The Tobacco Master Settlement: That Time We Got Em | STUFF YOU SHOULD KNOW

[00:00:00][music] Welcome to Stuff You Should Know, a production of iHeart Radio.

[00:00:07][music] Hey, and welcome to the podcast. I'm Josh and there's Chuck and [music] Jerry's here, too. And this is Stuff You Should Know. I think part of our ongoing corporate malfeasants edition.

[00:00:21]>> Yeah, for [music] sure. Uh, and the beginning of this episode ties in a lot with uh we did an episode about the history of the cigarette. Sure.

[00:00:29]>> Like just the thing that you shouldn't put in your mouth, but people do, >> right?

[00:00:34]>> Uh and so we're going to talk a little bit about that here at the beginning because you need to know a little bit about that uh as it leads up to what were the, you know, this lawsuits against big tobacco. Uh and we should start by saying that it's been a long time that we've uh known that tobacco and smoking was really bad for you and would kill you. uh like the 1920s we knew for sure, the 1950s we really really knew. And uh in n the 1960s is when John F. Kennedy finally came out uh via his surgeon general Luther Terry and said, "All right, everybody, it's 1964.

[00:01:14]I'm finally going to issue a government report based on, you know, about a dozen studies with lots of data about a million male smokers. and this stuff is really bad for you. So, we're going to have to start putting um warning labels on packages.

[00:01:30]>> Yeah. Uh the great thing about those warning labels though is you were um educated to imagine Sammy Davis Jr.

[00:01:39]saying it in your head.

[00:01:41]>> That's right.

[00:01:42]>> So, um the cigarette companies, this is the beginning of their um playbook. And their playbook was basically nuh-uh.

[00:01:51]>> Yeah.

[00:01:51]>> Prove it. You can't prove it. This is the whole idea of settled science. The idea that which is just a complete um oxymoron. Science is never settled. It's a constant ongoing process. Yeah. But the idea that you have to have 100% definitive proof before you can even begin talking about whether something is harmful or not. Um and really exploiting and manipulating the public through really horrible means. This is where that all started. And then the first response that cigarette companies came up with was to say, "All right, how about we put filters on cigarettes?"

[00:02:26]Because, as everybody knows, cigarettes make your throat kind of scratchy sometimes. They can make you horsearse.

[00:02:32]And that's okay. That's just part of smoking. These new filters are going to help with all of that. And there you go.

[00:02:39]Cigarettes are healthy, everybody.

[00:02:41]>> That's right. Uh in the 60s and 70s, that's when we saw uh lighter cigarettes or low tar cigarettes.

[00:02:48]uh in the ' 50s they got really sort of organized and official about their um uh PR campaigns I guess their propaganda campaigns uh when they formed the tobacco e uh industry research committee um under the guise of studying the health hazards of smoking but it was very much just a PR move um they put out a ad called a frank statement to cigarette smokers early on which said like hey we're really like your health is paramount to us as we sell you cigarettes. It's hard not to laugh because it's just so dumb to think about that people would have bought this.

[00:03:24]>> Yeah. But also just so cynical that they would even see this too, you know.

[00:03:28]>> But they said, "All right, we're really going to pledge to research this everyone because we care about your health." Um, but also again like you can't really prove that it's just a cigarettes. Like how do you know that these people dying of lung cancer didn't also get it from all the other stuff that's going on in the world?

[00:03:44]>> Yeah. And actually that would become kind of codified in what's called the Roper proposal. There was a tobacco institute vice president. So in addition to the tobacco industry research committee, they also came up with the tobacco indust uh tobacco institute and then they renamed the TIRC the council for tobacco research. No word of the industry in it. So it's even more trustworthy. Right.

[00:04:10]>> Mhm. And Fred Panzer was vice president of the Tobacco Institute and he wrote a mo a memo in 1972 that said essentially here's what we should do. We need to create doubt about the health charge without actually denying it. And essentially it's a variation on the theme that the case is not proved. And he said um kind of what you were saying that like these are like you can't really prove that it's cigarettes. So, for example, um extroverts are more likely to smoke cigarettes, but they're also more likely to get out in the world and dropped out dead of a heart attack. So, maybe it's [laughter] just that extroverts smoke cigarettes or that there was one called the constitutional hypothesis that was people who get sick from smoking are biologically predisposed to get sick in general. So, it's really them. This was all just thrown about in 1972 to basically lie to the public and confuse the public about whether or not cigarettes were unhealthy or harmful.

[00:05:09]>> Yeah. So, they're pushing this campaign out uh behind the scenes. They are uh just throwing in the back file drawer every study that they had that showed that nicotine was addictive uh that smoking was bad for you. like they're suppressing that information uh as well as uh at the same time targeting children uh with you know product placement in movies um specifically Superman 2 in 1981 with Marlboro uh obviously we've talked about Camel Joe before in the history of the cigarette >> that was >> what did I say Camel Joe >> I like Camel Joe >> okay >> we should leave all this in there except the beep although there's plenty of those in episodes [laughter] >> yeah let's get the beat out.

