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RJ Reynolds

Lost Empire: the Rise and Fall of R. J. Reynolds Tobacco Company.

Date: 19991118; 19991229
Length: 363 pages
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Named Person
Senkus, M.
Darr, E.A.
Rodgman, A.
Ramm, H.H.
Teague, C.E. Jr
Ctr
Gray, B. Jr
Dowdle, J.
Wade, C.
Blixt, C.A.
Bumgarner, J.
Colucci, A.
Epa
Crohn, M.
Rowland, R.
Rjr
Stowe, M.
Stevenson, S.
Reynolds, J.H. Iv
Horrigan, E.A. Jr
Odear, R.
Seagraves, R.
Ford, Y.W.
Hoult, P.J. Jr
Fda
Tucketr, C.A.
Smith, W.
Debethizy, J.D.
Ogden, M.W.
Johnston, J.W.
Donahue, D.W.
Beasley, L.J.
Long, J.
Hall, L.W. Jr
Burrows, D.S.
Inman, L.J.
Sears, S.
Goldstone, S.F.
Mckim, T.F.
Rjr Nabisco
Schindler, A.J.
Referenced Document
List of Smoking and Health Articles. Closing the Circle A Med Student and His Mice Set Off Alarms, by Tursi F, White Se, Mcquilkin S, 19991118. Manning the Ramparts,by Tursi, White Se, Mcquilkin S, Winston-Salem Journal, 19991118. Selling Smoke, by Tursi
Date Loaded
15 Feb 2002
Author
Winston Salem Journal
Piedmont Publishing
Crothers, C.
Tursi, F.
Mcquilkin, S.
White, S.E.
Oterbourg, K.
Box
Rjr5340
Characteristic
Marginalia
Brand
Winston
Camel
Salem
Non-RJR Brands
Real
Premier
Eclipse
UCSF Legacy ID
rbg70d00

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RJR Page 2 of 2 Joumal 's managing editor, hatched the idea for this project and continued to support it as it grew in scope, time and cost. The Journal 's publisher, Jon Witherspoon, also supported the project, paid the bills and encouraged a complete telling of this story. Taking three reporters off their regular jobs for more than a year caused considerable hardship in the Journal newsroom. Many editors and reporters had to work harder and longer because of this arrangement. The members of the tobacco team want to thank their colleagues for their patience and support. Published on October 24, 1999 JournalNow Home Page Arts & Entertainment I Ask SAM I Bus.iness I Classifieds I Cyberguide E-mail Us I Livin I News I Opinion I Site Mao Speak Out (Message Boards) I S ecial Reoorts I Sports The WIRE I TV Lish'ngs I Weather © Piedmont Publishing Co. Inc. Top of.the oae http•Jlwww.journalnow.comlprojectsllostempirelacknow.htm 11/18199
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The Making Of Lost Empire  Tht FaII nr R.). Reynolds Tobacco Compan Front I Acknowledgements I Bibio r4 aDhv I Chaoters I Links I Notables The Making of Lost Empire This project, which was supposed to last about eight months, started in May 1998 with a trip to Minneapolis to retrieve RJR memos and internal reports that had been part of a court case there. The goal was to go through these documents, do some key interviews, and then write a series of stories on the history of Reynolds Tobacco. Ideally, everything would be back to normal by Christmas 1998. Here we are, almost 18 months from when we began with the first of what will be more than two months of daily stories on R.J. Reynolds Tobacco Co. What happened? The simple answer is: Good stories, like 500-pound gorillas, go where they will. The reporters realized pretty quickly that it would take more time to tell this epic story in the way it demanded to be told. As with most good stories, this one is about people. It is about those who inhabited the inner sanctum, who wrote the reports, who made the decisions that made RJR what it was and what it became. The reporting covered almost 50 years of RJR history -- a time of hope and optimism that faded as the medical case against smoking closed, ushering in tougher times for RJR here and abroad. The reporters on Lost Empire were Frank Tursi, the newspaper's projects and science reporter; Steve McQuilkin, a business reporter who covered tobacco; and Susan E. White, a metro reporter who covers county government. The project editor was Ken Otterbourg, the Journal 's metro editor. Since May 1998, the reporters worked out of an office in the newspaper's basement. This project was as much a task of managing information as a reporting and writing job. A new computer system was installed in the basement to allow the tobacco team to handle the more than 700 computer files of information compiled for this series. The reporters interviewed more than 100 people in a dozen states and the District of Columbia and transcribed more than 165 hours of interviews. There is no shortage of documents about the tobacco industry. Many once-secret documents have been made public through court cases. Other industry documents used, including a wide-ranging Page 1 of 2 http:l/www joumalnow.com/projects/lostempire/about.htm 11/18/99
