WED, THU: DAYS 106, 107: Formula for Exposure

May 24, 2005 10:17 pm by Gene Borio

If there is a heartthrob amongst the tobacco lawyers, you’d have to say it is Philip Morris USA’s Tom Frederick. Young enough to be a DOJ lawyer, he’s handsome, with a sturdy, college wrestler’s build. Though he has a strong widow’s peak that from the side gives him a faint resemblance to Eddie Munster, his good looks, dark, slicked-back hair, and easy but assertive manner has spurred one courtroom wag to note, “He’s got that Gordon Gecko* thing going on.”

Just an ever-so-slight tinge of grey at the temples tells you he’s not quite as young as you thought, and when he takes out his glasses to read, it heartbreakingly shatters his seeming aura of physical perfection.

One asset he told the court he is particularly proud of is his ability to speak-extremely-fast. And he could do so without sacrificing strength or clarity, too. How appropriate that his area of cross Thursday should be Formula 1 racing. Indeed, in his cross of Campaign for Tobacco-Free Kids CEO Matt Myers (following that of B&W’s David Bernick), he left the court reporter so far in the dust that Judge Kessler had to caution him several times to slow down. Put a Marlboro helmet on him at the podium and he’d look right at home (the aerodynamic full-face screamer featured on the cover of Auto-Zone, US Exhibit #92137, would do just fine). The atmosphere inside Courtroom #19 seemed especially charged as he and veteran lawyer Mr. Myers verbally raced around the track vying for position.

The scraps of Mr. Myers’ Written Direct that were left after the bloodletting of the last few days included his claim that the F1 Marlboro racing team, which is sponsored by non-defendant Philip Morris International, is a serious MSA loophole, because its Marlboro imagery finds its way back to the US in the form of TV coverage, news coverage, magazines, internet sites and, in colors at least, one race. (That race is The United States Grand Prix in Indianapolis, which Judge Kessler will be able to enjoy as she’s reading prior testimonies, from the pit walk-out June 16th through the support series events, and finally, the actual F1 Grand Prix on Sunday, June 19. See: http://www.usgpindy.com/news/story.php?story_id=4386) It does seem odd for the F1 GP’s website to show the Marlboro logo at http://www.usgpindy.com/. This would have been quite the DOJ exhibit!)

The Marlboro logo/Formula One race is an important issue on 2 levels:

1. Defense needs to show that the MSA assures that there is no possibility of future RICO wrongdoing, while the government needs to show the MSA is inadequate. DOJ had wanted Mr. Myers’ to testify that several elements which the industry had agreed to in the 97 Proposed Resolution were stronger than similar provisions in the MSA.

The MSA allows Philip Morris USA one sporting sponsorship. Philip Morris USA has chosen an Indy Racing League (IRL) car racing team in conjunction with Team Penske (which it will discontinue by December 1, 2006). And yet, according to DOJ, while Philip Morris USA plays the good guy, its evil twin, Philip Morris International, keeps flooding the country with Marlboro logos.

Mr. Frederick attempted to demonstrate that no one in this country pays any attention to F1 anyway (another entry for my forthcoming Museum of Disingenuous Arguments). He showed a 2003 Sports Illustrated article in which Michael Schumacher, a huge F1 star in the rest of the world and main driver of the Marlboro team (officially, the Ferrarri team) likes to vacation in the US because nobody recognizes him here. He then showed another article which said the same thing; to my mind, the language of the 2nd article indicated the author was simply repeating the information from the first article. But while Schumacher may be relatively little known compared to other US sports superstars, Ms. Eubanks on redirect was able to show that F1’s print coverage and TV viewership is still substantial.

2. Mr. Myers said that [roughly], “Philip Morris USA and Philip Morris International are 100% subsidiaries of Altria . . . so Altria has control and responsibility for both. . . . Decisions flow back and forth”

Mr. Myers here stepped up to the Altria/PMU/PMI issue and its many attendant gnarly issues that no one in this trial seems to want to address. Perhaps the connections among the 3 companies will be dealt with in DOJ’s closing arguments, or in Dr. Fischel’s corporate governance cross-examination this Friday.

