February 10, 1998
STATE OF MINNESOTA
DISTRICT COURT COUNTY OF RAMSEY
SECOND JUDICIAL DISTRICT
File No. C1-94-8565
The State of Minnesota, by Hubert H. Humphrey, III, its attorney general, and Blue Cross and Blue Shield of Minnesota,
Plaintiffs,
vs.
Philip Morris Incorporated, R.J. Reynolds Tobacco Company, Brown & Williamson Tobacco Corporation, B.A.T. Industries P.L.C., Lorillard Tobacco Company, The American Tobacco Company, Liggett Group, Inc., The Council for Tobacco Research-U.S.A., Inc., and The Tobacco Institute, Inc.,
Defendants.
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THE CLERK: All rise. Ramsey County District Court is again in session, the Honorable Kenneth J. Fitzpatrick now presiding.
THE CLERK: Please be seated.
THE COURT: Mr. LeBow, I remind you that you're still under oath.
THE WITNESS: Okay. Yes, Your Honor.
THE COURT: All right, counsel.
MR. WEBER: Thank you, Your Honor.
Good morning, ladies and gentlemen.
BENNET LeBOW called as a witness, being previously sworn, was examined and testified as follows:
BY MR. WEBER:
Q. Good morning, Mr. LeBow.
A. Good morning.
Q. Just like Mr. Gill yesterday, you and I haven't met before; have we?
A. No.
Q. Let me introduce myself. My name is Bob Weber,
I represent Philip Morris in this case. I'm going to be asking you a series of questions, and just as Mr. Gill yesterday, if you don't understand a question, please let me know. And I'll try to ask you direct questions, as he did, and you try to give direct answers. Okay?
A. All right.
Q. Okay. Thank you.
Let me just start out so we understand where things are here. You have settled, that is, Liggett has settled its case with the state of Minnesota; correct?
A. That's correct.
Q. No dispute remaining between Liggett and the state.
A. That's correct.
Q. Haven't settled with Blue Cross?
A. That's correct.
Q. So you've settled with one of the clients of Mr. Ciresi and Mr. Gill, but not the other; correct?
A. Correct.
Q. Do you have any agreement or understanding of any type with respect to Blue Cross Blue Shield in this case?
A. No.
Q. So it's a real dispute. There's nothing phony about it.
A. That's correct.
Q. And you don't have any agreement to cooperate in any way with Blue Cross or its attorneys?
A. That's correct.
Q. Now sir, you arrived when in Minnesota for this case?
A. When did I arrive?
Q. Yeah.
A. Sunday night.
Q. And did you meet with any lawyers for the state or lawyers for Blue Cross since you've been here?
A. No.
Q. Now you hadn't met Mr. Gill before. Had you met any of the other lawyers from the state's law firm?
A. Yes, I met Mr. Ciresi before.
Q. When did you meet Mr. Ciresi?
A. Oh, I don't know. It was six months, nine months ago, something like that.
Q. And where was that?
A. In a law firm in --
Could have been earlier than that, I'm not sure exactly when. Could have been a year ago maybe. In a law firm in New York.
Q. Which firm was that, sir?
A. Firm of Millbank -- excuse me, Berschied --
Q. Milberg Weiss?
A. Milberg Weiss. I'm sorry.
Q. And that's a firm that has filed a number of suits against the tobacco company; is it not?
A. That's correct.
Q. And you were there with Ciresi and who else?
A. With my attorney, Mr. Kasowitz.
Q. And were there lawyers from Milberg Weiss there?
A. Yes.
Q. And what was the discussion at that meeting?
A. I think it was just discussing the general state of tobacco litigation at the time, the Minnesota case, Blue Cross case, some of Milberg Weiss's cases.
Q. And you were there with lawyers who were suing the tobacco company for the state -- tobacco companies for the state of Minnesota and the Milberg Weiss lawyers who were suing tobacco companies on behalf of other clients; correct?
A. Correct.
Q. And they were asking you for information and you were giving them information; correct?
A. I don't think they asked me for information. We were just exploring, you know, various settlement proposals. At the time I think -- again I'm not clear exactly when it was -- I think we were still negotiating with Minnesota at the time.
Q. Hadn't reached your final agreement yet as you recollect?
A. I'm not quite sure. I don't think so. I think it probably was before we reached a final agreement.
Q. Let me see if this helps you at all. Your final agreement with Minnesota was reached, I think, on March 20 of '97.
A. That's correct.
Q. Does that timeframe help you at all in placing this meeting, sir?
A. I believe we did meet before then, sometime before then.
Q. Have you had any conversations since that time with any of the lawyers from Mr. Ciresi's firm?
A. No.
Q. What --
Have your lawyers over the past few weeks, let's say, met with lawyers from the state or Blue Cross to discuss the scope of your testimony?
A. Not to my knowledge. I don't know.
Q. Have your lawyers told you anything about any discussions they've had with lawyers for the state or Blue Cross?
A. No.
Q. Did you get advance notice in any way of the questions you'd be asked yesterday by Mr. Gill?
A. Absolutely not.
Q. So there was no script or outline given to you with respect to the topics that would be inquired about?
A. Absolutely not.
MR. GILL: Your Honor, point of clarification. Is counsel seeking to treat this witness as an adverse witness with respect to these questions?
THE COURT: Okay. Are you considering this an adverse witness, counsel?
MR. WEBER: Yeah, I am, Your Honor. He's obviously met with the lawyers for the other side, he's settled with the state, and as I'll soon show, he's got an agreement to cooperate with lawyers for the state.
THE COURT: All right. Go ahead.
BY MR. WEBER:
Q. Now the documents you were shown yesterday by Mr. Gill, had you ever seen those documents before?
A. I believe I'd seen some during deposition by the state.
Q. Apart from a litigation context, had you ever seen those before?
A. Not to my knowledge, no.
Q. Now did Mr. Gill or anyone else tell you that those documents were representative of the 30 some million pages that have been produced to the state of Minnesota here?
A. No, he didn't tell me anything.
Q. And you didn't do an inquiry to determine whether those were representative or the not; did you, sir?
A. No, I did not.
Q. So you're not telling the jury from your perspective that those documents were representative of the other documents; are you?
A. Well we only saw five or six documents yesterday.
Q. So the answer to my question is no?
A. That's correct.
Q. Indeed, it's correct, is it not, Mr. LeBow, at the time you entered into your March 20, '97 agreement, you had not personally seen any documents relating to smoking and health from Liggett or any other company; correct?
A. I believe I'd seen some of the Liggett documents up to that point in time.
Q. You remember your deposition was taken in the Broin case this summer -- or last summer?
A. I remember a couple depositions, yes.
Q. Can you pull down your Broin '97 deposition. There should be a stack of depositions there, Mr. LeBow.
A. Volume one or two?
Q. Page 77 -- I think that's in volume one.
MR. GILL: Is there an exhibit number?
MR. WEBER: I'm sorry, the exhibit on that is AZ008018.
THE WITNESS: It's in the bound books or in --
MR. WEBER: In the ones you've got your hands on there, Mr. LeBow, Broin ' 97.
THE WITNESS: Volume one.
Q. And I'm going to ask you to turn to page 77. And tell me when you're at page 77.
A. Okay.
Q. And ask if you were --
And this deposition was taken in June of '97, was it not, sir? If you'd look on the front page.
A. The front page?
Q. Should be right on the front page.
A. Oh, yes. Okay.
Q. Okay. And turn to line 17 and let me ask you if you were asked this question and gave this answer.
"But your" --
"Question: But your statements with regard to what other tobacco companies have done or may have done or what Liggett had done or may have done are based upon what your lawyer, your current lawyers have told you and not based upon any personal review of any documents?
"Answer: That's correct."
A. In June '97 that was correct.
Q. Okay. And your settlement occurred before June of '97; correct?
A. That's correct.
Q. Now you took control of Liggett, as I think you told Mr. Gill yesterday, in 1986?
A. Correct.
Q. And I may have misunderstood you, Mr. LeBow, but I thought you said that Brooke owned --
Brooke is your top-tier company; correct?
A. Correct.
Q. And by that I mean it's -- it's the company that has some public shareholders including yourself.
A. Correct.
Q. And I thought you said yesterday that Brooke owned a hundred percent of Liggett.
A. That's correct.
Q. Okay. Has there been a change in the structure recently?
A. No.
Q. Last summer didn't Brooke own a hundred percent of a company BGLS, which in turn owned a hundred percent of Liggett?
A. Yeah, there's an intermediate company there, but everything is a hundred percent owned.
Q. Okay. So it's the same structure as it was last summer.
A. Right. Hasn't changed.
Q. So Brooke is on the top. That owns a hundred percent of the company called BGLS; correct?
A. Correct. Correct.
Q. Then BGLS owns a hundred percent of the stock of Liggett.
A. Correct.
Q. Now regardless of how that structure is, you are the person who ultimately controls Liggett; correct?
A. Correct.
Q. And you've got the power to make and change Liggett policy; do you not, sir?
A. Correct.
Q. Indeed, when you signed this settlement agreement in March of 1997, you did that even without getting a formal board approval from the Liggett board; did you not?
A. That's correct.
Q. Or a formal board approval from the Brooke board; correct?
A. No, we got approval from the Brooke board.
Q. Before the settlement?
A. Either before or during the time. They were fully informed.
Q. But at least the --
They were informed, but there hadn't been a formal resolution; had there?
A. I don't recall.
Q. Could you turn to tab seven if you would, sir. It's in the first book on your left, I think the book Mr. Gill gave you yesterday.
A. Oh.
Q. Okay?
A. Uh-huh.
Q. And I think, if I looked at that correctly this morning, that should turn you to what's labeled Exhibit 2389?
A. Correct.
Q. Now that's a copy of your agreement dated March 20, 1997, with, among others, the state of Minnesota; is it not?
A. It appears to be.
Q. Take a quick look at it. I think you'll see that it's a conformed copy; correct?
A. I guess. I don't know.
Q. It doesn't have actual signatures, it has typed-in signatures. That's what I mean by "conformed."
A. Okay. Go ahead.
Q. Okay? So this appears to you to be the agreement, a copy of the agreement you signed with the state of Minnesota; correct?
A. Appears to be, yes.
MR. WEBER: Your Honor, I'd move the introduction of what's marked as Plaintiffs' Exhibit 2389.
MR. STRICKER: Your Honor, Liggett objects. This is not a copy of the agreement, it is something that was pulled off the Internet. I believe defense counsel had designated actual copies of the agreement, which we have no objection to.
MR. WEBER: Okay.
THE COURT: Do you have a copy?
MR. WEBER: I've got another copy. I used this one simply because it was the one the state marked; I thought it would be easier. But I've got another copy.
Q. Would you go to binder one up there, Mr. LeBow, and look at the exhibit number that ends with 8005, please, sir. If you have a hard time finding it --
A. Yes, I have.
Q. You've got it?
A. Yes.
Q. Is that an actual copy of the agreement you signed, March 20, 1997 with, --
A. Yes.
Q. -- among others, the state of Minnesota?
A. Yes. It appears to be, yes.
Q. Sometimes, Mr. LeBow, my questions go a little longer than you expect.
A. Okay. I'm sorry.
Q. I'm going to do my very best not to cut you off, but just for the record, let me get it out. Okay?
A. Okay.
Q. So that is a true and correct copy of the agreement you signed with, among others, the state of Minnesota in March of '97.
A. It appears to be, yes.
MR. WEBER: Okay. Your Honor, I'd move into evidence Exhibit AZ008005.
MR. STRICKER: No objection, Your Honor.
MR. GILL: No objection, Your Honor.
BY MR. WEBER:
Q. Now that's the agreement, is it not, by which all of the claims the state of Minnesota had against Liggett were settled?
A. I believe it's all the Medicaid claims.
Q. Right. All of the claims that were involved in this litigation got settled pursuant to that agreement.
A. By the state of Minnesota, that's correct.
Q. Turn to section six of that agreement, if you would, Mr. LeBow. It's a section labeled "Settlement Fund," if you would.
A. Yes.
Q. And I'd like you to go down to section 6.3.1. It's about halfway down the page. Do you see that, sir?
A. Yes.
Q. And starting in section 6.3, that discusses the payments that Liggett is to make pursuant to that settlement; correct?
A. Correct.
Q. And those payments were to be made to the entire group of attorneys general with whom Liggett settled at that time; correct?