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RJR Page 1 of 1 Lt~9f'7 E~Yla~'~~~I vtNames.1ZMkueN"r• The Fall of R.J. Reynolds Tobacco Company The biggest and best-managed company in the U.S. tobacco industry. That's how Time magazine described the R.J Reynolds Tobacco Co. in a cover story in April 1960. But the good times would not last. Lost Empire is about a company and an industry under attack from government regulators and trial lawyers. It is a story of sacrifice and greed, of honor and deception. It is about the consequences of inaction and of the,t,oids not:taken. And because of RJR's ties to our community, it is also the story of Winston-Salem. About the Series I Acknowledgements I Bibliography i Chaoters ~ Links I Notables Chapter 13: King Richard meets King Tobacco RJR took its no-TV windfall and bet big on racing JournalNow Home Page Arts & Entertainment I Ask SAM I Business I Classifieds I Cyberauide E-mail Us I Livin I News I Opinion I Site Mao I S eak Out {Message Boards I Special Reoorts I Spods The WIRE I TVListinc s I Weather © Piedmont Publishing Co. Inc. T~o _of the pa4e http://www.w-s joumal.com/projects/lostempire/ 11/18199
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The Story Behind the Struggle to Survive Page 2 of 2 were -- and still are -- selling a lawful product, and they maintain that the medical evidence is inconclusive. No industry has been under more legal pressure than the tobacco industry. Reynolds alone has more than 600 lawsuits pending against it. Company attorneys always feared the crippling jury verdict that would set a precedent and invite more lawsuits. What they did not foresee was the irreparable damage done by the barrage of damning internal reports and memos that the lawsuits brought to light and which eventually forced them to the settlement table. When our story opens, RJR is a domestic tobacco company with virtually no international sales and no other businesses. A global empire that extended to shipping, oil production, fruit and crackers was built and then dismantled until the company finally returned -- in a vastly diminished role -- to what it was at the beginning. After Winston and Salem cigarettes were introduced in the 1950s, the joke around town was that RJR's next brand would be called "hyphen." City and company were that close. They remain inexorably linked, by the economics of RJR's remaining operations and its 5,000-plus employees in Forsyth County, and by the lasting legacy of a remarkable man and the remarkable company he built. Though in many ways the city has moved on, it can still be said with a certain pride that as RJR goes, so goes Winston-Salem. Published October 24, 1999 Journal_Now Home_Page Arts & Entertainment i Ask SAM I Business ~ Classifieds I Cvbercuide E-mail Us ~ Livino I News I Oinion I Site Map Speak Out (Message Boards) I Special Reports I Sports The WIRE I TV Listings I Weather © Piedmont Publishing Co. Inc. Top of the n2oe . httpa/www.joumalnow.comlprojectsllostempire/start24.htm 11/18/99
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The Making Of Lost Empire report by RJR's outside attorneys in 1985, are still the subject of litigation and have never been written about. Reporters obtained court transcripts and depositions from a dozen trials and reviewed financial documents from the 1950s forward. They looked at a wide range of government reports, including patent applications, Securities and Exchange Commission investigations, surgeon generals' reports, and the Environmental Protection Agency's report on second-hand smoke. They read diaries from some of the participants and looked through family scrapbooks. They also read hundreds of books, magazine and newspaper articles about tobacco. The two most helpful were Nannie Tilley's The R.J. Reynolds Tobacco Com pany , and Richard Kluger's Ashes to Ashes , which chronicles the rise of Philip Morris Co. Top.of the.p.age JournalNow Home Page Arts & Entertainment I Ask SAM ~ Business I Classifieds I Cyberauide E-mail Us I Living I News I 0 inion i Site Ma Speak Out (Message Boardsi I Special_,Repqfts I Sports The WIRE I TV Listinas I Weather © Piedmont Publishing Co. Inc. Top of the page Page 2 of 2 http://www journalnow.comlprojects/lostempire/about.htm 11/18/99
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RJR Page 2 of 9 and let the smoke linger in his mouth. It certainly tasted better and was easier to draw than the other filter brands. Smoking them was like sucking air through a mattress. This cigarette would not only allay the health fears some smokers were beginning to have, but with the right advertising campaign and slogan it might propel the company to the top of the industry again. Gray's father had directed the company's first rise to the top in the 1920s, but Reynolds had not occupied that spot for the past 14 years. Like his father, then, Gray could lead RJR to the top again. He crushed the stub of his Winston in an ashtray on his desk and slowly hobbled over to the table in his office where men from the William Esty Co. huddled over advertising copy. Their task was to come up with a Winston slogan. The future of RJR depended upon it. Gray insisted that the ad campaign center on the cigarette's taste. That's what separated it from the other filters on the market, he repeated over and over. One of the admen, reading over the copy, was struck with