Deposition of John H. Hager
Deposition of John H. Hager
June 28, 1997
4/25/72
As discussed, higher nicotine at the same tar level is generally accomplished through the selection of tobaccos, and Lorillard has bought some higher nicotine tobaccos recently. Other ways would include the addition of Compound W, a change in cigarette paper, and the use of reconstituted instead of stems (stems have a very low nicotine content). The change in Newport is similar to our work on PM menthol--increase in nicotine and menthol at the same tar. The opposite situation is Sano--lower nicotine at a given tar level.
--Text of the Exhibit 3 Memo
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
NO. 96CV-5903
STEVEN R. ARCH, WILLIAM BARNES, CLARAN MC NALLY, CATHERINE POTTS, NORMA RODWELLER, BARBARA SALZMAN, EDWARD J. SLIVAK and JOHN TEAGLE,
Plaintiffs,
v.
THE AMERICAN TOBACCO COMPANY, INC., ET AL.,
Defendants.
Deposition of JOHN H. HAGER
TRANSCRIPT of testimony as taken by and before PATRICIA M. MULLIGAN, a Certified Shorthand Reporter and Notary Public of the State of New Jersey, at the offices of CHADBOURNE & PARKE, 1200 New Hampshire Avenue, Washington, D. C., on Saturday, June 28, 1997, commencing at 10:30 in the morning.
A P P E A R A N C E S:
CLIFFORD E. DOUGLAS, ESQ.
500 Lake Street, Suite 202
Evanston, Illinois 60201-4635
Attorney for the Plaintiffs
(847) 328-0790
RODA & NAST
801 Estelle Drive
Lancaster, Pennsylvania 17601
BY: ROBERT LA ROCCA, ESQ.
Attorneys for the Plaintiffs
(717) 892-3000
SHOOK, HARDY & BACON
One Kansas City Place
1200 Main Street
Kansas City, Missouri 64105-2118
BY: SHANNON L. SPANGLER, ESQ.
Attorneys for the Defendants
Lorillard Tobacco Company and Brown & Williamson
CHADBOURNE & PARKE
30 Rockefeller Plaza
New York, New York 10112
BY:DANIEL J. O'NEILL, ESQ.
THOMAS E. RILEY, ESQ.
Attorneys for John Hager
E X H I B I T S
NUMBER DESCRIPTION IDENTIFICATION
Hager-1 Memo dated 6-5-74 from Irby to McCarthy
Hager-2 Memo dated 5-14-69 from Ashworth to Sadler, Brooks, Chumney
Hager-3 Note dated 4-25-72 from Hager to Heimann
Hager-4 Memo dated 6-4-68 from Coty to Stoever
Hager-5 Memo dated 5-7-69 from Mann to Leake
Hager-6 Memo dated 3-15-72 from Hager to Leake, Irby, Cogbill
Hager-7 Memo dated 7/5/68 from Coty to MacDonald
THE VIDEOGRAPHER: Going on the record. The time is approximately 10:32. This is the videotape deposition of John Hager taken by the plaintiff in the matter of Steven R. Arch, et al., versus The American Tobacco Company, et al., under the jurisdiction of the U. S. District Court for the Eastern District of Pennsylvania 96-5903-CN. This deposition is being held at the law office of Chadbourne and Parke, 1200 New Hampshire Avenue, Washington, D. C. on Saturday, June 28, 1997.
My name is Jim Roberts. I'm the video specialist. The court reporter is Patricia Mulligan. We are here from Wage and Spinelli Court Reporting with offices at 4 Becker Farm Road, Roseland, New Jersey.
Counsel will now state their appearances for the record, and the court reporter will please swear in the witness.
MR. DOUGLAS: My name is Cliff Douglas representing the plaintiffs in the Arch case.
MR. LA ROCCA: My name is Robert LaRocca, also representing the plaintiffs in the Arch case.
MR. O'NEILL: My name is Dan O'Neill with Chadbourne and Parke representing the witness.
MR. RILEY: My name is Thomas Riley with Chadbourne and Parke. I represent Mr. Hager.
MS. SPANGLER: My name is Shannon Spangler with Shook, Hardy and Bacon in Kansas City. I'm here representing Brown and Williamson Tobacco Corporation; BATUS Holdings, Incorporated; BATUS, Incorporated; Lorillard Tobacco Company; Lorillard, Incorporated; and Loews Corporation.
MR. HAGER: My name is John Henry Hager.
-----------------------------------------------------------------
J O H N H. H A G E R,
4600 Sulgrave Road,
Richmond, Virginia 23221, sworn.
DIRECT EXAMINATION BY MR. DOUGLAS:
Q. Mr. Hager, as you heard, my name is Cliff Douglas, and I represent the plaintiffs in the Arch case brought against the major cigarette companies in Pennsylvania. You understand that. Correct?
A. Yes, sir.
Q. Can we get your current address?
A. 4600 Sulgrave Road, Richmond, Virginia. 23221.
Q. And you are retired from The American Tobacco Company. Is that correct?
A. That's correct.
Q. And when did you retire?
A. I retired officially on July 1st of last year, but that was due to our separation package which went back to the point of separation in January of 1995, and we were paid X number of months of separation pay prior to the official retirement.
Q. You've been sworn in by the court reporter this morning, and you are familiar with what it means to be under oath. Is that right?
A. That's correct.
Q. And you've had an opportunity to discuss this deposition with your attorney, Mr. O'Neill. Is that correct?
A. We have had some discussions. Yes.
Q. I'm sure that he's cautioned you not to answer any question that you don't understand.
A. Right.
Q. And I would like to caution you the same way.
Let me also say at the outset that there may be times during this deposition that your attorney will raise objections, which, of course, is his right and an appropriate part of the process. I just want you to understand, to avoid any confusion on this, that even when an objection is made, you are still required to answer the question unless you're instructed by your counsel explicitly not to do so.
Again, if you don't understand a question at any time, please say so, and I'll do my best to clarify for you.
Why don't we begin then by getting a little background on your positions with American Tobacco and/or American Brands over the years. When did you first begin with the company?
A. In April of 1961.
Q. Which company was that with precisely?
A. The American Tobacco Company.
Q. What was your position when you first started with the company?
A. Assistant foreman, and I'll elaborate briefly. That was with the American Suppliers division of what was then The American Tobacco Company.
Q. What did the American Suppliers division do?
A. It was the leaf end of the business. Tobacco buying, processing and storing.
Q. What was your next position?
A. Let's see. My next position would have been assistant foreman at the Virginia branch cigarette factory of the American Tobacco Company.
Q. What year would that have been?
A. That would have been in '62.
Q. After that?
A. I was assistant -- Well, that was assistant foreman. I became assistant superintendent in August of -- Excuse me. July of '63 and was moved one month later to - Reidsville, North Carolina, to be assistant superintendent of the Reidsville branch of The American Tobacco Company, which is another cigarette production facility.
Q. Was that also in leaf processing and storage, or was that something else?
A. That was manufacturing.
Q. What year was that in or what years?
A.'63.
Q. What was your next position?
A. Assistant superintendent of Reidsville.
The next position, I think -- You're taxing a lot of memory here. Coordinator of the new products division of The American Tobacco Company.
Q. What year was that, sir?
A. That would have been mid '64.
Q. You were moving quickly. What followed that position and when was that?
A. I was then assistant to the director of manufacturing.
Q. Also in '64?'
A. No. No. That was in '68.
Q. What was next?
A. Marketing coordinator.
Q. In what year?
A.'69.
Q. What did the marketing coordinator do?
A. In my instance it was part training program, exposure to other parts of the company, part communications and liaison between marketing and purchasing, between marketing and manufacturing, between marketing and other departments of the company.
Q. And after that job you went on to -
A. Assistant to the president.
Q. Was that also in '69 or sometime later?
A. That was in '69 through mid '70.
Q. How would you briefly describe your role as assistant to the president?
A. The role was basically special assignments, coordination, support, services to his office. I had a reputation of working between departments and trying to build task forces and address specific situations, if you will. It was another coordinating type function.
Q. Who was the president?
A. Robert K. Heimann.
Q. Am I correct in understanding then that was a job that involved rather comprehensive familiarity with the broader company, all of its different divisions and how they worked with one another?
A. Certainly that would have been the role of the job, to learn a lot of that, and as I performed the job I'm sure I gained greater experience and background, but I don't claim to know it at all when I went into the job. It was part of a management trainee type of situation all through these various positions.
Q. Following your job as assistant to the president, am I correct in understanding that that is when you moved over to head the research and development section?
A. That's correct. I believe it was in June of 1970.
Q. And how long did you hold that position?
A. Three years. To June of 1973.
Q. Where did you go then, sir?
A. I was promoted to executive vice president in July of '73.
Q. Until when did you hold that position?
A. That's a good question. I then went to the hospital and almost died.
Q. When would that have been?
A. August. First week in August of 1973. I was the lucky recipient of polio from the Sabin oral vaccine.
Q. Did that place you on some sort of a disability leave?
A. Yes. In essence. The way our sick leave was set up, you stayed on the payroll for X number of weeks depending on your longevity with the company, and then you went on a half-salary basis; and I don't remember the exact weeks involved. I'm sure it is in some records somewhere, but I was at the hospital approximately four months; roughly two months in Richmond, Virginia, roughly two months in New York at the Rusk Institute of Rehabilitation, and it was only at Christmas of '73 that I was eventually discharged from these hospitals and was told, in essence, to go back to Richmond. I was in the process of moving to Connecticut, when I got polio, to work in the New York office, and went back to Richmond. And we had sold our house and we rented an apartment in Richmond. And for the next couple of months I was just doing some physical therapy and sort of surviving and just able to begin to get my feet on the ground.
Q. When did you return to the company part-time or full-time?
A. The first thing that happened is when all these weeks and half weeks ran out I was put on disability retirement.
Q. This was precisely in what time period you were on disability retirement?
A. Starting about February of '74.
Q. Does that mean you were not employed by the company in that period?
A. That's correct. Now, I did have -- Since I had not had much longevity with the company -- You know, most people go on the disability retirement they've been there 30, 35 years. Obviously I had not been there that long, so the company supplemented by disability retirement with what they call a consultancy fee, but required very little of me while I was still trying to get my feet on the ground.
But by -- And I don't remember here again the exact month, but by April of that year I started being able to go back to the office a little bit, and so Mr. Heimann decided I should be performing a function of background, legal research involved with our legal department on the antitrust cases which were related to the leaf end of the business.
There were three specific cases; Windom, Hinton, and Galloway. One in North Carolina, one in Kentucky and one in South Carolina, and so I was a helper, Dan, whatever you call it. I went back as a resource to our team -in the industry team involved in antitrust lawsuits facing the industry at the time.
Q. So just to clarify your status then, you were not employed as a salaried employee, but you were a consultant?
A. I was a part-time consultant or a consultant. I don't remember what the contract said. Supplementing my disability retirement income. Anxious to go back to work.
Q. Did you have a title at that time?
A. No, I sure didn't, although it never was made clear to everyone that I had, quote, unquote, retired and, quote, unquote, been sent out to Richmond and bumped out of the way, if you will. There was some confusion on some parts. There was no notice. No computer said, Wipe him out. It was a very sensitive issue for both me and the company.
Q. When did you return as a salaried employee?
A. August of '74 Q. That was full-time?
A. That was full-time. The disability retirement program had a provision that if someone had returned to sufficient health, they could return from disability retirement to employment. It all followed the official program of -
Q. What was your position when you returned full-time?
A. Coordinator of leaf.
Q. For how long did you hold that position, sir?
A. Several years. I forget the exact date. The next title was leaf services director, which was a promotion and expansion from the coordinator of leaf position.
Q. Approximately when was that?
A. It must have been late seventies, around 1980. I don't remember the exact date on that. I'm sorry. It was sort of an evolutionary position.
Q. What would your position have been after leaf services director?
A. Eventually it led into becoming vice president of leaf.
Q. About what year?
A. Here again, that's mid-eighties. Gosh. I don't remember all these exact dates, but it was three, four years later.
Q. That's all right. Your memory is admirable. After your vice president position of leaf in the mid-eighties you went on to what?
A. They expanded the position to become vice president of leaf and specialty products.
Q. What do specialty products refer to?
A. It referred to lots of things. It referred first to the Golden Belt Manufacturing Company, which was the subsidiary of The American Tobacco Company which was in the printing business. We made labels and foil.
