Tobacco Chief Warns Of Price Hike

June 13, 2000 - The head of the nation's No. 1 tobacco company told a jury Tuesday he will have to raise cigarette prices if ordered to pay a damage award.

"There's no bank in the world that will loan us money, pending resolution of cases like this," Philip Morris President and CEO Michael Szymanczyk said during his second day of testimony. "To pay the money, you have to collect it from somewhere."

His testimony is part of a bid to dissuade the jury from requesting billions of dollars in punitive damages on behalf of 300,000 to 500,000 sick Florida smokers.

The six-member jury has already awarded $12.7 million in compensatory damages to three people in the nation's first class-action suit by sick smokers to go to trial.

Under cross-examination by smokers' attorney Stanley Rosenblatt, Szymanczyk said the tobacco companies have already been punished enough, citing the 1998 agreement in which cigarette makers paid $254 billion to settle state lawsuits. Circuit Judge Robert Kaye quickly reminded him that that agreement was not punishment because the industry settled voluntarily.

When Rosenblatt asked again whether the industry should be punished for creating a defective product and hiding the truth about the risks of smoking, Szymanczyk replied, "Not in this case because my understanding of punitive damages is to change behavior and punish."

He said the industry has already changed the way it markets cigarettes.

"You don't think you should be punished for 50 years (of bad behavior) because you're good guys today?" Rosenblatt asked.

"The things we're doing are the right things ... we should be left to do those things," Szymanczyk said.

When Rosenblatt asked Szymanczyk if he would apologize for the industry, the executive said, "It would be pretty insincere," explaining he has only run the company for three years.

Szymanczyk also admitted that smoking is addictive, but not under Rosenblatt's definition of addiction being a habit one cannot quit.

"Most people who want to quit smoking can quit," Szymanczyk said, adding that he defines addiction as a repetitive behavior that people have difficulty stopping. "Smoking is addictive as the word is commonly used."

Szymanczyk, 51, began testifying Monday as the first of five tobacco executives lined up to tell the jury about how their companies have reformed in the face of lawsuits and public criticism. His testimony was scheduled to continue Wednesday.

The appearance of Szymanczyk, and the planned testimony of the other tobacco CEOs, underscored the trial's importance. Tobacco executives generally keep low public profiles and rarely testify under oath.

Witnesses for the sick smokers have estimated the five tobacco companies being sued could raise $150 billion to $157 billion to pay a punitive damages verdict. Those figures would dwarf the national punitive dmages record of $3 billion, assessed against Texaco in 1987.

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