an idea. "I've got it," he announced, perhaps a bit too triumphantly. "Winston Tastes Good Like a Cigarette Ought to." (Business Week footnote The Making of a Cigarette Gray's father, Bowman Gray Sr., came to a similar crossroads in the early 1900s. He clearly saw the future, and it dismayed him because the chewing and smoking tobacco he was hawking for RJR in Baltimore weren't part of it. Everywhere Gray went, people were smoking cigarettes, and he kept urging his bosses in Winston to come up with one. Ready-made cigarettes had always been considered the smoke of effeminate Europeans or illiterate immigrants who crowded into Northern cities. Even as late as 1910, smokers in New York bought a quarter of all cigarettes sold in the United States. Real men smoked cigars or, if they had some money, pipes. John L. Sullivan, the heavyweight boxing champion, spoke for most American smokers when he said that only "dudes and college misfits" smoked cigarettes. But as the second decade of the 20th century began, anti-smoking groups in cities and states across the country clamored for a ban on malodorous pipes and cigars in public places. The aroma from a cigarette, on the other hand, was relatively benign. And it didn't take an hour to smoke or require any special skill or equipment. In an increasingly urbanized society, the cigarette was compact, mobile and less obtrusive and objectionable than other forms of smoking. Richard Joshua Reynolds could see the trends as clearly as his young salesman, whose opinion he valued, could. He had offered Gray the sales job in the company's "northern territories" in 1895 because he thought the boy had determination and grit. Plus, he came from good stock. Gray's grandfather had bought the first lots in Winston and his father had helped start Wachovia National http:l/www.joumalnow.com/projects/lostempire/tobl a.htm 11/18/99
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• RJR Front I Acknowledgements I Biblioaraphy I Chapters I Links I Nota_ bles Behind the Lost Empire Many of the people we talked to for this series gave graciously of their time and often at some personal risk of being deposed in a future tobacco-related lawsuit. In some cases, they had never been interviewed at length by a reporter about their roles at R.J. Reynolds Tobacco Co. It would have been difficult to do this story without some cooperation from RJR. The newspaper notified the company early on about this project, and company officials said they were eager to tell their side of the story. RJR gave us unprecedented access to experts in its legal, scientific and manufacturing departments. That cooperation, though, had its limits. We weren't, for instance, allowed to interview anyone who currently works for the company's marketing and advertising departments, and some documents we requested either couldn't be found or were withheld. John Singleton, the director of RJR's corporate communications, handled most of our requests as forthrightly and as quickly as the corporate bureaucracy would allow. We are immensely grateful to John and other members of the public-relations staff for sticking with us for the past 18 months. Other people at RJR we would especially like to thank for helping us are: Rodney Austin, Charles Blixt, Frank Colby, Paul Crist, Daniel Donahue, William Hobbs, Ed Horrigan, Joe Inman, Jerry Long, Alan Rodgman, Murray Senkus, the late William Smith, J. Paul Sticht, David Townsend and Tylee Wilson. We would also like to thank others who didn't work at RJR. They include: Phil Carlton, N.C. Attorney General Mike Easley, Don Garner, Wendell Gauthier, Michael J. Horowitz, former Minnesota Attomey General Hubert Humphrey III, Chuck Kueper, Kelli Kueper, Patricia Kueper, John G. Medlin Jr., Paul Monzione, Mississippi Attorney General Mike Moore, John R. Sprague Jr., Calder Womble and William F. Womble. We also want to thank the staffs of the Winston- Salem Jourrral library, the Library of Congress, the Forsyth County Public Library, the Forsyth County Tax Assessor's Office, the Manuscript Collection at the University of North Carolina at Chapel Hill, the Special Collections Library at Duke University, the Baptist Collection at Wake Forest University and Andrews Publications. Gravity Inc. of Fort Worth, Texas, gave us eight CD-ROMs containing thousands of RJR documents that had been subpoenaed by the House Commerce Committee in 1997. Gravity sold the CDs to lawyers. Bosses don't usually get the credit they deserve. Carl Crothers, the htip:/lwww. joumalnow. corn/projects/lostempi re/ackn ow. htm Page 1 of 2 11/18/99
