An Inside Look at Battles of Big Tobacco

A new cache of internal documents details the tobacco industry’s long obsession with California’s smoking wars and its palpable fear that adverse legislation, if not killed in this bellwether state, would spread throughout the country.

Covering parts of three decades of tobacco politics in California, the documents describe the industry’s herculean efforts to defeat, then blunt, the effects of the state’s tobacco tax initiative, Proposition 99. That landmark 1988 ballot measure was the nation’s first law to earmark tobacco taxes for anti-smoking programs.

Included are memos lamenting the steady erosion of industry power following voter approval of the law, which vastly increased the financial resources of local health agencies and anti-smoking groups.

Beginning within days of Proposition 99’s passage and continuing through the 1990s, the industry tried mightily--with some success--during the annual state budget process to divert tobacco tax money away from anti-tobacco efforts to various health care programs.

Aiding the industry in this effort was its Sacramento lobby corps, including Nielsen, Merksamer, a top political law and lobbying firm that counts among its clients Gov. Pete Wilson and an array of business interests.

While the tobacco industry had clout in Sacramento, it was hamstrung by local groups, many of them funded by Proposition 99, that fought to impose local smoking bans. A 1992 Tobacco Institute memo says it had become “physically impossible” to attend all the hearings on smoking ordinances, “let alone mount successful opposition campaigns.”

The papers are among 33 million pages produced by the tobacco industry in response to a major lawsuit by the state of Minnesota. They were obtained from a document depository in Minneapolis by an aide to Stanton Glantz, a medical school professor at UC San Francisco, who provided them to The Times.

The documents reveal how the nation’s big cigarette makers sought to strike unusual alliances with other groups that also had a vested interest in diverting tobacco tax funds.

One such group was the California Medical Assn.--although representatives of the influential physicians’ organization say there never was such an alliance.

The documents also highlight the role that the Dolphin Group, a Los Angeles consulting firm, has played in representing the interests of tobacco giant Philip Morris in California. The Dolphin Group now runs the gubernatorial campaign of Republican Atty. Gen. Dan Lungren.

Nation’s Biggest Tobacco Market

The preoccupation with California is easy to understand. Although the percentage of state residents who smoke is below the national average, California, with its huge population, remains the nation’s biggest tobacco market. Several counties account for more business than most states.

“While we’re involved everywhere, California is a very significant market for us,” Philip Morris spokesman Brendan McCormick said in an interview Friday.

Representatives of Dolphin and Nielsen, Merksamer declined to comment.

Almost from the day Proposition 99 passed, industry memos bemoaned lost power due to the vast infusion of money--roughly $450 million a year--that flowed into state coffers, with much of it funneled to local health agencies and private anti-smoking groups.

“The environment for the sale and use of tobacco products in California continues to deteriorate,” lamented a 1991 memo from the Tobacco Institute, the main tobacco industry trade group. “And because California serves as a bellwether state, tobacco-related steps taken there often find their way into other states.”

Glantz, a leader in the anti-tobacco movement, said he was particularly outraged by industry efforts to enlist the California Medical Assn. “It lets you into the back room to let you see what they were really doing,” Glantz said of the documents.

It’s not clear from the records whether the doctors’ group actually did tobacco industry bidding. However, earlier in the 1990s, the medical association did lobby Wilson and the Legislature to shift millions of Proposition 99 money away from some anti-tobacco programs and into care for indigents.

Steven Thompson, the medical association’s chief lobbyist, noted that the group had been at odds with some anti-tobacco groups over use of Proposition 99 funds for indigent health care, but if that dispute aided the tobacco forces, “that is accidental.”

The documents date from 1977 to 1994. They trace the industry’s early success in killing measures to restrict public smoking, and end in late 1994 with the trouncing of Proposition 188, the tobacco industry-backed initiative that would have overturned California’s statewide workplace smoking ban.

According to a 1987 memo, when industry lobbyists faced Proposition 99, they noted with a measure of pride that in a prelude to the initiative war, a bill to raise tobacco taxes failed to get a single vote in its first committee hearing. That reinforced the message “that it will always be a long and grueling battle when you take on tobacco.”

