Tobacco Documents Online

Ellis, Cathy ~.WMENIffiff From: Keane, Denise Sent: Wednesday, May 08,199812:22 PM To: Nelson, Jack (PMUSA Mac Mail); Ellis, Cathy Cc: Barrington, Marty; Mulderig, John Subject: RE: CTR & TI 201b0S--ZoS14142 YES - BUT THERE ARE A NUMBER OF ISSUES TO WORK 7HROUGH. ALTHOUGH WE NEED TO DISCUSS A LONGER TERM PLAN - I THINK WE SHOULD AWAIT THE OUTCOME OF EFFORTS TO VACATE THE TEMPORARY RECEIVERSHIP. From: Ellis, Cathy Sent: Tuesday, May 05, 1998 2:11 AM To: Nelson, Jack (PMUSA Mac Main: Keane. Denise Subject: RE: CTR & 11 Should we meet on this topic? From: Nelson, Jack (PMUSA Mac Maiq Sent: Monday, May 04, 199811:31 AM To: Barrington, Marty: Eliis, Cathy: Keane, Denise Subject: CTR & Tf N.Y. Judge Places Tobacco Institute Under Control of Receiver (WP) The Washington Post via Dow Jones Publication Date: Sunday May 3, 1998 A Section; Page A13 Copyright 1998, The Washington Post Co. All Rights Reserved By Bill McAllister Washington Post Staff Writer I -Z-D (0b S-1PG1-f qZQt . The Tobacco Institute, the Washington trade group that for nearly 40 years has fought efforts to brand tobacco as a health hazard, has been placed under control of a temporary receiver by a New York state judge for allegedly abusing its tax-exempt status. The unusual action Friday by state Supreme Court Judge Stephen Crane was in response to a complaint by New York Attorney General Dennis C. Vacco that the institute and the Council for Tobacco Research USA Inc. are tobacco-funded "fronts" that serve "as propaganda arms of the industry." Vacco said both organizations have abused their tax-exempt status under New York law, where they were incorporated. Thomas Lauria, a spokesman for the Tobacco Institute, said yesterday the group had done nothing to violate its status as a nonprofit organization under New York law and would challenge the receivership at a June 8 court hearing. "Evidently Mr. Vaoco does not believe we should participate in the process of addressing government-public Issues," Laurla said. The attorney general charged in a statement Thursday that the institute, Page 1

which is based at 1875 Eye St. NW, and the research group "together fed the public a pack of lies in an underhanded effort to promote smoking and addict our kids." Because they promoted the profit-making efforts of the tobacco industry, Vacco said, they should lose their nonprofit status. On Friday, Vacco petitioned the Manhattan court to dissolve the two groups' charters as part of a lawsuit he had filed against them and seven tobacco companies in January. Judge Crane responded by naming Milton S: Gould, 88, a partner at LeBoeuf Lamb Greene & MacRae, to take control of the Tobacco Institute, and retired state Supreme Court justice Walter M. Schackman, 71, to oversee the Council for Tobacco Research. On June 8, Crane will decide whether to make their appointments permanent. "This action begins a process that will ensure that the tobacco industry will no longer be able to continue to finance their propaganda machine at taxpayer expense," Vacco said. "It is quite a victory for Vacco," Stephen Gillers, a New York University law professor, told Newsday. "The Tobacco Institute and the Council for Tobacco Research are viewed by the anti-tobacco activists as twin evils and responsible for suppression of much of the negative research about cigarettes. Vacco has essentially immobilized them, at least temporarily." In a news conference Thursday, Vacco charged that the Tobacco Institute "was established specifically to create controversy and doubt about health claims associated with smoking and to design public relations campaigns to mislead and deflect criticism about the tobacco industry." Both the institute and the research organization that Vacco sued were supposed to disappear under the agreement that the state attorneys general reached last year with the tobacco industry. The agreement has not been ratified by Congress, but under its terms, the industry would be allowed to replace the institute, its primary lobbying and public relations arm, with another organization, provided 20 percent of its new board of directors come from outside fhe industry. The appointment of a receiver to oversee the institute caught its officials by surprise, Lauria said. But he said the organization is not about to give up or leave the tobacco industry without a voice in Washington. "We believe that every citizen, every interest group, has a right to form a trade association and to address public policy issues in a public forum," said Lauria. As for Vacco's charges that the institute was a sham, Lauria said: "As a trade association, we have always reflected the industry point of view. Every trade association does that." Copyright (c) 1998 The Washington Post Page 2

