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    Judge Decides Against Tobacco Cos. in Racketeering Suit

    Analysts believe penalties will not affect companies negatively; decision allows Altria to move forward with Kraft spin-off.

    WASHINGTON -- New limitations will be imposed on tobacco companies' marketing efforts as a result of a federal judge ruling in the 1999 racketeering suit, reported The New York Times.

    Judge Gladys Kessler found cigarette makers -- including Batco, Brown & Williamson; Lorillard; Philip Morris (and its parent company, Altria); and R.J. Reynolds -- need to be punished for deceiving the public about the dangers of smoking, the report stated. Liggett, another company involved in the case, was excluded from the penalties, as it did "not have a reasonable likelihood of future violations," Kessler found.

    The deception by tobacco companies, according to the judge, amounted to "an immeasurable amount of human suffering," the newspaper reported.

    During the nine-month trial, cigarette companies were shown to have "marketed and sold their lethal product with zeal, with deception, with a single-minded focus on their financial success and without regard for human tragedy or social costs that success exacted," she stated in her ruling.

    As a result of the ruling, tobacco companies must stop labeling cigarettes as "low tar," "light," "natural," or any other "deceptive brand descriptors which implicitly or explicitly convey to the smoker and the potential smoker that they are less hazardous to health than full-flavor cigarettes," Kessler noted in her 1,742-page decision.

    Companies must also overhaul advertising and marketing strategies, as well as start a campaign in newspapers and television on the "adverse health effects of smoking," Kessler said.

    But there is a ray of sunshine for the tobacco companies. Kessler did not approve a government proposal that the industry should underwrite a multi-billion dollar smoking cessation program and an educational program for children about the dangers of smoking, the paper reported. Under recent appeals court ruling, she had no power to impose such penalties, according to Kessler.

    Executives at Reynolds were "gratified that the court did not award unjustified and extraordinarily expensive monetary penalties," Mark Smith, spokesman for Reynolds American told the The Associated Press.

    Altria vice president and lawyer, William S. Ohlemeyer, said in a statement after the ruling that the decisions were "not supported by the law or the evidence presented at trial, and appear to be constitutionally impermissible or infringe on Congress' sole right to provide for the regulation of tobacco products," reported The New York Times.

    But Wall Street analysts feel that this ruling is still positive, according to The Times. "There's nothing in this ruling that is going to hurt the profitability of the business," David Adelman, analyst at Morgan Stanley, told the newspaper. "This industry is not a bunch of Boy Scouts," he added. "It's an industry that was not well regarded by the public, anyway. So I don't think there are significant public relations or legal ramifications from the decision."

    Adelman also questions the fate of major "light" brands -- such as Marlboro Lights and Camel Lights -- which make up more than 50 percent of the U.S. cigarette market.

    "The likelihood that the 'light' issue ends here is low … I think this will get appealed to D.C. Circuit Court of Appeals, and there may even be issues here for the Supreme Court," Marc Greenberg, analyst for Deutsche Bank, told the paper.

    The ruling came after the markets had closed Thursday. In early trading, stocks for Altria, Reynolds American and others named had risen.

    The decision marks the removal of the final roadblock for Altria, parent of Philip Morris, to spin off its Kraft Foods unit in an effort to increase value for shareholders.

    Other roadblocks already decided was the Florida's Supreme Court decision to maintain the appeal of a $145 billion penalty in a class-action suit against various tobacco companies and a similar $10 billion suit against Philip Morris in the Illinois Supreme Court.

    The federal case dates from the Clinton administration in 1999, when president Bill Clinton called the Justice Department to action and bring a civil racketeering suit against tobacco manufacturers in his State of the Union address, the Times reported. The suit -- accusing cigarette companies of fraud, deceptive advertising and dangerous marketing -- was one the government's largest in the scope of the charges brought against companies and the resources devoted.

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