A. That's correct.
Q. Not just to Minnesota, but to all the other signatories; correct?
A. Correct.
Q. Now let's start with section 6.1. Says Liggett will make the following payments; correct?
A. Correct.
Q. Then 6.3.1 says "An initial payment of 25 million due 120 days from the date of a Future Affiliate Transaction;" correct?
A. Correct.
Q. Now there has --
We'll talk about those later, but just for now, there has been no future affiliate transaction; has there, sir?
A. That's correct.
Q. So no payment pursuant to 6.3.1.
A. Correct.
Q. Now 6.3.2 then says that Liggett will make annual payments to this entire group of attorneys general equivalent to 25 percent of its pretax income. Do you see that?
A. Yes.
Q. All right. Now has Liggett made any payments pursuant to that provision yet?
A. Not yet. It's not due yet.
Q. Okay. Now at the time this agreement was signed in March of '97, the most recently completed fiscal year for Liggett had been 1996; correct?
A. Correct.
Q. Now in 1996 Liggett had no pretax income; correct?
A. Correct.
Q. Liggett had lost money.
A. That's correct.
Q. So if the formula applied to the 1996 year, there would have been no payment due at all; correct?
A. That's correct.
Q. Now what was Liggett's pretax income in 1997, sir?
A. It's not finished yet. I don't know exactly yet.
Q. It's going to be negative again; isn't it?
A. I don't think so.
Q. It was negative at the end of the third quarter; wasn't it? About 16 million, a little bit worse than last year?
A. I don't recall.
Q. But you cant tell the jury today that Liggett has any pretax income for '97; can you?
A. It's going to be approximately -- approximately zero; maybe plus a little bit, maybe minus a little bit. I don't know yet. The books aren't closed yet.
Q. So to the best of your knowledge, there will be no payment due this year under 6.3.2 either; correct?
A. I can't say that yet.
Q. You can't say there will, you can't say there won't.
A. No, because the books aren't closed. And there was a big price increase last quarter, so there were -- there was profits last quarter.
Q. But with respect to what you know now as the person ultimately in control of Liggett and Brooke, you can't say one way or the other whether -- whether there will be pretax income for '97 or not.
A. I don't know that.
MR. GILL: Asked and answered, Your Honor.
THE COURT: It's been asked and answered.
Q. If there is pretax income, it's likely to be quite small. As you say, could be near zero; correct?
A. Correct.
Q. So that whatever payments there might be would be minimal, 25 percent of a quite small income; correct?
A. Correct.
Q. So that as of right now, in return for getting the dismissal of all the charges against Liggett, Liggett hasn't paid the state of Minnesota a penny; correct?
A. Correct.
Q. Now as of March '97 when Liggett signed its agreement with the state of Minnesota, Liggett itself had a net capital deficiency of about 150 million dollars; didn't it?
A. It had a negative net -- tangible net worth, like all the other tobacco companies have also.
Q. It had a net --
Liggett had a net capital deficiency of about 150 million; didn't it?
A. It's called a negative tangible net worth, and all the other tobacco companies have the same thing.
Q. Okay. You understand I'm asking about Liggett now, though.
A. Yes.
Q. Okay.
A. The answer is yes to that.
Q. And it was about 150 million dollars?
A. Correct.
Q. Can you explain to the jury, when you say "negative net worth," that means that on the books there are more liabilities than assets; correct?
A. That's correct, as we do not carry any good will on our books -- or very little good will. All the other tobacco companies carry substantial good will.
Q. Now let's talk about Brooke for a minute.
At the time you signed your agreement in March of '97, Brooke, too, had a negative -- a net capital deficit; did it not?
A. That's correct. Same thing applies to Brooke.
Q. And Brooke's net capital deficiency was larger, though; wasn't it?
MR. GILL: Your Honor, objection, relevance as to Brooke.
THE COURT: Sustained.
Q. The survival of Liggett as of March '97 depended on your ability to negotiate with the lender to either adjust or extend due dates of some debt; did it not?
A. When, March of '97?
Q. Right.
A. No, it did not at that time.
Q. You had payments coming due in January '98; did you not?
A. Well it depended upon it in January '98, not in March '97.
Q. But you knew in March '97 that something had to be done to adjust or extend that date -- that debt; correct?
A. In January of '98 something had to be done, yes.
Q. And if I'm correct, Mr. LeBow, in both 1992 and 1993 Liggett and its auditors had expressed questions -- strike that -- Brooke and its auditors had expressed questions in Brooke's reporting forms to the Securities and Exchange Commission about whether or not Brooke could continue as a going concern; correct?
A. I'm not sure of your years. I think your years are wrong. I believe your years are incorrect.
Q. Okay. Let me come back to that in a minute.
At least as of March '97, you knew the market share of Liggett had been declining for the last decade; correct?
A. Declining for a long time.
Q. For the last decade; correct?
A. Not that much.
Q. Could you pull down your deposition in -- I think it's labeled RJRC,
it's one of the ones lying horizontally there, and it -- that's AZ008091.
A. Yes.
Q. And could you turn to page 102.
A. I've got it.
Q. And ask you -- turn to line 17 and ask you do you remember being asked the following question and giving the following answer.
"And in terms of Liggett's market share, Liggett's market share has been declining for the last decade; is that correct?
"Answer: That's correct."
A. That's correct.
Q. That was the question and answer you gave in -- in that case; correct?
A. Correct. The market share went from three percent down to two percent up to March of '96, and then dramatically, since we settled the first settlement in March of '96, it has dramatically climbed over that. So yes, over 10 years it was a one percent decline.
Q. But it has declined over the last decade; right?
A. Yeah. One percent it's declined over the past 10 years.
Q. And what's your market share total?
A. About 1.5 percent.
Q. Now the decline accelerated, did it not, after your settlement?
A. Yes.
Q. Even before your new warnings went on?
A. Yes.
Q. And there's no evidence you know of that your market-share decline is going to turn around soon; is there, Mr. LeBow?
A. Not that I'm aware of right now, no.
Q. Okay. We can take that off.
Now you were aware that the attorney generals with whom you were negotiating in early '97 knew that Liggett was in difficult financial circumstances; correct?
A. That's public knowledge. Has been for quite a while.
Q. And it was obvious to you as the man in charge of Brooke and Liggett that Liggett's promise to pay money to the attorney generals wasn't the prime motivation for them to settle with you; correct?
A. Correct.
Q. Indeed, there's an express provision in the agreement in which Liggett says it doesn't guarantee that there will ever be any earnings to fund the settlement; correct?
A. I don't know. Where is that?
Q. Could you turn to 6.2 of the agreement, Mr. LeBow.
A. Yes.
Q. And doesn't that say, "Settling Defendants" --
That's a reference to Brooke and Liggett; correct? That's the defined term.
A. Yes. Yes.
Q. Okay. And doesn't it say in the second line they do not guarantee any earnings?
A. You're not reading it right. Do not guarantee any earnings against -- of the settlement fund, not from Liggett. You're reading it totally incorrect.
Q. Okay. Let me -- let me go on then.
A. Okay. Thank you.
Q. But you didn't guarantee any earnings in the agreement; did you?
A. No, no specific guarantee. It wasn't guaranteed either way.
Q. Now the financial terms in this agreement, such as they are, were terms that were necessary for Liggett to survive; correct?
A. Yes. We could not -- we could not afford to -- to have a major judgment against us. We're not Philip Morris or RJR. We could not pay a judgment if a major judgment came against us financially, yes.
Q. Now yesterday you and Mr. Gill discussed putting all the cards on the table. Do you remember that?
A. I remember his words, yes.
Q. And you agreed that that's what you were doing, is putting the cards on the table; correct?
A. Yes.
Q. The fact of the matter is you actually held a few cards back; didn't you, Mr. LeBow?
A. Which cards are those?
Q. For example, state of Minnesota hasn't gotten money yet, but it got some promises from you and from Brooke and Liggett; didn't it?
A. That's not holding a card back.
Q. Did you tell the jury yesterday that you not only settled with the state, that you had contractually promised to assist the attorney generals and their lawyers in their lawsuits against these companies?
A. We -- we agreed to release all of our documents and to testify if requested, and that's what we're doing.
Q. Did you tell the jury yesterday that in this agreement there were cooperation provisions that required you to cooperate with the plaintiffs and their attorneys in this case?
MR. STRICKER: Objection, Your Honor, the transcript speaks for itself. And it's asked and answered.
THE COURT: Okay. It's been asked and answered.
Q. Turn to --
Let me ask you this: A contractual promise to cooperate with the lawyers and the parties, that's an important fact; isn't it?
A. I think it's -- well, you know, yeah. Yes, it's an important fact. I'm happy we're doing this.
Q. And that's an important fact for a fact finder to know with respect to testimony, isn't it, that there's a contractual promise to help one party?
A. What is a fact finder, please?
Q. The jury.
A. Oh.
Q. Indeed, if you were a fact finder and you wanted to evaluate someone's testimony, you'd want to know whether they got a contractual promise to cooperate with one party in the lawsuit; wouldn't you?
A. We had a contractual promise to supply all of our documents, release all of our privileges and to testify if requested, and that's what we're doing.
Q. Let me turn you, if I could, Mr. LeBow --
Well let me ask for an answer to that question. That's an important fact for the fact finder to know; isn't it?
A. Yes. In that context, yes.
Q. Now turn to agreement -- the same agreement we've been dealing with, right at the beginning in one of the whereas clauses labeled E.
Did you find that, sir?
A. Yes, I have it.
Q. Could you read E. To the jury?
A. "The Attorneys General acknowledge and agree that this Settlement Agreement, including the cooperation provisions thereof, are important to the prosecution of their Actions against the non-settling Defendants."
MR. STRICKER: Your Honor, if I could just object that what's shown on the overhead could please be the exhibit rather than this copy off the Internet.
THE COURT: Do you have the exhibit that you can --
MR. WEBER: Yeah, I've got another copy of it, Your Honor.
BY MR. WEBER:
Q. Now, this agreement was personally signed by you and by Attorney General Humphrey; correct?
A. Correct.
Q. And pursuant to paragraph E., Attorney General Humphrey was acknowledging that your cooperation, that is, Liggett's cooperation, was important to his action against the rest of the defendants here; correct?
MR. GILL: Asked and answered, Your Honor.
THE COURT: It's been asked and answered.
Q. Now the agreement has numerous other provisions requiring you to cooperate with the lawyers for the state; does it not, Mr. LeBow?
A. In what sense?
Q. Well, let's -- let's turn to 4.3.1. May take me an extra second if we're working off the other copy.
Okay. Could you -- do you have 4.3.1, Mr. LeBow?
A. Yes, I do.
Q. Okay. And that says that each settling defendant -- and that's Liggett and Brooke; correct?
A. Correct.
Q. That says that they will cooperate with the Attorney General and the attorneys representing the Attorney General; correct?
A. Correct.
Q. Okay. Could you turn to 4.3.1(3), which is two paragraphs down.
A. Yes.
Q. And that's in the middle there. That says that you've agreed to actively assist the attorneys representing the attorneys general in locating witnesses and et cetera; correct?
A. Correct.
Q. And you shall -- down here at the end, Mr. LeBow -- shall actively assist counsel in interpreting documents relating to litigation. You see that?
A. Yes.
Q. And that's what you were doing here yesterday on the stand; weren't you, actively assisting counsel --
MR. GILL: Objection, Your Honor, argumentative.
MR. WEBER: I'm sorry. Can I get the question in?
MR. GILL: I'm sorry.
THE COURT: Finish your question.
MR. WEBER: I'm sorry, Your Honor. I didn't mean to interrupt him.
Q. The question is: That's what you were doing here yesterday, Mr. LeBow, isn't it, actively assisting counsel in interpreting documents?
MR. GILL: Objection, argumentative, Your Honor.
THE COURT: No, you may answer that.
A. I think any witness on the stand is doing that. I don't see anything special that's being done there. I was just reading the documents and -- and giving my personal opinion on them.
Q. Well let's turn to 4.3.2.(3), Mr. LeBow.
A. That's the same place you are now; right?
Q. No, that was 4.3.1(3). This is 4. --
A. Okay.
Q. You with me?
A. Yes.
Q. It starts out "offer their employees...."
A. Yeah, I have it.
Q. Okay. And it talks about offer employees to testify in deposition, at trial; correct?
A. Correct.
Q. And you've come here voluntarily at the request of the state; have you not, sir?
A. That's correct.
Q. And indeed initially you said you couldn't be here until Tuesday and you wouldn't testify until then, but the state wanted you Monday and you came here yesterday; correct?
MR. GILL: Your Honor, objection. I ask that the jury be instructed that this is pursuant to a court order that Mr. LeBow is here.
