Historic Lawsuit Against Philip Morris USA on Behalf of U.S.Government Charges Violations of the False Claims Act in MilitaryDealings; Pending Court Ruling
Alleged Overcharges by Philip Morris Diminish Funding for Programs Benefitting Military Families
WASHINGTON, DC, Nov 13, 2012 (Menafn - MARKETWIRE via COMTEX) --Citing "knowing violations" and "wanton, willful and recklessdisregard" of contractual agreements with the U.S. military thatultimately deprived millions of dollars in funding for programs foractive duty and retired military personnel and their families, alawsuit filed against Philip Morris USA Inc. (PM USA) by AnthonyOliver on behalf of the U.S. government is currently pending a rulingby the U.S. District Court, District of Columbia. The complaint wasfiled under the False Claims Act that allows individuals to effectlegal action on behalf of the government ("writ of qui tam") and isthe first known lawsuit of its type ever filed against PM.
The complaint states that PM USA has been selling its cigarettes tothe military at prices significantly higher than what civiliandistributors are charged. A particularly disturbing effect of PMUSA's behavior is the significant reduction of funding for programssponsored by the military services' Morale, Welfare and Recreation(MWR) Fund. MWR funding derives in part from tobacco profits from themilitary exchanges. Consequently, the victims of these False Claimsare not the smoker, but all servicemen and women and their familieswho benefit from MWR-funded services.
According to the complaint, PM USA charged the higher prices to themilitary despite most favorable customer warranties stipulated in PMUSA's long standing agreements with the Navy Exchange Service Command(NEXCOM) and the Army and Air Forces Exchange Services (AAFES). Theseentities, two components of the U.S. Department of Defense SupplySystems Command, provide goods and services to active duty andretired soldiers, sailors, airmen and marines.
As a result, the complaint maintains that PM USA has "charged NEXCOMand AAFES millions of dollars more, annually, for its cigaretteproducts than has been paid by either defendant's affiliatespurchasing such products or foreign purchasers buying suchproducts..." The complaint also contends that PM USA "falselywarranted" that it was in compliance with price warranties as part ofits agreements with NEXCOM and AAFES.
While the lawsuit seeks unspecified damages, the False Claims Actprovides six years of retroactively applied recovery for thegovernment of three times the cumulative overcharge plus up to10,000 per occurrence. The suit estimates that, for Marlborocigarettes alone, AAFES and NEXCOM purchased approximately 1.8million cartons annually overseas "...at improperly inflated pricespursuant to defendant's false claims and false statements."
In its July 27, 2012 response attempting to get the legal actiondismissed, PM USA called the complaint a "strike suit" by a"disgruntled competitor." PM USA then proffered a labyrinth ofoften-contradictory reasons to explain how its pricing structure tothe military does not violate the False Claims Act.
"I will not remark on PM's preposterous personal attack on me today,"Oliver stated, "but our opposition memo to the court efficientlyunravels their obfuscations and absurd explanations. For example, inits motion to dismiss, PM USA maintains 'managing the SurgeonGeneral's Warning' is justification for a higher price to themilitary compared to civilian market distributors. How exactly isthat so when civilian market distributors purchase the very sameproduct with the identical warning at a much lower price?"
Responding to another meritless argument from PM USA that boasts thegovernment continues to contract with Philip Morris, Oliver againcited his Opposition Memo to the Motion to Dismiss: "...the existenceof continuing contracts between Philip Morris and the militaryexchanges can be explained by Philip Morris's policy of restrictingits civilian market distributors from selling to the military."International distributors will not defy Philip Morris' instructionsand jeopardize their lucrative direct purchase privileges with PhilipMorris or Philip Morris affiliates. This fact, the Oliver oppositionmemo explains, "leaves the government with only two options -- toeither buy Philip Morris cigarettes directly from it [at any price]or to abandon the world's top-selling cigarette brands."
"In other words, Philip Morris has engineered both a price and supplychain chokehold on the United States military. This lawsuit is acivic duty intended to stop a charade -- a charade that has reducedfunding by millions of dollars to the military's Morale, Welfare &Recreation programs," Oliver stated.
Mr. Oliver filed the complaint in 2008 which resulted in a four-yearDepartment of Justice investigation. The Department of Justice hasreserved its right to intervene.
Mr. Oliver and the interests of the U.S. government are representedby Zuckerman Spaeder LLP of Washington, D.C., Silver Golub andTeitell LLP of Stamford, Connecticut and John F. Murphy of Hartford,Connecticut. Anthony Oliver is President and CEO of Kick Cigarettes,an independent cigarette manufacturer and supplier to the U.S.government, and is CEO of HONCHO Brands, which markets e-cigars.
The complaint filed is Case # 08 0034 (CKK).
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SOURCE: Anthony Oliver
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