Q. For cigarette manufacturing?
A. Primarily, but not exclusively. It is located in Durham, North Carolina. I became president of what was called The American Tobacco Company of the Orient which is primarily a leaf supply organization in Turkey and Greece.
Q. Let me make sure I heard that correctly. American Tobacco Company of the Orient?
A. Yes. And I was involved as an individual in some cases for the company in a wide variety of civic and community and statewide and industrywide organizational supportive activities.
Q. Tell me a little bit more about The American Tobacco Company of the Orient and what it did.
A. American Tobacco Company of the Orient is an old company. Its primary function was to provide Oriental tobacco to The American Tobacco Company.
Q. By way of importation?
A. Yes.
Q. Have we brought you up to the time of your retirement or was there -
A. No. Then I was promoted to senior vice president of leaf and specialty products.
Q. Did your job description change in some manner with that promotion?
A. Not significantly. I think it reflected the fact I had been made a member of the operating committee and was involved with industrywide operations. It was a recognition of progress. -
Q. What is the operating committee?
A. Operating committee is just a committee of senior management, internal management as opposed to a board which may or may not have external members.
Q. What was the operating committee's relationship to the board in terms of communications with the board or some sort of function with respect to the board?
A. It was all done through the C. E. O. There was no direct -
Q. The operating committee reported to the C. E. O.?
A. Yes. He was the chairman of the committee.
Q. Was that your last position?
A. That was atthe point in time when Brown and Williamson, orB. A. T., if you will, purchased The American Tobacco Company from American Brands.
Q. Do you have or have you had relatives who also work for American Tobacco?
A. Uh-huh.
Q. And who would they be?
A. My father, my uncle, and my grandfather.
Q. And briefly, sir, what were the positions that those gentlemen held with the company?
A. My father held a great variety of positions, ending up as executive vice president of The American Tobacco Company. My uncle held a variety of positions, ending up as vice president dash tobacco and cigarettes of The American Tobacco Company. My grandfather was general manager for a company called Fenzer Brothers, which was one of the companies amalgamated into The American Tobacco Company by Mr. Duke, and ultimately became a director of American Tobacco, but I quite frankly don't know what his titles were.-
Q. Was that a paternal or maternal grandfather?
A. Paternal.
Q. Any other relatives?
A. Not that I'm aware of. I think maybe one of my grandfather's brothers had a lesser job in the company. Other than that I'm not aware of it.
Q. Now, sir, have you held consulting positions with other tobacco companies besides American Tobacco or with tobacco industry trade associations?
A. Only since my retire -- Well, only since my separation from The American Tobacco Company. At the time of the purchase by B. A. T.
Q. Do you remember, that's since -
A. January of 1995.
Q. January, '95. Do you hold -
A. July, '96 was when I was officially retired, but I performed no functions for The American Tobacco Company since January of '95 due to the separation situation.
Q. What are the consulting positions you have held or now hold since January, 1995?
A. Starting in, I believe -- must have been either April or May of '95 through December of '96, I was a consultant with the Tobacco Institute, State Activities Division. On a part-time basis, and since January of 1997 to the Brown and Williamson Tobacco Corporation, government affairs division on a part-time basis.
Q. Describe for me, please, what your state activities position with the Tobacco Institute involved.
A. It involved in a cooperative fashion as - As I say, this was a part-time job. It involved working with the State Activities Division of the Tobacco Institute. The director is a man named Pat Donoho, and it involved working with Pat on industry-related matters, first in the southeast region, states like Virginia, North Carolina, Maryland where I had had a lot of experience working with their new vice president, John Shipper, who was the regional VP.
It involved support of governors conferences. It involved liaison with Brown and Williamson in their evolutionary setting up of their own independent governors affairs department which, January 1 of '97, I began to be a consultant to, instead of the Tobacco Institute.
Q. Am I correct in assuming that much of the work involved in your consulting with the Tobacco Institute then would have dealt with lobbying?
A. Not directly. No, sir.
Q. Does the Tobacco Institute lobby?
A. The Tobacco Institute has contract lobbyists in every state in the union, I believe, but I don't think the institute itself directly lobbies, but I'm not a lawyer.
Q. But it is involved in lobbying activities?
A. Sure.
Q. And in what way, if any way, did your work with the Tobacco Institute have some effect on their lobbying, the work of their contract lobbyist?
A. I don't think -- Very little. I mean, that wasn't my function. I was not a lobbyist.
Q. What was your function precisely then?
A. My function was as an industry resource, as an experienced executive, as one who had served on some of the committees at the institute, to be available for advice and to work with them in, as I say, primarily governors conferences, meeting people.
Q. Can you give me a couple of examples of requests to you for input, what those requests asked you for, what the issues involved were?
A. Well, as I say, I was a part-time government affairs lobbyist. For instance, when the tobacco market opened in Maryland, in southern Maryland, I went there with the regional vice president of the institute to welcome a group of the Maryland state legislators to explain to them what tobacco markets were all about, and to tell them about the auction system and take them on a tour, and so they might have a better appreciation of the role tobacco plays in their economy.
Q. Did you deal with specific policy issues; for example, tobacco excise taxes or other tobacco policy issues?
A. We may have discussed policy issues. Sure. That's what state activities is all about. In each state in the union they're concerned with legislation that impacts the industry, pro or con.
Q. Did your work involve -
A. Discussion, advice? Perhaps.
Q.-- encouragement of keeping tobacco taxes at a low level or opposing increases in tobacco taxes?
A. I'm not-- I would be surprised if the Tobacco Institute would be working on raising tobacco taxes.
Q. I would, too, sir, but in terms of your own personal activities on that issue.
A. We would discuss the subject. Yes.
Q. And your position on tobacco taxes would be what?
A. Well, my position is that the tobacco taxes tend to be regressive, tend to be unfair, if they're going to be bloated out of proportion, and that any state should have a balanced taxation program.
Q. You oppose raising tobacco taxes?
A. Usually. Yes.
Q. When do you support raising them?
A. I would have to see the circumstances. I'm not --I'm not going to say. I don't have a specific instance in mind right this minute, but perhaps it would be a time and a place where it would make sense. I don't know.
Q. Now, in the year and a half or so that you consulted with Brown and Williamson -
A. No. I only started with Brown and Williamson in January of 1997, and this is June of '97.
Q. Pardon me. What work have you done as a consultant to Brown and Williamson?
A. Very similar activity to that performed while I was a consultant with the Tobacco Institute, but more direct involvement with their personnel as opposed to with the Tobacco Institute personnel.
Q. I need to ask you, sir, what is your Strike that.
What has been your compensation as a consultant to the Tobacco Institute and to Brown and Williamson?
A. It is -- Well, I think it's a confidential matter. It is in excess-- On the disclosure form the Commonwealth of Virginia requests the form that I filled out for the secretary of the Commonwealth it's greater than $10,000 a year.
Q. Sir, I need to remind you that you are under oath, and I do require an answer to the question.
A. Well, I would like to take a break and discuss that with counsel. I think someone's salary is personal information. I don't see why we should have to have that in the public domain. I don't think that's -
Q. Let me suggest this. We all know you're in the middle of a political race.
A. Right.
Q. And tobacco is an explosive issue these days and probably particularly in the State of Virginia.
A. I've chosen not to submit my income tax forms to the public, and I think it is a right of a candidate not to have to do that.
Q. The difficulty here, sir, and the reason we need to ask the question is that the compensation you've received from the tobacco companies is a legitimate inquiry that goes to the question of any possible bias into your credibility before the jury and the judge in this case. And they need to understand, as you explain to us your views and your opinions and your knowledge where you're coming from.
So we do need to ask you those questions, notwithstanding it may be troubling in the context of your outside activities.
A. Okay. Then let's take a break and talk to counsel.
THE VIDEOGRAPHER: Off the record, 11:03.
(Recess.)
THE VIDEOGRAPHER: Back on the record at 11:10.
Q. Mr. Hager, let me revisit the question we were discussing before the break and ask you to please tell us your compensation in connection with your consulting work for the Tobacco Institute and -- and Brown and Williamson.
MR. O'NEILL: On the record, I believe that all that is relevant is the fact that Mr. Hager has been paid as a consultant to the Tobacco Institute and to Brown and Williamson. I believe that the amount of a man's income and salary and whatnot is personal, and I believe that the reasons why you're inquiring into this have something to do other than this lawsuit, to which I object, and I don't think it is necessary for you to have that information. However, if you persist in asking it we will provide it on the basis that this part of the transcript be deemed highly confidential.
MR. LA ROCCA: On the same basis, Mr. O'Neill, would you agree to the same information as to his compensation, highest compensation with American Tobacco and whether, just to follow through on it, the total sums he's currently receiving, whether it is from American Tobacco, Tobacco Institute, or Brown and Williamson, so we can get a full picture of just his tobacco-related income?
MR. O'NEILL: Yes. If you're not talking about stocks and bonds, you're just talking about retirement pay, salary, or compensation as a consultant.
MR. LA ROCCA: Unless he got the B stocks like a stock option, where he is paid in stock. I don't mean stocks that he just purchased out of his own income, unless it was a stock -
A. I never got any stock options. I got stock options, but I never got any stock given to me.
MR. LA ROCCA: All right.
MR. O'NEILL:Would this be agreeable to you, highly confidential?
A. Yes. My concerns are strictly that I don't think this should be a public matter for other purposes. If it has pertinency to the lawsuit so be it, but for the judge and jury that's fine, but I'm not -- I just think it is patently unfair to be taking personal information and bandying it about with the public.
MR. LA ROCCA: We want to show you we're really -- I want to take exception to what Mr. O'Neill said because we're not here for any purpose other than the Arch lawsuit. So I think based on what you just said, we've agreed to it.
Q. Needless to say, I'm from Chicago and Mr. LaRocca is from Philadelphia, and we have probably literally no interest in Virginia politics whatsoever.
A. I appreciate that, and I hope -- I would value that relationship and that attitude because there are some reporters who just would love dearly to blow this grossly out of proportion.
Q. Let me move on then since for the time being we've settled that issue.
Let me ask you, sir, are you aware of the fact that a settlement was proposed and reached by the tobacco industry with others in the past week?
A. Yes.
Q. You've read about it?
A. Read about it in the newspapers, lots in the newspapers. I haven't had time to watch T. V. So I don't know anything about what's been on T. V., but I can tell you what's been in the newspapers.
Q. It is been hard to miss, sir. Have you talked to anybody from Brown and Williamson about the settlement?
A. Not directly. I have been in on a conference call with the government affairs staff led by Mr. Bob Pruitt, and I was in on a second conference call which was led by Bob Pruitt and his peers from the other tobacco companies for a larger group of industry associates.
Q. In these conference calls the details of the settlement were explained to you or summarized for you?
A. Not really. The conference calls weren't that long. They were global conference calls about a global settlement. The big picture, but certainly not the intimate details, and it was purely one-way informative type.
MR. O'NEILL: Can you tell me, sir, what that has to do with the issue in Arch?
MR. DOUGLAS: Laying a foundation, and we're just about to get there.
MR. O'NEILL: Thank you.
Q. Are you aware that in the settlement that the tobacco industry has agreed to new rotating health warning labels that would be enacted to appear on all packages of cigarettes in the United States?
A. I saw that in one of -- in the boxes that go with the writeups.
Q. Let me go through the warnings that the tobacco companies have agreed to have appear on their packages and in advertisements in the event that this settlement is enacted into law.
A. That's right. The agreement is for the purpose of settlement.
MR. O'NEILL: I object to the form of the question.
MR. DOUGLAS: I haven't actually asked a question yet.
MR. O'NEILL: All right. To your statement then. As I understand it there is a memo of understanding that has been signed and that the memo of understanding says this is for settlement purposes only for the purpose of getting legislation enacted, that there's no admission of liability on behalf -- or agreement on behalf of the companies to any of this.
MR. DOUGLAS: I understand all of that. And the questions that we're going to deal with now will have no direct relationship to the settlement as settlement. I'm simply using that as a basis for asking a few questions about the witness' views of some of the statements made in the health warning labels.
MR. O'NEILL: Can you tell me what that has to do with Arch?