In the memo, the lobby firm A-K Associates described its effort to keep wealthy potential supporters of Proposition 99, such as organized labor and the California Medical Assn., on the sidelines.

According to the memo, the California Medical Assn. talked of spending $1 million on the initiative but had been dissuaded through intimidation tactics. Medical association executives said the group never was committed to spending such sums.

The memo raised the possibility that to dissuade the medical association from donating heavily, the doctors’ group would be threatened by “punitive action,” including “anti-medicine initiatives or legislation.” To underscore the threat, the memo said, lobbyists met with lawmakers and arranged “to have anti-medicine legislation drafted and leaked to the right CMA leaders.”

“There was some of that that surfaced,” recalled Jay Michael, then chief lobbyist for the medical association. “Frankly, it didn’t intimidate us in any way.”

The medical association donated $82,000 to the yes-on-Proposition 99 campaign. Even though the industry spent $26 million to defeat Proposition 99, voters approved it.

In later years, several other states, including Massachusetts, Arizona and Oregon, patterned tobacco tax ballot measures after Proposition 99.

Prop. 99 Was a Double Whammy

Because cigarette taxes cut into sales, the industry fiercely resists increases. However, traditionally such hikes have contained a small silver lining, because government dependence on tobacco taxes created a vested interest in a prosperous tobacco industry.

However, Proposition 99 contained a double whammy. Cigarette consumption would take two hits, one from the tax increase, and a second because the money would fund anti-smoking programs.

So the industry immediately turned its attention to diverting the tax revenues from “unacceptable” anti-smoking programs, as one memo called them, to general government uses.

“Restrictive language should be added to ensure these funds are spent on the truly needy,” said a Nielsen, Merksamer memo dated a month after Proposition 99 passed.

In this regard, the industry had some success. Gov. George Deukmejian and Wilson each diverted funds from anti-smoking efforts to other health programs, leading to a spate of lawsuits by anti-smoking groups.

“The Wilson administration has consistently made decisions based on sound policy,” and not aimed at accommodating cigarette makers, Wilson spokesman Sean Walsh said Friday.

Stage Set for Workplace Ban

In memos and reports in the years following passage of Proposition 99, tobacco lobbyists and officials repeatedly portrayed themselves as overwhelmed by a surge in local ordinances to restrict smoking that they attributed to Proposition 99 funds.

The David and Goliath imagery was no longer accurate. The industry more closely resembled Gulliver, tied down by an army of Lilliputians.

“Resources are stretched so thin that things will just begin to happen by default,” said a tobacco institute memo in September 1990.

In turn, the mushrooming of local smoking curbs set the stage for what, from the industry’s perspective, was a disastrous state law--the workplace smoking ban known as AB 13, carried by former Los Angeles Assemblyman Terry Friedman.

In a series of e-mail exchanges from late 1993, Philip Morris executives discussed the “dire . . . situation,” explaining how a pending vote in San Francisco on a local smoking ban would make it easier for state legislators to support AB 13.

Los Angeles, Sacramento, and San Jose already had tough public smoking laws. Philip Morris official David Laufer added in another e-mail that smoking bans in the largest population centers would make AB 13 “all the more appealing and easy to enact when [legislative] session reconvenes in early January 1994.”

The San Francisco law did pass. So did AB 13.

With Philip Morris in the lead, the industry then embarked on an attempt to overturn AB 13 by pushing a 1994 initiative, Proposition 188. The industry spent almost $20 million on the effort, only to have it defeated overwhelmingly.

Industry operatives next turned to combating AB 13. A “California Action Plan” prepared in late 1994 for Philip Morris by the Dolphin Group, called for steps to “safeguard bars and taverns against the threat of a total smoking ban.”

As it turned out, the ban was extended to bars and taverns at the start of this year. The industry, with the help of Dolphin and other operatives, is involved in a big-spending campaign to convince lawmakers to repeal the ban on smoking in bars.

Another prominent Dolphin client, Lungren, was strongly criticized last year for being among the last of 40 state attorneys general to sue cigarette makers on behalf of state taxpayers. Critics pointed to the Dolphin connection as evidence that Lungren was cozy with Big Tobacco.

Lungren, who has denied any pro-tobacco sentiments, eventually did file a lawsuit, which is scheduled for trial early next year.