STATE OF MINNESOTA AND BLUE CROSS AND BLUE SHIELD OF MINNESOTA, PLAINTIFFS,

V.

PHILIP MORRIS, INC., ET. AL., DEFENDANTS.

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