MR. DOUGLAS: It does have a lot to do with Arch, sir, because the health warning label statements are statements regarding the health effects of cigarette smoking on the consumer, and American Tobacco, of course, was involved in having to deal with those issues, and Mr. Hager's views and understanding of those issues is critical, is central, in fact, to the jury's consideration of American Tobacco's role in this issue and its possible liability in this lawsuit.
MR. O'NEILL: I hear you. I don't understand the relationship, but go ahead.
Q. I'm just going to read a few of these warning labels, sir, and ask your opinions as to whether the statement is true or not true.
The first warning label reads,
Cigarettes are addictive.
A. My opinion is that's not true.
Q. The next is, Tobacco smoke can harm your children.
A. My opinion is that can be true.
Q. Can be true.
A. That's what the statement says. Can harm your children.-
Q. Cigarettes cause fatal lung disease.
A. My opinion is that can be true in some people, but I certainly don't agree with it as a direct statement to impact all people.
Q. Is it certainly true for some people?
A. No. Not necessarily. You ask me my opinion.
Q. Yes, sir.
Cigarettes cause cancer.
A. The same exact wording applies to the last. Perhaps it can cause cancer in some people, but it certainly is not a universal type statement that I would agree to.
Q. So you disagree with the statement?
A. Yes.
Q. On that specific warning label, let me follow up by asking, is it your belief that nobody has contracted cancer of any kind from cigarette smoking?
A. I didn't say that.
Q. I'm asking.
A. No. I think epidemiological studies indicate there can be a causal association, but that there has never been a direct linkage. They've never induced whole cancer -- cancer from whole smoke in animals.
Cancer is a very complex disease. It could be genetic. It could be people -certain people are predisposed to various problems.
We're all human beings. We're a little bit more complex than these simplistic statements. I just don't think that you can -you know, we're not doctors. We're not scientists. We're not God. We're people. It's a very complex situation.
Q. So I really want to be clear about this, sir. Nobody has died as a result of their cigarette smoking.
A. I did not say that.
Q. Okay. You've responded in a general manner. I'm trying to get more specific.
A. I think I responded in a very intelligent manner to the questions that were asked.
Q. The Surgeon General estimates that 400,000 or more Americans die every year from their cigarette smoking, directly due to their cigarette smoking. Do you agree with the Surgeon General's finding?
A. I have no basis to know what he estimates this on, and I'm not a scientist. I am not a doctor; and if he says he estimates it, I take him at good faith, but that doesn't mean I have to agree with him.
Q. Is it your view that he's wrong?
A. It is my view that I don't know.
Q. Is it your view that it is possible that half as many people have died from cigarette -
A. I do not know, sir.
Q. How many would you approximate based on the knowledge you have from 30 years -
A. I have no knowledge of any.
Q. No knowledge whatsoever.
A. I said there could be statistical association and there could be causation and- health risks for some people, but I am not - This is not my field. I'm sorry. I was not trained as a scientist or a chemist or a doctor, and I'm a leaf tobacco man.
Q. Another warning label states, Cigarettes cause strokes and heart disease. What is your view of that statement?
A. Same as the previous.
Q. Do you smoke, sir?
A. Not now, sir.
Q. Have you ever smoked?
A. Yes.
Q. And when was that?
A. For 20, 30 years. I don't remember all the exact dates. I don't keep diaries. I smoked for a long time. Certainly from up until the time I had polio, and then some with very mild cigarettes after I had polio, but I haven't probably smoked in the last five years.
Q. Could you approximate between what ages you smoked from the time you started to the time you stopped?
A. Well, 20 to 36 and then -- I mean, you know --I don't know whether you've been through something like polio. It's a benchmark in your life. After that on a much lesser basis for, oh, probably another 15 years. I don't remember. As I say, I can't tell you the date that I smoked the last cigarette. In fact, I've even smoked a couple since then. I mean, you know, it is not something I keep a record of.
Q. Before you contracted polio, sir, how many cigarettes a day were you smoking?
A. I was never a heavy smoker. I perhaps smokeda pack, but I always smoked relatively mild cigarettes. Smoked a lot of Carltons. Smoked Tareyton Lights or whatever.
Q. What was the reason for your smoking what you describe as mild cigarettes?
A. Because I like them.
Q. After you resumed smoking, were you smoking at the same level of number of cigarettes a day?
A. More or less. I'm not -
Q. About a pack a day?
A. I'm nota habitual person. I might have smoked during the week and not on the weekend, or I might have smoked a pack one day and none the next day and two pack -- Depending on the setting, the culture, the situation, the climate.
Q. Are you carrying a pack of cigarettes with you today?
A. No.
Q. It won't surprise you to know I'm not either.
A. I'll be glad to go get one, though, if you want one.
Q. No, thank you. I'll pass on that offer, but I appreciate it.
Another one of the warnings agreed to pending Congressional ratification is, Smoking during pregnancy can harm your baby. What is your view of that statement?
MR. O'NEILL: Objection to the form. It wasn't agreed to pending Congressional ratification.
Go ahead.
A. I've never been pregnant, so I really am not a doctor. I'm sorry, and I have no further light to shed on that particular statement.
Q. Do you have children?
A. Yes.
Q. And what are their ages now?
A. 19 and 23.
Q. And did -
A. Excuse me. 24. My mistake. 19, 24. Five years apart.
Q. As your two children were growing up, did you give them any advice as to whether or not they should smoke?
A. No specific advice. No.
Q. Do they smoke?
A. No. The older one may smoke an occasional cigar. I don't know. I've never seen him do it.
Somebody said -
Q. Are they both boys?
A. Yes.
Q. Another proposed warning which, in fact, I believe, mirrors a warning already in existence on cigarette packs is, Quitting smoking now greatly reduces serious risks to your health.
Do you agree with that statement?
A. I wouldagree that it may reduce serious risks to your health, butI would not globally agree to the direct statement. No, sir. As I say, we're all people andwe're all individuals. We're all different. Howit affects you is different than how it mayaffect me.
Q. Are you aware of the rate of death due to cigarette smoking estimated by the consensus of epidemiologists?
MR. O'NEILL: Object to the form of the question.
Q. Let me be clear, if I can. That wasn't that well put.
Epidemiologists have found, and I'm asking if you're familiar with this fact, that of current smokers who continue to smoke without quitting, roughly 50 percent of them will die from a disease caused by their cigarette smoking.
MR. O'NEILL: Object to the form.
Q. Have you heard that?
A. You're talking about my opinions of estimates.
Q. Just asking if you've heard that information.
A. I don't know that I've ever heard it in the form that you ask it. I have read the media widely over the years, the print media, and certainly been exposed to television and radio like all the rest of us have. I've read in trade journals, as well, information about the tobacco industry and about statements made about the tobacco industry.
So whether I have ever heard that specific statement, I don't believe I have, but there's been lots of similar statements out there. People estimating that things can happen, and that's fine. That's their -- You know, that's their job.
Q. During yourtime with American Tobacco what research intosmoking and health did American Tobacco do in-house?
A. None that I'm awareof. In-house.
Q. Did American Tobacco sponsor smoking and health research?
A. It is my understanding, yes, that they did, some of which I had some association with and most of which I had no association with.
I presume they were a sponsor of the Council for Tobacco Research and the types of programs that they had. I know that the department of research and development had some very limited contracts with the department of pharmacology at the Medical College of Virginia, and perhaps some other organizations that I have long since forgotten, but there was very little that I had any knowledge, direct knowledge, about.
Q. How many employees did the research and development section have at the time you were heading that section?
A. It changed during the time. I mean, of course, it seems to me we started out with something in the order of 240, 230, and we ended up slightly under 200 during that period of time.
Q. About what was the budget of R and D while you were there?
A. I wouldlove to answer your question. I honestly don't remember. It was over a million dollars, I think, but I just don't remember those numbers. It has been a long time ago.
Q. What were the areas on which R and D focused, if not on smoking and health issues?
A. Well, I hope I remember them all. We had -- Of course, we had an administrative department which performed all the personnel-related functions and administration of the operation. We had physical and chemical testing where we related to the production of the company as to whether the production met the specifications of the company. We had essential materials which dealt with all of the packaging materials that were used by the company. We had an agricultural leaf services area where we dealt with the tobacco and the tobacco farmers and the university of research stations.
AS I say, I don't remember every division. It was quality control. It was physical and chemical testing. It was agricultural, and then there was a new products division, or new products development area, that worked on product development and product improvement, and they dealt with blends and favorings (sic) and packaging materials and -- You name it. So there were a multitude of departments within the overall complex of the department.
Q. In all of the jobs that you held over, if I calculate it correctly, 34 years with American Tobacco -
A. Yes.
Q. What responsibilities did you have at any time during that period that involved smoking and health research or information collection at the company?
MR. O'NEILL:I object to the form of the question.
A. I would say none other than as a department of research and development director, I'm sure our library received and catalogued the information. The way I understand your question, I think the answer is none. I think I understand the question.
Q. Was smoking and health research -
A. It was not a function of the department of research and development while I was the director of the department.
Q. AS I understand it from you, it wasn't the function of any other part of the company either?
A. I'm not equipped knowledgewise to comment on the two executive officers and what happened in our home office. I'm commenting on what I personally was involved with, and I apologize, but I just can't speak for the whole company. I just don't have the knowledge.
Q. You testified earlier, sir, that you had quite a broad familiarity with the different parts of the company and how they related to each other among other times when you were assistant to the president.
A. Well, let me just say two things. One, if you look at my whole career with American Tobacco Company over the 34-year span that you mentioned, it is predominantly involved in what I call the supply chain end of the business. Leaf. It is involved with tobacco. With farmers. With buying tobacco. With importing tobacco. With exporting tobacco. With blending tobacco. With storing tobacco. I am a leaf tobacco person, and even though I've held other jobs in the company, I was the leaf man. I was the person over this many years that was involved in that side of the business.
Sure, they needed people to communicate between departments and to coordinate and to bring intelligence to projects and task force operations, but I was never trained nor intimately involved in many of those other operations. I was the grease between the gears. I was not the gears.
Q. Are you familiar with the -- what I'm referring to when I mention the Bermuda Hundred or Chester facilities?
A. Yes.
Q. What were those, or what are those?
A. Depends on which year you're asking about. If youcould give me a time definition, I could give you a better answer.
Q. Well, let me leave it open. If you would like to give me time periods, please feel free to do that.
A. I will give them to you to the best of my recollection, and they're not going to be precise.
The first facility at Bermuda Hundred was a facility named the Hanmer, H-A-N-M-E-R, division. Dr. Hanmer had been an executive of the company. The Hanmer division was built at Bermuda Hundred, oh, I guess in the early sixties. It was -- Or midsixties, I should say.
It was a reconstituted tobacco production facility, and a leaf-blending facility.
The Hanmer division was the first operation there. That was followed in late '60 by the department of research and development's new products division, which was built next on land adjacent to the Hanmer division, and eventually the new products division was amalgamated with a research department, and the research department also moved there. So over the years it became the total research department, but it started out being the new products division.
The third facility was called the P. D. L. The process development laboratory, which was a research arm of the Hanmer division, had a minipaper machine inside. That operation was eventually shut down. The building was totally renovated and became the administrative center of The American Tobacco Company. That would have been in the late eighties.
So at the end when we were purchased by British American Tobacco, there were three facilities there. The administrative center, the research and development department, and the Hanmer division.
Q. Are those to your knowledge all still there as you've just described them?
A. They certainly --The facilities are all still there. The Brown and Williamson Corporation, which is part of British American Tobacco, operates the Hanmer division as a reconstituted tobacco plant. It sold the other two facilities to Reynolds Metals Company.
Q. And what is the Chester facility, if youknow?
A. It is-- That's slang for exactly what we just discussed.
Q. They're one and the same, Bermuda Hundred and Chester.
A. Yes.
Q. Thank you.
A. The administrative center and research - No. The administrative center had a Chester mailing address. Hanmer division research had a Hopewell mailing address. Little bit of the war between the north and the south.
Q. And at all times you've been describing, has -- Until the sale to B. A. T. as you described it, were all of these facilities you've described owned by American Tobacco?
48 A. Yes. To my knowledge. I'm sure they were.
Q. What is your understanding of the relationship of Gallaher to American Tobacco Company?
A. It was an evolutionary relationship over many years. The American -- First you have to talk about Gallaher in relationship to American Tobacco; but in order to be technically correct, you would have to go through the evolution corporately of American Brands and American Tobacco, also.