THE COURT: All right. Gentlemen, I do not abide by two people arising at the same time. You're going to have to organize your objections. One person may stand and state his objection.
MR. WEBER: I'll withdraw -- I'm sorry, Your Honor. If it helps, I'll just withdraw the question and I'll move on.
THE COURT: It will help. Otherwise I'll have to ask for the objection again.
BY MR. WEBER:
Q. Now was it part of your cooperation agreement that you agreed with almost every single question Mr. Gill asked you yesterday?
A. Absolutely not.
Q. You believe you have fully cooperated with the attorneys general and their lawyers pursuant to the agreement; correct?
A. As I say, we waived our attorney-client privilege, we released all of our documents, and I've been here, you know, appearing as a witness.
Q. And you believe you've fully cooperated, correct?
A. As of right now, yes.
Q. As a matter of fact, this agreement even creates an oversight committee by the attorney generals to make sure you are cooperating; correct?
A. I think it calls for that at some point in time, yes.
Q. Let me go to section 4.1 of the agreement now, if I could, Mr. LeBow. If you could turn that --
I'm sorry I can't give you the page, because we're working off of two different copies.
A. Yes, I have it.
Q. Do you have 4.1?
Now another part of the agreement was that the attorneys general demanded that you, Bennett LeBow, personally make a statement; correct?
A. Correct.
Q. Not Liggett or Brooke, but you, Bennett LeBow.
A. Either way.
Q. Well it was a personal statement by Bennett LeBow; correct?
A. On behalf of myself and on behalf of Liggett and Brooke.
Q. And as a matter of fact, it was written right in the agreement with the language about "I, Bennett LeBow;" correct?
A. Correct.
Q. And that was a negotiated statement; correct?
A. The lawyers negotiated some of the words, yes.
Q. There were several drafts of that at least; correct?
A. I wasn't aware of that. I don't know.
Q. Had you ever negotiated a personal statement that you were going to make before?
A. Not that I recall.
Q. Now during these negotiations, to your knowledge, there was nothing they asked you to say, no statement they required that you didn't agree to say; isn't that true?
A. That's absolutely true.
Q. You did insist on the insertion of one sentence in there, did you not, and that's the sentence that says, "I personally am not a scientist?" Do you see that?
A. I don't know if I insisted upon that or my lawyers insisted upon that.
Q. But that was from a request from your side.
A. From our side, I believe so, yes. I'm not sure of that, I'm not sure. It could have been from the other side too. I don't recall.
Q. Turn to --
See if this refreshes your recollection. Turn to your 1997 deposition in the Broin case at page 93, if you would, please.
MR. WEBER: And I'm sorry, Dick, do you have the exhibit number? I --
MR. GILL: Which one is it again?
MR. WEBER: It's 8018, 8018.
Q. And it's page 93 starting at line 15. And let me ask you if you were asked this question and gave this answer.
"And so you asked for the insertion of the language, quote, I personally am not a scientist, period, unquote.
"Answer: Yes." Obviously I can't give expert opinions in these types of things."
Correct?
A. Correct.
Q. And you didn't mean in this statement in section 4.1 to speak as an expert; did you, Mr. LeBow?
A. I'm not a scientist as I've said many times.
Q. And you didn't mean to speak to the jury yesterday as an expert on any matter of science; did you?
A. Not as an expert in science. As a, you know, CEO and owner of a tobacco company I did.
Q. And your opinions on matters of science are just that, your personal opinions as a layman; correct?
A. Obviously.
Q. And everybody's got those; correct?
A. Everyone has their own opinion, yes.
Q. Now let's go to the second sentence of section 4.1, which is this negotiated statement we've been talking about, and that's the one that says, "Cigarettes were identified as a cause of lung cancer and other diseases as early as 1950." Do you see that, sir?
A. Yes.
Q. Now you didn't know that at the time you signed this agreement, did you, that they were identified as a cause of lung cancer as early as 1950?
A. I was told that by my attorneys, yes.
Q. Right. You were told that at the time; correct?
A. Yes.
Q. And that was --
You were given that information by your attorneys.
A. Well, and I read it in the populace press in cases like this.
Q. But I mean you have stated before, have you not, Mr. LeBow, that this statement about 1950 was information you got at the time of the negotiations?
A. Or before. They were during the negotiations, yes.
Q. Now, you don't personally know that statement is true; do you?
A. Well I saw some documents yesterday which kind of, you know, indicate it's true.
Q. You don't --
You didn't look at the scientific literature to see what was out there; did you, Mr. LeBow?
A. No, I'm not a scientist. I didn't look.
Q. And your lawyers aren't scientists or doctors; are they?
A. Not to my knowledge.
Q. Let's go to the third sentence now, if you could, please. That's the one that begins --
Well actually one, two, three, four, let's go to the fourth sentence. "But, like all of you, I am aware of the many reports concerning the ill-effects of cigarette smoking." Do you see that, sir?
A. Yes.
Q. And you didn't need your lawyers to tell you that fact, did you, that the public had long been aware of the ill-effects of cigarette smoking?
A. No.
Q. Indeed, you spoke to us yesterday about your knowledge on the 1964 Surgeon General's report; correct?
A. I don't recall yesterday --
Q. Okay.
A. -- exactly what I said.
Q. Well let me see if this -- this me minds you. You said that one of the things that was in your mind when you decided to quit smoking had been the publicity associated with the 1964 Surgeon General's report; correct?
A. That's correct.
Q. And when the 1964 Surgeon General's report came out, Mr. LeBow, that wasn't the first time you as an individual had heard that smoking might carry health risks; correct?
A. In 1964?
Q. Right.
A. I don't recall back 30 years.
Q. You don't?
A. No.
Q. Okay.
A. Exactly.
Q. Okay. Now --
And it's also true, is it not, with respect to the knowledge of the ill- effects of cigarette smoking, that the warnings have been on the packs since 1966. You know that; don't you, sir?
A. Some of the warnings have been, yes.
Q. Except for your agreed-upon warning; correct?
A. Except for the addiction warning.
Q. Now let me go to the next sentence which begins, "We at Liggett...." Do you see that, sir?
A. Yes.
Q. Now again, this is a statement you agreed to make; correct?
A. Correct.
Q. That was negotiated with the attorneys general; correct?
A. Correct.
Q. Now when you said "We at Liggett," and that sentence goes on to say acknowledge that smoking can cause disease, but when you said "We at Liggett," when you made that statement, you had never checked with any scientist at Liggett about what their advice or opinion might be on that very issue; had you, sir?
A. That's correct. I don't think we have any scientists, as you know, currently.
Q. Now --
But you didn't check; did you?
A. No, I did not check.
Q. So clearly when you said on March 20, 1997, "We at Liggett," what you were talking about was I, Bennett LeBow; correct?
A. No, my lawyers had -- had advised me that Liggett documents, you know, supported these statements, that given that -- that information I support what they said.
Q. So it was based on what you believed and what your lawyers told you.
A. From the documents that they had reviewed over a period of six months, yes.
Q. And you hadn't reviewed those documents.
A. I had not personally reviewed the documents, no.
Q. Now it goes on to say that -- in that same sentence about we at Liggett acknowledge that smoking causes certain health problems; correct?
A. Yes.
Q. Now as you said yesterday, you had been aware prior to this time about Liggett's prior position which had been that smoking was a statistical risk factor, not a proven cause of disease; correct?
A. From the previous attorneys I'd been aware of that, yes.
Q. And hadn't you been generally just aware of that from your management of the company over the years, that the position was that smoking was a statistically associated risk factor, not a proven cause?
A. Again, principally from the attorneys, not the management per se.
Q. But you clearly knew that at the time.
A. Oh, yes. That was the industry position at the time.
Q. Now isn't it true that when you agreed in this negotiation to say "cause" and include the word "cause" in that sentence, you didn't even know what the difference between a risk factor and a cause was? Isn't that true?
A. As I said before, I'm not a scientist.
Q. So the answer to my question is no, you didn't know the difference; did you?
A. The scientific difference? No.
Q. And furthermore, you didn't really believe that this statement was inconsistent with prior statements Liggett had made to the effect that smoking had not been proven to be a cause of cancer; did you?
A. I -- I think this is totally inconsistent.
Q. Totally inconsistent?
A. Yes. We acknowledge it, that it is a cause.
Q. Would you turn to your 1997 deposition in the Broin case, that's 018, Dick. And turn to page, if you would, please, 199.
A. Which deposition is this now?
Q. The '97.
A. '97 Broin?
Q. '97 Broin, page 197. That one is in two volumes, Mr. LeBow.
MR. WEBER: May I approach, Your Honor?
THE COURT: Yes.
A. I only have one --
Oh, here it is.
Q. No, no, no, right -- it's right down at the bottom.
A. Oh, I'm sorry.
Q. Okay? Excuse me.
199, start at line four and let me ask if you were asked this question and gave this answer .
"In response to a question of whether cigarette smoking causes lung cancer in human beings, Liggett said that, quote: Cigarette smoking and a number of other factors are statistically associated with lung cancer. Liggett further states that it has not been scientifically established that cigarette smoking causes lung cancer. Liggett first became aware of the reported statistical association between cigarette smoking and lung cancer when studies reporting the association became public." Question: "Do you see that?
"Answer: I see it.
"That statement, do you interpret that statement as inconsistent with the statement you made pursuant to section 4.1 of the Attorney General's agreement?
"Answer: No, I do not."
And that's the question you were asked and the answer you gave; correct?
A. This was --
Q. Mr. LeBow, could you answer that?
A. You got to look at -- at a point in time.
Q. Can you answer my question?
A. That's what it says here, yes.
Q. Okay. Now sir, let me turn you to the next section in 4.1 where you -- we'll go right down, it also --
That last sentence, it talks about "We at Liggett," and it went on to say that nicotine is addictive; correct, sir?
A. Correct.
Q. And again, with respect to the "We at Liggett," you hadn't checked with any scientist at Liggett about this at the time you made that statement; correct?
A. Again, it came from my attorneys, not from checking with scientists that we don't have, so I had no scientist to check with.
Q. Okay. So the answer is no.
A. No.
Q. As a matter of fact, at that time you hadn't checked with any other scientist; had you, Mr. LeBow?
A. No.
MR. GILL: Asked and answered, Your Honor.
MR. WEBER: This was any other, not just the Liggett.
THE COURT: Okay. Why don't you let me rule on the objection, --
MR. WEBER: Okay.
THE COURT: -- counsel.
Overruled.
A. The answer is no.
Q. Okay. Thank you, Mr. LeBow.
MR. WEBER: And I'm sorry for interrupting, Your Honor.
Q. Now we're going to discuss later, Mr. LeBow, your prior testimony in 1993 when you testified that smoking wasn't addictive, but I -- I don't want to focus on that now, I just want to stay on this 4.1. All right, sir?
A. Okay.
Q. And -- and some other issues.
Now your wife and your daughters smoke; do they not?
A. My wife currently smokes.
Q. And have your daughters quit since 1993?
A. One daughter has.
Q. And as of 1993, when you were deposed in the Broin case, your wife and your daughters were smokers; correct?
A. Correct.
Q. And at that time you said that you had never urged them to quit because they were adults and they make their own decisions; correct, sir?
A. Correct.
Q. And now you yourself had quit; had you not?
A. Thirty years ago, yes.
Q. And did you consider yourself addicted?
A. No, not too addicted. But it did take me six to eight weeks to withdraw the symptoms.
Q. So you were somewhat addicted?
A. I don't know the definition of "somewhat addicted" or unaddicted.
Q. That's what I'm trying to find out. Did you think you were addicted or not?
A. It was -- it was difficult for six to eight weeks to withdraw, yes.
Q. Does that mean you were addicted?
A. Again, I'm not a scientist.
Q. Whatever that definition was, you were able to make the decision to quit; correct?
A. It was difficult, but I did it, yes.
Q. And whether we call it addiction or dependence or habit or whatever, you made a decision to quit and you quit.
A. Over a tough period of six to eight weeks.
Q. And you know that some 40 million Americans have quit smoking; don't you?
A. And I know 30 million Americans have not quit smoking.
Q. Okay. As a matter of fact, there are more people who have quit smoking than those who currently smoke; correct?
A. I don't know the details.
Q. Now you don't know -- as a matter of fact, let me strike that.
You have no idea, do you, Mr. LeBow, as to what differences there may be between the Surgeon General's definition of addiction and habit in 1964 and the definition later adopted in 1988?