[00:05:54]>> Uh, so that was in 1988.

[00:05:57]>> Uh, I like Camel Joe, too.

[00:06:01]>> I always called him Camel Joe. I didn't know that wasn't the name.

[00:06:04]>> I'm sure there's some retired tobacco industry guy who's like, "Man, we should have called him Camel Joe. That is way better."

[00:06:10]>> Uh, here's a Gen X stat for you, which is fairly staggering, but completely believable. Mh.

[00:06:15]>> Um, youth uh, smoking, like kids and teenager smoking had been on the decline kind of through the 70s and 80s for the most part. And then in the '9s when Gen X came around to like prime smoking age, it really jumped. Uh, it hit an all-time high in 1997 of 36.4% of youth were smoking. Uh, adults were smoking at 24.7% at the time. And that's just a staggering number. I think it's at like 3 point something% now. So, Gen Xers were smoking at a rate of 36%.

[00:06:50]>> Yeah. And there's two things that that they suggest had to do with that huge jump in um youth smoking. One was this big campaign and push to target youth smokers. The tobacco industry called them replacement smokers. They would replace the other lifelong smokers that died off from smoking, right? And that's the thing too is like one of the things about smoking very few people start smoking as adults. We call them total morons. Most people who smoke started smoking in adolescence. So the tobacco industry had every incentive to go after kids. They just knew that society would not allow them to do that if they did it overtly. So they had to do it, you know, kind of under the radar with Camel Joe.

[00:07:36]Um the other thing is that there was a price war that started in the mid90s and that they think that um this the drop in the price of cigarettes made it more likely for younger kids to smoke because younger kids are more price sensitive than older people who are smokers.

[00:07:55]>> Remember how cheap cigarettes were back then?

[00:07:57]>> Yeah.

[00:07:57]>> It's like a buck some buck 25 a pack or something >> for sure.

[00:08:02]>> Yeah. I mean I wasn't a regular smoker.

[00:08:04]I occasionally smoked uh as we talked about before. So, I wasn't like buying packs, but I sold them at the Golden Pantry uh in Athens, Georgia on the east side. And cigarettes were cheap and they're somebody told me the other day that they were like 12 to $15 and like 20 something bucks in New York a pack.

[00:08:22]>> I I believe that. I totally believe that.

[00:08:26]>> Well, well, we'll see why here in a minute.

[00:08:28]>> So, yeah. Um, one of the other things too that they're doing at the same time besides suppressing studies, sewing doubt and confusion among the public about the harm of cigarettes, they're just out and out denying publicly that not only are cigarettes not harmful, they're not even addictive. That as recently as 1994, >> yeah, >> they were publicly saying like like the head of Philip Morris was saying in interviews, we do not believe cigarettes are addictive. In the 90s, people had known like all you had to do is ask a smoker back in the 50s if they were addicted to cigarettes and they could tell you that they probably were. Um, and like this the the industry in the '9s still wouldn't >> fess up to that. Like that was their tactic. Just a complete solid wall with zero cracks in it over and over again being reinforced publicly.

[00:09:19]>> Yeah. Actually, in the 1950s, I think they probably said like, "No, I don't think they're addicted, but you have a cigarette. Can I have a cigarette?"

[00:09:25]>> Right. I see a guy over there smoking.

[00:09:26]You think he has an extra cigarette for me?

[00:09:28]>> Right. [laughter] >> Uh, all right. So, in the 1950s, uh, we need to start with sort of lawsuit talk.

[00:09:34]Um, there were a lot of lawsuits, all unsuccessful, uh, by the mid90s when they were still saying that it wasn't addictive. There were at least 400 lawsuits uh, that they never lost, they never settled. They had 100% record.

[00:09:50]>> That's crazy.

[00:09:51]>> Which is staggering to to learn. Um they had obviously a ton of money to to form like the best legal representation they could, but they're also actively lobbying state governments about making it harder to sue about tort reform because like hey tobacco is a natural product. So cigarettes fall into that category. Uh like despite all the other stuff that's in there so you can't sue somebody for packaging a natural thing and selling it to people. Yeah, that was the other thing they were doing too is they were really lobbying um government really effectively. Like they spent a lot of money on lobbyists, right?

[00:10:27]>> Not like now.

[00:10:29]>> So yeah, they were like the teflon dawn um of industries. I guess the tobacco industry was um >> what did you just say? Not like now cuz I I picked up a likeastic.

[00:10:43]Yeah. What were you mentioning? I'm sure they're still pouring tons of money into the lobby.

