpret the minds of people
four months into working with the company that I maybe never knew of until
about, you know, six, seven, eight, nine months ago in this document, and
you want -- I don't even know who presented this thing, and you want me
to interpret what they were thinking in
developing an ad campaign? I cannot do that. I have no idea what they
were thinking. I know what the words say here, but I can't get into the
minds of somebody at a meeting that I was never at. And I don't even know
who was there.
Q. This morning when you started you said RJR never
marketed or targeted young people --
A. I --
Q. -- in the entire time that you were with the
company. You said that; didn't you, sir?
A. Yes. I've --
Q. And now you said that you read this article --
or this document nine months ago; correct?
A. Yeah, something like that.
Q. So you knew what these words said when you made
the statement under oath --
A. Oh.
Q. -- that RJR never marketed to young people; didn't
you?
A. I have never in my 24 years with this company,
in all of my experiences, had anybody suggest or talk about marketing cigarettes
to 14-year-olds or 15- year-olds or 16-year-olds. I've never encountered
that in my 24 years. I've been on the Executive Committee for 10 and the
president for four, and I've never, in my experience, ever heard anybody
in the day-to-day business of
working in the business, with all the issues and problems, talking about
we have to increase our share of 14-year-olds.
*22 Q. Could you answer my question?
A. Yes. I told you I've never heard people doing
this in the course of my business --
Q. You said --
A. -- when I was with the company.
Q. You said this morning that RJR never marketed
to youth in all of the time that you were with the company, and when you
said that, you knew about this document. "Yes" or "no?"
A. Well, I knew about this document.
Q. Now let's go on and see what the document says
in addition to what we've already seen.
"Research has shown that among young adults" --
Again, the 14- to 24-year-olds; correct?
A. Yes, sir.
Q. -- "the new Winston ads generate twice as much
recall as any previous Winston campaign and are 40 percent more persuasive
compared to the Marlboro campaign;" correct?
A. That's what it says.
Q. So your company in 1974 had gone out and surveyed
to see how effective
their ads were to young adults including 14-, 15-, --
A. I had --
Q. -- 16- and 17-year-olds; correct?
A. I had no knowledge of that. I have never seen
a document -- I have never seen a document that said that we were doing
ad research among 14-, 15- and 16- and 17-year-olds.
Q. That's what this says; doesn't it, sir?
A. No, it says "young adults." It doesn't say we
did ad research with 14-, 15-, 16- and 17-year-olds.
Q. Let's go back to young adults, page one. "...this
young adult market, the 14-to-24 age group...," do you see that?
A. Yes.
Q. Okay. Now if you go back to the page we were
on, this shows that research reports were being given to the board regarding
young adults; correct?
A. It says young adults.
Q. And young adults was defined in this document;
wasn't it, sir?
A. They defined young adults as 14- to 24-year-olds.
Q. And what the board was being told is that the
new Winston ads generate twice as much recall as any previous Winston campaign
and are 40 percent more persuasive compared to the Marlboro campaign among
those age groups; correct?
A. It says that the new Winston ads generate twice
as much recall as any
previous Winston campaign and are 40 percent more persuasive than Marlboro.
That's what it says.
I have no knowledge -- I have never seen a document,
I don't know of any --
I've never known the company to do ad research with
14-year- olds.
Q. Well, the board was being told about research
for young adults which was being defined as 14, 15, 16 and 17, all the
way up to 24 years old; correct, sir?
A. I don't know what somebody said to the board
beyond what is on this document. I have no knowledge, have never heard
of, never seen anybody doing ad research, quantitative marketing research,
qualitative marketing research, taste test, reviewing promotions, any of
the normal things that you do in the marketing of a product when you are
trying to persuade somebody to buy your product. I have never seen any
of that research ever done against 14-, 15-, 16-, 17-year-olds.
Q. Is --
*23 A. And I would not look at this document and
draw that conclusion. That is totally inconsistent with my experience,
that they have ad research of 14-year-olds.
Q. Did you ever see any document in RJR produced
by your lawyers that said, "This exhibit," 12493, "never happened?" Did
you ever see that?