A. No. Again, I'm not a scientist.
Q. You have no idea how the term "addiction" differs from the term "dependence" or "dependency;" do you, sir?
A. Again, I'm not a scientist.
Q. You have no idea how the term "addiction" differs from the term "habit;" do you, Mr. LeBow?
A. Again, I'm not a scientist.
Q. So, when you made this statement in section 4.1 about nicotine being addictive, you weren't drawing a distinction between addiction or dependence or habit; were you, sir?
A. This was coming pretty much from my -- my own personal feeling, which I think is very strong about addiction, and again I look at my wife as -- as an example and what the attorneys had -- after reviewing many documents, the Liggett documents and privileged documents, were advising me.
Q. My question, sir, is: When you made this statement in section 4.1, you weren't drawing a distinction between the terms addiction, dependence or habit; were you?
MR. GILL: Asked and answered, Your Honor.
THE COURT: It's been asked and answered.
Q. Mr. LeBow, could I return you to your '97 deposition in Broin. I think this is volume one, page 142.
MR. WEBER: Do you have the number on that?
MR. GILL: Is this different than --
MR. WEBER: No, it's the same -- same one so far.
Could you bring that up for me? I just want beginning on line eight because he's answered the other one.
Q. Ask if you remember being asked this question and giving this answer.
"So in making this statement at paragraph 4.1 of the settlement agreement in which you said you were not a scientist but in which you made your assertions with regard to addiction, you were not drawing a distinction necessarily between addiction, dependency and habit because you don't know the distinctions between those words; isn't that correct?"
There was an objection.
You went on to say, "No, I don't know the legal or scientific definitions of those three.
"Question: So you weren't making, you couldn't make a distinction of that kind because you didn't know what the distinction was?
"Answer: Again, I'm not a scientist, I can't."
MR. STRICKER: Objection.
Q. You remember being asked those questions and giving those answers; correct?
MR. STRICKER: Objection, asked and answered.
THE COURT: Well it's been asked and answered, but I don't see where it's proper impeachment.
MR. WEBER: Okay. I'll move on.
Q. Now let's go to the next page of the agreement -- I'm not sure it's the next page on the version you have, Mr. LeBow -- and go to paragraph two. This is still in section 4.1, and this is the section in which you agreed to put a smoking is addictive label on your product; correct?
A. Correct.
Q. And you stated yesterday yesterday that that's on all your packs of L&M, Chesterfield, Lark, Eve, et cetera; correct?
A. Correct.
Q. Now Liggett makes a couple hundred private-label brands as well, doesn't it?
A. Yes.
Q. And I assume that's on all of those packs also?
A. It's on most -- all of them except for ones -- I believe the ones we make under contract from certain customers. But it's their -- it's their packs, not our packs.
Q. So that Liggett is currently making and selling cigarettes on which this warning doesn't appear; correct?
A. I believe so, but I'm not absolutely sure. There are some customers where they own the brand, it's their brand, we don't have any control over it. But we do what's called contract manufacturing. It's not -- we're not selling the brand, we're doing merely the contract manufacturing.
Q. So -- and I --
I think over 50 percent of Liggett's business is in private-label brands; correct?
A. Yeah, but not contract manufacture.
Q. So --
Well let's talk about the private-label brands first, then we'll talk about the contract ones. Okay?
A. Okay.
Q. With respect to private label, are all of those carrying your smoking is addictive label now?
A. They're supposed to, best of my knowledge.
Q. Okay. But you still are making and selling some cigarettes pursuant to contract in which you don't put the smoking is addictive label on it; is that --
A. No.
Q. Am I correct, sir?
A. No.
Q. Okay. Could --
THE COURT: Counsel, --
A. -- you explain --
THE COURT: -- excuse me. I don't mean to interrupt, but you'll have to conduct your questioning at the podium.
MR. WEBER: I'm sorry. I'm sorry, Your Honor.
THE COURT: Okay.
Q. There are some contract brands that Liggett makes and sells that currently don't carry the label. Did I understand you correctly?
A. We don't sell, we make under contract from other people who sell them.
Q. Well you don't give them away; do you?
A. We sell them to that -- to that -- that manufacturer, additional OEM, it's called an OEM supplier under his contract directly.
Q. So it's --
A. It's his brands, he owns them. Under his direction we do manufacture some cigarettes.
Q. Okay. So you sell them these --
What can we call these, just so you and I are communicating? Contract cigarettes?
A. Contract --
Q. Or what -- what -- what term is -- is best for you?
MR. GILL: Your Honor, object to this line of questioning. It's collateral.
THE COURT: No. You may answer it.
A. Contract manufacture.
Q. Contract manufacture cigarettes?
A. Yes.
Q. Okay. I'll -- I'll try to state on that to make sure we're focused on those.
With respect to these contract manufacture cigarettes, you don't give them away, you sell them; right?
A. To the contract manufacturer, yes.
Q. Okay. And when you sell them, they're completely-made cigarettes, you're not selling just tobacco; correct?
A. Correct.
Q. And when you sell them, they're in packs; correct?
A. Yes.
Q. And they're in cartons; correct?
A. Yes.
Q. So when they're leaving your facility, these cigarettes are wrapped in a pack of cellophane and they're in a carton; right?
A. Correct.
Q. And then they're in big boxes; right?
A. Correct.
Q. Thousands of cigarettes; correct?
A. Correct.
Q. Am I correct, sir?
A. That's correct.
Q. And now none of those carry the smoking is addictive labels; correct?
A. I believe that's correct. I'm not a hundred percent sure.
Q. Do you think there's something different about those cigarettes than the other cigarettes you put the labels on?
A. No.
Q. You didn't tell the jury yesterday that you were still making cigarettes without putting the label on it; did you, sir?
MR. GILL: Beyond the scope, Your Honor.
THE COURT: No, you may answer that.
A. No.
Q. Now the statements you made in section 4.1 about cause and addiction --
it's the prior page. Do we have that here? Here we go. These --
This is the negotiated statement we were talking about, Mr. LeBow?
A. Yes.
Q. You had never made any of those statements publicly until they were negotiated in this settlement; correct?
A. Correct.
Q. Now let me go to section 4.1.4, Mr. LeBow. Do you see that?
A. Yes.
Q. Now that starts out, "Liggett has instructed its advertising people," et cetera, do you see that?
A. Yes.
Q. You hadn't done that at the time you signed this agreement; had you?
A. Hadn't done what?
Q. Instructed your advertising people of anything. Had you?
A. We have very few advertising people.
Q. As a matter of fact, you didn't even know you had any at that time; correct?
A. That's correct.
Q. So when you say you instructed your advertising people, that wasn't true; was it?
A. Well they --
Technically we have some advertising. Very small advertising. What it is exactly, I don't know.
Q. You don't even know what it is.
A. No.
Q. And you wouldn't even know who to instruct.
A. No. I instructed the chairman or the president of Liggett to instruct -- through him instructing advertising people. Don't be technical with me.
Q. The fact is at the time you didn't even know if you had any advertising people; correct?
A. I was not totally informed, no.
Q. I'm sorry, I --
A. No, I did not know exactly what the advertising is. I don't know today.
Q. You hadn't --
And you've testified that you hadn't advertised -- that Liggett hadn't advertised for years; correct?
A. No, we had done some advertising. I think in the Eve area we'd advertised.
Q. That was back in the '91-'92 period; correct?
A. No, not true. I think later than that.
Q. You had authorized a major advertising campaign for Eve back in the ' 91-'92 period. Do you remember that?
A. No, I did not authorize anything. We had -- Liggett had its own management. They -- they pursued that.
Q. Didn't you decide to invest in a substantial advertising campaign of some 30, 40 million dollars back in the early '90s with respect to Chesterfield, Eve and other brands?
A. The management of Liggett did do that, yes.
Q. You didn't make that decision?
A. No. The management of Liggett, you know, recommended it and they did it.
Q. And you're certain about that.
A. Yes.
Q. Okay. Can you turn to page -- your 1993 Broin deposition, page 51, sir. At least I think it's page 51. Do we have that?
MR. WEBER: And that, Dick, that's 8010.
Bring that down a little bit so we can see it.
Q. Let's start at about line 15 where you start talking about some of the problems in the business. Do you remember this series of questions and answers?
"What are the problems?"
"Question: What are the problems?
"A couple of years ago, we decided to spend a lot of money in advertising on various brands, change the focus of the company, marketing focus.
"Question: What had the marketing focus been before?
"Answer: It had been just none, really.
"Question: It was basically very little advertising?
"Answer: Very little.
"So who made that -- did you make that decision?
"Answer: Yes."
That's what you testified to in '93; wasn't it?
A. If you read it --
That's what I testified. But if you read it correctly you'll see that we decided, "we" meaning the management of Liggett, who were running the company, and I made the final decision after they recommended it to me. Again as a holding company, I never ran the company. They decided to do the advertising and I approved it.
Q. Those were the questions you were asked and the answers you gave; correct?
A. Yeah, that -- yeah. That's what it means.
Q. Okay. Now that was about a 30-, 40-million-dollar ad campaign?
A. In '92, so '92 and '93, yes.
Q. And the ad campaign didn't work, didn't have any success for you; is that correct?
A. That's correct.
Q. And that campaign involved billboards and magazines; didn't it?
A. Correct.
Q. You weren't advertising in any magazines that had majority-under-18 circulation; did you?
A. Well, it didn't work, so we obviously did not.
Q. Okay. Is the answer no?
A. The answer is no. We do not advertise.
Q. And you didn't believe --
You didn't believe when you were advertising on billboards that you were advertising and attracting children; did you, sir?
A. I'm not sure how many billboards we actually did. I have no idea.
Q. Could you answer my question?
A. What was your question again?
Q. My question was you didn't believe when you were advertising on billboards that you were advertising to and attracting children; did you?
A. As far as I know, no, but I have no direct knowledge of that.
Q. You're not an expert in advertising; are you, sir?
A. I was not even involved in the management of the company.
Q. Could you answer my question?
A. No, I'm not an advertising expert.
Q. Let's turn to section 17 of the agreement. And just so we're on the same page, Mr. LeBow, these are the -- what are called the future affiliate sections.
A. Yes.
Q. And you discussed some of those a little bit with the jury yesterday; did you not?
A. Correct.
Q. Now rather than go through each one of them independently, but we can do that, let me ask this question and see if we can deal with them generally, and if not we'll -- we'll go another way.
So let me ask you this: There are a number of provisions here in section 17, particularly section 17.1 through 17.4, that you at Liggett and Brooke requested, as you said yesterday, to provide to Brooke and Liggett an opportunity to merge with or affiliate with another tobacco company. Is that fair?
A. No, it's not a opportunity, it just says in the event that.
Q. Okay.
A. It's not an opportunity per se.
Q. You viewed each of these sections, 17.2 and its subparts all the way through 17.4, as assets to Brooke; correct?
A. Potential.
Q. And you negotiated for them and you got that agreement from the attorneys general, and what those sections provided you would be, let's say, an opportunity in the case of future events where Liggett or Brooke might be more attractive to another company to merge with or affiliate with; is that fair?
A. These sections are carryovers from the March '96 agreement. They're just pretty much carryovers from the agreement that we entered into in March '96, so we just pretty much carried most of those over into this agreement.
Q. Can you answer my question, sir?
A. Repeat the question.
Q. Okay. These sections are ones that Liggett and Brooke negotiated and got in this agreement, and they viewed them as potential assets because they created an opportunity for Liggett and Brooke in the future, depending on certain events, to be more attractive to another company for a potential affiliation; correct?
A. As we had in '96, yes.
Q. Now in two of these, section 17.3 and section 17.4, two of these sections are only of value to Liggett if one of the other companies loses a case; correct?
A. Yes.
Q. And based on these provisions and the other provisions of the agreement, including your cooperation provisions, it's true that Brooke has an economic incentive to see the other tobacco companies lose their litigation against the attorneys general; isn't that true?
A. Well you're looking at 17.3 and 17.4 only. Theoretically, you know, you can make that -- kind of make that statement, but that's not the intent here.
Q. My question is: Brooke has an economic incentive to see the other tobacco companies lose their litigation against the attorney generals; correct or not?
A. I don't think that's correct, because 17.3 and 17.4 are totally under the control of the other tobacco companies. We have no control over this.
Q. Well not limiting it to 17.3 and 17.4, Brooke -- but including that -- Brooke has an economic incentive to see the other tobacco companies lose in the litigation against the attorney generals; isn't that true?
A. I don't see how you say that, on what basis.
Q. Okay. Could you turn, Mr. LeBow, to the deposition RJRC --
MR. WEBER: May I approach, Your Honor?