Mr. Myers said that Altria can and does exert control of Philip Morris International’s Marlboro trademark, when it wants to, ie, in a case where Mr. Myers had received from overseas a toddler’s outfit with a Marlboro logo.

The interplay between Altria (defendant), Philip Morris USA (defendant) and Philip Morris International (non-defendant) is a rich subject, and hasn’t been strongly addressed yet. For example, PMU CEO Michael Szymanczyk in his Written Direct indicates the “new” Philip Morris USA was all his idea, and that in 1997 when he became CEO:

“I decided to steer the company in a direction that was consistent with societal expectations and was consistent with what I thought a responsible company should do. I created a Mission Statement and worked with my Senior Team to develop a set of Core Values to begin this process.”

Mr. Szymanczyk apparently never had to check this out with Altria CEO Louis Camilleri. While he admits that Altria compensates him with very nice bonuses for meeting Philip Morris USA’s “nonfinancial Mission goals,” even as the company falls short of its financial targets, we have seen no communications between Altria and Mr. Szymanczyk that discuss the genesis and continuation of this unusual business arrangement in detail.

Obviously, PMI is a lot looser in its activities than Philip Morris USA. Could DOJ make the case that PMI’s behavior, as apparently sanctioned by Altria, might represent PMU’s in the future, in the absence of the MSA or other litigation threats, including this case? Could this play into DOJ’s attempts to prove the likelihood of future violations, or even its attempt to “prevent and restrain” future ones?

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Flying Low

Ms. Eubanks, in her redirect, objected in her turn to the barrage of objections from Mr. Bernick and Mr. Frederick, which often concerned the limited scope allowed for Mr. Myers’ testimony.

However, Ms. Eubanks did seem to establish:

–That despite Mr. Frederick’s attempts to show that Mr. Myers cannot knowledgeably speak to Formula One exposure in the US, Myers’ CTFK does indeed regularly track such exposure.

–That, as Mr. Myers said [roughly], “we continue to see image advertising, colorful images with people, in magazines rated as having more than 15% OR 2 million readers.” Yesterday, Mr. Myers had referenced a recent “Final Four” Sports Illustrated with a back-cover Camel “Pleasure to Burn” ad featuring a wind-whipped, leather-jacketed motorcycle rider gripping off-frame ape-hangers (high handlebars–think Dennis Hopper in Easy Rider), and somehow, at considerable speed, managing to keep his cigarette perched behind his ear. This sort of ad would have been prohibited under a black-and-white, people-barring provision of the Proposed Resolution, and certainly wouldn’t have been allowed in such a highly popular issue with a youth readership of over 2 million. (Mr. Bernick had established previously that some companies’ self-imposed youth advertising restrictions had risen beyond the MSA requirements since 1998. But not far enough to slow down this ad.)

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Defense Gets a Boost from the States

Mr. Bernick, in his short cross of Mr. Myers Thursday morning, concentrated on putting in the record the vast amount of money that various government arms received from tobacco taxes and settlement payments, from which society could fund all sorts of tobacco control initiatives, if it wanted to.

Thus, it could be argued that the states which use their tobacco settlement funds to balance budgets or to repair sidewalks while eschewing tobacco control funding, are substantially contributing to the tobacco industry’s defense in court.

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How the Hours Fly

An interesting issue came up today which may explain why the Defense has called so few witnesses for this round–it has used up all but 7-8 of their allotted 265 hours. Most of their time, of course, has been used in cross-examining DOJ witnesses. Should they need a few more hours for some pressing reason, Judge Kessler has indicated she would be accommodating.

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*The “greed is good” character played by Michael Douglas in the 1987 Oliver Stone movie “Wall Street.”

8 Responses to “WED, THU: DAYS 106, 107: Formula for Exposure”

  1. Beverly Frederick Says:

    Aside from the Eddie Munster reference, I would have to agree with everything written about my husband, Tom Frederick. I think he should be “May” in the 2006 “Hunk of the Month Trial Site Lawyers” calendar.

    His mom and his sisters concur.

    Thank you,

    Mrs. Thomas Frederick

  2. Gene Borio Says:

    It certainly is nice to finally see some unbiased opinion on this site!

    ;-)

    Best,

    Gene

  3. tobacco observer Says:

    Indeed. Not having access to images of said counsel, I will avoid comments on their pulchritude, and try to restrain my own to the issues at trial.