A. You mean --
No, I never saw that.
Q. Did you ever see any document that said, "This
document about a presentation to the board was a figment of somebody's
imagination?" Did you ever see such a document?
MR. WEBER: Objection, Your Honor, he's arguing again.
THE COURT: No, you may answer that.
Q. Did you ever see one?
A. Nobody ever said that.
Q. Did you ever see a document that said, "This
presentation is a lie?" Did you ever see that?
A. No.
Q. Now what we do know is, if we go on to chart
nine, we see that even for Salem, significant improvements were going to
be made designed for more young adult appeal; don't we, sir?
A. That's what it says.
Q. And this was going to include more true-to-life
young- adult situations; correct?
A. Yes, sir.
Q. More dominant male visuals; correct?
A. That's what it says.
Q. A greater spirit of fun; correct?
A. Yes. Yes, it does.
Q. Greater use of water as a refreshment symbol;
correct?
A. Yes.
Q. And what it, the board, was told is that research
has shown these changes have measurably improved the ads in terms of greater
recall; correct?
A. That's what it says.
Q. Greater refreshment playback; correct?
A. Yes.
Q. More young adult appeal; correct?
A. That's what it says.
Q. And then it goes on to say that efforts to identify
an even stronger campaign are being aggressively pursued by two advertising
agencies, and at least one campaign is anticipated to be market tested
in early 1975; correct?
A. That's what it says.
Q. And it goes on to say that further young adult
emphasis is being placed through the successful Salem box "denim" campaign;"
correct?
A. Yes, that's what it says.
Q. Then it talks about Camel filter advertising;
correct?
A. Yes, sir.
Q. And if we go on to the next page, we see that
advertising awareness has increased among prime prospects -- young adult
males; correct?
A. Yes, sir.
Q. Then it talks about a new program for the Camel
filter; correct? Chart 12.
A. Yes, I -- but I notice that it also talks about
18 to 24 up there with "Advertising awareness...."
Q. It's also increasing it in that age group; correct?
A. Yes.
Q. Yeah.
A. But not 14-year-olds in that one.
Q. It's increasing it in both; isn't it, sir?
A. I have no idea. But it seems to me there's two
definitions for young adult in this presentation.
Q. Oh. So you're accepting --
Now you accept that this was presented, the 18 to
24 male group?
A. Oh, it's -- it's in this presentation.
Q. So there's an 18 to 24 male age group, too, also?
A. Well they're talking about 18 to 24 here. You
were talking about, you know, 14-year-olds and ad research, and I just
noticed as you skipped over that there was 18 to 24 suddenly in this thing.
*24 Q. Sure. They segment markets; don't they?
A. Well all marketeers segment markets.
Q. Thank you, sir.
A. I --
Q. Now chart 12, "New Program for Camel Filter;"
correct?
A. Yes. Yes, sir.
Q. Starting in July 1974, a new marketing program
was put into the test market, targeted at young adults and designed to
be even more competitive against Marlboro; correct?
A. That's what it says.
Q. That's about the time you started; correct, sir?
A. Yes. That's about a month or so after I started
with the company.
Q. Now you weren't in marketing; were you?
A. I wasn't in the tobacco company. I was in R.
J. Reynolds Industries.
Q. And one of the programs was a new Meet the Turk
advertising campaign; correct?
A. Yes, sir.
Q. And a new Marlboro-like blend in the product,
do you see that?
A. That's what it says.
Q. Do you know what the new Marlboro-like blend
was?
A. No.
Q. Do you know if there was manipulation of pH?
A. No.
Q. "Significantly increased ad campaign;" correct?
A. Yes, sir. That's what it says.
Q. And do you know what the Meet the Turk campaign
was, sir?
A. I sort of remember it from those days, seen it
recently. It was a -- a guy that looked like he was about 33, 30 to 35
years old with dark hair and a mustache.
Q. And there were some problems with that because
of the Greek/Turkish war at the time?
A. That's what I understand.
Q. And was that campaign subsequently pulled because
of those problems?
