Behind the Tobacco Retreat

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The U.S. government has spent four years and more than $135 million building a case in federal court that cigarette makers profited over the course of a half-century by lying to the American public about the dangers of smoking and racking up generations of addicts in the process. The proposed penalty-- $130 billion--would pay for a recovery program for every cigarette addict in the U.S. for the next 25 years.

When the Justice Department abruptly changed course last week, reducing the penalty sought to $10 billion, critics cried foul, charging it was a reflection of the Administration's ties to the tobacco industry, including a Justice Department with a handful of high-level political appointees who used to belong to law firms that represented Big Tobacco. "The public has to be on the lookout for clandestine negotiations," says Matthew Myers, a witness in the case and president of the Campaign for Tobacco-Free Kids.

But speculation that politics was behind the move is "exactly wrong," a career Justice Department prosecutor involved in the case told TIME. Government attorneys were caught off guard in February by a circuit-court ruling that severely limited the payout they could seek from Big Tobacco, said Justice Department officials. Under the racketeering statutes cited in the case, the government could not recommend a penalty for any past wrongdoing and instead was restricted to proposals geared to prevent and restrain future action. Prosecutors scrambled to adjust their case. The solution, based on recommendations by longtime Justice lawyers, was to ask the court to demand an initial $10 billion payment, then appoint a monitor to review the behavior of the industry and recommend a suitable penalty every year until the cigarette makers stop their misdeeds. Ted Wells, a lawyer for Philip Morris USA, calls the plan a "last-minute, desperate attempt" to save the case. But Justice lawyers say that far from staging a retreat, they are betting on the "virtual certainty" that the tobacco industry won't change its ways in one year and thus will be liable for steep penalties for years to come. --By Brian Bennett