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Tobacco CEO opens books in Florida trial


June 13, 2000
Web posted at: 3:43 p.m. EDT (1943 GMT)

MIAMI (CNN) -- The head of the largest U.S. cigarette maker told a Florida jury Tuesday that a large punitive damage award in the ongoing tobacco class action lawsuit would make it impossible for the company to pay future claims.

Philip Morris CEO Michael Szymanczyk testified for a second day, hoping to convince jurors not to award punitive damages to between 300,000 and 500,000 sick Florida smokers. The jury has already ordered Philip Morris, R.J. Reynolds Tobacco Co., Brown & Williamson Tobacco Corp., Lorillard Tobacco Co. and Liggett Group to pay $12.7 million in compensatory damages.

Florida law limits the amount of punitive damages juries can award to protect companies against bankrupting verdicts, but Szymanczyk testified that the award could still cost the industry billions, or even trillions of dollars.

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Szymanczyk testified that Philip Morris's net worth was about $6.4 billion. He said that to get that amount, the company would have to sell all of its assets, equipment, and inventories. However, Szymanczyk said it might be hard to find a buyer willing to pay that price.

He also said the company would not be able to borrow the money.

"Right now Philip Morris has no borrowing power at all. As far as we can tell, no bank in the world will lend us money pending resolution of cases like this," Szymanczyk said.

"To pay the money, you have to collect it from somewhere," he testified.

Szymanczyk said that could drive up the cost of his company's cigarettes, making them two or three times more expensive than cigarettes made by competitors that were not named in the suit.

He testified that the company has more than 1,000 lawsuits pending against it.

"When I Look at the punitive damages, it just rules out the possibility of paying compensatory damages (in those cases)," Szymanczyk said.

Szymanczyk also testified that any punitive damage award would hurt Philip Morris's 13,000 employees.

He said the company already has had to close a Kentucky plant because price increases to pay for the nationwide master settlement pushed down demand for cigarettes. Under that agreement, the industry agreed to pay $254 billion over 25 years to repay states for the cost of treating smoking related illnesses.

Szymanczyk also testified about the company's web site. It went on line at the end of 1999, according the Szymanczyk. He told jurors it warns users about the risks of smoking.

"The most important thing to understand about this litigation is that the claim against the tobacco companies has shifted from one of product liability to claims about fraud."

Anthony Sebok, law professor
Tobacco litigation chat transcript

The CEO was asked: "Does Philip Morris actually agree with that statement, that cigarette smoking causes lung cancer and other diseases?"

"Yes," Szymanczyk replied.

Szymanczyk is the first of five top tobacco executives expected to testify for the defense in the punitive damage phase.

The other CEOs expected to testify are Andrew Schindler of R.J. Reynolds Tobacco Co., Nicholas Brookes of Brown & Williamson Tobacco Corp., Martin Orlowsky of Lorillard Tobacco Co. and Bennett LeBow of Liggett Group Inc.

CNN Correspondent Susan Candiotti contributed to this report

Philip Morris chief testifies in Florida tobacco trial
June 12, 2000
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May 30, 2000
Miami jury awards nearly $13 million in tobacco lawsuit
April 7, 2000

American Academy of Periodontology
U.S. Centers for Disease Control and Prevention

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