A. Yes. That's my understanding of it, yes.
Q. If you go on to the next page, right above chart
14, do you see where "Ad spending has been increased in 1975 with
more targeted efforts against young adults to more fully exploit this potential?"
A. Yes, sir.
Q. And you see in chart 14, "We have also increased
our media efforts toward young adults for our brands?"
A. Yes, sir. Yes.
Q. And can you go on to the next page. There was
also special events --
A. Yes, sir.
Q. -- directed against young adults; correct?
A. Yes, sir.
Q. And if you go on to the next page, sir, chart
17, there were also special events and promotional activities; correct?
A. Yes, sir.
Q. Heavy involvement at the event site; correct?
A. Where -- where are you?
Q. Right next to chart 17.
A. Oh. Yes, sir.
Q. Permanent billboard advertising and brand exclusivity
at concession stands; correct?
A. Yes.
Q. Sell our branded event-related items such as
Winston hats, shirts, jackets; correct?
A. Yes.
Q. Tie-in banners and posters, I think it should
say, with strong brand identification and brand commercials over the public
address systems; correct?
A. Yes, sir.
Q. And can you go on to the page which bears the
Bates number 1320. And that's the number in the right-hand side, sir. That's
the same exhibit. You see the small numbers on the right hand?
A. Oh.
Q. Those are called Bates numbers.
A. Right, one --
*25 Q. 1320.
A. Got it.
Q. Do you see here at the top it says, "Finally,
successive waves of couponing will be tested in '75?"
A. Yes, sir.
Q. "By way of explanation, we will select a specific
market of young adults. These people will be given successive waves of
coupons good for a substantial price reduction on a carton purchase."
A. Yes, sir.
Q. "We will then track this group to determine the
amount of switching to our brand."
A. Yes, sir.
Q. "The strategy here is to take these customers
'off the market' for their regular brand long enough to convert them."
Do you see that?
A. Yes, sir.
Q. And would you agree that young people have less
income, generally speaking, than people in the work force?
A. Yes, sir.
Q. Would you agree they're more price sensitive?
A. No.
Q. You wouldn't.
A. No, sir.
Q. Okay. If we go on, then, "Our special merchandising
division is in its second year with its successful wholesale operation
of premiums at beaches and special events through a separate sales force
and a mobile store." Correct?
A. Yes, sir.
Q. And young people gather at beaches; don't they,
sir?
A. Yes. And old people and middle-aged people.
Q. I'll grant you that. All ages; isn't that right?
A. Yes.
Q. But young people hang out on beaches a lot; don't
they?
A. I'm 53. I hang out on the beach a lot when I
get a chance. So young people hang out on beaches, lots of people hang
out on beaches.
Q. "We anticipate selling over a million items in
1975 -- a million 'walking billboards' for our brands;" correct?
A. Yes, sir.
Q. "We will continue our special sampling programs
on beaches, resort areas and sports arenas in major metro markets -- where
there are large concentrations of young adults." Correct, sir?
A. Yes, sir.
Q. They don't talk about large concentrations of
CEOs hanging around beaches; do they?
A. No, they hadn't on here.
Q. And can you go on to page 1322.
A. Is this -- is this the one with --
Okay, I got it.
Q. Same -- same document.
A. I got it.
Q. See where it says, "Metro Action Programs?"
A. Yes, sir.
Q. It says, "The marketing development manager concept
became a reality in July of this year" --
A. Yes, sir.
Q. -- "and to date we have seen most encouraging
programs?"
A. Yes, sir.
Q. And that would be in July of 1974, the time you
joined the company; correct, sir?
A. No, I -- no, I joined in late May of '74.
Q. Well, you were there about a month and a half.
A. Right.
Q. "We have substantially increased our vending
distribution through the
establishment of area vending managers who are responsible for and pay
close attention to vending." Correct?
A. Yes, sir.
Q. "We have implemented the salesman 'Ride with
the Vendor' program tied with bonus placement payments on Salem Super and
Vantage." Correct?
A. Yes, sir.
Q. Now are young people able to get cigarettes easier
from vending machines than they were over the counter, if you know?