    >>Could DOJ make the case that PMI’s behavior, as apparently sanctioned by Altria, might represent PMU’s in the future, in the absence of the MSA or other litigation threats, including this case? Could this play into DOJ’s attempts to prove the likelihood of future violations, or even its attempt to “prevent and restrain” future ones?

    PMINTL is simply not a defendant in this case. They don’t sell cigarettes in the USA, and they aren’t a signatory to the MSA.

    I’m not sure what the legal status of advertising cigarettes on race-cars in Europe is, but I’d imagine said marketing is legal there. In any case whatever PMINTL does in Europe is certainly NOT a RICO violation and would be an issue for the EU to deal with, not the American Justice system. Judge Kessler simply has no jurisdiction over PMINTLs actitivies in Europe. That would also go for selling European kiddy pajamas with Marlboro ads on them.

    If the DOJ wants to argue that because PMINTL advertises on racecars in Europe, PMUSA or the other tobacco companies might start doing the same, I don’t think that argument is going to get them very far. There are a lot of things the tobacco companies *could* do. . .but that’s different than providing evidence that they are *likely* to do these things, a nececessary component of this civil RICO trial. Realistically, PMUSA probably isnt going to pay for expensive European racecar sponsorships when they dont sell cigarettes in Europe! If they want to market to Americans there are undoubtedly more efficient ways to do that than paying for European racing, and hoping that a few Americans catch the ads on cable TV.

    Apart from that, as far as whether or not PMINTL’s advertising practices *could* spill over to PMUSA, I think its too late in the game to start making that kind of argument at trial anyway. The liability portion of this case is already closed, and the DOJ doesn’t get to introduce new evidence anymore.

  4. Neil Collishaw Says:

    Obsevers of the relationship between Philip Morris International and Philip Morris USA might like to study the behaviour of these two branches of PM during the mid-1990s when there was money to be made as Imperial Tobacco’s agent for smuggling Canadian cigarettes back into Canada.

    Fascinating insights into this relationship came to light when a Royal Canadian Mounted Police search warrant and related affidavit were made public following a November, 2004 raid on Imperial Tobacco Canada’s Montreal headquarters.

    A description of the document, as well as downloadable segments of the entire document can be found here.

    http://www.smoke-free.ca/eng_home/news_special_RCMP_Search_Warrant_Jan_05.htm

    While the document is written in French, it includes extensive quotes from tobacco industry documents written in English, and they tell a fascinating story that is very pertinent to the DOJ case. The deep involvement of PMUSA and PMI in the Canadian cigarette smuggling saga is described in Annex C, Chapter 3 of the Canadian affidavit. There are tales on intra-company cooperation, feuding and dispute resolution. To see Chapter 3, download the following 2 pdf’s.

    http://www.smoke-free.ca/ITL%20search%20warrant/November%202004%20ITL%20search%20affidavit%20-%20Annex%20C%20-%20Chapter%203%20-%20pp%2044-63.pdf.

    http://www.smoke-free.ca/ITL%20search%20warrant/November%202004%20ITL%20search%20affidavit%20-%20Annex%20C%20-%20Chapter%203%20-%20pp%2064-83.pdf

  5. dan huntley Says:

    There is so much stuff on tobacco issues it’s really difficult for an oridinary employee to identify all the issues and conclude which side this trial is favoring. Is there a non-bias publication that can summarize and simplify the position of this trial?

  6. krueger Says:

    If you see the trial as a horse race, the only question being who wins, or who’s most likely to, I’d say there isn’t a lot of reliable information on that. We can’t read the Judge’s mind, her decision will likely be appealed for years anyway, and other events meanwhile may render this case moot.

    If you see larger issues in the trial, there’s a lot of information on that. Much of which has been posted here.

  7. Mike Morrison Says:

    Please note: The bike Dennis Hopper rode in Easy Rider did not have “ape hangers” - it had compact, close in handle bars. Fonda’s bike was the one with the “high risers”. A minor point to be sure, but get your facts correct.

  8. Gene Borio Says:

    You’re so right. Those who would like pictures of the different styles, and who was riding which bike, may look here: http://www.bikemenu.com/photoseasyrider.html

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