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RJR Page 1 of 9 Introduction I Acknowledgements I Bibliooraphy I Chapters I Notables I Related Links Chapter 1, Part 1 On the Brink As R.J. Reynolds Tobacco Co- got ready to introduce its first filter cigarette, a proud history tied to Camel's growth was bumping up against the future By Frank Tursi, Susan E. White and Steve McQuilkin JOURNALREPORTERS ® Winston-Salem Journal Bowman Gray Jr. stood at the window of his office on the 19th floor of the Reynolds Building and stared down at the tiny cars slowly making their way through the tangle of traffic on Main Street. He inhaled deeply from his cigarette and expelled a stream of smoke that slowly engulfed his head in a pale blue cloud. Gray rolled the cigarette in his fingers. He had been selling cigarettes all his life. This one, he knew, was a winner. • The sales numbers that came in from Boston that May day in 1954 confirmed what his gut was telling him: The gamble was paying off. Though it had been on the market in New England for less than two months, R.J. Reynolds Tobacco Co.'s first filtered cigarette was already outselling the other, more established filter brands. Some of the old-timers at Reynolds said they hadn't seen such demand since Mr. R.J. introduced Camels more than 40 years earlier. Gray was just a kid then, but he remembered the old man visiting his house on Sunday afternoons to talk business with his father, who, as head of the company's sales department at the time, orchestrated the rise of Camels. The men would sit on the Journal Photo By Charlie Buchanan porch for hours, near a convenient set of bushes that would be on the receiving end of the steady stream of tobacco juice produced by Reynolds' ever-present chew. Sometimes, Reynolds' brother Will -- known as "Uncle Will" to every kid on that block of West Fifth Street -- would join them. Though he and his brother remained at a respectful distance, young Bo Gray could overhear the men talk excitedly about the prospects of Camel, the company's first cigarette. This one could be bigger, Gray thought, as he took another drag http://www.joumalnow.com/projects/lostempireltobl a.htm 11/18/99
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RJR Page 3 of 9 Bank, the town's biggest bank. That's where Gray was working as a 21-year-old teller when Reynolds offered him the tobacco job. There was really no reason why Gray should have taken it. Reynolds' company had been in business 20 years, but it made only chewing tobacco and didn't sell anything north of Washington. It wasn't even the largest of the 30 or so tobacco companies in Winston. That honor belonged to P.H. Hanes & Co. (Tilley footnote) Dick Reynolds was a big, rawboned farm boy from a place in Virginia called No Business Mountain. But he could be right persuasive. People who first met him often underestimated his intelligence because of his lifelong stammer and his inability to spell, a symptom of what is now known as dyslexia. Reynolds' father became rich making and selling tobacco plugs and twists. The son was attracted to Winston because of the little town's railroad spur to Greensboro and its location in the middle of farm country that grew the best tobacco in the world. He arrived in 1874 and built his first tobacco factory a year later on a lot no bigger than a tennis court. "He was a strange man, Dick Reynolds was," Josephus Daniels, the publisher of the Raleigh News & Observer, said of his old friend. "A bold, daring and audacious man with little education and little polish.... North Carolina has not produced another merchant of such vigor and success." . Gray apparently saw those qualities also, because he quit a secure bank job that paid $1,500 a year for a precarious future at $5 a week. Reynolds first sent his new salesman to Georgia to help him overcome his shyness and to develop some selling skills. Then it was on to Baltimore, which Reynolds envisioned as the gateway to the Northern markets. That he would entrust such an important post to a relatively inexperienced salesman was an indication of Reynolds' high regard for Gray. So he didn't dismiss Gray's urgent pleas about cigarettes. He agreed that they represented the tobacco industry's future. Yet, there was little he could do about it. Since late 1899 his company had been part of James Buchanan Duke's trust, the American Tobacco Co. Though he used Buck Duke's money to build modern plants and to crush competitors of his chewing tobaccos, Reynolds couldn't venture into the cigarette market, which American controlled. The U.S. Supreme Court provided the opening when it dissolved the trust as an illegal monopoly in 1911 and gave Reynolds control of his company again. "Watch me and see if I don't give Buck Duke hell," he wrote in a letter to Daniels. Reynolds did well under Duke's benign dictatorship. His company emerged from the trust as the largest in North Carolina. Its sales exceeded $12 million, a fourfold increase since Reynolds willingly joined with Duke. RJR was the undisputed king of chewing tobacco, and its Prince Albert, which was introduced in 1908, was ~ the most popular pipe tobacco in the country. ~ Producing cigarettes, though, would be a direct challenge to Duke. -' He and his Wall Street cronies still held the largest block of voting o rn w -4 hftp:l/www.joumalnow.com/projects/lostempireltobl a.htm 11/18/99

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