*26 A. Oh, I would -- I would think so. If you had
a vending machine outside of a bar, for example, where it would be hard.
Quite possible.
Q. And on the next page, you see a plan to further
increase the vending distribution?
A. Yes.
Q. And that was going to be by working with the
Tru-Check computer system in '75; correct?
A. Yes, sir.
Q. And that was an organization that provided computer
printouts on brand placements in vending machines; correct?
A. Yes, sir.
Q. Did you hear of the Tru-Check program?
A. Well I began to work in sales in April of '76,
and I remember hearing of
Tru-Check, yes.
Q. What's your understanding of Tru-Check, sir?
A. It's a -- what it says here, it was a way of,
you know, tracking placements. You know, a vending machine is like a carton
display or a package display, you make payments to get slots to get your
brand in -- in the distribution channel. This is, you know, fairly typical
of how you get distribution. You want to make your product available at
retail.
Q. Make it more widely available for retail; correct?
A. You want to make your product as available at
retail as you possibly can. All consumer product companies want to do that.
Q. Do you know any other consumer product industry
whose product is reported to kill over 400,000 people a year?
MR. WEBER: Object to the argumentative nature, Your
Honor.
THE COURT: You may answer that.
A. No, sir.
Q. There were also localized promotions, if you
go over to page 1324; is that correct?
A. Yes, sir.
Q. And these local promotions related to various
demographic groups in our society; correct?
A. Yes.
Q. Puerto Ricans, African Americans; correct?
A. Yes, I believe that's --
Yes. Yes.
Q. And RJR was increasing its activity in those
areas; correct, sir?
A. According to this, yes.
Q. And they put up a super wall display, a gigantic
painted wall about the size of a half an acre on 8th Avenue in New York
City; correct?
A. Yes, I see that. Yes.
Q. You also hired at that time fashion consultants;
correct?
A. Where is that at?
Q. Go to page 1325A.
A. Okay.
Q. Chart 29, do you see it?
A. Yes.
Q. "...we have just introduced a new advertising
campaign in women's magazines;" correct?
A. Yes.
Q. Tied in designers such as Bill Blass, Ralph Lauren,
Calvin Klein; correct?
A. Yes, sir.
Q. Hired a fashion consultant; correct?
A. Yes, that's what's here.
Q. And put 50 window in-store displays in Bloomingdales,
Filene's, I. Magnin, other top department stores; correct?
A. Yes, sir, that's what this says.
Q. And you know that was done; don't you, sir?
A. No. I wasn't in marketing, I was working at RJR
Industries. I don't remember Bloomingdales and Filene's and the Salem fashion
consultant.
Q. Could you go on to page 1327.
You just don't remember; is that right, sir?
A. Well I don't. This is 23 years ago.
Q. Go on to page 1327.
*27 A. Yes, I'm there.
Q. And chart 31 was the key growth opportunities
reviewed again; wasn't it?
A. Yes, sir.
Q. And it says here, "We have reviewed the new and
improved programs for our established cigarette brands designed to:
"Increase our young adult franchise." Correct?
A. Yes, sir.
Q. That's what they were designed to do as reported
to the board in September of 1974; correct, sir?
A. Could you ask that question again?
Q. Yes. That's what they were designed for as reported
to the board in September of 1974.
A. I can't say that's the case, I wasn't there.
This is a very long report that we just went through,
or presentation. There is specific data about 14- to 24-year-olds relative
to brand choice and tracking data. We get the -- you then say there's evidence
of ad research, which I have no knowledge of, and then they start talking
about all of their marketing plans for, I guess, the -- you know, for '75
or whatever, and I have no knowledge that they were sitting down doing
product research, ad research, focus groups, all that sort of stuff that
you do to direct something at someone during this period of time, and that
they were after 14- to 17-year-olds based on this presentation. It is completely
incongruent with my own experience in the organization, and I became part
of the sales organization, the sales component of this, in April of '76,
and I never heard anybody talking about we got to get more 14-year-olds
smoking our cigarettes and we've directed this ad campaign at 14-year-olds,
or the Salem fashion program and Filene's is after 16-year-olds. I've never
heard anything like that.
