Even if the tobacco industry agrees to pay billions of dollars to settle pending lawsuits, cigarette companies still face a broad criminal investigation of charges that they conspired to deceive the government and the public about the dangers of smoking.
The 2-year-old federal probe is moving forward rapidly, as three grand juries hear testimony and key tobacco executives seek immunity from prosecution in return for their cooperation, according to people familiar with its progress.
A settlement of the pending civil lawsuits would not end the criminal investigation, though some observers believe a civil deal might make government prosecutors less inclined to seek severe criminal penalties against the tobacco companies and their executives.
While it has received little media attention, the criminal tobacco probe is one of the most extensive ever of a legal business sector and poses questions about the boundary between aggressive marketing and criminal fraud.
"A key to this industry's survival has been maintaining an aura of legitimacy," said Clifford E. Douglas, an anti-smoking lawyer who has assisted investigators by locating tobacco whistle-blowers. "To be branded as criminal would change that forever."
He added: "This could result in prison terms for individuals."
Apparently, some tobacco executives fear he might be right. One, Thomas S. Osdene, former research director for Philip Morris, the nation's largest cigarette maker, invoked the Constitution's Fifth Amendment privilege against self-incrimination last month to avoid answering questions in a Texas civil suit.
Osdene, a Ph.D chemist who worked for Philip Morris from 1965 until the early 1990s, has asked for immunity in the criminal case, according to Douglas. From his home in Richmond, Va., last night, Osdene said: "I have absolutely no comment to make."
Douglas said two other tobacco industry research officials also have sought immunity, but prosecutors so far have turned them all down.
"They are now targeting middle-level individuals," said John Banzhaf, a George Washington University law professor and head of Action on Smoking and Health. "There's nothing like being told by an FBI agent, 'You'd better cooperate, or you'll be indicted.' "
John K. Russell, a Justice Department spokesman, would say only, "The investigation is continuing."
Several people involved in tobacco litigation say they believe the probe has accelerated dramatically this year, with three federal grand juries hearing evidence:
In Washington, prosecutors are building a case that the tobacco companies knowingly submitted false statements to federal regulatory agencies and to Congress while hiding internal documents that took a far darker view of the effects of cigarettes.
In Brooklyn, N.Y., grand jurors are considering whether the Council for Tobacco Research, an industry group that pays for scientific studies, posed as a legitimate, nonprofit scientific organization while actually quashing research that demonstrated the hazards of smoking.
In Manhattan, a grand jury is probing allegations that the tobacco companies deceived shareholders by failing to disclose their own studies showing the addictive properties of nicotine and the links between cigarettes and disease.
Focus on top 3
In recent months, three teams of FBI agents and prosecutors in Washington have been gathering information on the three biggest U.S. tobacco companies -- Philip Morris, R. J. Reynolds and Brown & Williamson -- Douglas said.
Those teams are plowing through hundreds of thousands of industry documents. They include papers given to anti-smoking activists by whistle-blowers who worked for Philip Morris and Brown & Williamson, as well as files turned over by the Liggett Group.
The smallest of the major U.S. tobacco companies, Liggett settled the lawsuits against it in March and agreed to cooperate with the government and plaintiffs' attorneys.
The Justice Department's probe is technically not related to the civil settlement talks, which are reported to be near a resolution. But the investigation may have been a factor in driving the industry to the negotiating table. A bid by the big tobacco companies to have the criminal probe dropped as part of a civil settlement was rejected out of hand by state attorneys general, according to people familiar with the talks.
Parallel to civil suits
The potential criminal charges closely parallel the accusations in civil lawsuits, which include claims from 40 states for Medicaid money spent treating tobacco-related illnesses and a score of class-action suits on behalf of ailing smokers. And some observers believe a civil settlement could dampen the criminal probe.
"If there's going to be a grand settlement and everyone's going to shake hands, it would seem strange to come back and hit the tobacco companies with criminal charges," Banzhaf said.