How Philip Morris, Tobacco Foes Tied the Knot

Moments after lawmakers unveiled landmark legislation last spring to impose the most sweeping regulations on cigarettes in history, two of the people most closely involved in the momentous compromise bumped into each other leaving a press conference on the deal.

Though they were just a few steps from each other outside the Senate’s television studio, Matt Myers and Mark Berlind didn’t shake hands, embrace or even say hello. Instead, they moved silently past each other, carefully avoiding eye contact.

Myers and Berlind may be the biggest winners if Congress approves the tobacco bill this week. But they’re about as comfortable as boys and girls at a sixth-grade dance.

It’s easy to see why: Myers is the president of Campaign for Tobacco Free Kids, a group dedicated to outlawing smoking. Berlind is the chief legislative counsel for Altria Group, the parent of Philip Morris USA, the nation’s leading cigarette maker.

But the awkward encounter that day belies an uncomfortable alliance between the two men and their organizations that has helped to move the tobacco bill closer than ever before to the president’s desk.

In the next few days, Members of Congress will decide whether they will include the compromise tobacco bill in a corporate tax bill that they hope to approve by Friday.

Thanks to separate but equally calculated decisions by Philip Morris and the Campaign for Tobacco Free Kids, each has broken ranks with their typical allies, formed a secret alliance and met clandestinely to iron out key sticking points on the legislation.

“It’s the most unusual alliance I have seen in a while,” said Rep. Henry Waxman, a 15-term Democrat from California and author of the House version of the tobacco bill.

The talks between Philip Morris and the Campaign for Tobacco Free Kids took place on Capitol Hill even as the two sides battled over a $200 billion Justice Department lawsuit in a federal courthouse a few blocks down Pennsylvania Avenue.

The face-to-face negotiating sessions and conference calls were so sensitive that Philip Morris and the Campaign for Tobacco Free Kids refused to tell even their closest allies.

“Guilty as charged, if the charge is did we roll up our sleeves and say, ‘What are we going to accomplish?’ and ‘How do we get there?’” Myers told Roll Call last week.

“We were always hopeful that the original discussions would bear fruit,” added John Scruggs, vice president of government affairs for Altria Group, the parent company of Philip Morris USA, Philip Morris International and Kraft Foods.

But as the encounter in the Capitol last May shows, the two are uneasy bedfellows.

“We would never get in bed with these guys,” said William Corr, executive director of the Campaign for Tobacco Free Kids and a former aide to Senate Minority Leader Tom Daschle (D-S.D.). “Philip Morris is the opponent.”

Added Scruggs, a one-time aide to former Senate Majority Leader Trent Lott (R-Miss.): “It’s far from an alliance. We have a commonality of interests in seeing the same piece of legislation enacted. They are working very hard in support of the same legislation that we happen to be working in support of.”

Despite the comments, Philip Morris and the Campaign for Tobacco Free Kids are well under the sheets on the tobacco bill. But getting them to take off their slippers took years.

The Roots of an Alliance

The seeds of today’s coalition were planted years ago, when executives at Philip Morris and Tobacco Free Kids quietly made separate decisions about how they would deal with tobacco legislation in the future.

At Philip Morris, evidence of a shift emerged in 1998. Facing billions of dollars in lawsuits by smokers and declining cigarette sales, company executives began considering ways to head off future lawsuits and protect their market dominance.

Altria executive Berlind first laid out a case for supporting federal regulations in a 23-page internal memo dated Oct. 1, 1998.

In the memo, Berlind likened the regulation of cigarettes by the Food and Drug Administration to federal oversight of other risky products, such as guns, alcohol and gambling.

Even in the case of firearms, the government didn’t outlaw the products, but instead “largely leaves it to consumers to discern the riskiness of the products by themselves,” according to an internal memo obtained by Roll Call.

Publicly, the company still opposed FDA legislation on Capitol Hill. But the tide was turning.

The transition accelerated a few months later with a Philip Morris public relations campaign called “PM21” — an effort to polish the company’s image.

The firm purchased millions of dollars of antismoking advertisements, funded a range of programs to reduce teen smoking and ramped up its political donations, according to current and former Philip Morris lobbyists.

Support of FDA regulations seemed to be the next logical step in the image campaign, according to a memo from one of Philip Morris’ public relations firms in early 2001.

“Though the nature of the FDA regulation issue does present some challenges for Philip Morris, we believe that it also opens an important opportunity for the company to enhance the Philip Morris corporate image,” said consultant John Brady in a March 2001 memo to lobbyists in Philip Morris’ Washington office.

“The simple fact that other tobacco companies will likely come out on the opposite side of the issue — against FDA regulation — provides Philip Morris with a chance to distinguish itself from its competitors as a good corporate citizen,” the memo continued.

Of course, the new federal regulations also stood to help the company’s bottom line.

Because Philip Morris controls roughly half of the $40 billion annual cigarette market, a ban on cigarette advertising would help the company solidify its grip on the market.

Without the ability to advertise, smaller players such as Brown & Williamson and RJ Reynolds — now Reynolds American Inc. — would have few options to swipe market share from Philip Morris and the world’s most recognized brand, the Marlboro Man.

RJ Reynolds has dubbed the bill the “Marlboro Monopoly Act.”

Philip Morris executives soon cautiously reached out to the company’s longtime adversaries in the antismoking community, including Scott Ballin, a pragmatic antismoking advocate and former chief of the American Heart Association. Ballin had been searching for creative ways to move a tobacco bill through Congress.