Q. Are you done?
A. Yes.
Q. Okay. But we do know that what was reported to
the board is that research has shown that among young adults, the new Winston
ads generate twice
as much recall as any previous campaign and are 40 percent more persuasive
compared to the Marlboro campaign. We do know that this document shows
that this was reported to your board of directors in September of 1974;
don't we, sir?
A. I have -- I have no idea, and I don't think you
do either, that -- in that particular paragraph, if they're referring to
18- to 24-year-olds or what. I do not believe this company, to my knowledge,
has ever done ad research on 14-year-olds.
Q. Let's go over to the next page.
Were you done, sir? I didn't mean to cut you off.
A. No, we're -- you want to go to the next page.
Q. Were you done with your statement there?
A. Yes.
Q. Go to the next page, 1328. "New opportunity new
brands," chart 32, do you see that?
A. Yes, sir.
Q. "New brands and/or line extensions with benefits
or new personalities and with directed appeal to younger smokers offer
the quickest opportunity to combat Marlboro and Kool." Correct?
A. Yes, sir.
Q. Do you know what percentage of the under 18 age
segment Marlboro and
Kool had in 1974?
A. No, sir, I don't know.
Q. Can you direct your attention now to Exhibit
12377.
*28 A. "DOMESTIC OPERATING GOALS?"
Q. That's it, sir. ""RJR REYNOLDS TOBACCO COMPANY
DOMESTIC OPERATING GOALS;" correct?
A. Yes.
Q. Trial Exhibit 12377; correct?
A. Yes, sir.
MR. CIRESI: We'd offer that exhibit, Your Honor.
MR. WEBER: No objection, Your Honor.
THE COURT: Court will receive 12377.
BY MR. CIRESI:
Q. Now what's a domestic operating goal?
A. It's a business goal for the domestic tobacco
company.
Q. Why are goals set?
A. So you have something to strive for.
Q. Something to shoot for; correct?
A. Yeah, something to shoot for, something to strive
for. That's what goals are set for.
Q. Okay. Well let's see what RJR was striving and
shooting for. "MARKETING
GOALS."
If you turn to the next page, by the way, you see
this is November 26th, 1974, do you see that at the top?
A. Yes.
Q. Okay. This is about two months after the board
meeting; correct?
A. Yes, sir. Two, three months, yes.
Q. "MARKETING GOALS." As you say, something to strive
for.
"Primary goal" -- and this would, I guess, be the
primary thing RJR was striving for; correct?
A. That's what it says.
Q. "Primary goal in 1975 and in ensuing years is
to reestablish RJR's share of growth in the domestic cigarette industry."
Sound familiar?
A. I just read it here.
Q. Does it sound familiar?
A. You mean have I heard this before?
Q. Yes.
A. In 1975? No. Or '74, whenever this was done.
Q. Didn't we just see that back in the --
A. Oh, you're talking about the previous --
Well it sounds the same as the previous document.
Q. Sounds the same as the document that was the
presentation to the board;
correct, sir?
A. They had the goal to increase the share of market.
Q. "Increase our Young Adult Franchise.
"14-to-24 age group in 1960 was 21 percent of population;
in 1975 they will be 27." Do you see that?
A. Yes.
Q. "As they mature, will account for key share of
cigarette volume for the next 25 years." Correct?
A. That's what it says.
Q. "Winston has 14 percent of this franchise, while
Marlboro has 33 percent." Correct?
A. That's what it says.
Q. Remember, I just asked you what the -- if you
knew what the market share was of Marlboro?
A. Yes.
Q. But -- no, that's not fair. Let me retract that,
because I think when I asked you I asked you for under 18. So forget that
question. All right, sir? Let's just --
A. I'll be happy to.
Q. Let's look at this document.
"Winston has 14 percent of this franchise, while
Marlboro has 33." Do you
see that?
A. Yes.
Q. Okay. Now this evidences the fact that RJR was
looking at that age group and ascertaining what its market share was; correct?