Received by NewsEDGE/LAN: 5/3/98 3:40 PM Tobacco Trade Groups Ordered Into Temporary Receivership (New York) (NEWSDAY) By Harry Berkowitz (c) 1998, Newsday NEW YORK A New York state judge Friday ordered that two receivers temporarily take control of the tobacco industry's trade group and research organization in response to state Attorney General Dennis Vacco's lawsuit seeking that they be shut down. Judge Stephen Crane of State Supreme Court in Manhattan appointed Milton Gould, 88, a partner at LeBoeuf Lamb Greene & MacRae, to take control of the Tobacco Institute, and retired State Supreme Court Justice Walter Schackman, 71, of the law firm Davis & Gilbert, to run the Council for Tobacco Research. Crane ordered that both groups show cause at a hearing on June 8 why they should not be dissolved a common response to a lawsuit but the appointment of receivers for not-for-profit groups is rare. "This is most unusual," Gould said in an interview. Vacco, in a suit first filed in January 1997, accused the groups of fraudulent conduct and said that they were trying to mislead the public about links between smoking and disease and so did not deserve tax-exempt status. Thursday, Vacco asked for an expedited hearing. The judge's order included permission for Vacco to "take proof and issue subpoenas" against the groups. "Judge Crane's order begins a process that will ensure that the tobacco industry will no longer be able to continue to finance their propaganda machine at taxpayer expense," Vacco said. "It is quite a victory for Vacco," said Stephen Gillers, professor of law at New York University. "The Tobacco Institute and the Council for Tobacco Research are viewed by the anti-tobacco activists as twin evils and responsible for suppression of much of the negative research about cigarettes. Vacco has essentially immobilized them, at least temporarily." "I would certainly expect that the Tobacco Institute will be given a fair hearing to demonstrate that such an action is improper," spokesman Tom Lauria said Friday, adding that every industry should have the right to have a trade group and engage in public debate on public issues. The Council for Tobacco Research did not comment. Vacco's attempt to dissolve the groups is part of a state suit seeking to recover billions of dollars in smoking-related Medicaid costs from the industry. Dozens of other states have filed similar suits, and the industry has settled out of court with Mississippi, Texas and Florida. A trial is under way in Minnesota. Although the Tobacco Institute is based in Washington and has branches in five states, it was incorporated in New York state in 1958, as was the Council for Tobacco Research, based in New York, in 1971. Distributed by the Los Angeles Times-Washington Post News Service Copyright (c) 1998 The Los Angeles Times - Washington Post News Service Received by NewsEDGE/LAN: 5/2/98 2:44 AM Judge appoints receivers for 'not-for-profit' tobacco groups (AP) NEW YORK (AP) A lawyer and a former judge have been appointed Page 3

to take over operations of two tax-exempt groups accused of being propaganda machines for the tobacco industry. State Supreme Court Justice Stephen Crane on Friday appointed former judge Walter Schackman to take over day-to-day operation of the Council for Tobacco Research and lawyer Milton Gould to run the Tobacco Institute. Crane also ordered each group to file a $500,000 bond and provide a statement of assets and liabilities, and names of creditors and claimants, and all other information relevant to dissolution proceedings. State Attorney General Dennis Vacco said Thursday he was moving in court to revoke the tax-free status the groups enjoy as not-for-profit research and information organizations because they violated their charters. Vacco accused the groups of "fraudulent and illegal" acts by posing as nonprofit groups while, at taxpayer expense, they "fed the public a pack of lies in an underhanded effort to promote smoking and addict our kids." Crane also authorized Vacco to issue subpoenas, which the attorney general's office says "will now place the burden on the industry to produce further documents on how it manipulated research information and data regarding tobacco use and health." Crane scheduled a June 8 hearing on Vacco's petition. The attorney general was able to sue in New York because both organizations have their certificates of incorporation in this state. Gould, who said he has had several receiverships, said he did not know yet what his specific job would be in this case. Gould said he was the attorney for the receiver of the stores that became the Toys ' R' Us chain. Thomas Lauria, Tobacco Institute spokesman, said his group had not been served with notice of the receivership by Friday evening. But he added, "We expect that the Tobacco Institute will be given a fair hearing to demonstrate that such an action is improper." Lauria said Thursday that the institute's purpose "is to articulate the tobacco industry's point of view before the public and government bodies." The spokesman for the Council for Tobacco Research, Dr. James Glenn, was said to be out of town until next week and not reachable for comment. Copyright (c) 1998 The Associated Press Received by NewsEDGE/LAN: 5/2/98 1:24 AM Tobacco research arms placed in receivership (REUTERS) NEW YORK, May 1 (Reuters) - A New York state judge on Friday ordered that two tobacco-funded research entities be placed in receivership pending the outcome of a motion filed by the state seeking to close them permanently. State judge Stephen Crane ordered that the Tobacco Institute Inc. and the Council for Tobacco Research USA, the two tax-exempt entities, be temporarily be placed in receivership, said New York Attorney General Dennis Vacco. Vacco filed a petition in state court Thursday to shut down the two entities. He said that the two tax-exempt entities were created ostensibly to provide the public with honest research and Page 4

information but instead served as propaganda arms for the industry. Vacco argued in the petition that the two entities acted in a "persistently fraudulent and illegal manner by using their tax-exempt status to advance the efforts of the for-profit tobacco companies." The Council for Tobacco Research and the Tobacco Institute are New York not-for-profit corporations whose certificates of incorporation were filed in 1971 and 1958, respectively. Crane appointed retired state judge Walter Schackman and attorney Milton Gould to serve as temporary receivers of the entities pending a June 8 hearing on dissolution. As part of the order, Crane also ordered the entities to file a statement of corporate assets and liabilities with the court by June 1. Vacco said he filed his petitions to dissolve the research entities after major tobacco companies said they would not participate in proposed federal legislation to deal with tobacco litigation and reduce underage smoking. The move also follows the House Commerce Committee's release earlier this month of 39,000 tobacco documents that gave new details of how tobacco companies deliberately hid potential health risks from the public. The documents also showed the extensive role played by lawyers in directing sensitive health research and concealing findings. Copyright (c) 1998 Reuters Received by NewsEDGE/LAN: 5/1/98 10:21 PM Page 5