So don't misread what I'm saying, but originally American Tobacco held a small share, I think it was around 14 percent of Gallaher's stock due to the amalgamation of the Wix Company, W-I-X, which it had owned many years previous. Then in 19 -- I believe '68 or '69, must have been '69, the American -- I don't know whether it was before it became American Brands or after it became American Brands. The dates are all right in there.
Anyway, American purchased the balance Well, a big chunk of the balance of the stock of Gallaher, which took their share from, say, 13 percent up to, say, 70 percent, 68 percent, something. Then two or three years later they brought the balance in a shareholder buyout.
So over a three-step process American Tobacco and ultimately American Brands became the sole stockholder of the company known as Gallaher. And so up until the buyout by B. A. T., Gallaher was an independent, wholly-owned -- I assume the technical word is subsidiary of American Brands. Not of American Tobacco.
Q. To your knowledge did Gallaher's ever conduct or sponsor smoking and health research?
MR. O'NEILL: Is Gallaher a defendant in this lawsuit?
MR. DOUGLAS: Gallaher, as the witness has just explained, for years has been a sister company to American Tobacco.
THE WITNESS: Subsidiary of American Brands.
MR. O'NEILL: It is not a defendant in this lawsuit, is it? I object to any inquiry -
THE WITNESS: I don't think so.
MR. O'Neill: -- any inquiry into the question of Gallaher.
MR. DOUGLAS: Well, it is relevant, sir -
Q. Let me ask again if you know whether Gallaher conducted in-house -
A. I have no idea.
Q.-- smoking and health research?
A. None. Zero.
Q. Do you know if it sponsored any?
A. None. Zero. No idea.
Q. Over the years as an employee with American Tobacco, did you have any communications with Gallaher?
A. With their leaf executives.
Q. What was the nature of those communications?
A. Concerning leaf and leaf matters. Worldwide trade, tobacco growth in other countries primarily. Gallaher had had an office in American. Goldsboro, North Carolina. So we had some cordial relationship with them, arms-length, because they operated independently of us; but tobacco people are pretty friendly people, and we were friends with those people.
Q. Did you have cooperative activities between your staff at American Tobacco and staff employees at Gallaher?
A. No.
Q. So all of the communications you've just mentioned having were totally on an informal basis?
MR. O'NEILL:I object to the form of the question. I don't know what you mean by that.
A. I don't either. American Tobacco Company did have a lot of staff. To me there's a difference between staff and line. We had a lean and clean operation. And so we had people, heads of departments, but we didn't have wads of staff sitting around. I don't quite get it. Nor did Gallaher either.
Q. Letme move on to an issue that you touched on earlierwhich concerned your role in leaf. I think youreferred to yourself as the leaf man -
A. Yes.
Q.-- and developed a specialty in that. Would you agree?
A. I was not the only leaf man and we had a team and we had a teamlike approach, but I understand what you're saying.
Q. Has American Tobacco always imported leaf from other countries in your experience, or did that happen sometime midway through your career?
A." Always" is a long time. Cigarettes are made up of a multitude different types of leaf. So your question is nonspecific, but we imported Turkish and Greek and Bulgarian and Yugoslavian tobacco for at least 50 years, probably 75. Ever since the American blend cigarette came on the scene.
MR. DOUGLAS: I would like to offer as our first exhibit, if you would mark this, please.
(Exhibit Hager-1, marked for identification.)
Q. Did you ever discuss nicotine within the company?
A. Did I ever discuss nicotine within the company? I'm sure I did. Tobacco is a nicotine plant.
Q. What do you mean by it is a nicotine plant?
A. Well, the biological name I think is nicotiana tobacco. I hope I gotthat right.
Q. What is the role of nicotine in cigarettes as you understand it?
A. I'm not a scientist. I'm not a chemist.
Nicotine is natural ingredient in tobacco, and since tobacco is-- makes up almost all of what is in cigarettes, then obviously nicotine is in cigarettes. And it plays some complex role in the desire of people to smoke cigarettes.
Q. Would you agree there is a naturally-occurring variability in nicotine in tobacco plants?
A. Yes, but let me ask you a question. Are we talking about the document now?
Q. We haven't gotten to the document yet.
A. I got confused.
Q. I will let you know, though, to be absolutely clear.
A. Go ahead.
MR. DOUGLAS: Could you read the question back, please.
(The last question is read back by the reporter.)
A. Oh, yes, significantly.
Q. Could you tell me a little bit about the difference between different types of tobacco?
A. It is not only between different types of tobacco. It is within each type of tobacco. Depends on the weather, the soil, the seed, the growing conditions. Every year it is different within every type of tobacco. In fact, it is different in every stalk position on the plant.
Q. You would agree that -- I assume that American Tobacco makes sure in its manufacturing processes that each brand of cigarette which is marked for a certain level of nicotine using the FTC standards has consistent levels of nicotine?
MR. O'NEILL: Object to the form of the question. That's not the facts as I know them.
Q. Do you understand the question, sir?
A. In the first place American Tobacco Company was bought out and doesn't exist. You asked in the present tense, I think. American Tobacco Company doesn't do anything today.
Q. Consider it in the past tense then. Point well taken.
A. American Tobacco tried to produce its products according to the specifications that were issued by the department of research and development, and part of the purpose of the specifications was to maintain a uniformity, a consistency in product delivery to the consumer so that we wouldn't be accused of fraud.
In other words, if the tar and nicotine levels on a pack of cigarettes stayed a certain content under the FTC method, I think it is the responsibility of the company to produce the products within a range to meet those published numbers, if I understand your question.
Q. Would you please describe for the jury then the ways in which American Tobacco controlled the nicotine levels to insure that they were according to specifications?
A. Well, we didn't control nicotine levels per se. We looked at several parameters. What we were trying to do was blend large amounts of tobacco so that the highs and lows in nicotine and other sugar content was very important, total volatile basis or whatever you want to look at in a tobacco plant so that we would mix crop years,
stalk positions, grades, types of tobacco in the blend to try to maintain a consistency and uniformity in the product over time.
Q. Did American Tobacco ever purchase nicotine to add to cigarette filler?
A. Not to my knowledge.
Q. And to be clear about the terms We're using, let me make sure I've used the term " filler" correctly. How would you define " filler"?
A. Filler, in a cigarette context filler is usually a cigar industry term. But filler in a cigarette context would be what we call cut rag. It would be the blended tobacco at a certain stage of the prefabrication process in the factory.
Q. So let me just restate the question slightly differently. Do I understand correctly that your testimony is American Tobacco never purchased nicotine from an outside supplier?
A. I didn't say that. I don't know what they did experimentally. The research department, over many, many years, could have done things experimentally I'm not aware of.
What I said was certainly on a production basis, on a general rule, on a mass production, I'm not aware that the company ever even came close to purchasing nicotine to put in its general production.
Q. Did the company ever add nicotine?
A. Sir, I can't speak for the company. I'm not the company. I'm John Hager. I'm not aware of the company ever adding nicotine. I'm aware there is a notation in the Waxman report that suggests there was a small short-term test market with some -- not during the time I was research director -- but with some reference to an addition of a malate, but I am not aware the company ever added nicotine to any products.
Q. You're including test products?
A. Test products that I am aware of. I'm not speaking for the company. I'm speaking for me. I'm not --I'm not equipped to speakfor the company.
Q. If we could refer to Exhibit 1 then?
A. Yes, sir.
Q. And Mr. O'Neill will understand when Iask you to take your time in reviewing it, if you would like.
A. It has been sent to me, so I have seen it in recent days only.
Q. Let me begin by asking you a -This document which is dated June 5, 1974, which is identified as a confidential memorandum or report from R. M. Irby, Jr., manager, new products division research and development, to Mr. J. B. McCarthy, executive vice president, and it regards nicotine content of reconstituted tobacco.
Could you tell me who these two gentlemen are?
A. The titles, I think, suggest who they are, or were. At the time.
Q. Whowere they at the time?
A. Julian McCarthy was an executive vice president of the company. He was physically located in the NewYork office. Dick Irby was the manager of the newproducts division physically located in Bermuda Hundred.
Q. Did you know these gentlemen?
A. I did.
Q. Did you work with them?
A. Over the years, sure, I worked with them.
Yes.
Q. On June 5, 1974 -
A. I was retired.
Q. You were on your disability -
A. Retirement.
Q. Working as a consultant at that time?
A. June, yes. I think I was. That's correct. I was located up at the other facility uptown.
Q. I would like to ask you a -
A. I did not receive or see this memorandum at the time, if you're interested in that.
Q. The record will reflect that you are noted as having been copied on it. At the end of the memo it indicates Mr. J. H. Hager, executive vice president, and Mr. V. B. Lougee, the Third, research and development director are indicated as receiving c. c.'s.
A. I understand that. I'm not particularly surprised. As I say, I was retired. I never received or saw the memorandum. The JMS, Janice M. Street, the secretary shown here, was a very loyal person to me, and nobody ever told her that I was retired. We didn't have computers in those days. They had secretarial manuals that were not necessarily updated regularly. She was proud of me; and even though I was dead and gone almost,
she kept copying me until somebody told her not to. And nobody ever put a notice out saying I was on disability retirement, and so it took a long time for it all to dwindle down to the fact that I was gone. They didn't want me to be gone, but I was gone. So even though it shows me as a copy, I never received, nor did I ever see it until it was shown to me recently.
Q. When you were gone, you were gone for how long?
A. Well, I was stricken with polio in August of '73. I was gone from being an employee of the company until August of '74. It was about a year.
Q. You were physically removed from the company -
A. Except, as I told you, when I came back as a consultant to work as a resource for the legal department in the antitrust lawsuits. I was put on a totally different track. It was specifically indicated that I was not to work with the people I used to work with, and that's why they put me on this different track as a consultant, with our legal department people on a totally different subject.
Q. Did you testify earlier that you had begun to come back to the company in February of 1974?
A. I did. Not in the location of the research department. Uptown at 400 Jefferson Davis Highway, which was the old research department, and to begin to try to get my feet on the ground and sort out my personal papers and start writing checks again and catch up with the mail. And that's when I was told to study the background, the leaf background, for these antitrust suits - which ultimately led to a more specific job.
Q. What happenedto this and any other memos that were addressed toyou that you testify you didn't receive at the time? Did they disappear or were they givento you later?
A. I have no idea. Thiswas a -- My getting sick was a cultural thing inthe company. Mind you, it was not 1997. It was 1974. I had been promoted. People were proudof me. Then I almost died. Right?
And the little people in the company -And I don't mean to be calling this nice secretary a little person, but nobody ever came along and said, Hey, look, we bumped him out. We put him on disability retirement because we don't want him to come to New York. Nobody strips you of a title when you're almost dead. Right?
So it was a very difficult situation for both me and the company; and so it took a long time for people to accept, it took a long time for the records to reflect that poor old John Hager, indeed, was gone, and I'm sorry, but that's the way it was. And if you can't understand it, you don't understand the culture of those days and this company.
We didn't have computers. So she might have put my title on there. That doesn't mean she generated the document. I don't know.
Q. So you have no idea. Your testimony is you haveno idea?
A. I don't have aclue. All I can tell you is when this memorandum was produced I was on disability retirement.
Q. Your testimony is that this little person, the loyal secretary -
A. I don't like that description. I realize it was mine.
Q. I'm just using your own words.
That this loyal secretary knew you were gone and put your name on here to honor your memory?
MR. O'NEILL: Object to the form of the question.
Q. Just trying to understand.
A. No secretary told her not to put it on there, I guess. Dick Irby didn't write a lot of memos. I don't know. I can't explain it. I do not know. I can tell you I was not working in any of these areas at the time.
Q. What was Dick Irby's relationship to youin the company? Did he work for you or with you?
A. Much earlier he had worked for me. Yes.
Q. When was that, sir?
A. 1970, in those days. When I was research director and earlier when I was coordinator of new products. Actually Dick Irby and Betty Collier and John Hager were the first three employees of the new products division of the company back in '64.
MR. DOUGLAS: I would like to introduce this document as Hager-2, please.
(Exhibit Hager-2, marked for identification.)
Are you familiar with the term
" Compound W"?