A. Well the 14-to-24 age group, according to this
document, yes.
Q. Yeah. Wrong? Wrong thing to do?
A. I testified earlier that I don't believe you
should be looking at brand traces and franchises of people that are under
the age -- legal age to buy the product, and you shouldn't be looking at
14-, 15-, 16-year-olds.
*29 Q. Mr. Bible testified yesterday when he saw
--
I want you to assume Mr. Bible testified when he
saw documents like this regarding Philip Morris --
MR. WEBER: Objection, Your Honor. Before we even
-- I'm sorry for interrupting. Before we even get to that, the court has
repeatedly sustained objections when someone characterizes another witness's
testimony, so before we even got there I wanted to make the objection.
THE COURT: Well it's very difficult if I don't know
what he's going to ask.
Q. I would like you to assume, sir, that Mr. Bible
on a number of occasions, when faced with documents which showed that Philip
Morris was looking at youth and smoking, that he said he was ashamed. I
want you to assume that. All right?
A. Okay. I'll take your word for it.
Q. If Philip Morris was doing what is reflected
in these two documents, are you ashamed?
MR. WEBER: Let me object, Your Honor, for the same
reasons we just went through.
THE COURT: No, you may answer that question.
A. I'm -- I have --
I don't know that they were targeting 14-year-olds
in the way that you are suggesting here with these ad campaigns and sampling
programs and all that sort of thing. I don't know that that was going on.
I think they were wrong to be doing analysis of brand selections from people
who were 14, 15 and 16 years old, and, you know, I -- we don't do that
today. It shouldn't have been done then in my opinion. And I'm not ashamed
of that. I think it was wrong. I don't think they should have been doing
that. It is the core, the policy of the company, my personal belief is
you don't market cigarettes to people under the legal age to buy the product;
that if you did that, that would be something to be ashamed of. That is
clearly, to me, unethical. If you get around that and start -- you're not
doing that, but you start analyzing brand traces of under- age to project
future markets, I think that's wrong, I think it's, frankly, stupid, and
it shouldn't be done and it's unnecessary.
But there's nothing here that I know for sure, based
on my own experience
with the company, that I say I'm ashamed of what they did, when my experience
was when I worked in sales, when I worked in the company, that I never
heard anybody talking about directing marketing efforts at 14-year-olds.
It --
You know, back in 1976 -- well in '77, '78, another
guy and myself put together the sales plan for one of the biggest marketing
product launches in the history of consumer products, a product called
Real cigarettes --
Q. Excuse me, sir.
A. -- and --
MR. WEBER: May he complete his answer, Your Honor?
MR. CIRESI: Your Honor, I'm going to ask that the
witness be instructed to answer the question.
THE COURT: Well it is -- he's really starting to
wander. I really think that is not really responsive.
A. I am not ashamed of something that somebody did
24 or 25 years ago when I don't even know what they did. And what is being
suggested here is completely counter to my own experience working back
in those days.
*30 Q. Is your answer no?
A. No.
Q. Thank you.
Now, what the document shows they were doing is
as follows: "We will direct advertising appeal to this young adult group
without alienating the brand's
current franchise." Correct?
A. That's what it says.
Q. So they have the goal at the top, which you say
is something to strive for; correct?
A. Yes.
Q. And then they say how they're going to achieve
that goal; don't they?
A. That's what it says.
Q. And the goal is to increase the young adult franchise,
which is 14- to 24-year-olds; correct, sir?
A. That's what's being said here. That's --
Q. And one of the ways they're going to do it is
set forth on the next page, which is the Tru-Check vending machine program;
correct?
A. No, I don't think that's true. I mean Tru-Check
is just a mechanism to get distribution in one of the channels in a distribution
system, a vending machine. It was a distribution program.
Q. And the -- and the distribution --
A. The master strategy to get 14-year-olds to buy
cigarettes, I can't believe that.
Q. And the distribution system that they were talking
about here was 14- to 24-year-olds; correct?
A. I don't believe that.
Q. That's what it says, though.
A. I worked in sales in April --
Q. Excuse me.
A. -- of '76, and I with man --
I never heard anybody talk about Tru-Check and vending
as a way to get 14- year-olds to start smoking cigarettes.
