Tobacco.org

• How cigarettes funded Balkan wars 

In the second of two pieces on organised crime accompanying his Radio 4 series How crime took on the world, Misha Glenny reveals the details of a cigarette-smuggling scam that funded many of the paramilitary killing machines in the Yugoslav wars.

The first counterfeit cigarettes appeared on the markets of the former Yugoslavia just days after the war broke out in June 1991.

These were fake Marlboros, Rothmans, Winstons and other well-known brands that had been manufactured in different parts of the Balkans and beyond. . . .

The cigarettes often arrived in the Balkans via Rotterdam and Asia

There was only one drawback - when you drew your first puff, instead of the familiar blend of Virginia tobacco, the back of your throat was assaulted by a taste akin to a mixture of sawdust and goat's dung.

It took a restless Serbian entrepreneur called Vladmir "Vanja" Bokan to provide the market with an improved product a couple of years later. . . .

He swiftly secured Greek citizenship and once again prospered as a master smuggler.

But on 7 October 2000, as he emerged from his Mercedes 500 in front of his villa, Bokan's face was obliterated by 29 bullets fired from a couple of semi-automatics. The killers were never brought to justice.

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• Philip Morris International Inc. (PMI) Announces Agreement to Acquire Rothmans Inc. 

Philip Morris International Inc. (NYSE / Euronext Paris: PM) announced today that the company has entered into an agreement with Rothmans Inc. (Rothmans) to purchase, by way of a tender offer, all of the outstanding common shares of Rothmans. The agreement and related offer have the full support of the Board of Directors of Rothmans.

Rothmans' sole holding is a 60% interest in Rothmans, Benson & Hedges Inc. (RBH). The remaining 40% interest in RBH is currently owned by PMI and, as a result of this transaction, RBH will become wholly owned by PMI. PMI and Rothmans have been joint shareholders of RBH since 1986.

PMI agreed to make the offer following Rothmans' and RBH's finalization of the CAD $550 million settlement, announced today in a separate release issued by Rothmans, with the Government of Canada and all ten provinces. The settlement resolves the Royal Canadian Mounted Police's investigation relating to products exported from Canada by RBH during the 1989-1996 period.

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• Altria Group, Inc. (Altria) Reports 2008 Second-Quarter Results  

Altria Group, Inc. (NYSE: MO) today announced second-quarter reported diluted earnings per share (EPS) from continuing operations of $0.45 versus $0.34 in the second quarter of 2007, up 32.4% versus the prior year. This quarter's reported results were impacted primarily by lower pre-tax charges related to the closure of Philip Morris USA's (PM USA) Cabarrus, North Carolina manufacturing facility, solid operating companies income (OCI) performance by PM USA and John Middleton Co. (Middleton), and lower general corporate and interest expenses. Adjusted diluted EPS from continuing operations increased 12.2% to $0.46 versus $0.41 in the prior-year period.

"During the second quarter, Altria delivered strong earnings per share growth, reflecting our commitment to deliver substantial shareholder return," said Michael E. Szymanczyk, Chairman and Chief Executive Officer of Altria Group, Inc. "Altria is reaffirming its 2008 earnings per share guidance, reflecting confidence in the strength of our businesses."

"PM USA delivered solid income growth and achieved strong retail share results, driven by Marlboro, and John Middleton's cigar business delivered strong income, volume and share performance," Mr. Szymanczyk said. "Altria also continued to realize cost savings from its corporate restructuring program."

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New York Appellate Court Says State Settlement Bars Punitive Awards In Individual Lawsuits 

The court held that "punitive damages claims are quintessentially and exclusively public in their ultimate orientation and purpose." The court concluded that the interest in punitive damages was therefore "previously and appropriately represented by the State Attorney General" in a 1998 settlement brought on behalf of all of the people of the State.

"Philip Morris USA believes the appellate court reached the legally correct decision in barring an individual plaintiff from seeking punitive damages. The ruling still permits the award of compensatory damages in individual cases," said Murray Garnick

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Louisiana Court Enters Judgment In Scott Case; Philip Morris USA Plans Further Appeal 

The state's appellate court, in a 2007 opinion, found that individuals whose claims arose after Sept. 1, 1988 could not participate in the smoking cessation program. The company contends a trial is necessary to determine what smokers, if any, are eligible for the program and its costs if the case is to proceed.