A. Not particularly. No, sir. The memo would suggest it is a code -- a code. Code name, code word. Code for nicotine being used experimentally within the department of research and development.
Q. Do you recall ever -- Is it your testimony under oath that you never heard the term " Compound W" -
A. That's not what I said.
Q. With all of your years at the company -
A. Let's see what I said. Do you mind?
Q. This is a new question.
A. Okay.
Q. Did you ever hear of Compound W in all of your years at American Tobacco?
A. I assume I did. Yes, sir. We had code names for lots and lots of things within the department of research and development. It was a very competitive business. Research and development was a competitive function of a competitive business. They used codes. We had A's and B's, and BB's and CC's, and W's and X's and Y's and Z's. So we had lots of codes for lots of projects, lots of things.
Q. Was there a code that you used for tar?
A. I don't remember one.
Q. Do you recall using a code for Polonium 210?
A. I bet they did. I don't recall that. I don't know we ever talked about Polonium 210.
Q. Or a code for benzo-(a)-pyrene?
A. I don't recall.
Q. What specific recollection do you have of the term " Compound W"? You said you generally think you remember it.
MR. O'NEILL: Object to the form of the question.
A. The memo would suggest they're talking about experimental work within a group within the company. So, you know, it seems to me this group of people had some reason to use this nomenclature or this coding.
Q. Let me ask the question again, Mr. Hager. What, if any, specific recollection do you have of the term " Compound W"?
A. None.
Q. None whatsoever.
A. The term within parts of the department of research and development pretty obviously refers to nicotine, and I may have some recollection, but in the leaf end of the business we did not use the term. So I think there's a distinction here. This is experimental by scientist in the research department as opposed to nicotine in cigarettes or leaf tobacco.
Q. That's your testimony even though you were head of new products and head of R and D for several years?
A. I said that the term was used within an experimental part of the research department. It did not refer to nicotine in tobacco or in cigarettes in a general usage term. I did not say I never heard of it.
Q. Weren't you assistant to the president of the company at the time this memo is dated?
A. Yes. Or I may have been marketing coordinator. I didn't give you precise dates on that.
MR. DOUGLAS: I'm going to offer to be marked as Hager-3 a document headed " John H. Hager."
Q. It appears to be on notepaper bearing your name. It is a handwritten document dated April 25th, 1972, and, Mr. Hager, I would appreciate it if you would read this into the record, please.
(Exhibit Hager-3, marked for identification.)
A. This is a memorandum dated April the 25th, 1972, to Mr. Heimann.
" As discussed, higher nicotine at the same tar level is generally accomplished through the selection of tobaccos, and Lorillard has bought some higher nicotine tobaccos recently. Other ways would include the addition of Compound W, a change in cigarette paper, and the use of reconstituted instead of stems, paren, stems have a very low nicotine content, end of parent The change in Newport is similar to our work on Pall Mall Menthol." It says PM menthol. "-increase in nicotine and menthol at the same tar. The opposite situation is Sano, lower nicotine at a given tar level."
Q. And it is signed?
A. By me.
Q. You recognize your handwriting?
69 A. That looks like my scratch.
Q. Is it still your testimony, sir, that you have no recollection of any specific instances of dealing with Compound W?
A. That's correct. Back in 1969 obviously it became a slang term, if you will, for some work we had done in the research department. This memorandum is dated almost three years later obviously in response to a direct question by Mr. Heimann. At least it appears to be that way.
Q. What was your job on April 25th, 1972?
A. I was the director of research and development.
Q. You called Compound W a slang term at this point in time? What do you mean by that?
A. A descriptive term.
Q. Was it a reference to nicotine?
A. I would assume so. Yes, sir. The memo certainly suggests that, but it is a theoretical --It's an answer to a theoretical question. How do you get higher nicotine? Well, you can add it. You can buy tobacco differently. You can do it lots of other ways. Through shuffling reconstituted, shuffling stems in the blend. It seemed to me like it was a very direct answer to a very direct question, a theoretical type of question.
Q. Why was the president of American Tobacco interested in this question in 1972?
A. He was trying to perform his function - He had dual function. He was involved very heavily with marketing, and he wanted to know why certain brands were performing better or worse than other competitive brands, and was it related to marketing and advertising or related to product? Product content.
Q. Was it his view that nicotine content affected the popularity of brands?
A. I doubt it. I don't know. I can't -- You have to ask him that. It was a parameter in cigarettes. Many times when nicotine was too high consumers didn't like it. Many times when the nicotine was too low consumers didn't like it; but of course nicotine goes total volatile basis of sugar and all the other constituents of the tobacco, so it is not just nicotine. But it is a variable in the product when you compare one product against another or one company's line of products against another company's line of products.
Q. You said earlier regarding Exhibit 2, didyou not, that Compound W was being used in some small restricted test fashion in 1969?
A. I said the memo suggested that.
Q. Wouldn't it be the case, Mr. Hager, that almost exactly three years later Compound W was still being used at American Tobacco?
MR. O'NEILL:Object to form.
A. WhoA. No. This doesn't suggest usage.
This is an answer to a theoretical question. A global question. Didn't have anything to do with usage.
Q. You refer here to the addition of Compound W -
A. No, I don't.
Q.-- asaway -
A. As a way. Asatheoretical answer to a theoretical question. As a way to increase nicotine content. Sure. Why wouldn't it be part of theanswer to the question?
Q. If you would, Mr. Hager, let's look at thememo ofJune 5th, 1974.
A.'74. All right.
Q. From Irby to McCarthy. If you will look under the Section Number 1 at the third paragraph. First page.
A. Okay. I got you.
Q. That paragraph reads:" The Compound W, which we purchased several years ago from Conray Products and subsequently sold to Black Leaf Products, was of 90 percent total alkaloid purity. "
A. Okay.
Q. You were with the company and this preceded your disability?
A. That's correct.
Q. Do you recall purchasing -
A. No. It was bought.
Q. This is while you were head of the R and D?
A. No, it was not. It was certainly back here in '69. The string of memos you produced suggest it was bought several years ago, several years prior to '74. It seems logical -- It was bought '69 it was not bought while I was research director, I can tell you that. I was research director starting in June of '70.
Q. Who would have bought Compound W then?
A. I can't tell you who bought it. I can tell you who the director of the department of research and development was.
Q. Who was that?
A. That was Edward S. Harlow, but I cannot tell you who bought it. I don't have a clue.
The memo also suggests they sold it, and subsequently. I don't know what the definition of the word " subsequently" is.
Q. Were you involved in the sale of Compound W?
A. I don't recall. I don't think so, but I don't recall specifically.
Q. What was Conray Products?
A. I do not know.
Q. Never heard of it?
A. No, sir. I mean maybe in my life sometime I've heard of it, but I certainly don't recall.
Q. Do you know what Black Leaf Products was?
A. No. I think Black Leaf may have been a company that did ---sold insecticides and pesticides, bug control material. Do we still have a Black Leaf spray that you can spray in your kitchen today? I don't know. Beats me.
Q. Nicotine is used as an insecticide, or has been?
A. I think it was used to kill bugs. Or - It was certainly used in some form, in some way. I don't know. I do remember that people had other purposes they used nicotine for.
Q. If you look at the bottom of that first page, I'm going to read starting from the last paragraph, second sentence.
" Our limited experience indicates that it is highly preferable to convert the Compound W to malate or citrate salt prior to adding it to the concentrated extract. The salt form is more stable for processing and somewhat less hazardous in handling."
Can you explain from your position of expertise what they're talking about here?
A. I thinkyou have to put it in context.
Earlier in the paragraph it says " experimental runs." The -- One of the purposes of the research and development department was to be creative and innovative and try all types of new things. This appears to refer to a limited body of work done by a limited body of people within a very large department. Experimentally they were -- According to the memo, at least, they were trying some experiments.
Q. I have to ask you to answer my question which asks for your explanation for what they are talking about here when they refer to it being highly preferable to convert the Compound W to malate or citrate salt.
A. I do not know. I was not privy to these discussions or to this memorandum or whatever basis upon which this memorandum was written. So I don't know. I am not a chemist.
Q. Is it not true, sir, you had just spent several years as head of R and D?
A. Head of R and D with over 200 people performing a multitude of functions with a lot of experimentation going on by a lot of people. Yes, sir.
Q. Your testimony is that this description means nothing to you.
A. Nothing of any -- I mean, it stands on its own merit, what the words say. It means no more to me than the merit of the words as written. Anything else would be presumptuous.
Q. On Page 2 under Section Number 2, it is headed RC Formula Modification. Do you know what RC Formula refers to?
A. RC is the code word for reconstituted tobacco. Do you know what reconstituted tobacco is?
Q. It then says, " Our current formula for RCTM is as follows."
Do you know what RC-TM refers to?
A. It is another code for a subproduct. In other words, RC describes the family of reconstituted tobacco products that were produced. RC-TM was one of many produced.
Q. Does TM stand for something? Are those initials?
A. That's part of this elaborate coding system. I have no idea. Might be a person's initials. It might be a product. Could mean Tareyton. We had a product named Tareyton.
Q. Beneath that there's a list of several things. Would you tell me what each of those means, if you know?
A. Raw tobacco input ingredients.
Q. What does BS Leaf stand for?
A. BS Leaf, B is the code for bright or flukered (sic) tobacco. BS was a grade, actually, and Leaf is whole leaf as opposed to strips or scraps or stems or something else. So that's a grade of leaf tobacco.
Q. What is KLS Scrap?
A. KLS. K is B-U-R-L-E-Y, Burley. KLS is a Burleyblend line. Scrap is the very small particles thatare screened out of the blend line in thecigarette factory.
Q. What is TS?
A. TS is code name for Turkish whole leaf.
Q. The next one seems to be self-explanatory.
A. Scrap out of the -
Q. Number 35 Scrap?
A. That's the flukered line as opposed to me KLS being the Burley line, and that's this 18-mesh scrap that was screened out of the flukered strip blend.
Q. What does Fines and Shorts refer to?
A. Fines are a smaller screen product that comes after the various types of leaf have been blended together. That could be all the way up to a 64 or 80, 86 mesh. Shorts came from the cigarette factory full floor. When they had it - in the production of cigarettes, they generate shorts. Shorts were aslang term for the -- the reclaimed tobacco fromcigarettes that did not get into the packages and go out the door.
Q. So these sweepings off the floor -
A. I didn't say they were sweepings on the floor. You said that. Shorts came -- shorts were short tobacco that came out of cigarettes, either from packages that were rejected or from the throwout box on the cigarette machine or, you know, they could come from lots of places, but I never used the term " sweepings on the floor," and I object to that.
Q. Would you refer to that as throwaway dust?
A. Throwaway dust is a different product than any ofthese that we've talked about.
Q. What is throwaway dust?
A. Throwaway dust is even a finer mesh product that was determined to be unsuitable for use in the cigarette factory.
Q. Going back to the paragraph directly beneath the list of those raw tobacco input ingredients, would you please read that paragraph into the record starting -
A." If the lower nicotine-containing leaf components such as Turkish can be replaced with high nicotine tobacco such as Malawi," That's the name of the country, " sun-cured scrap (5% nicotine), the nicotine content of the resulting RC would be of the order of 1.6 to 1.7%. The availability of such high nicotine tobaccos is currently unknown. Taste evaluation would also be mandatory prior to any substantial production."
Q. Was TheAmerican Tobacco Company payingclose attentionto nicotine levels in its products?
A. This relates toreconstituted tobacco.
Q. Reconstituted tobacco -
A. Reconstituted tobacco was produced on a paper machine, a -
Q. Whatpercentage of a cigarette would reconstituted tobacco make up?
A. It depends on the specific product, specific blend. Itvaried all over the map.
Q. Give me an example of some of American Tobacco's major brands and the percentage of reconstituted tobacco -
A. Well, that's -- I think that's highly confidential information. Blend formulations. I don'tsuggest I recallthem anyway, but it was in a range of, say, 8 to 18 percent of a finished cigarette blend, might be reconstituted tobacco depending on what point in time, which blend. Whatever reconstituted tobacco was done for economy purposes to reclaim all tobacco by-products and produce in a paper machine process reconstituted tobacco that then could be blended black into the process in the cigarette factory.
