N.Y. Judge Places Tobacco Institute Under
Control of Receiver

By Bill McAllister, Washington Post Staff Writer
Copyright 1998 The Washington Post
May 3, 1998

The Tobacco Institute, the Washington trade group that for nearly 40 years has fought efforts to brand tobacco as a health hazard, has been placed under control of a temporary receiver by a New York state judge for allegedly abusing its tax-exempt status.

The unusual action Friday by state Supreme Court Judge Stephen Crane was in response to a complaint by New York Attorney General Dennis C. Vacco that the institute and the Council for Tobacco Research USA Inc. are tobacco-funded "fronts" that serve "as propaganda arms of the industry." Vacco said both organizations have abused their tax-exempt status under New York law, where they were incorporated.

Thomas Lauria, a spokesman for the Tobacco Institute, said yesterday the group had done nothing to violate its status as a nonprofit organization under New York law and would challenge the receivership at a June 8 court hearing. "Evidently Mr. Vacco does not believe we should participate in the process of addressing government-public issues," Lauria said.

The attorney general charged in a statement Thursday that the institute, which is based at 1875 Eye St. NW, and the research group "together fed the public a pack of lies in an underhanded effort to promote smoking and addict our kids." Because they promoted the profit-making efforts of the tobacco industry, Vacco said, they should lose their nonprofit status.

On Friday, Vacco petitioned the Manhattan court to dissolve the two groups' charters as part of a lawsuit he had filed against them and seven tobacco companies in January. Judge Crane responded by naming Milton S. Gould, 88, a partner at LeBoeuf Lamb Greene & MacRae, to take control of the Tobacco Institute, and retired state Supreme Court justice Walter M. Schackman, 71, to oversee the Council for Tobacco Research. On June 8, Crane will decide whether to make their appointments permanent.

"This action begins a process that will ensure that the tobacco industry will no longer be able to continue to finance their propaganda machine at taxpayer expense," Vacco said.

"It is quite a victory for Vacco," Stephen Gillers, a New York University law professor, told Newsday. "The Tobacco Institute and the Council for Tobacco Research are viewed by the anti-tobacco activists as twin evils and responsible for suppression of much of the negative research about cigarettes. Vacco has essentially immobilized them, at least temporarily."

In a news conference Thursday, Vacco charged that the Tobacco Institute "was established specifically to create controversy and doubt about health claims associated with smoking and to design public relations campaigns to mislead and deflect criticism about the tobacco industry."

Both the institute and the research organization that Vacco sued were supposed to disappear under the agreement that the state attorneys general reached last year with the tobacco industry. The agreement has not been ratified by Congress, but under its terms, the industry would be allowed to replace the institute, its primary lobbying and public relations arm, with another organization, provided 20 percent of its new board of directors come from outside the industry.

The appointment of a receiver to oversee the institute caught its officials by surprise, Lauria said. But he said the organization is not about to give up or leave the tobacco industry without a voice in Washington.

"We believe that every citizen, every interest group, has a right to form a trade association and to address public policy issues in a public forum," said Lauria. As for Vacco's charges that the institute was a sham, Lauria said: "As a trade association, we have always reflected the industry point of view. Every trade association does that."

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