In a November 2001, Steven Parrish, the company’s senior vice president for corporate affairs, sent a startling letter to Ballin in which he said Philip Morris wanted to talk to officials in the antismoking community about drafting a bill.

“I know that a true dialogue involves listening and I realize that members of the tobacco industry have not always been good listeners,” Parrish wrote in a letter that Ballin keeps in his office. “I assure you that I want to listen to you, your colleagues ... and others so that we can find a common ground.”

“I had a sense that they were doing internal soul-searching,” Ballin recalled.

Meanwhile, in the penthouse offices of their downtown headquarters not far from Philip Morris, officials of the Campaign for Tobacco Free Kids were undergoing their own change of heart.

After a decade of watching tobacco legislation fail, Myers began to realize that antismoking advocates would never get regulation without changing strategy.

“A lot of these people wanted to hold out for a perfect bill,” said Ballin, who once worked for Tobacco Free Kids. “A perfect bill may be the goal to shoot for, but if you hold out for it you are never going to get it.”

Negotiating With the Enemy

Still, settling on specific language would prove to be difficult for Philip Morris and the antismoking advocates.

The 2001-02 session of Congress ended without legislation. Last year also failed to bear fruit after Sen. Judd Gregg (R-N.H.) failed to forge a deal.

But behind the scenes, a new player emerged who was able to bring the two sides together: Sen. Mike DeWine (R-Ohio).

When Gregg called off talks in the fall of 2003, DeWine quietly reconvened negotiations.

“What we knew was that they were not far apart,” said DeWine, a lifelong health advocate and father of eight. “I always thought that they were close.”

Led by aide Abby Kral, DeWine’s staff pressed Philip Morris, the Campaign for Tobacco Free Kids, national health organizations and other stakeholders to come together on a bill.

Complicating the process for DeWine was the fact that few antismoking officials would agree to negotiate with Philip Morris.

“There is just no benefit to working with them,” said Paul Billings, the vice president of national policy at the American Lung Association. “They still are an evil company. They nearly sell more cigarettes than all other cigarette makers combined.”

One group decided that getting legislation to regulate tobacco was worth the price of negotiating with the enemy: the Campaign for Tobacco Free Kids.

Unbeknownst to their allies in the public health community, representatives of the Tobacco Free Kids spoke with Philip Morris lobbyists several times and met at least once to iron out language that both sides could accept.

“There were meetings and discussions that involved” Philip Morris, said Corr, the No. 2 official in the campaign’s Washington office.

Both sides say most of the talks were arranged by DeWine’s office because officials from Tobacco Free Kids and Philip Morris felt uncomfortable dealing with each other.

Several times, however, Myers spoke directly to Philip Morris officials either face-to-face or by phone. “I believe there was at least one meeting with multiple parties present where both sides were there,” said Myers.

Even the talks over the telephone could be awkward at times. Because neither side wanted to initiate phone calls to the other, Philip Morris and Campaign for Tobacco Free Kids officials relied on intermediaries to set up conference calls so they could talk directly.

Despite the difficulties, both sides say the direct talks were helpful.

“The advantage was that you got to hear what the other side’s concerns were,” Myers said. “I did think that was useful.”

The discussions helped prompt several breakthroughs. For example, Philip Morris agreed to drop its opposition to the FDA’s 1996 rule on the marketing and sales of cigarettes to youths.

Tobacco Free Kids swallowed a provision that gives Congress sole authority to ban cigarettes or to reduce nicotine levels to zero. Many in the antismoking community had wanted to give the FDA that power.

In the end, the two sides settled on a bill that would give the FDA broad new authority to regulate the sale and marketing of cigarettes and other tobacco products.

In another crucial deal, the legislation was paired with language in the Senate that would offer a $10 billion buyout package to U.S. tobacco farmers. This summer, the Senate voted overwhelmingly to add the complete package to a corporate tax bill that must be complete by year’s end.

House and Senate conferees on the corporate tax bill met for the first time Monday night and hope to wrap up the bill by the end of the week.

Though it will be difficult to keep the new tobacco regulations in the tax bill, the negotiations between Philip Morris and Tobacco Free Kids have moved the bill closer than ever before to Congressional approval.

Despite the progress produced by the talks, many antismoking advocates were displeased with what Tobacco Free Kids had done.

“You don’t negotiate with the enemy. You don’t sit down with the tobacco companies,” said Mike Seigel, a Boston University professor with close ties to the antismoking movement. “There is no reason for a public health group to put compromises in a bill unless they are trying to appease Philip Morris in order to retain their support for the bill.”

Officials at Tobacco Free Kids insist that they did not bend to the wishes of Philip Morris. “We have not wavered in the six years we’ve been doing this,” Corr said. “Philip Morris has shifted.”

Added Myers: “There are people whose interests who you normally don’t share but for different reasons are able to agree on legislation — that is what happened here.”

Still, the criticism stings those at Tobacco Free Kids. “You’d love to have support from everyone,” Corr said. “But we think that this is the best that we’ve got. If it helps pass the legislation, then we think that will help the public health. The goal is to get the legislation passed.”

But Myers and Corr have gotten support from an unconventional source. “They are most definitely pursuing this for the public interest,” said Philip Morris’ Scruggs. “They are definitely not pursuing it because they have any sympathy whatsoever for the tobacco industry.”