Q. I know that's what you're saying here, sir, but
but we have documents --
MR. WEBER: Let me object to counsel's argument and
commentary, Your Honor. It's not a question.
THE COURT: Okay. Ask your question, counsel.
Q. We have documents; correct, sir?
A. You have a lot of documents.
Q. Now do you think the person who authored this
document knew that it would somehow, some way, some day, get into the hands
of the state of Minnesota's lawyers?
MR. WEBER: Objection, Your Honor, it's argumentative
and irrelevant.
THE COURT: Well it's not irrelevant. You can answer.
A. I seriously doubt that in November 26th, 1974,
who -- whoever wrote this thought this would end up in the state of Minnesota.
Q. Fair to state that the person who writes documents
internally thinks they're going to stay internal?
A. I don't think there are many people working for
Reynolds today that believe if they write a document it's going to stay
internal today.
Q. I would agree with you today, sir. I would agree
with you today.
MR. WEBER: Let me object to counsel's commentary,
again, Your Honor. It's not a question.
Q. If --
THE COURT: Go ahead.
Q. -- people today feel that way, they're going
to be a little more careful the way they write memoranda today; aren't
they, sir?
A. We write --
People write memoranda. They write memos. You asked
me if I thought that these people knew this document would end up in Minnesota,
and I said no, I don't think they did.
Q. That's not what I asked you.
*31 A. And --
Q. That wasn't my last question.
People today, you say, think their documents may
get out, so my question to you is pretty simple: People today, having that
in mind, are going to be a little more careful the way they write memos;
aren't they?
MR. WEBER: Argumentative and irrelevant, Your Honor.
A. I --
THE COURT: You can answer.
A. May or may not be. I can't tell you everybody
that writes -- you know, I don't know --
Careful about what?
Q. Well --
A. About describing our business and our objectives
and what we're trying to do?
Q. Haven't you been aware that RJR gives lessons
as to what to say and not say in memos?
A. No, I -- I'm not aware of that one.
Q. You're not aware of the lawyers saying be careful
about what's said in memos?
A. I have no knowledge of lessons being given to
people in the company on how to write memos and what language to use.
Q. Ah, my last question was a little different.
A. I missed it then.
Q. Are you aware that lawyers have said to be careful
about what's put in memos?
A. I am not aware of that.
Q. You're not aware of that.
A. No, I'm not.
Q. Let's go back to Exhibit 12377. You've never seen
any document that said this is false.
A. I'm -- I'm -- where --
Where are we?
Q. Same exhibit.
A. Okay.
Q. 12377, the domestic operating goals, what RJR
was striving for back in 1974.
A. Right.
Q. All right? On the second page, after talking
about its marketing goal, which was to increase the young adult franchise,
they talk about the vending machine sales and the Tru-Check computer systems;
correct?
A. Yes.
Q. And if we go on, we will see that they talk about
exploiting the potential of the growing cigarette categories; correct?
A. Yes.
Q. And they talk about the fact that they hired
a fashion consultant; correct?
A. Are we on the same --
Where are we?
Q. I'm on Exhibit 12377.
A. And which Bates number?
Q. Look at page --
If you go to page two at the top.
A. Okay.
Q. It's Bates --
Do you have that?
A. Yes, I have it.
Q. You see the vending machine there?
A. I'm with the vending machine.
Q. Now go to the next page, page three.
A. All right. Okay. All right.
Q. There's a reference to the fact that a fashion
consultant was hired; correct?
A. Super -- sale of --
Q. First bullet point, sir, last sentence.
A. Oh, yes, I got it. Okay. "We have hired a fashion
consultant...," yes.
Q. Same thing we saw in the report to the board
two months before; correct?
A. Yes.
Q. And the vending machine and the Tru-Check system
we saw in the report to the board two months before; correct?
A. Well I believe so.
Q. And developing new brands and line extensions,
do you see that down at the bottom of that page?
