On the one-month anniversary of the September 11 terrorist attacks, the tobacco industry took aim at Congress’s first effort to respond to the crisis with a major piece of new legislation-what would later become the USA Patriot Act. On the morning of October 11, GOP Representative Michael Oxley of Ohio, chairman of the House Financial Services Committee, brought what was then called the “Financial Anti-Terrorist Act” before his committee. The bill was intended to strengthen the hand of US law enforcement in going after what the Bush administration called “the financial sources of terrorism.” It tightened US restrictions on money laundering, demanded greater transparency in US financial institutions and provided new levers for law enforcement to track international money trails used by terrorist and criminal organizations.
What the bill Oxley presented that day did not contain was Section 107(B), which was part of the act when it was first introduced on October 3, and which would have expanded the definition of money laundering to include “fraud or any scheme to defraud against a foreign government or foreign government entity, if such conduct would constitute a violation of this title if it were committed in interstate commerce in the United States.” Why? The section, which the Justice Department had requested to aid its crackdown on money laundering, would have rendered major tobacco companies accused of smuggling cigarettes overseas extremely vulnerable to legal challenge, and they wanted it out.
At the time, the tobacco companies were facing legal assaults on several fronts. On the docket at the US federal courthouse in New York City were two cases being argued in parallel: Twenty-two Colombian states and the city of Bogot´, and ten European governments-including France, Germany, Italy, Spain and Greece-had accused Philip Morris, RJ Reynolds and British American Tobacco of defrauding their governments of hundreds of millions of dollars in tax revenues and of taking the illicit profits back to the United States, which would constitute money laundering. In Colombia, as in Europe, the bulk of cigarette taxes are used to fund education and health programs, many of which deal with the health effects of smoking.
Since the cases were filed in 2000, the tobacco industry’s lawyers have argued that they should be dismissed, citing a legal precedent known as the “revenue rule,” which states that US courts have no jurisdiction over matters related to the collection of foreign taxes. The Patriot Act provision would have trumped the revenue rule and provided clear legal standing to the plaintiffs in those lawsuits. But it was not to be. According to a Congressional source close to the negotiations, Representative Oxley removed the provision from the bill at the behest of the White House and GOP whip Tom DeLay, under pressure from big tobacco.
“The tobacco companies didn’t care that in striking that provision they might have opened the American people to greater risk of a terrorist attack and funding terrorist groups that might attack our own people,” Congressman Henry Waxman, who has been a leading antagonist of the tobacco industry in Congress, commented in an interview last month. “They wanted to make sure that that provision would not have been interpreted to give standing to these foreign countries.” In a letter sent to me by Philip Morris’s director of public communications John Sorrells, the company did not dispute the latter point, but insisted that the changes were supported by the “business community at large”-which has long been concerned with issues of foreign liability. It vigorously denied that the change would hamper “the government’s ability to bring suits to combat terrorism.”