[00:10:48]>> Oh, sure. Sure. Yeah, I'm sure too.

[00:10:50]>> Um but so they were they were just completely um untouchable. Like I mean if you have a 100% record that in and of itself will prevent people from filing suit against you, right?

[00:11:03]>> Yeah. Because it's expensive.

[00:11:05]>> It is. Right. And you're just like I'm not going to win or the chances of me winning are so low. Um I might not even file suit. So the state also we should mention Congress is doing almost nothing about this at this point. So the state attorneys general um William Sapphire just smiled from heaven.

[00:11:24]>> Uh led by a guy named Michael Moore, he was the attorney general for Mississippi. Uh they got together and they said, "Well, if the the federal government's not going to do anything about it, we're going to Yeah. And one state might not be able to take on the tobacco industry, but every state, territory, and DC together definitely can take on the the tobacco industry.

[00:11:47]And not only can we take them on, we can seriously threaten to bankrupt the entire tobacco industry right out of existence. If we if we really try.

[00:11:58]>> Yeah. And they they played their cards right because they were like, "How can we best go at them?" Uh maybe Medicaid is the way to do it because we have these Medicaid programs uh through our individual states that are not going bankrupt, but they're they're in bad shape in a lot of cases because they're treating all these smokers who are really expensive uh to get through like you know lung cancer treatment and they have deceived us for all these years.

[00:12:24]So, let's go after him for for RICO status, like fraud and racketeering. And that'll that'll send a a shiver uh even through the spine of a teflon dawn, >> right?

[00:12:35]>> And they were turning up uh like L Livby says, like literal truckloads of documents from the industry about them selling to teenagers, burying studies, covering up what they knew about how addictive everything was. And there were I mean this would be a good sort of thriller movie almost like a Soderberg kind of thing. He'd probably do a great job with it where like they're erasing uh like documents out of offices while they're trying to actively like bury these documents. Like I think the the guy from Texas um was literally trying to put papers on a private jet so they could be taken to a district judge before the state court could seal them up because once uh the feds are investigating it can't be sealed at the state level, >> right? Or even if they do seal it at the state level, this federal district judge is like that doesn't apply to me. So I can I can make these public or part of a court case, right? So yeah, I mean yeah, that is like a thriller and there is something that kind of touched on this.

[00:13:33]It was the the insider with um who was the Australian actor who used to get in fights all the time.

[00:13:40]>> Russell Crowe.

[00:13:41]>> Yeah. Russell Crowe is Jeffrey Wigan I think. Yeah. Who was like this whistleblower tobacco industry. It was great. I think that was a Michael Man movie.

[00:13:50]>> Michael Man.

[00:13:52]>> Man, I I nailed it.

[00:13:54]>> You're nailing all of it.

[00:13:55]>> I should be a guest on Movie Crush.

[00:13:57]>> Oh man. If only. But one of the other things you kind of um touched on their strategy like the focusing on lying to the public and targeting teens that was a really smart strategy because if they were just like cigarettes are harmful and we need to get rid of them. A lot of adults are like you don't need to tell me whether I should smoke or not. I can kill myself if I want to. So they left that part alone and they went after the fact that they were targeting teens and lying to the public because the public sentiment can get behind those two things like yeah kids are out of bounds. We don't want them smoking and you know we were lied to all these years by these same people. Yeah, go get them. So that was a really smart strategy that these attorneys general like took on like it was amazing an amazing court angle I think is what they call them.

[00:14:50]What a court angle. Look at that.

[00:14:52][laughter] Uh yeah, for sure. And the writing was on the wall for investors because we're talking about hundreds of billions of dollars at stake.

[00:15:00]>> And they were like, "Hey, this is this is going to look really bad and our stock prices are going to really go in the tank and so you got to cut a deal here."

[00:15:08]>> Uh so in a which the tobacco company never had thought about, you know, because they had not only lost uh uh never lost, they never settled anything.

[00:15:15]Yeah. So, finally in April of 97, uh, they were set to go to trial in a few months, and they're like, "All right, let's get a meeting set up with this Michael Moore character from Mississippi, not the movie guy, obviously."

[00:15:27]>> Sure.

[00:15:27]>> Uh, and an attorney for Tobaccofree Kids who was working with the states about all the the marketing toward, uh, you know, kids with Joe Camel Joe and everybody.

[00:15:36]>> So, they started negotiating like, "All right, out of the gate, let's just say we'll get rid of Camel Joe. We love him.

[00:15:43]Kids love him, but uh, we'll get rid of him." and the Marbor man if that makes you happy >> Kramer.

[00:15:48]>> And then a few months later in June uh they said all right we got to start talking like hash out the money part. So how does 368.5 billion dollars sound over 25 years as just an opening salvo?