Q. Do you have it?
A. I have it. I have it.
Q. You got it? Okay. And that is 8091.
And could you turn to page 162, line 16, and see if --
Can you get that in better? And see if you can -- if you remember being asked these questions and giving these answers.
"Question: Based on all of this, you have an economic incentive to see the other tobacco companies lose pending litigation against the attorney generals; isn't that correct?"
There was an objection.
And you answered, "Well, I would think even on a competitive basis if I have a settlement and they lose I'm obviously in a competitive advantage, forgetting any agreements, and that would be true of almost anyone.
"Question: And so the answer would be yes; is that correct?
"Answer: The answer would be yes."
A. The answer is yes, with that qualification prior that you have there, the answer I gave, on a competitive basis. It would be also true if you had a judgment against them, they would have a competitive advantage. So it works both ways. So I don't see what you're talking about.
Q. Those were questions you were asked and the answers you gave; correct?
A. That's what it says.
MR. WEBER: Now Your Honor, could you give me some indication about when you might want to take a morning break, because I -- I can -- I'm about to change areas and I can go --
THE COURT: We'll take a break now.
MR. WEBER: Okay.
THE COURT: Okay.
THE CLERK: Court stands in recess.
(Recess)
THE CLERK: All rise. Court is again in session.
THE CLERK: Please be seated.
MR. WEBER: Your Honor, thank you. I just wand to raise very quickly an evidentiary issue. We went out this morning when the examination was going on and bought some packs of Liggett cigarettes. They don't have the addiction warning. And we raised the issue with Mr. Gill as to whether or not he'd have an objection to our trying to introduce those packs into evidence even though they weren't predesignated, and he took the position, which I expected, that since they hadn't been predesignated, he would object. And I guess what I wanted to ask the court is I certainly can ask Mr. LeBow if it's still possible to buy cigarette packs that Liggett's made that are unbranded that don't carry the warnings, whether it's still possible to buy them in Minnesota, and if he says that and agrees with that, then I don't have any need to introduce them, but if he doesn't, then my question is I'd like the right to be able to introduce those packs and show that in fact you can still go out in Minnesota and still get them.
THE COURT: That seems reasonable to me.
MR. STRICKER: I'm not sure what would be the evidentiary value of admitting them into evidence unless they want to use them as impeachment, but I don't expect there to be a problem with Mr. Weber's questions, frankly.
THE COURT: Okay. I'll allow it basically.
MR. GILL: Your Honor, if I could.
THE COURT: Yeah, sorry.
MR. GILL: I think the problem may well be that there's just absolutely no way to establish when those particular packs of cigarettes were shipped to Minnesota, how long they were in a warehouse before they got to a retail outlet or how long they've been sitting.
THE COURT: You can -- you know, you can bring that out. That's not a problem. But if he says that there are no packs anywhere in any --
You have to ask a pretty broad question before you can ask that. Okay?
MR. GILL: And if Mr. LeBow would say he just doesn't know --
THE COURT: Then you can't impeach him.
MR. WEBER: If I bring those in, so we don't have any wasted time later, can I just mark those as Defense Composite Exhibit A or something for now?
THE COURT: Okay. Don't do anything in front of the jury until the issue comes up.
MR. WEBER: I'll look to Your Honor.
THE COURT: Okay.
MR. WEBER: Thank you, Your Honor.
BY MR. WEBER:
Q. Mr. LeBow, it's true, is it not, that it's still possible to go to stores here in the Twin City area, here in Minnesota, and buy packs of Liggett- branded cigarettes, Chesterfield, Lark, et cetera, Liggett-branded cigarettes that don't carry the addiction warning?
A. The addiction warning was put on -- we started manufacturing them last fall, so there's an inventory turn problem. I mean I don't know how old the inventory is here. It's possible, anything is possible. But everything coming out of our factory now that are Liggett brands have those warning labels on them.
Q. Except for those contract manufacture ones we mentioned earlier; correct?
A. These are brands owned by other people. We have no control over those brands, yes.
Q. Well, but you could tell those other people that you're not going to sell them those cigarettes and put wrappers and labels on them without the addiction warning; correct?
A. They would go somewhere else and just get them made somewhere else.
Q. So your choice is you'd rather not put the warning on and keep the business; right?
A. Well without that business we'd probably go -- go bankrupt immediately, I would think. I don't know.
Q. Now yesterday you said, in response to Mr. Gill, that there were three basic reasons that motivated your settlement. Do you remember that?
A. Yes.
Q. And one of them was an economic issue; correct?
A. Originally in March '96, yes.
Q. And in March '97 as well; correct?
A. Yes. There were too many trials coming up that we couldn't afford to lose.
Q. And there was also an issue related to this RJR potential transaction and still the possibility of that you mentioned to Mr. Gill; correct?
A. That was a very minor reason.
Q. And the third one was --
You said yesterday, and I want to quote you, you said you didn't want to have to go to court to lie. Do you remember that?
A. Yes.
Q. Okay. Well whether you had a settlement or not, Mr. LeBow, you wouldn't go to court to lie; would you, sir?
A. No, I would not.
MR. STRICKER: Your Honor, if I could object to the placing up of documents on the overhead before we know what's even going on.
THE COURT: The objection is sustained.
MR. WEBER: I'll -- I'll take that off. I'm sorry, Your Honor.
Q. And with respect to the issue, the economic issue, the economic motivation, that in and of itself was an independent reason for the settlement without regard to documents and without regard to litigation; correct?
A. Initially in March '96, that's correct.
Q. And in March '97 also; was it not?
A. It was one of the reasons. There were trials coming up in Texas and Minnesota, and if Liggett were to lose one, we'd be out of business immediately.
Q. So even if --
Even with respect to the economic reason, that was an independent reason in and of itself for the March '97 agreement; correct, sir?
A. Say that again. Without regard to economics? You -- you confused me there.
Q. All right. I -- I think that was an unclear question, so let me be clear.
If you had decided it was a prudent business decision for economic reasons to reach this March 20, 1997 settlement, even without regard to documents or litigation --
A. Well just like all the other tobacco companies reached a global settlement for economic reasons.
Q. Could you answer my question, sir?
A. It was --
One of the reasons, as I said before, was economic. No question about it.
Q. Now let -- let me turn now to some of your experience at Liggett over the years, Mr. LeBow.
A. Okay.
Q. When you took over in '86, you knew the warning labels had been on the packs for 20 some years; correct?
A. Yes.
Q. And you knew the warnings had been in the ads for approximately 15 years or so; correct?
A. I didn't know exactly, but I knew there were warning labels.
Q. And you knew smokers had been warned of serious health risks with respect to the use of cigarettes; correct?
A. Yes.
Q. You knew the company you were buying was -- had been a defendant and still was a defendant in a number of smoking-and-health cases; correct?
A. A few of them, yes.
Q. And over the course of the years during your tenure as CEO of Brooke, Brooke has always included disclosures about tobacco litigation in its filings with the Securities and Exchange Commission in forms 10-K and 10-Q; correct?
A. Like the other tobacco companies, we did the same thing. That was the industry line. We disclosed everything.
Q. And the 10-K, just to the jury understands, that's a filing with the Securities and Exchange Commission for your annual report; correct?
A. That's correct.
Q. And your 10-Q, just so the jury understands, are forms filed with the Securities and Exchange Commission for your quarterly results; correct?
A. Correct.
Q. And you, Bennett LeBow, sign each one of those when they're filed with the Securities and Exchange Commission; do you not, sir?
A. For Brooke I do, yes.
Q. And it's true that over the years in those filings, Brooke has disclosed both the existence of the litigation and the fact that litigation is always uncertain; correct?
A. We consolidated Liggett's disclosure. We consolidated Liggett's disclosure with Brookes, so this is all related to Liggett's, you know, filings.
Q. But the disclosure references the tobacco litigation and says litigation is always uncertain; correct?
A. We did what the lawyers told us at the time.
Q. And that was to say litigation results were uncertain; correct?
A. That's what the attorneys at that time were telling us, yes.
Q. And indeed, at no time during your entire tenure at Brooke did you ever tell the Securities and Exchange Commission or your shareholders that you were going to win every case; did you?
A. I -- I -- the -- the --
Our disclosure said what the party line was, so to speak, what the industry line was. We said what the attorneys at the time told us to say.
Q. Could you answer my question?
A. Repeat the question.
Q. Did you ever, during your entire tenure at Brooke in your securities disclosures to your shareholders or to the Securities and Exchange Commission, state that no cases would be lost?
A. I don't believe that we did. I don't know that for sure.
Q. In fact, the regular statement was that litigation was uncertain and you could not predict results; correct?
A. Again, this was Liggett's statement which Brooke consolidated, which the attorneys wrote and which we included into our filings with the SEC, that's correct.
Q. So the answer to my question is yes, that's what was said?
A. Yes, that's correct.
Q. And you signed those; correct?
A. I signed Brooke's, which was consolidated with Liggett statements.
Q. And when you signed those forms with the SEC, you're signing those under a legal obligation that the material statements in there are correct.
A. Upon advice of my attorneys, the advice they gave me at the time, I signed it, yes.
Q. Now during your tenure as CEO of Brooke, you had many occasions to visit the Liggett headquarters in Durham; did you not, sir?
A. Occasionally, yes.
Q. Indeed, at one time you were acting as co-chief executive at Liggett; correct?
A. For a few-month -- couple-month period, correct.
Q. And you also visited Liggett every four to six weeks, spent a few days there; didn't you?
A. Not the past years, no, not that often.
Q. At least as of 1993 you were visiting there every four to six weeks, spending a day; weren't you?
A. Could be. I don't recall. Probably every couple months, a day or so.
Q. And that was --
Was that relatively constant over the years, that every four weeks, eight weeks, somewhere in that period, you would go to headquarters?
A. No. The past four, five years have been much less; maybe every two months, three, four, five months. Very infrequently.
Q. Now in all the years that you've been in control of Liggett, which is since 1986, you've known that tobacco policy and smoking and legal issues were matters of public debate; did you not?
A. I read the newspapers, yes.
Q. And you knew smoking-and-health issues were in the news?
A. Yes.
Q. You knew the Surgeon General reports had come out over time and there's always some publicity; correct?
A. Yes.
Q. You were aware, then, of the Surgeon General's estimates about smoking- attributable disease; correct?
A. Yes.
Q. So you knew smoking and health was a serious issue.
A. It was an issue, yes.
Q. It was a serious issue.
A. Yes.
Q. Now during your entire period at Liggett --
I want to ask you some questions about what you did with this serious issue. Isn't it true that during your entire period at Liggett you never knew who the top scientific professional at Liggett was?
A. That's correct.
Q. Isn't it true that during your entire period at Liggett you never reviewed any research done or funded by Liggett?
A. That's correct.
Q. And during that entire period you never once asked for a list of Liggett research to review; did you?
A. No, because they were just doing -- you know, they weren't doing much research.
Q. And you never entered the research department in all those years; did you?
A. That's correct.
Q. Walked by the door a number of times, but never even walked in; right?
A. That's correct. They weren't doing anything I had any interest in. We were never doing any -- any public health-type research, to the best of my knowledge.
Q. You never met with the scientists at Liggett during that period; correct?
A. That's not --
Not that I can recall.
Q. You didn't even know what type of scientists Liggett had; correct?
A. I assumed they had tobacco-type scientists, people who knew the tobacco business and were just doing flavorings and creating different types of cigarettes.
Q. As a matter of fact, you can't even name one scientist at Liggett over the entire period you've been there; can you?
MR. GILL: Asked and answered, Your Honor.
THE COURT: You may answer that.
A. That's correct, I cannot.
Q. You never talked with Liggett scientists about whether smoking is addictive?
A. That's correct.
Q. Never talked with Liggett scientists about whether safer cigarettes were available or could be made?
A. Not --
No, I never did.
Q. Now you recall your testimony yesterday where you spoke about the one time, I believe, you were visiting down in Durham and Mr. Horrigan was tied up in 1994 getting ready for some congressional testimony; correct?
A. Correct.
Q. And he gave testimony, I believe, the next day?
A. Correct.
Q. And you watched that on TV.
A. That's correct.
Q. And that testimony created a firestorm of publicity, that whole hearing; didn't it?
A. Yes.
Q. And yet even then -- well let me strike that.
And that testimony and that hearing dealt with issues relating to nicotine; correct?