A. Yes.
Q. And this is reference that this would afford
us, meaning RJR, the quickest opportunity to combat Kool and Marlboro and
with directed appeal to the young smoker; correct?
*32 A. That's what it says.
Q. And if you go to the next page, page four at
the bottom of the page talks about working on a cigarette in which 95 to
98 percent of the nicotine has been removed; correct?
A. That's what it says, yes.
Q. Well you know that you can remove almost all
the nicotine from cigarettes; don't you, sir?
A. We could do it today. I mean there are processes
--
I mean if somebody told me go take all the nicotine
out of cigarettes today, I couldn't do it; I don't have the processes to
do it, I don't have the capacity or the process to do it. There is technology
where you can remove nicotine from cigarettes, yes.
Q. Okay. That's what I mean. It's -- it's technically
feasible; isn't it, sir?
A. Sure.
Q. Can you direct your attention now to Exhibit 12865.
A. Got it.
Q. By the way, who usually gets the domestic operating
marketing goals?
A. Who --
Q. Yes.
A. Who -- who gets the goal?
Q. Who gets the documents setting forth the domestic
operating goals?
A. Everybody in the company knows what our market
share goals are, and the financial goals.
Q. Goes right to the CEO of the company; doesn't
it?
A. Oh, everybody --
The people that run the machines in the factories
know our goals.
Q. The last document we saw, domestic operating
goals, a document like that would go to the top of the company; correct,
sir?
A. I would assume that document went to the -- to
the CEO of the tobacco company.
Q. All right. Now if we can direct our attention
to Exhibit 12865, do you see that's from a Mr. Hind to Mr. C. A. Tucker?
A. Yes.
Q. And you know who Mr. Tucker is?
A. Charlie Tucker was the vice-president of marketing
and sales, I -- back
in January 1975.
Q. High official.
A. He was --
Yes, he was the head of marketing and sales.
Q. What was his function as head of marketing and
sales?
A. He was responsible for the marketing and sales
departments in the company.
Q. What does that mean?
A. All the development of marketing plans, sales
plans, ad campaigns, promotions, distribution, you know, merchandising
programs at retail, all -- he had that responsibility.
Q. The whole gamut; correct?
A. Yes.
Q. Okay. In order to achieve the marketing goals
of the company; correct?
A. Yes.
Q. Now this document is dated January 23rd, 1975?
A. Yes.
Q. Marked "SECRET," "RJR SECRET?"
A. Yes.
Q. When are "SECRET" stamps put on documents at
RJR?
A. When you don't want your competitor to know about
it. I would think
that's why it was put on there.
Q. Is that the only reason to put it on?
A. Well that's the only reason I know of.
Q. It's also restricted access; isn't it?
A. Yeah, restricted access for the purpose of making
sure competitors don't find out about things you're trying to do.
Q. Restricted distribution within the company; correct?
A. Yes. Typically something that is secret would
be restricted access.
*33 MR. CIRESI: Your Honor, we'd offer Exhibit 12865.
MR. WEBER: No objection, Your Honor.
THE COURT: Court will receive 12865.
BY MR. CIRESI:
Q. Now this is from Mr. Hind; correct?
A. Yes, it is.
Q. Do you know Mr. Hind?
A. Well I remember Jim Hind. He -- yes, I remember
him.
Q. Now were you in the marketing department at this
time?
A. No, I was in R. J. Reynolds Industries.
Q. How long were you at the Industries at that point,
sir, RJR Industries?
A. Oh, I started in May, so seven, eight months.
Q. May of which year?
A. '74.
Q. So you were there for seven or eight months?
A. Yes.
Q. And then you went to RJR Tobacco?
A. Yes, in April of '76.
Q. '76.
Now this document to the vice-president, Mr. Tucker,
who's in charge of all marketing and sales, distribution, advertising,
promotion, states as follows: "Our attached recommendation to expand nationally
the successfully tested 'Meet the Turk' ad campaign and new Marlboro-type
blend" --
Do you know what that is?
A. No.
Q. It was an ammoniated cigarette; wasn't it?
A. I don't know that.
Q. Pardon me?
A. I