"The company believes the trial court has disregarded the state appellate court's mandate to conduct further trial proceedings to determine how many persons may participate in the cessation program and the total cost of the program," said Murray Garnick, Altria Client Services senior vice president and associate general counsel, speaking on behalf of PM USA.

The amount awarded today is less than a quarter of the amount awarded for the program's funding in the 2004 trial because the appellate court deemed much of the earlier award legally improper. Philip Morris USA is one of four tobacco companies responsible for the judgment, plus interest since June 30, 2004.

In its order, the trial court acknowledged the multimillion-dollar award "may be too large" for the number of persons who will qualify for smoking cessation services, but insisted that eligibility could be determined administratively rather than by conducting further trials.

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• Alicia Keys snubs out Philip Morris  

Philip Morris International has pulled down billboards and posters promoting an Alicia Keys concert today in Indonesia's capital after the singer protested the cigarette company's sponsorship.

The logo and slogans of A Mild cigarettes, produced by a Philip Morris affiliate, featured prominently in promotional materials for the concert. . . .

Philip Morris International did not say whether it was demanding its money back, nor reveal how much it had paid to sponsor the event.

"Whether tobacco sponsorship of music events leads to youth smoking is a matter of serious debate," the company said in a statement received today. "Having considered the facts in this specific instance, we have decided to withdraw all branding associated with this concert."

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• KEAST: The CPP should butt out 

At the same time Ottawa is trying to get Canadians to stop smoking through ads, high taxes, age restrictions and dire health warnings on every cigarette pack, the Canada Pension Plan Investment Board (CPPIB), the federal Crown corporation that manages the assets of the Canada Pension Plan, is pouring hundreds of millions of dollars into tobacco stocks. As of March 31, 2008, its tobacco holdings had a market value of more than $490-million. . . .

like it or not, part of your premiums have been used to buy huge stakes in some of the world's biggest tobacco companies. These holdings include $165-million stake in Philip Morris International and a $72-million investment in Altria, which controls half the U. S. cigarette market.

Your CPP contributions have also been used to buy $38-million worth of British American Tobacco, the world's #2 tobacco firm (behind Altria Group) and a company that sells nearly 855 billion cigarettes in more than 190 countries annually. Other sizable holdings include Japan Tobacco ($42-million), Imperial Tobacco ($25-million),Carolina Group ($24-million), Korea Tobacco ($21-million), Reynolds American ($12-million) and Canada's largest tobacco company, Rothman's ($57-million). . . .

investing public money in tobacco stocks is a bit like second-hand smoke, it's both annoying and a serious health hazard that racks up billions in health care costs. Maybe it's time for the Canada Pension Plan to give up smoking.

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FDA OVERSIGHT OF TOBACCO PASSES U.S. HOUSE OF REPRESENTATIVES 

The American Lung Association of New York today applauded the courage and leadership of New York's Congressional Delegation for voting overwhelmingly in favor of the Family Smoking Prevention and Tobacco Control Act (H.R. 1108). Today's historic vote -- the first time in history that the House of Representatives has voted on this legislation -- is an important step for public health, and it is imperative that the Senate act quickly to pass this crucial measure. . . .

In 2007, the American Lung Association's State of Tobacco Control Report Card gave New York only a "C" for the tax on cigarettes in January, when the excise tax on cigarettes in New York was $1.50. At that time, 15 states placed ahead of New York. Now, with the latest raise, the current tax of $2.75 is the highest of any state in the nation and will likely give New York an "A" for tobacco tax in next year's report.

For more information, including New York's State of Tobacco Control Report Card, visit http://www.alany.org/.

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BAT gives upbeat outlook on earnings rise  

LONDON (Reuters) - British American Tobacco, the world's second-biggest cigarette maker, beat forecasts with a 16 percent rise in first-half earnings and gave an upbeat outlook brushing aside fears of a consumer slowdown.

The London-based group which makes Kent, Dunhill, Lucky Strike and Pall Mall cigarettes, reported adjusted diluted earnings per share of 62.02 pence in the first six months of 2008 ahead of analysts' forecasts ranging from 60.1 to 61.1p with a consensus of 60.5p in a Reuters poll. . . .