A. Some of it, yes.
Q. And even then, as the man in charge of Liggett who had been for a number of years the man who made policy at Liggett, you made no inquiry whatsoever at that time into the issue of addiction; did you, sir?
A. I was advised by about 10 or 15 lawyers, inside and outside, that there was no issue, so I just -- I just paid no attention to them at the time.
Q. And so the answer to my question is no, --
A. The answer is --
Q. -- you made no inquiry?
A. That's correct.
Q. Isn't it fair to say, Mr. LeBow, that over that entire period of time you took no interest whatsoever in the scientific affairs of Liggett?
A. That's absolutely correct.
Q. Now also during your tenure at Liggett, you never directed Liggett to invest in less-hazardous cigarette technology; did you?
A. That's correct.
Q. You never told Liggett to invest in research for less-hazardous cigarettes; did you?
A. We have no funds for research, so we -- we never did.
Q. Never did?
A. Correct.
Q. Didn't have even a million to put into research.
A. Correct.
Q. Is that fair?
A. That's fair.
Q. Over your entire period.
A. Smoking -- I mean health-related research?
Q. Right. Right.
A. That's correct.
Q. Because things had been so tight during this entire period; correct?
A. Well again, I was told by the attorneys there was nothing to do with it.
Q. But you had 30, 40 million that you approved to put into advertising; didn't you, Mr. LeBow?
A. That's correct.
Q. You don't even know as you sit here today if Liggett makes ultra low tar or ultra low nicotine cigarettes; do you?
A. I don't run the company. I don't know the details of all the cigarettes. But I do know what the attorneys have been telling me and what they told me years ago, that I do know.
Q. Do you know the answer to my question?
A. I don't exactly.
Q. Do you know that Liggett-made cigarettes on average have higher tar and nicotine than those of the other manufacturers?
A. Because they are the old brands, that's I assume is why.
Q. Is the answer yes?
A. I don't know for sure.
Q. Now, over the entire period of time you've been at Liggett, Liggett hasn't put one dime into CTR; has it?
A. I don't know.
Q. You don't know that it has; correct?
A. I don't know that it has.
Q. Do you know that Liggett was at one time years ago a member of The Council for Tobacco Research?
A. I don't know for sure, but could have been.
Q. Isn't it true that over the entire period of time you've been the man in charge of policy at Liggett, Liggett has made no contributions to independent laboratories or universities to research smoking-and-health issues?
A. Not to my knowledge. I don't know.
Q. And isn't it true that over the past period of years Liggett's R&D expenditures are so small that they're not even material to the financial statements, and you've told the Securities and Exchange Commission that?
A. I don't know their -- their statements, how they are presented precisely. They could -- could be correct, I don't know for sure.
Q. Up to this day, Mr. LeBow, you've never inquired as to what programs Liggett has to discourage youth access to cigarettes; have you?
A. No, I don't --
We don't sell to children, so there's no -- no sense --
Q. You don't sell to anybody at retail; do you?
A. At retail? No.
Q. My question, then, is: Up to this day, you've never inquired as to what programs Liggett has to discourage youth access to cigarettes; have you?
A. No, I never have.
Q. Now just so the jury understands, cigarettes are sold at retail by retailers; correct?
A. Correct.
Q. They're not sold by cigarette companies at retail; correct?
A. Correct.
Q. You'd agree that one way to prevent youth access to cigarettes is to provide education and information to retailers about age-restrictive products; correct?
A. And stop advertising to them, like Joe Camel. That's another way.
Q. Can you answer -- can you answer my question?
A. Yeah, that's correct.
Q. Okay. Now it's true that cigarette companies can't police every retail outlet in the country; isn't that right?
MR. GILL: Your Honor, beyond the scope of the cross-examination by plaintiffs.
THE COURT: Sustained.
Q. Let me go back -- I'm sorry. Let me go back to toward the end of 1993, if I could, Mr. LeBow. Okay?
A. Yes.
Q. At that time you knew Liggett had a number of cases pending against it in -- in the tobacco area; correct?
A. '93 you're talking?
Q. Yeah.
A. Yeah, we always had 20 or 30 cases pending.
Q. And you knew as of 1993 that the Surgeon General some years earlier had declared smoking to be an addiction; correct?
A. Yes.
Q. You knew that Mr. Dye, your president, had testified in front of Congress several years earlier during the period you were president of the company; correct?
A. I was not aware of the details of his testimony.
Q. But you knew he had been in front of Congress on smoking-and-health issues.
A. Not in detail, no. I don't know when exactly he was.
Q. But you knew that it had happened, not the detail, but you knew that the president of Liggett had been in front of Congress; did you not?
A. A former president. In '93 he was not the president.
Q. No. I'm saying in earlier years when he was the president.
A. Okay, yes.
Q. Okay. As a matter of fact, you also knew that Liggett had had one smoking-and-health case that went all the way up to the Supreme Court; correct?
A. Yes.
Q. And you knew that that's a case that had been tried in New Jersey; correct?
A. Liggett and other defendants. We were not the only defendant there.
Q. Right. But I'm talking about Liggett now. That had been tried in New Jersey; correct?
A. That's correct. We were one defendant out of many defendants.
Q. And that case had allegations of addiction and conspiracy and got a great deal of publicity; did it not?
A. I don't recall the details of it. I don't know if addiction was a major part of it at all.
Q. Well you kept up with it in the news.
A. Basically this was 1988 we're talking about. I'd owned the company for a year or so. Again, it was not of concern because the lawyers had told us there's nothing to be concerned about. We didn't pay a penny in 30 years, we don't intend to pay a penny now.
Q. But you were reading the Wall Street Journal and the New York Times back at that time; weren't you?
A. Yeah, I read them.
Q. You knew the warnings were on the packs at that time?
A. Yes.
Q. You knew that you were disclosing as material items in your securities filings information about these cases; correct?
A. I don't know how material it was, but it was being disclosed per the attorneys telling us what to disclose.
Q. And no one was telling you, obviously, not to disclose information about the litigation; correct?
A. Correct.
Q. And you know that what you disclosed in your securities filings were material information; correct?
A. Correct.
Q. You also knew, come late 1993, that you were going to be called to give live testimony under oath; correct?
A. Where? At a deposition you mean?
Q. Yes.
A. Yes.
Q. You knew that you were going to be called to give live testimony under oath in the Broin case; correct?
A. Correct.
Q. And you did give live testimony under oath in the Broin case in November 1993; did you not, sir?
A. That's correct.
Q. You knew a sworn deposition was a serious matter; correct?
A. Yes. Yes.
Q. You took the same solemn oath there that you took here; correct?
A. Yes.
Q. And you took it to heart the same way; correct?
A. Correct.
Q. You met with your lawyers beforehand?
A. Yes.
Q. The lawyers didn't suggest that you lie or suggest that you misrepresent; correct?
A. Well they did advise me what the industry position was on various things.
Q. They didn't suggest you lie or misrepresent; did they, sir?
A. They told me what their position -- what these -- what the stated position was on addiction and -- and health areas.
Q. Can I have an answer to my question?
A. They didn't tell me to lie, but they told me their position.
Q. Now --
And you testified to what you felt was true under your solemn oath at the time; correct, sir?
A. As advised by my attorneys at the time, yes.
Q. Well you testified to what you felt was true; correct?
A. Based upon the information I had, a lot of which came from my attorneys.
Q. Based upon whatever you had, you testified truthfully.
A. Yes.
Q. You weren't just mouthing a company line, you were telling the truth, the whole truth, and nothing but the truth, so help you God; correct, Mr. LeBow?
MR. STRICKER: Objection, argumentative, repetitive.
THE COURT: It's getting argumentative and repetitive, counsel.
Q. Now in 1993, Mr. LeBow, seven years after you took the helm of Liggett, you swore under oath in that deposition that you did not know whether smoking caused lung cancer; correct?
A. I didn't know based upon the information given to me at the time by my attorneys, that's correct.
Q. Well you understood it was your testimony; correct?
A. Well based upon information given to me. I did not do an independent research of smoking and health, that's correct. I relied upon my counsel's advice.
Q. But you knew it was your testimony, not your counsel's testimony; right?
A. Yeah, based upon the information they'd given me.
MR. GILL: Objection, asked and answered, Your Honor.
Q. And you stated that you did not know that smoking caused lung cancer; correct?
A. I stated what I believed, what I felt, what I was told by my attorneys, yes.
Q. And that was that you did not know that smoking caused lung cancer; correct?
A. I -- I did not know. I'm not a scientist. I don't know the exact details, correct.
Q. And --
Correct. Thank you.
You confirmed under oath that you had no interest in discussing smoking- and-health issues with leading world authorities; correct?
A. At the time there were only a few lawsuits going on. I was advised by my attorneys there was nothing to be concerned about, that this lawsuit -- the deposition I was involved in was strictly a -- a nuisance case, and I did not have any interest pursuing it to any great detail. I had many other companies at the time and was very busy with other things. It was not my field of expertise. That's correct.
Q. You confirmed at the time under oath that you had no interest in discussing smoking and health with the world's leading researchers; did you not?
A. No, I had no interest, correct.
Q. And you agreed at the time that you didn't know and you didn't care whether or not the Surgeon General was correct about whether smoking caused disease; isn't that right?
A. In the context of running the company at the time, in the context of what the lawyers were telling me, there was nothing to be concerned about, so I was not going to spend, you know, hours and hours or days and days analyzing something.
Q. Well you knew smoking and health was a serious issue. You just told me that a moment ago; correct?
A. It was an issue, yes.
Q. You said it was a serious issue; didn't you?
A. For certain people, yes.
Q. Okay. But it wasn't for you?
A. I didn't smoke.
Q. You made and sold cigarettes.
A. Okay.
Q. Okay? And you just said it's a serious issue; right?
A. I owned a company that made and sold cigarettes. I'm the chairman of the board of our holding company. I don't operate the company on a day-to-day basis. My lawyers and my management told me it was not an issue; therefore, I did not spend hours and hours and days and days of time investigating it in 1993.
Q. Based on whatever you did, your testimony was that you didn't know and you didn't care whether or not the Surgeon General was correct; right?
A. I didn't focus whether the Surgeon General was correct or not.
Q. So the answer to my question is yes?
A. Yes.
Q. As a matter of fact, you even said that if someone sent you a surgeon general's report, you wouldn't even read it; correct?
A. Correct, I wouldn't take the time. I'd read some things in the newspapers. I knew generally what it said.
Q. As a matter of fact, at that deposition in 1993, you also stated that tobacco wasn't addictive; correct?
A. Based upon my personal experience and the advice of my attorneys, that was the information I had at the time, yes.
Q. And that was your truthful testimony at the time; was it not, sir?
A. At the time, yes.
Q. Now as a matter of fact, at the time you didn't describe six to eight weeks of cravings, you said you quit like this (snapping fingers); isn't that what you said?
A. In the context of 30 years ago, yes.
Q. And that was your testimony in 1993; right?
A. I don't recall exactly what it was.
Q. You don't deny that you said you quit like this (snapping fingers)?
A. I quit quickly, being six to eight weeks. That's pretty quick.
Q. Like this (snapping fingers) you said under oath; is that right?
A. I don't recall.
MR. GILL: Objection, argumentative, Your Honor.
THE COURT: Getting argumentative, counsel. Move on.
Q. You stated at that same deposition you had no interest in how tobacco companies gave out money to research smoking-and-health issues; correct?
A. Well as I said, we didn't do that, so I had no interest in it.
Q. You agreed that as a businessman it wasn't your role to get into health issues; right?
A. Wasn't my personal role, no.
Q. Now a few years after you gave that deposition, Mr. LeBow, there was a satirical play that appeared off Broadway called Loose Lips. You remember that?
A. Yeah.
Q. You went to see Loose Lips; didn't you?
A. I didn't go --
My daughter took me there. I had no idea what the play was about.
Q. Did you go there?
A. She took me there, yes.
Q. Okay. So you were there.
A. She took me there, yes.
Q. Now Loose Lips was a satirical show; correct?
A. Yes.
Q. And to satirize means to make fun of or to ridicule; correct?
A. Correct.
Q. And part of what that play Loose Lips was about was a satirical play on your deposition testimony from 1993; correct?
MR. GILL: Your Honor, excuse me, object to relevance, assumes facts not in evidence, and no foundation.
THE COURT: Yeah, I -- I don't see its relevance. We're getting pretty far afield. Move on to some other area.
Q. Now as a businessman, sir, your business has a negative net worth of almost a half billion dollars; correct?
A. Yeah. We have no good will on our books like all the other companies do.
Q. You entered your agreement with the attorney generals as a businessman, not as a scientist; correct?
A. The original one was entered strictly on a financial basis, the original 1996 one. The 1997 one was entered on that plus all the documents I had seen in the intervening period.