Q. What did controlling the nicotine levels in the reconstituted tobacco have to do with economizing?
A. All right. We were replacing whole tobacco in cigarettes with reconstituted tobaccos. You got that straight. Now, reconstituted tobacco was a lower nicotine product. In the reconstituting process nicotine was lost, and these by-products contain lower levels of nicotine than the raw whole tobacco; and so, therefore, in order to save money youhave to produce an acceptably tasting product in reconstituted tobacco. It is a lower nicotine product. It is a product that in the production loses a lot of the taste characteristics compared to the tobacco it is intended to replace in the blend.
Q. Are you denying that American -
A. I'm not denying anything.
Q. Let me ask the question, sir. Are you denying that American Tobacco was controlling nicotine levels in its reconstituted tobacco?
MR. O'NEILL:Object to the form of the question.
A. I don't-- I don't understand your line of reasoning. I am saying that we worked with the import-- input ingredients in the reconstituted tobacco formulas, both experimentally and in production, so that we could generate a product coming out the other end of the paper machine that would have levels of nicotine that approach the level of the tobacco it was going to replace. It is a lower nicotine product due to the process.
MR. DOUGLAS: I ask that that answer be stricken as nonresponsive. I'm going to ask the question again.
Q. Did American Tobacco control nicotine levels in its reconstituted tobacco.
A. We weren't -- Did American Tobacco work to produce nicotine levels? Yes. You can't control nicotine with a natural product and a paper machine.
Q. Was the nicotine level that resulted from the manufacturing process described here natural?
A. Yes.
Q. Explain that.
A. All of the ingredients that went in had nicotine. The product that came out the other end of the machine had nicotine. The sheet, reconstituted tobacco, it was a 100-percent all-tobacco process using water. You know how a paper machine works?
Q. As a leaf specialist, was it your role to choose precisely which tobaccos would be used in blending in this process?
A. No. We had people on the payroll, I mean, that did that -- did those jobs. If I had sat around and worked on every blend and every experiment all day long, I couldn't have done anything else in my job.
Q. I think, and I might have cut you off previously, thatyou were going to describe, and I would like you to do that now, the reconstituted tobacco process, how reconstituted tobacco is manufactured.
A. All right. It's done on a paper machine,
so it's similar to thepaper-making process. Now,
you put in raw materials. 100 percent tobacco, raw materials of some blend like this blend suggested here in this memorandum, and you add water, and you form a slurry in these big vats with these big paddles. And so you create a liquor, if you will, or a condensate which you separate from the fiber. And so you end up with two separate routes for the -- for the product that's been coming out in a liquid form and the fiber that's coming out in a fibrous form.
You then form a sheet on the machine with the fiber. And then at the size press you add the condensed liquor -- that's a paper machine term -- that condenses back on the sheet, and then you dry the sheet, and then you break the sheet into pieces that resemble pieces of tobacco strips, and you dry it further and pack it in a box or a hogshead.
So what you have done is put your components in and you've separated them. You've put them back together, and you've created a different kind of a product, all 100 percent tobacco, during this whole stepwise procedure and you pack it up in a box. And you've lost some nicotine in the process. You've lost other volatiles in the process.
Q. So what you come up with there as a resultof thatprocess is -
A. Reconstituted tobacco.
Q. Not naturally-grown tobacco, but a manufacturing product?
A. 100 percent reconstituted -- 100 percent tobacco reconstituted product.
Q. And it is a manufactured product.
A. It is manufactured -- Yes. In this leaf process.
Q. Thank you.
A. Let me qualify that by saying from time to time we did add hygroscopic agents like a glycerin or propylene glycol, at the same time added to cigarette blends. So when I say 100 percent tobacco that would include the hygroscopic agents that may also be added.
MR. DOUGLAS:We need to take a break.
A. I'm just going to sit here because I'm anxious to move asfast as possible. THEVIDEOGRAPHER:Off the record at 12:30. This isthe end of Tape Number 1.
(Recess.) THE VIDEOGRAPHER:Back on the record at 12:42. This is Tape Number 2.
Q. Sir, I would like to refer you to the bottom of Page 3 of the June 5th, 1974, memo.
A. Yes.
Q. Let me begin by asking you a question about nicotine in cigarettes. Is it your view that nicotine must be in cigarettes for cigarettes to be commercially successful?
A. I'm not saying the -- I'd be interested in seeing what Webster's definition of the word " cigarette" is. It may mean a smoking material containing nicotine. I don't know what the definition is in the dictionary.
Q. Let's use the conventional understanding of what a cigarette is.
A. Nicotine is one of a complex series of compounds that is unique in tobacco and delivers a certain smoke that seems to be attractive to people. If you took all the nicotine out, which some companies have actually tried, or there have been close to denicotinized cigarettes, they don't seem to have the same appeal. On the other hand, that doesn't mean it is not possible, certainly both from an experimental and perhaps even eventually a commercial standpoint, that you could produce a cigarette without nicotine.
Q. Are cigarettes without nicotine not successful in the marketplace for a particular reason in your view?
A. They don't have the taste and flavor that people desire in a cigarette. On the other hand, some people smoke very low-nicotine cigarettes, and so -
Q. What does nicotine taste like?
A. I don'tknow. I've never tasted nicotine.
Q. You just testified that the lack of nicotine affects the taste and flavor of a cigarette. Is that correct?
A. Yes. It could. Sure. That's right. Well, cigarettes with low nicotine taste are different than cigarettes with high nicotine, and there's balances of other ingredients, casing ingredients and natural ingredients in tobacco that forms the total smoke complex. It is not just -- Nicotine is just one ingredient. There's sugar in tobacco, too, you know.
Q. You raise a good point. Do they taste different because of the different levels of nicotine or because of other substances used in the product?
A. I would say all and both and whatever. As I said, it's a package. It is a complex product.
Q. So your view is that the taste of nicotine is a key feature of cigarettes and their acceptability to consumers?
MR. O'NEILL:Object to the form.
A. I didn't say that, sir. I don't know what nicotine tastes like. I said nicotine is part of a complex package of ingredients in tobacco that form the taste. It may be that nicotine doesn't have any taste. I don't really know.
Q. Let's boil it down. Nicotine affects the taste in your view. Correct?
A. It certainly seemsthat it is one of the many things that somehow together interrelated affect taste.
Q. Let me ask you to read -
A. I think it is an oversimplification to say it's just nicotine. Tobacco has all kinds of thingsin it, so if you burn it you get all types of complex smoke -
Q. We're trying with your assistance to help the jury gain some understanding of what--what our -
A. I have no objection to that at all, but as I say, I'm not a chemist. Nor am I a taste expert. Q. Let me ask you, if you would, to read for the recordthe last two lines of Page 3 and the last --the top three lines on the next page, please.
A. Readingfrom a memorandum dated June 5th, 1974, written by Dr. Richard M. Irby, Jr.
Q. That's okay. We have this in the record.
A." In general, we have found to date that increasing the level of nicotine in the smoke by the addition of Compound W has little, if any, affect on taste. Smoke impact is noted at higher levels. Smoker satisfaction can only be measured by having panel members smoke several packs of cigarettes."
Q. It looks like this gets at the issue you were just attempting to describe. As an expert on this subject matter, is it your understanding that raising the nicotine level by adding nicotine -- Here it's called Compound W -- did not affect the taste?
A. Well, I appreciate the compliment of being called an expert. I was a leaf man. I was not a chemist. I was not a researcher. I was a businessman.
Q. With all due respect, and this respect is due, youwere with the company for 34 years.
A. I appreciate that.
Q. You told me you ran -
A. PerhapsI was expert in some fields, but I was not necessarily expert in all fields.
The memo suggests the addition of the Compound W, as it's called in the memorandum, had little, if any, affect on taste. So I'll accept that on face value. I was not involved in this experimentation. Therefore, I don't really know.
Q. What does it mean to say, " Smoke impactis noted at higher levels"? What is " smoke impact"?
A. I would only be giving you an opinion or a guess as to what smoke impact was. It would relate, I presume, to the strength of the smoke.
Q. It relates directly to nicotine. Doesn't it? This is the context in which they're talking about it.
A. It is all interrelated. Smoke is composed of many, many ingredients, and so if you've got smoke impact, you can't be just talking about nicotine.
Q. This memo -
A. I didn't write this memo.
Q.-- is about nicotine content, and the discussion that these experts whom you worked with are having here is about nicotine content and the adding of nicotine in the form of this code word," Compound W." That's what they're talking about here.
A. Experimentally they're trying something.
Q. So I'm asking you -
A.-- to see what effect it has.
Q. In that context, when they talk about smoke impact noted at higher levels because of the addition of nicotine, what does this mean to you?
A. What it means to me is that you had an experiment going on where you had two different products, one without and -- one with a certain level and one with a slightly higher level, then they noticed the difference between the two, but I think it would be presumptive to say it is simplistic. It is just direct relationship.
Q. Smoke impact has nothing to do with taste, though, does it, according to this statement here?
MR. O'NEILL:Object to the form of that question. That's not what the statement says.
A. It doesn't say whether it has anything to do with taste or not. That's not what the man was -
Q. Does the sentence say that increasing the level of nicotine has little, if any, affect on taste?
A. That's what I read into the record from the memorandum by Dr. Irby. Yes.
Q. I'll take that as a yes.
A. No. The question is, did the memo say that. Yes.
Q. That's what I'm asking.
A. The memo says that.
Q. It says while nicotine has had little, if any, affect on taste, smoke impact is at higher levels because of the addition of nicotine, and so I'm asking you, sir, how do you define" smoke impact"?
MR. O'NEILL:Object. It is been asked and answered.
A. I don't have any new light to -- As I say, I didn't write the memo. The man has his own definition of terms. It would be an opinion of mine, you know. Smoke impact is the complex reaction from the total smoke.
Q. Is it your opinionthat smoke impactmay refer to the effect ofnicotine on the brain?
A. I think that's a reach. I mean -
Q. I'm asking your opinion.
A. I'm not going to speak for Dr. Irby. My opinion is no.
Q. Or on the central nervous system?
A. No. No. I mean I don't -- You know, I don't understand.
Q. Does nicotine have an effect on the brain of the smoker?
A. On the brain? I'm not a doctor. I assume it has some impact on the body, on the physiology of the body, but I'm not into medical terms. I'm not trained in that field, and I think that question is beyond my scope, sir.
Q. Is nicotine a drug?
A. Is nicotine a drug? I guess it depends on the definitionof a drug. ~ I guess in its pure form, it may be. Extracted. I don't know what the Surgeon General says about that.
Q. Was Compound W a drug?
A. A drug. Not to my knowledge. I'm not aware that it was.
Q. Do cigarettes deliver nicotine to the smoker?
A. Do cigarettes --Nicotine would be one of the many complex ingredients in smoke that's delivered to the smoker, yes. It is a nicotine plant, and cigarettes are made of tobacco.
Q. So to clarify, nicotine is delivered to the smoker in the smoke from the cigarette. Correct?
A. That's what the smoking machine, the test, would suggest. Yes.
Q. And it is described in this exhibit, nicotine levels can be altered during the manufacturing process? Is that correct?
A. Sure. Different blends, different input in ingredients are going to alter the level of nicotine and many other constituents. It's going to alter the sugar levels, it's going to alter many other levels of finished product ingredients.
Q. The company, in other words, if I understand youcorrectly, sir, can control many parameters of the cigarette-
A. I didn't say we could control it. You asked did we change it.
Q. Is change not a function of control?
A. This is a natural product going through a complex manufacturing process, and you can predict a range of results from the product that comes out the other end, but that's different than controlling. I mean, we're dealing with a raw agricultural product. You're talking about controlling a raw agricultural product. It is not that easy. If it was that easy, why would we go through all this great effort to handle it carefully and to produce -- you know, to put it through the process.
Q. When American Tobacco made reconstituted tobacco, a process you were describing before a break, it selected precisely which materials went into the reconstituted tobacco plant. Did it not?
A. No. It selected generally which materials went into the tobacco plant -
Q. And did -
A.--within a grade. Within TS Leaf you might have tobacco from four or five companies and four or five crop years and different levels of sugar or whatever. Did it produce to target specification? Yes. Did it control? No. It didn't have the capability to control.