The results were boosted by strong growth in most of BAT's regions, apart from Latin America, and also benefited from currency translation as the pound was weaker against most of the world's major currencies, which helped boost operating profits by 134 million pounds for an overall 16 percent increase.

BAT spokesman Michael Prideaux told Reuters the company had not seen any sign of trading down to cheaper products around the world due to slowing economic growth.

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• BAT Net Rises 11% on Emerging-Market Demand for Kent (Update4)  

British American Tobacco Plc, Europe's largest cigarette maker, said second-quarter profit rose 11 percent after smokers in emerging markets from Russia to Malaysia switched to higher-priced Kent and Dunhill cigarettes.

Net income climbed to 650 million pounds ($1.3 billion), or 32.35 pence a share, from 584 million pounds, or 28.52 pence, a year earlier, the London-based company said today in a statement. That beat the 622 million-pound median estimate of 10 analysts surveyed by Bloomberg. Revenue gained 17 percent to 2.92 billion pounds.

First-half volume sales under its four main brands advanced 20 percent, said BAT, which generates about half its profit in emerging markets.

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• Rise in Tax, Drop in Cigarette Sales May Squeeze Md.'s Expected Revenue 

Cigarette sales have dropped by nearly 25 percent in Maryland since the state's tobacco tax doubled in January, as sticker shock apparently has curtailed some residents' smoking and sent others across the border for better deals. . . .

But the decline during the first six months of the year significantly exceeded their projections, exacerbating Maryland's budget problems and prompting speculation about what other factors might be at play. The tight economy, for example, has almost certainly added incentive for some to kick the habit.

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EDITORIAL: Another Smoke Screen  

Perhaps it was folly to expect the people who swore they didn't believe tobacco is addictive to stop marketing cigarettes to young people.

Big Tobacco promised a decade ago to stop trying to hook callow and clean-lunged youths on its dangerous product. . . .

The tobacco industry created the secret campaign after learning that nearly half of smokers between the ages of 12 and 17 prefer menthol cigarettes. . . .

This study should spur Congress finally to vote on pending legislation giving the U.S. Food and Drug Administration the power to regulate tobacco, including the use of additives such as menthol.

We wonder how tobacco executives can sleep at night, knowing that their menthol strategy is hooking countless youths . . .

The researchers believe the rapid introduction of mild menthol brands violated the 1998 pact tobacco executives signed with state governments barring them from directly or indirectly targeting youths. We urge Attorney General Richard Blumenthal to investigate.

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WELCH: Right(ish) Answer, Wrong Arithmetic  

Ten years ago last month, John McCain's bill to slap a $1.10-a-pack federal tax on cigarettes died on the Senate floor. McCain's position had been that the price hike would prevent kids from smoking . . .

For the record, I'm happy that John McCain no longer wants to apply a federal tax on cigarettes (though I'm less happy that he continues to want to regulate tobacco through the Food and Drug Administration). But I think this minor progression -- which he repeats on topic after topic, week after week --illustrates how for McCain, positions and even facts are malleable; it's the high moral dudgeon that remains the same.

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Official says administration opposes FDA tobacco control 

"The administration would strongly oppose this legislation," the secretary of health and human services, Michael Leavitt, said in a July 21 letter to Rep. Joe Barton, R-Texas. Barton is the senior Republican on the House Energy and Commerce Committee, which approved the bill on a 38-12 vote in April. At the time, 11 Republicans on the committee voted in favor of the legislation.

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SULLUM: House Approves Philip Morris Protection Act  

In a July 21 letter to Rep. Joe Barton (R-Texas), the ranking Republican on the House Energy and Commerce Committee, Leavitt said "the Administration would strongly oppose this legislation" and raised various objections:

The regulatory obligations created by the bill would be a significant added responsibility for the Food and Drug Administration and one that is inconsistent with FDA's mission of ensuring food safety and the safety and effectiveness of drugs, biologics, and medical devices. . . .

Our trading partners believe that by banning the sale of clove cigarettes but not prohibiting the sale of menthol cigarettes, the bill raises questions under U.S. international trade obligations. The government of Indonesia has repeatedly objected to the bill on the ground that this disparate treatment is unjustified and incompatible with WTO trade rules.

I lay out my objections to the bill here, here, and here. I explain the objections of critics who consider the bill racist here.

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