Q. Mr. LeBow, you already testified that --
A. I mean my lawyers had seen, excuse me.
Q. -- you hadn't seen a single document.
A. I saw a few of them, but my lawyers saw most of them, correct.
Q. Hadn't you testified that you hadn't seen any documents up to that time?
A. I saw some. I don't recall when it was, if it was before that or after that.
Q. And you needed the financial terms of that 1997 agreement for Liggett to survive, as you already said; correct?
A. Well we --
MR. STRICKER: Objection, asked and answered, Your Honor.
THE COURT: It's been asked and answered.
Q. And you believe in carrying out your agreements; do you not, Mr. LeBow?
A. Yes.
Q. And that agreement that you signed on March 20, 1997 requires you to assist Minnesota and its attorneys in the case against these other defendants; correct?
MR. GILL: Your Honor, asked and answered.
THE COURT: It's been asked and answered.
Q. And that's why you're here; isn't it, Mr. LeBow?
MR. STRICKER: Objection, Your Honor, asked and answered.
THE COURT: You may answer.
A. I'm here because of the court order, I'm here because I want to be here.
MR. WEBER: No further questions at this time, Your Honor. Thank you.
If you'll give me just a minute, Jim, I'll get this stuff out of here.
BY MR. STRICKER:
Q. Good morning.
A. Good morning.
Q. Mr. LeBow, you testified that Liggett's market share had declined since the settlement that it's reached; is that correct?
A. That's correct.
Q. Why, in your opinion, has Liggett's market share declined?
A. Many reasons, some of them very difficult to -- to establish. Very --
I'm sure most of them are competitive reasons. The other companies are unhappy that we reached a settlement back in March 1996. But I can't put my finger on exactly.
Q. Can you explain more what you mean by the companies were not pleased by the settlement in '96?
A. Well when the settlement, first settlement was reached with the attorneys general, the few attorneys general and the Castano class action, I was completely vilified in all the press by the companies saying I was crazy. "We never paid a penny. It was the wrong thing to do." They were completely up in arms. I was accused of being, you know, a turncoat, everything you can imagine. And it just all came out at that time.
Q. And was there a similar reaction after the 1997 settlement?
A. It was very similar reaction then. Even worse, I think, at that point in time. But amazingly, two weeks later all the companies showed up to do their own settlement and spent three months negotiating their own settlement with the same attorneys general.
MR. WEBER: I move to strike the last sentence as non-responsive, Your Honor.
THE COURT: Well it is non-responsive.
BY MR. STRICKER:
Q. Mr. LeBow, what other actions did the tobacco companies take after the settlement in March 1997 with respect to Liggett?
A. Well I don't know exactly what they did, but for one thing that happened, in March '97 we got a copy of a letter which was sent to -- by The American Wholesalers Association to all the wholesalers in the country stating that Liggett was not protecting the wholesalers, even though they hadn't read the letter, and the wholesalers should be very wary of dealing with Liggett, et cetera, et cetera. And, you know, it was completely false and the -- our agreements did protect the wholesalers. And things like that hurt our business.
Q. Now Liggett agreed as part of the settlement to turn over documents; is that correct?
A. That's correct. We turned over all of our documents and released and waived our full attorney-client privileges.
Q. Was --
Did the industry have a reaction to Liggett's waiving its attorney-client privilege and producing documents?
A. Yes. They went to court in North Carolina immediately and sued us to prevent that.
Q. Is that lawsuit still going on?
A. To the best of my knowledge it still is.
Q. Did they also seek to get an injunction to preclude Liggett from producing documents to courts and to anyone else?
A. That's correct. They tried to prevent us from turning over our documents to, like, the 15 courts or the 18 AGs we were settling with.
Q. But Liggett has been able to produce the documents to the people --
A. That's right. They turned them over to various courts, and the courts have found crime and fraud in these various documents, and they've produced them.
MR. WEBER: Move to strike, Your Honor, as non-responsive.
THE COURT: Sustained.
BY MR. STRICKER:
Q. Mr. LeBow, you were asked some questions about your involvement in the businesses of Liggett, the day-to-day operation. Do you recall that testimony?
A. Yes.
Q. Could you explain to the ladies and gentlemen of the jury what your role is at Brooke Group as it relates to Liggett.
A. Brooke Group is a holding company which owns, as I said, through another intermediary company, a hundred percent of Liggett. I am not involved in the day-to-day operations. I go there, you know, once every few months. There's other management who run the company. So we merely set, you know, the strategic, long-range goals of the company.
Q. Does Brooke own other companies as well as Liggett?
A. Yes, we do.
Q. Mr. LeBow, I believe you testified that Liggett does not do a significant amount of marketing at this time; is that correct?
A. That's correct.
Q. Are you aware of any marketing that Liggett has done or is doing to youth?
A. Not to my knowledge.
Q. What's the average age of a smoker of Liggett brands?
A. Best we can estimate, the Liggett brands, the four brands we have, average age is 50 -- 50 years old and up. And if you take the assumption that, you know, that youths are the new smokers, we spent 30, 40 million dollars advertising, did not work, got absolutely no new smokers.
Q. Now is Liggett a member of The Tobacco Institute?
A. Not at this time, no.
Q. And is Liggett a member of The Council for Tobacco Research?
A. No.
Q. Are you aware of any other United States cigarette manufacturer other than Liggett who is not a member of The Tobacco Institute and the CTR?
A. There might be some small ones. I don't know. Not -- not the -- none of the major ones, no. They are all -- they are all members, to the best of my knowledge.
Q. Mr. LeBow, have you or Liggett ever agreed or conspired to monopolize the Minnesota cigarette market?
A. Absolutely not. We're too small to do that.
Q. Have you ever agreed or conspired to try to keep anyone else from selling cigarettes in Minnesota?
A. No, absolutely not.
Q. There was some discussion earlier about the cigarettes that Liggett manufactures for others. Do you recall that?
A. Yes.
Q. Would you explain to the ladies and gentlemen of the jury what that whole process involved?
A. These are brands we do not own or control; in other words, these are other companies, you know, distributors of some sort, it's their brands, their -- their cigarettes. They determine the packaging, they determine everything. We have no control over it. And we merely do what's called a contract manufacture for them. We have no direct control at all over these cigarettes.
Q. Now Liggett is continuing to sell cigarettes today; is that right?
A. Correct.
Q. Do you have any position on whether that's appropriate or not, given what you've testified to?
A. Well we've kind of --
We've taken a public position, and I think I'd like the other companies to take the same position, in 25 or 30 years we're going to be out of business and we should be out of business, and so should the other companies, because if you're not going to sell to children, really truly not selling to children, you're not going to have any business by definition in 30 years. So that's the public position we've taken.
Q. Now Mr. Weber asked you a lot of questions about statements that you made as part of this -- in the settlement and in other settlements, statements that you made. Do you recall that -- those questions?
A. Yes.
Q. Do you believe you -- any of those statements were false?
A. Absolutely not.
Q. Do you believe those statements are true?
A. Absolutely.
Q. Did you in any way -- or do you believe that the settlement agreements that you've reached on behalf of Liggett require you to lie?
A. Absolutely not.
Q. Would you agree to lie as part of the settlement?
A. No, of course not.
MR. STRICKER: I have no further questions, Your Honor.
BY MR. GILL:
Q. Good morning, Mr. LeBow.
A. Good morning.
Q. Do you recall that there were some questions by Mr. Weber that dealt with the disparity between the amount of money that Liggett has devoted to research over the time that you've owned the company in relation to the amount of money that Liggett has spent on advertising?
A. Yes.
Q. And the amount you spent on research by your own admission is little or nothing.
A. I think we spent about three, four million dollars a year.
Q. Three, four million per year on research?
A. Yeah, but not on health research. Strictly on what --
What we call research is brand research, meaning the different flavors of brands of cigarettes as our customers ask for them. They ask for certain brands.
Q. But you do concede to Mr. Weber and you concede in this court that Liggett has not devoted any funds toward research related to the health effects of smoking.
A. To the best of my knowledge, that's correct.
Q. And the amount of advertising that Liggett has spent in the 10 or 11 years that you have controlled that company is somewhere in the area of 30 to 40 million?
A. In 10 years, that's about right.
Q. Okay. Now Mr. LeBow, do you have any idea of the disparity between the amount of money that your competitors have devoted to research with respect to the health effects of smoking versus the amount of money that your competitors have spent on advertising cigarettes?
MR. WEBER: Objection, Your Honor, there's no foundation with this witness.
THE COURT: You may answer if you know.
A. I -- I -- I would believe that it's a huge disparity, huge, much more than any of ours.
MR. WEBER: I move to strike. It was based on belief, not fact.
THE COURT: Sustained.
Q. Now Mr. LeBow, there were also some questions dealing with what Liggett has put into the 10-K and the 10-Q forms that have to be filed by law with the Securities and Exchange Commission. Do you recall those questions?
A. Yes.
Q. I take it that with all the companies that you have owned over the last 30 years or so, your companies have filed an awful lot 10-K and 10-Q statements.
A. Very many.
Q. This isn't just Liggett, it's any company that you're involved with that is a publicly-traded company; correct?
A. That's correct.
Q. Okay. Now over the years you have used a lot of different types of law firms in connection with the companies that you've owned; true?
A. That's true.
Q. And I think you told us yesterday that one of the reasons that you wanted to receive the advice of the Kasowitz firm with regard to smoking cases was because you regarded the Kasowitz firm as a firm that had lawyers who were specialists in handling product-liability cases; correct?
A. That's correct.
Q. In other words, trial lawyers.
A. Correct.
Q. Now does the Kasowitz firm do your Securities and Exchange Commission filings?
A. No.
Q. You have a different type of law firm for that?
A. Yes.
Q. Are the lawyers that prepare those 10-K and 10-Q reports, are they trial lawyers?
A. No.
Q. They're business lawyers; aren't they?
A. That's correct.
Q. And what the business lawyers put into those reports in the section that requires them to comment on the company's litigation is that litigation is uncertain.
A. They get that from the trial lawyers, that's correct.
Q. Well wherever they get that from, that's what they put into virtually every 10-K and every 10-Q report that you've ever seen; correct?
A. Correct. We do that and so do all the other companies, yes.
Q. Regardless of whether they're filing the 10-K or the 10-Q for Liggett or any other company that you've owned over the years.
A. That's correct.
Q. Now there were also some questions that dealt with the settlement agreement that occurred between the state of Minnesota and Liggett in March of 1997. Do you recall those?
A. Yes.
Q. And just so we're absolutely clear on this, the state of Minnesota was not a part of the settlement agreement that Liggett reached in March of 1996; true?
A. That's true.
Q. That was the agreement that you told us was motivated purely and wholly by economic considerations; correct?
A. From my point of view, yes, at that time, yes, but I'd not seen any of the documents up to that time.
Q. Now there's also been some mention here in court this morning that one of the exhibits, in fact the exhibit that the state of Minnesota had designated with regard to the settlement, was the Internet version of the settlement agreement; correct?
A. Correct.
Q. In other words, this has not been a secret agreement; true?
A. True. It's very public.
Q. Okay. It has been public almost from the time that it was signed in March of 1997; correct?
A. Absolutely.
Q. Okay. And with respect to the provisions of the agreement that required you to make a public statement acknowledging that cigarette smoking causes cancer, lung cancer, heart disease, vascular disease and emphysema, those were all matters that were covered during your testimony yesterday in this courtroom; correct?
A. Yes, correct.
Q. And it was covered that they were specifically terms of that settlement agreement.
A. They were some of the terms, yes.
Q. As well as the provision in the agreement that required Liggett to acknowledge that cigarette smoking is addictive.
A. Correct.
Q. And it was on the basis of the reports that you received from your attorneys at the Kasowitz law firm that you agreed to make those acknowledgments; true?
A. They had -- they had reviewed all these documents and they advised me of what was in some of these documents that we saw yesterday and other documents which we haven't seen yet, that's true.
Q. And even though you did not spend the time to go through the documents yourself piecemeal, one by one, you trusted the advice that the Kasowitz firm gave you with respect to the content and the import of those documents; true?
A. Absolutely true. And events have shown it to be true. Whole documents have been released in Congress and others. So it's absolutely true, and I'm very confident I did the right thing.
Q. You sat here yesterday in court when Mr. Merryman was on the stand and you saw a number of exhibits that were introduced in this case; correct?