Q. Elaborate on that if you could. The target specifications included nicotine levels.
A. No. The target specifications included the blend formula to generate a finished product.
Q. And are you testifying that the blend formula was not put together with any regard to nicotine levels -
A. No. I didn't say that.
Q. Well, please -
A. You're tryingto say we controlled the finished nicotine inthe reconstituted tobacco, and I'm saying we didn't. Certainly you can determine what inputblends you put in, and you can extrapolate and predict within a range of what the finished productwill be, but it is going to fluctuate within a range.
Q. So looking at Page 2 of this memo again and the list of the raw tobacco input ingredients, would the nicotine level of the B. S. Leaf havebeen known before it was put into the manufacturing process here?
A. No. Unfortunately, you don't understand. We're using huge quantities of each of these ingredients in a mass production process. B. S. Leaf is a grade that describes a category of tobaccos that had great varience (sic) within the category.
Q. Let me give you -
A. We might buy B. S. Leaf in three or four different places. It might be from three or four different crop years. It might be from different stalk positions. It was a grade that had a broad definition, and so one hogshead or box of B. S. is going to be significantly different from the next box and the next one and the next one. Then they use hundreds of boxes a day.
Q. That's helpful. So if you were to look at one box or hogshead or -- I'm using your characterization - would an individual box or hogshead of the B. S. Leaf have been identified for the nicotine level in that -
A. No. Because we didn't --It is too extensive a testing and data system. We didn't have that type of data system on every box.
Q. I didn't ask about every box. Was sampling done for nicotine levels?
A. Was sampling done at the time tobaccos were acquired? Yes.
Q. At some time -- when they were acquired?
A. Generally sampling was done when tobaccos were purchased, but this was representative sampling, not necessarily precise or statistically correct.
Q. So at that point -
A. You go into a warehouse full of boxes of tobaccos and you take a few random samples, and you gotest them. It gives you some indication of what the whole is about.
Q. I want to be very clear because it gets confusing. I understand that. At the very beginning of the process, the whole cigarette manufacturing process then at the point at which the materials were purchased, sampling was done to determine nicotine levels in those materials. Is that correct? I believe that's what I just heard.
A. Yeah. That's correct. You're trying to develop some -- Not just for nicotine. We test it for several things. So I don't want to imply these samples were taken for the purpose of nicotine. They were taken for a cataloguing, a categorization of the lots, L-O-T-S, of tobacco which may include hundreds of boxes or hogsheads.
Q. Were they tested in a similar mannerfor tar levels?
A. You don't test tobacco for tar. You test --I mean, tar's in smoke. Not in tobacco.
Q. What is tar produced from?
A. In the context I think you and I are talking about, it is produced from burning tobacco.
Q. Tar is produced from substances in the cigarette that become what is called tar upon pyrolysis? Is that correct?
A. Yeah. I think -
Q. What are those substances, if you know?
A. Vast majority would be tobaccos. It may have some casing and flavoring materials added. Hygroscopic materials. -
Q. With regard to Compound W, which you wrote about in your note to Mr. Heimann in April, 1972, why call nicotine by a code name? Why not just call it nicotine?
A. I have no idea other than we used code names for lots of things. It was a competitive business, and research was a very sensitive and competitive part of a competitive business. It is a way to distinguish naturally-occurring nicotine from, I guess, this material that was bought for apparently some experimentation. I mean, that's logic to me, but I don't have specific knowledge.
Q. Would anyone else have seen this note to Mr. Heimann that you wrote?
A. I don't know. I don't specifically recall it. I don't know what Mr. Heimann did with his notes. It looks like a fairly curt note. So he probably called from the phone or sent to a secretary his desire to have a question answered, and I tried to answer it.
Q. Forgive me if I -- You've already told me and I don't recall, but who is John Ashworth?
A. John Ashworth was a department head within the department of research and development. He ran that old P. D. L. that I talked about. The process development laboratory.
Q. Was it his decision, to your knowledge, to give -
A. Oh. Excuse me. Yeah. That is John Ashworth. There was also a Jim Ashworth. That's why I had to go back and look. I said it right.
Q. Was it his decision to name nicotine Compound W?
A. I do not know.
Q. Who would have made that decision?
A. I do not know. I was not there in May of '69. It looks-- The memo would suggest it was his decision, but I'm not going to say because I don't know.
Q. What concern might have prompted the decision to give nicotine a code name?
A. Well, I object to your suggestion it was a concern. I think he may have just done it in protocol.
Q. After nicotine was code named Compound W, did employees, in your memory, or researchers specifically customarily refer to nicotine as Compound W among themselves?
A. As I say, I was in New York at this time. I don't recall any significant use of the term. This is an experimental operation. You're trying to translate experimental operations into general culture of the company and employees, and the answer is no.
Q. We've seen from the documents we've looked at together today that Compound W was a term according to this memo that was initiated in May of 1969. It continued to be used through your memo to Mr. Heimann in April, 1972. It was used in a later memo in 1974. We're talking a span of many years in the middle of which you were head of research and development for the company. Correct?
A. That's correct, but these three documents might have come from piles of thousands, I would presume, and -- or maybe millions. I don't know, but as I say, there were over 200 well-qualified people working in the department of research and development. 200 plus days a year. They were working on lots of things. I didn't get intimately involved in everything everybody did. I was trying to bring a businesslike approach to the operation.
MR. DOUGLAS:Iwould like to offer as the next exhibit, Hager-4. A memo dated June 4, 1968, from O. N. Coty, C-O-T-Y, manager,
quality control research and development to Mr. H. V. H. Stoever, S-T-O-E-V-E-R, Jr., manager, Durham branch. If you would take a minute to look at this, Mr. Hager?
A. Yes. I've seen it since the reporter sent it to me.
(Exhibit Hager-4, marked for identification.)
Q. Mr. Hager, you are indicated as having received a copy of this memo. This memo appears to describe the sending of four experimental lots of Lucky Strike Menthol blend, 100 millimeters, in which, "all four samples," and I'm reading from the memo, " were made up with a leaf blend to increase the nicotine level of this cigarette," and it goes on to say they " differ only in the casing and finishing flavor applied which is listed below for each lot."
Why, if you can tell me, was the nicotine beingincreased in these cigarettes?
A. Well, first, at this point in time I was assistant to Mr. French who was the director of manufacturing. I was the assistant to the director of manufacturing, and I got one heck of a large pile of memos every day. So I would consider this to be a routine memorandum about a factory test.
Q. Let me stop you there with a question aboutwhat you've just said. Are you testifying that it was a routine to receive a memo that described increasing the nicotine level in cigarettes?
A. No. I'm suggesting it was routine to do tests at factory level. We did them all day every day. We had ten factories; five cigar factories, four cigarette factories, and a smoking tobacco factory, and we did tests out the gazoo, and - They tried this and that and this and that. There's probably somebody in the next cubical trying to test to do the opposite. I mean, testing was a very routine thing, is the point I'm trying to make, sir.
Q. Why in these tests would nicotine levelshave been increased?
A. I presume because they used a different blend.
Q. That's how they would have been increased, correct, by using a different blend, but why would they have been increased?
A. To see what the results of using the different blend were.
Q. The results in what respect?
A. Taste and flavor. That's what we competed on. We were selling cigarettes that people wanted to taste good. Have good flavor.
Q. Pardon me if I'm a little bit confused. In a memo we saw earlier we saw a description of how raising the nicotine level by adding Compound W had little, if any, effect on taste. So isn't this inconsistent?
A. I think you're -- No. The memo you saw that in was five years after this particular memo.
Q. Was nicotine different -
A.-- in the first place. In the second place this is natural. This is tobacco blending. Didn'thave anything to do with Compound W.
Q. We're talking about nicotine, though, and its effect upon taste and flavor.
A. We're talking about tobacco blends, nicotine being one constituent of tobacco.
Q. Let's look at this memo in the exact words that are used here, if we may.
Described here specifically is the use of leaf blends to increase the nicotine level of the cigarette. That's specifically what the focus was, wasn't it?
A. That's what it suggests Mr. Coty indicated.
Q. Is there any doubt in your mind that's what it was about?
A. They used a different --They sent this leaf to the factory to make cigarettes, and this leaf blend had a higher nicotine content apparently. That's what it suggests.
Q. Would there be anything wrong with raising the nicotine level in a cigarette?
A. Would there be anything wrong with it?
Q. Yes, sir.
A. I think perhaps they were trying to do it to maintain a uniform level. Perhaps they were trying to do it to generate better taste and flavor. Perhaps the nicotine level had fallen in this brand over time. Perhaps they were trying to introduce a new product. Would there have been anything wrong with it? I don't see anything wrong with it. It's just a part of a broad-based experimental effort to look at different blends.
Q. Well, you're a true veteran of the tobacco industry from your years with American Tobacco, and you may have seen in the Congressional hearings in 1994 when the C. E. O. s of the major cigarette companies testified regarding the question of nicotine levels and control of nicotine levels. They denied that nicotine levels were ever raised and -
MR. O'NEILL: Object to the form of the question. This is an outrageous question. This is not what the testimony was. You're paraphrasing it incorrectly. If you want to read from the transcript of the hearings what was said by the president of The American Tobacco Company, fine. Don't paraphrase it and mischaracterize it.
MR. DOUGLAS: I'm asking Mr. Hager for your opinion, if there are those out there who have sought to deny that nicotine levels are ever raised.
MR. O'NEILL: Mr. Hager has already testified that they have raised and lowered nicotine in experimental cigarettes by all kinds of ways, different blends, and it is an agricultural product. Make it a specific question and make it relevant to this lawsuit.
MR. DOUGLAS: Now you're testifying.
MR. O'NEILL: No. I'm objecting. Make a specific question relevant to this lawsuit is an objection.
MR. DOUGLAS: With all due respect your characterizations about it being an agricultural product sounds like testimony.
MR. O'NEILL: I'm repeating what the witness said.
Q. This memo appears to be for experimental lots, as it says. Were nicotine levels ever raised in commercially-sold cigarettes ever in your career?
MR. O'NEILL: Objection. I believe that's been asked and answered.
Q. You may respond.
A. I tend to object to the question, too. We had blends in all of our cigarettes. We brought out new products. We changed blends, and in shuffling tobaccosin the blend you get different levels of nicotineand sugar and whatever.
You're trying to put different kinds of tobacco together to make a good blend. Cut rag we call it, with the flavoring and the humectants and the casing materials to produce a flavorful smoke. Now, we did it to achieve a smoke that people like. You never thought about did you increase nicotine or did you decrease nicotine and all this. I mean, that was not the process. This is an obscure memo. One test. I would dare say we had hundreds of tests.
Q. Should I take that as a yes or as a no?
MR. O'NEILL:Object to the form of the question.
A. I don'tget the question.
Q. I simply asked whether nicotine levels were ever increased -
MR. O'NEILL: He responded to what you asked.
MR. DOUGLAS:This was completely nonresponsive from what I can tell. I'm asking for a yes or no tothe question. You can explain it.
THE WITNESS: It is responsive in the way I look at it. I'm. not trying not to respond.
Q. I'll ask it very simply. Did American Tobacco ever increase nicotine levels in any commercially-sold cigarette?
A. The result of blending tobaccos or bringing out new products or natural variations in the raw materials could have resulted in an increase in nicotine level. Did we do it for that purpose? No.
Q. I've just asked whether the company raised nicotine levels in any of its commercially-sold cigarettes.
MR. O'NEILL: And he has answered your question. Move on to another one.
MR. DOUGLAS: I'm afraid he hasn't answered the question.
Q. Sir, you've just told me about motivations. I haven't asked you about motivations. I just asked a factual question.
A. Nicotine levels went up. Nicotine levels came down. Did we do it? I don't get the question.
Q. Let me ask you. Was that completely accidental?
A. I think tobacco is a variable product. Blends were generally consistent, but from time to time we developed new blends to generate better products, and we developed blends to bring out new products.
Q. Well, sir, you described yourself earlier as theleaf man. Was it your role as the leaf man -
A. A leaf man.
Q.-- to help develop blends which would control for -
A. No.
Q.-- for the leaf content?
A. That was the research and development role. That was a new product division role. I was a leaf man in working with farmers and buying tobacco and dealing with thousands of millions of pounds and imports and exports and that type of stuff, but people who worked at the bench in the laboratory in the new products division were the ones that shuffled blends to develop product specifically. I wasn't on the bench in the laboratory.