A. Correct.
Q. Did you see anything in those exhibits which was inconsistent with anything you got from the Kasowitz firm?
MR. WEBER: Objection, Your Honor, that is beyond the scope. There was no discussion about that.
THE COURT: Sustained.
Q. Finally one final matter, Mr. LeBow. There was some questions to you with regard to your motivation in entering into the 1997 settlement that included the state of Minnesota.
A. Yes.
Q. Okay. And you've made it clear to this jury that at the time that you made that settlement, there was no settlement with Blue Cross Blue Shield of Minnesota.
A. That's correct.
Q. And there was no settlement with Blue Cross Blue Shield of Minnesota.
A. That's correct.
Q. Now you understand that Blue Cross Blue Shield of Minnesota is making claims in this lawsuit against Liggett for violation of the Minnesota antitrust laws and the Minnesota consumer fraud statutes; do you not?
A. I understand that.
Q. You understand that those are serious claims --
A. Yes.
Q. -- involving substantial economic exposure to your company.
A. Absolutely, that's correct.
Q. Do you have any motivation to lose a lawsuit by the -- by Blue Cross Blue Shield against Liggett?
A. Absolutely not.
Q. And have you, sir, under oath in this court made the admissions that you made yesterday afternoon in spite of the fact that you understand that those admissions may well be material with regard to the claims that Blue Cross Blue Shield have brought against Liggett?
MR. WEBER: Objection, argumentative, Your Honor.
THE COURT: Well you may answer that.
A. Repeat the question, please.
Q. Mr. LeBow, have you made the admissions that you have made in this court under oath in spite of your recognition that those admissions may well be material to the claims that Blue Cross Blue Shield of Minnesota has made against your company?
A. I one hundred percent understand the possible consequences of -- of -- of those claims and of the testimony, and I'm -- and as I say, it's the truth and we have to get the information out, so I understand it completely.
MR. GILL: Thank you, sir. Nothing further.
MR. WEBER: Nothing further, Your Honor.
THE COURT: Why don't we recess for lunch, reconvene at 1:30 this afternoon.
THE CLERK: Court stands in recess to reconvene at 1:30.
(Recess)
THE CLERK: Court is again in session.
(Jury enters the courtroom.)
THE CLERK: Please be seated.
(The following side-bar conference was held:)
MR. WEBER: The motion I want to make, Your Honor, is a motion for a mistrial based on certain statements Mr. LeBow made on Mr. Stricker's examination. Mr. LeBow made references, non-responsive to questions, but references with respect to certain discovery proceedings and referenced findings of crime and fraud that had been made. Going into those discovery- related issues in front of the jury is clearly prejudicial. I have my own ideas whether it was inadvertent or advertent, but it doesn't matter, the damage was done; several jurors were seen writing notes. And I'm moving for a mistrial on that basis.
MR. CIRESI: I will respond first. I think counsel's characterization of Mr. Stricker's questions is inappropriate with regard to what his feelings are. It was clear that that issue in terms of the overall settlement was opened up, I believe, by Mr. Weber first in opening statements and in voir dire in fact. He questioned the answer, as I recall it, that dealt with the subject matter of whether Mr. LeBow ran into any problems in turning over documents, and there was a series of questions for which there were no objections. I believe that when that answer was given, Mr. Weber moved to strike it, and I believe the court sustained that. That's my recollection of it.
MR. WEBER: Not the crime and fraud, Mike.
MR. CIRESI: Well then you waived it. There was another one that you did move to strike and it was sustained along the same lines. And if you didn't move to strike, then you've waived it.
There's no basis for a mistrial. And I do not accept at face value his statement that people were writing things down. We have no way of knowing whether they wrote that down or anything else, Your Honor, and it's not a basis for a mistrial anyway. There's no prejudice.
MR. STRICKER: I only respond with respect to some implication that this was something intentional or was intended to mislead. Obviously that was not the case. Anyway, I don't recall -- I don't believe there was an objection raised to that request to strike.
THE COURT: Did you move to strike the answer?
MR. WEBER: I know I moved to strike one of them. I know it was stricken.
THE COURT: That was granted.
MR. WEBER: And I think there may have been another reference to it. But the fact of the matter is, putting something this inflammatory out there, it doesn't matter if it's purposeful or not, I think it's tainted this panel, and I don't think there's any way to unring that bell, Your Honor.
THE COURT: Well the motion is denied.
(Side-bar conference concluded.)
MR. CIRESI: Thank you, Your Honor.
Good afternoon, ladies and gentlemen.
(Collective "Good afternoon.")
WALKER N. MERRYMAN called as a witness, being previously sworn, was examined and testified as follows:
BY MR. CIRESI:
Q. Good afternoon, Mr. Merryman.
A. Good afternoon.
Q. Yesterday when we recessed I was discussing with you Exhibit 20987, which was a Tobacco Institute memorandum dated May 1, 1972 from Mr. Panzer to Mr. Kornegay. And to refresh your recollection, it dealt with general comments of Mr. Panzer's, and we were dealing with the bullet points, the first one of which was that the tobacco industry's holding strategy had consisted of creating doubt about the health charge without actually denying it. Do you recall where we were, sir?
A. Yes, sir.
Q. And you'll recall that I drew your attention then to the last bullet point, which was encouraging objective scientific research as the only way to resolve the question of health hazard. Do you recall that?
A. Yes, sir.
Q. And you are aware, are you not, sir, that the industry abdicated the scientific research responsibility that it had to the lawyers.
A. Did you say abdicated?
Q. Abdicated.
A. No, sir, I'm not aware of that.
Q. Are you aware that that was the opinion of Mr. Judge, who was the CEO of Lorillard?
A. I don't believe I've ever heard Mr. Judge say such a thing, sir.
Q. Do you recall if he ever said such a thing during the time that you were a vice-president for communications at The Tobacco Institute?
A. I have no such recollection of him saying anything like that, no, sir.
Q. Did you ever see a document that reflected that he said that?
A. I believe I may have in preparation for litigation, yes, sir.
Q. Is that the first time you saw it, sir?
A. Yes, sir, I believe it is.
Q. All right. Could we go to Exhibit 11 -- 10 -- 10165. And that would be in volume one, sir, of the cross book. It's the smaller book.
A. Could you give me that number again, please?
Q. Yes. 10165, volume one.
You have it in front of you?
A. Yes, I do. Thank you.
Q. This is a memorandum dated April 21st, 1978. That's about two years after you started at The Tobacco Institute; correct?
A. Yes, that -- that is correct.
Q. And this is a memorandum by Mr. Judge, the CEO of Lorillard. It was produced out of Dr. Spears' file from Lorillard.
MR. CIRESI: Your Honor, we would offer Exhibit 10165.
MR. BLEAKLEY: No objection.
THE COURT: Court will receive 10165.
Q. Sir, you see the date in the upper right-hand corner, April 21st, 1978?
A. Yes, I do.
Q. And it says "Scientific Research Liaison Committee?"
A. That's what it says, yes, sir.
Q. Now you knew Mr. Judge; did you not?
A. I was acquainted with him, yes, sir.
Q. Was he an honorable man, to use your words?
A. I have no reason to believe he wasn't.
Q. You never saw anything to lead you to that conclusion; did you?
A. No, sir.
Q. As far as you know, whenever he communicated with The Tobacco Institute, he spoke honorably and truthfully?
A. As far as I know, yes, sir.
Q. In this memo he states, number one, "We have again 'abdicated' the scientific research directional management of the Industry to the Lawyers with virtually no involvement on the part of scientists -- scientific or business management side of the business." Do you see that?
A. I see that.
Q. Did you ever have a conversation with Mr. Judge concerning that subject matter?
A. I don't recall any such conversation, no, sir.
Q. Did you ever have a conversation with anyone else in the tobacco industry where they told you that they had turned over scientific research to the lawyers?
A. No, sir.
Q. Did you expect the scientific research that was being conducted at the companies was being conducted by the scientists and directed by the scientists?
A. I really have -- pardon me. I really have no idea how the companies internally conduct their own product research or scientific research. That's something the individual companies would decide for themselves without consulting with us or making us aware of it.
Q. So while all this health issue was going on, you never asked, "How was scientific research conducted at Lorillard?" for example. You never asked that.
A. I never asked specific questions about how research was conducted or how externally-funded research was conducted either, no, sir.
Q. Did you ever ask any of the defendant companies that question?
A. No, sir.
Q. Did you ever ask either Mr. Kornegay or Mr. Chilcote if they knew the answer to that question?
A. Not to the best of my recollection, no, sir.
Q. Did you ever ask anyone at The Tobacco Institute that question?
A. I don't believe so, no, sir.
Q. So during your entire career at The Tobacco Institute, you had no idea how the results that you were provided with regard to research were generated within the companies; isn't that correct?
A. I wasn't privy to knowledge of how research is conducted within the companies, if -- if that's your question, no, sir.
Q. And you never asked anyone; correct?
A. No, sir.
Q. Now --
A. Not to the best of my recollection. Excuse me.
Q. Mr. Judge goes on to state, "Lorillard's management is opposed to the total industry future being in the hands of the Committee of Counsel."
Do you know what the Committee of Counsel is?
A. I'm familiar with the Committee of Counsel.
Q. And what's your understanding of the Committee of Counsel, Mr. Merryman?
A. It's my understanding that that is a group of attorneys from the companies who meet on occasion to discuss issues of common litigation interests.
Q. Is Shook, Hardy, one of the law firms representing the defendants in this case, part of the Committee of Counsel?
A. I'd have to say I think so. I have not ever attended a meeting of the Committee of Counsel --
Q. And they directed --
A. -- so I don't --
Q. -- what research would be done; correct, sir?
A. They what, sir?
Q. They directed what research would be done.
A. Not to the best of my knowledge.
Q. Nobody ever told you that.
A. No, sir.
Q. Let's see what else Mr. Judge says after the last statement. "Lorillard's management is opposed to the total industry future being in the hands of the Committee of Counsel, dash, it's reminiscent of late 1960's when Ramm's group ran the TI" -- that's Tobacco Institute; correct?
A. I assume that's what he means.
Q. -- "CTR and everything else involved with the industry's public posture." Correct?
A. That's what he says, yes, sir.
Q. And you know who Mr. Ramm is?
A. I've heard the name.
Q. And who was he, sir?
A. The Mr. Ramm with whom I'm familiar was an attorney at R. J. Reynolds.
Q. And did you hear that Mr. Ramm and his group ran the TI, CTR, and everything else involved with the industry's public posture during the 1960s?
A. No. This was the only time I've ever seen a reference to that.
Q. Of course you never asked that question; did you, before?
A. And I've never seen it elsewhere, no, sir.
Q. And when you first saw this document, did you ask anybody that question?
A. No, sir, it never occurred to me. I'd never experienced anything like that.
Q. Nobody ever told you about it; is that right, sir?
A. Nobody ever told me of this, no, sir. I have no reason to know whether or not it's true.
Q. Well, you have no reason to believe that Mr. Judge would be lying; do you?
A. I don't know what Mr. Judge is doing here. I can't read his mind.
Q. I didn't ask you to read his mind.
A. I --
Q. Do you have any basis to assert that he was lying when he wrote this?
A. I don't know what Mr. Judge was doing when he wrote this, sir.
Q. But you do know he was an honorable individual.
A. Certainly he was to me, yes, sir.
Q. Would you have liked to have known this before you made public pronouncements regarding smoking and health?
A. Well I'd like to know what Mr. Judge meant when he was writing this, what his state of mind was, what he was thinking about, what other things may have been happening at this time. But I've got no way of knowing.
Q. Would you have wanted to know if the lawyers were conducting -- or describing what type of research should be conducted before you made public pronouncements to the public about smoking and health?
A. Well with respect to research, I think that wherever and whenever there's a good idea for research, it ought to to be followed up on no matter who comes up with it, if it's a lawyer or somebody else.
Q. Well is your answer, then, it wouldn't make any difference to you?
A. It wouldn't make any difference to me who thought up the idea about some research.
Q. Would you have wanted to know that one of the member CEOs of TI felt that the industry had abdicated the scientific research directional management to the lawyers before you made public pronouncements regarding smoking and health? Would you have wanted to know that, sir?
A. I'd like to know what he meant by this, yes, sir.
Q. So you would have wanted to know about this so you could ask him what is this all about; correct?
A. I'd like to know what he had in mind, yes, sir.
Q. And if he had in mind that they had abdicated the responsibility to the lawyers rather than having the scientists do it, that may have affected what you would have s