Q. When you were involved in purchasing Malawi tobacco, did you know what the nicotine levels were in that tobacco?
A. We never purchased any Malawi tobacco that I'm aware of. We talked about it and it was one of the tobaccos that I assume was available, but in most tobaccos we purchased we got a sample, and we tested the sample, and we generally knew what the nicotine levels were, what the sugar levels were, what the base levels were. What the stem contents were, what the sieve sizes were. We determined a lot of things from samples before, during, and after we purchased leaf tobacco.
Q. So when tobacco was used, having determined earlier from samples what the nicotine levels were, the company knew what nicotine levels were being blended into the manufacturing process?
A. No, sir. You take a sample and you get a nicotine result from that sample. That doesn't mean the whole lot is exactly the same.
Q. What is the purpose in taking a sample at all then?
A. To try to learn something -- That's why a tobacco man --tobacco men go and look at the tobacco. We feel it, smell it, and touch it, and you make a judgement about its quality, and you take a sample to get some idea that your judgement has, you know, a basis. But the tobacco itself is going to vary. It varies from box to box; you know, it is not a homogeneous product. It is a heterogeneous product.
Q. Is one purpose of blending to try to -
A. To build in -
Q.-- to control it for the variability?
A. To try to build uniformity and consistency.
Q. Can the company produce a consistent product with regard to nicotine levels without knowing what the nicotine levels of the materials are that go into the manufacturing of that product?
A. Generally within a range, yes, sir.
Q. You're saying it doesn't need to know the nicotine levels?
A. No. It has indications from its profiling of its inventorying.
Q. Indications. Could you explain what you mean by " indications"?
A. Meaning sample results. Testing of samples. That helps you profile the inventory. Then you use this raw agricultural product in a manufacturing process, and the result is a variability within a range, and you try -- The goal was to keep the variability low within the range, but it was a variability. So how do you control a variability? You do the best you can, but we couldn't control it.
Q. Is it true during the 1970s and since American Tobacco produced increasing numbers of cigarettes with lower tar levels?
A. Our sales were dropping. I'm not sure we produced increasing numbers of cigarettes.
Q. Let's say a percentage of American Tobacco cigarette sales.
A. Yes. I think that's probably a fair statement. Consumer tastes change. Tobacco itself changed over time. Market demand changed. There was a great demand for newer products. Sure.
Q. You've testified that nicotine levelsaffect consumer acceptability. Correct?
A. I'm not sure I testified specifically that nicotine levels affect consumer acceptability. I said nicotine was one portion of smoke that determined taste and flavor that consumers reacted to in purchasing cigarettes. You're trying to take my words and put them into some other context, and I don't think that's right.
Q. I just want to understand your testimony.
114 A. That's fine.
Q. I appreciate your clarifying when I don't get it right when that's the case.
A. Okay.
Q. If nicotine falls below a certain level, amI correct in understanding that smokers won't buy that product anymore?
A. Oh, I think that's not correct. They buy Carltons and they bought Sanos, and they buy Merit Lightsor whatever. I mean, plenty of consumers would buy plenty of lower-nicotine products. -
Q. Is there a threshold below which they will no longer buy the product?
A. No. I don't think so. Carlton is about as low asit gets.
Q. Smokers would purchase nicotine-free cigarettes?
A. Some smokers, sir. The smoker population is a very diverse population.
..,
Q. In your experience, roughly what percentage of smokers would purchase nicotine-free cigarettes?
A. I didn't say nicotine-free. I said low. There's a great difference. I'm not aware of any nicotine-free cigarettes.
Q. So there must be a threshold below which smokers will no longer find it acceptable?
A. No. I think it's a technical question.
Q. I'm trying to understand your test -
A. How do you produce a nicotine-free cigarette? You tell me that, and then I'll answer your question. We didn't have the capability of it that I'm aware of.
Q. Has American Tobacco lowered tar levelsfor some of its brands in the 1970s?
A. Yes. I think that's a fair statement. Sure.
Q. As it did so, did it seek to maintain nicotine levels at a level that would remain acceptable to consumers?
A. No. We weren't -- We -- We were trying to build products that had a taste and flavor acceptability to consumers. We tried lots of new products. We tried lots of filters. We tried lots of levels of tar and nicotine. I don't know --I don't understand where you're coming from. Do we have a variety of products? We sure did, and did we work hard to try to get products that consumers wanted to buy? We sure did.
Q. I'm going to beg your forgiveness before I ask this question. It may be a little redundant, but it's because I'm having a little difficulty understanding. I just want to make sure that I understand your testimony.
Whether it's your belief a specific level-- whether or not you know exactly what that level is, but whether a specific level of nicotine has to be present in a cigarette in order for the cigarette to be commercially successful.
A. No. The way I understand your question, no.
Q. But, do I understand correctly that if a cigarette has no nicotine -
A. I've never seen -
Q.--it will not becommercially successful?
A. I did not say that. I'venever seen a cigarette withno nicotine. Howcan I answer a question aboutsomething that's theoretical?
Q. Actually, you testified earlier, didn'tyou, that there was a denicotinized cigarette sold by other members -
A. That didn't mean it didn't have nicotine in it. Denicotinized means reduced levels. It didn't mean zero.
Q. Are you familiar with a cigarette calledN-ext?
A. I think Philip Morris produced it, if I'm not mistaken.
Q. I believe you're right.
A.-- but I don't believe it was zero nicotine.
Q. I believe you're right about that, too.
A. It had nicotine in it.
Q. It had trace levels of nicotine.
A. Yes. It sure did.
Q. Is it your understanding that that cigarette succeeded in the marketplace?
A. I don'tknow what Philip Morris' goals were for their test market, but they pulled the test market. Whether they went national, I don't remember. Excuse me. It is not a roaring success today. It seems like there's other versions on the market of it today. They've renamed it and reformulated it. I don't know. There's cigarettes out there like that either by Reynolds or Philip Morris somewhere. Even today. I'm sorry.
MR. DOUGLAS: I would offer this as Exhibit Hager-5.
(Exhibit Hager-5, marked for identification.)
Q. This is a confidential memorandum from Timothy Mann, M-A-N-N, to Dr. P. H. Leake. May 7, 1969.
Feel free to look through the entirememo.
A. Yeah. I've never seen this one before.
Q. Who is Dr. Leake?
A. Dr. Preston Leake? He was a --I don't know what his title would have been in'69. He was like an assistant research director. I can't give you his exact title in '69.
Q. Who was Timothy Mann, if you know?
A. Timothy Mann was an employee of the company that had been sent down from New York to Richmond on a training program. He was a member of the marketing department, I believe, or maybe -- I don't know what his title was. I don't remember. I remember the name.
Q. Would you please read the third paragraph into the record?
A. This is a memorandum from Timothy Mann to Preston Leake, which I've never seen. it's dated May the 7th, 1969.
" Taking the proposition of higher nicotine cigarettes in general, I think that this is an area we are going to be most interested in. Because of that, I would recommend to you that we consider testing additional ways of adding nicotine to cigarettes such as, as you suggested, in the form of a salt during the overshot process."
Q. Do you know what he's referring to when he talks about the " overshot process"?
A. The overshot process was where humectants, hygroscopic materials were added to tobacco plants generally propylene glycol and glycerine and- sometimes invert sugar.
Q. Does this memo suggest to you, sir,
again, that the company was interested in exploring ways to add nicotine to cigarettes?
A. No. It doesn't suggest that to me. It suggests that one employee, who I believe was a trainee at the time, was writing a memorandum of some brainstorming-type idea to a higher employee about a concept. I don't think it suggests that the company was doing anything. You'll have to ask him, though, if you want to find out what he really meant by it. I can't speak for the man.
Q. Did you work with Timothy Mann?
A. No.
Q. Its remarkable that you recall 28 years later that he was a trainee.
A. He was an unusual person. He was not a typical employee of the research department. He was one of the people moved from one location to another, and that's the reason I remember his name. Tim Mann is actually the president of a cigar company. I saw him not too many years ago. But he wasn't a research -- He wasn't fish nor foul. That's why I say he was a trainee. You remember people who were sort of pulled out of one department and put into another department for training purposes.
Q. Is it your view that he was simply actingon his own?
A. Yes. Certainly he was not a scientist. Certainly he was not a trained research person.
Q. Looking at the fourth paragraph, it refersto a Mr. Faber?
A. Yes.
Q. Do you know who Mr. Faber was?
121 A. Do not have a clue. Never heard of him.
Q. Do you know what Mr. Mann would have been referring to when he talks about, as he does in the very last line of this memo, utilizing outside paneling or wider in-company paneling?
A. No. I do not. The company did paneling. I acknowledge that, but I don't know what this specifically refers to.
Q. Did American Tobacco ever send cigarettes with added nicotine out for consumer testing?
A. I do not know. I mean, I was in New York at this time. I didn't have any -- I have no knowledge of this, and now you're trying to get specific about an area I have no knowledge about. So the answer is no as far as I'm aware of.
Q. Are you familiar with the chemical methoprene?
A. Methoprene.
Q. As an insecticide?
A. Is thatan insecticide? Yes, sir. I've heard that term used. I'm not intimately familiar with it. I was going to say insecticide before you did. I think that's what it is.
Q. Do you know if American Tobacco ever used methoprene?
A. Ithink many years ago we might have. Yes. Certainly on small lots. I don't remember -- I just don't remember, but I've heard the term. Is methoprene the same thing as D. D. C. P.?
MR. O'NEILL: Is there any claim in this litigation concerning insecticides, use of insecticides? I'm not aware of any if there is.
MR. LA ROCCA:We have a claim for exposure to hazardous substances. I think insecticides would qualify as hazardous substances.
A. Bugs love tobacco, so we had to work hard on how to control bugs.
Q. Would methoprene be used to kill the Tobacco Beetle?
A. Experimentally it might have. In small lots it might have. I don't really recall, sir.
Q. You don't know if it was used regularly overany significant period of time?
A. I don'tthink it was unless it had another descriptive term, a code name or something that I'm missing the point here. You're using the chemical name, and I don't know, but I certainly was not the bug control expert.
Q. That wouldn't have been part of your portfolio as the leaf man?
A. No. No. It was research responsibility. There was one employee who literally did it all.
Q. I'm going to introduce as Hager-6 this memo.
A. March of '72.
(Exhibit Hager-6, marked for identification.)
Q. March 15, 1972, from John H. Hager to Dr. P. H. Leake, Dr. R. M. Irby, Jr., and Dr. E. C. Cogbill regarding a telephone conversation this morning with Mr. Robert K. Heimann.
Would you like to take a minute to look at this memo?
A. Yeah. If you want to ask me about it, that would be a good idea.
Q. Please.
A. All right, sir.
Q. Tell me about this memo, if you will. How this arose. Apparently you wrote it.
Correct?
A. Only 25 years ago.
Q. I was impressed that you remembered that fellow 28 years ago was a trainee. I thought you might remember this one.
A. I don't remember this memorandum specifically. It stands on its own merit. I mean, I don't, you know, suggest that it is a - followed a conversation with Mr. Heimann who was president and perhaps at that point chairman. I forget when Mr. Walker died; and the thing I see here and the thing that we always followed very closely is that no representative of this department was involved in this activity. And that we were not qualified to do medical or scientific, that type of research. We never did anything. We never got involved with it.
Q. If you wouldn't mind refreshing my recollection, when you -- what position you held at thetime you wrote this memo?
A. Research and development.
Q. Director?
A. Director. I think that's right. Yes.
That's correct.
Q. Thank you, sir. It appears that this memo that you wrote concerned a call you received from the president of the company?
A. That's correct. But he called every day. I don't think this was a special case.
Q. You were obviously close to the president?
A. Well, he liked to tell you to do a lot of things. Let's put it that way.
Q. He called you regarding hearings held in Washington by Senator Moss?
A. I don't even remember Senator Moss. Do you?
Q. There's some discussion here about allegations apparently that were leveled at -Pardon me for paraphrasing this -- that the Council for Tobacco Research had been set up as a, quote, unquote, front to protect the tobacco interests.
What's of interest -
A. Dr. Wynder implied that. I think that's what my statement here says.
Q. Thank you. What is of interest here, if you wouldn't mind reading this second paragraph into the record, please?
A. The second full paragraph?
Q. Yes.
A." Let merepeat:Biological and medical experimentation is outside of the scope of the Department of Research and Development of The American Tobacco Company. No emplo