[00:16:04]>> Yeah. And the the states were like I was not expecting that actually. Um but they so they were like okay here's the problem though. these are like we need to bring the feds in like that Congress has to approve of this deal the way that we've set it up. And there were some federal aspects to it. One was that the FDA would start regulating tobacco products. Um another one was that the companies, these tobacco companies would be um protected against any further civil and class action lawsuits.

[00:16:35]>> This is the big one. Yeah.

[00:16:36]>> Yeah. In exchange, they would create a fund to pay some of those people off.

[00:16:40]And then there would also be federal restrictions on indoor smoking. And this did not go very far because of that protection of the companies, right?

[00:16:51]Yeah. I mean, that was the the sticking point. I think they could have not too happily lived with the rest of it. Uh but that was that was uh a big one as far as Congress and and soon enough the American people were like, "Uh-uh, we can't have that."

[00:17:04]>> No.

[00:17:05]>> Um so Congress had a bill to ratify or at least considering a bill to ratify it. uh Universal Tobacco Settlement Act uh S1414.

[00:17:13]Uh they were debating it. All this disclosure comes out and they're like, "Man, they were really awful companies and it's worse than we thought even."

[00:17:23]And the idea of them being protected moving forward, like is it going to fly?

[00:17:27]So, the late Senator uh John McCain um said, "All right, how about S1415 where there's more money?" Like, how does 520 billion sound and we're not going to protect you from now on? Like, you're you can be sued moving forward, too.

[00:17:43]>> Yeah. The industry lobbied like they've never lobbyed before to keep this from getting passed through.

[00:17:49]>> Um and again, you mentioned the stock prices when all these stuff this stuff is going on. Their stocks are tanking.

[00:17:55]um when you know there would be a win for in the negotiations for the tobacco companies, their stock prices would go back up. It's all very cynical. Um and they the stock price went back up after um McCain's bill did not get passed. And one of the reasons it wasn't passed is because other senators added like riders that had nothing to do with tobacco. And I'm guessing unpopular writers probably at the behest of the tobacco companies.

[00:18:20]I could not find the writers to save my life. Um to basically sink this bill, you know, like like imagine if you had this great bill and then somebody's like um I'm also adding a writer to repeal the requirement for um child sexual predators from having to register and they can live by schools. Now your bill's not going to pass. And I get the impression that that's kind of what happened to McCain's bill.

[00:18:47]>> Yeah, for sure. Uh there was another thing we just sort of should mention in passing at least. There was another suit in October of 97. This is while they're debating uh these original bills in Congress where they did settle uh it was a separate class action suit that was filed 91 by flight attendants in the United States saying like hey smoking sections and planes are like killing us uh and it's pretty awful. So, um, it was a husband and wife team named, uh, Stanley and Susan Rosenblat who filed this one and they ended up settling for $300 million, uh, to fund medical research. And they said this was a big sort of turning point and that's the first time they officially caved. Yeah.

[00:19:28]>> And again, this is while they're debating these bills in the Congress, >> right?

[00:19:33]>> Uh, Chuck, I feel like we uh, set things up pretty well for a break. Like we deserve an ad.

[00:19:40]We deserve a break today. Let's do it.

[00:19:42]Okay.

[00:19:59][music] Okay. So, um, things are just kind of not going quite well because the whole thing was handed over from the states to Congress and Congress just fumbled it as they do.

[00:20:17]>> Um, so some of the states went on and were like, we're we're going to just keep going and negotiating our own agreements with the tobacco companies.

[00:20:26]Florida, Minnesota, Mississippi, who who had led the charge originally in the first place, and Texas, they all came up with their own settlements in like pretty eyepopping amounts. Texas got se more than 17.5 billion dollars out of their agreement. Minnesota got a nice chunk of change, but they also um had the foresight to say, not only are you going to settle with money, part of this is that you have to disclose um public records, all internal documents that are part of discovery in this process are going to be made public after this. And the tobacco companies had to agree with that. So that was where a lot of these disclosures came from that they had just been lying, lying, lying because these troves of um documents that came up in discovery during these cases just journalists went crazy. It was like a feeding frenzy on them.

[00:21:25]>> Oh yeah, for sure. Um they, you know, saw the writing on the wall once again.

[00:21:30]So they got together with the other remaining states uh who were all plaintiffs at this point uh in November of 1998 and agreed to what would end up being the tobas uh [laughter] tobasco the tobacco oh man the tobasco settlement. Can you imagine the numbers?

[00:21:48]uh the tobacco master settlement agreement, the MSA, >> which would include $26 billion paid out over 25 years to 46 states, five territories in DC.

[00:22:00]>> Yeah.

[00:22:00]>> And they would allocate it according to like how many um smokers they estimated each state had and how much it was still based on the Medicaid thing. So how much they had, you know, had to pay out in Medicaid for all these related costs.

[00:22:13]They said, "We'll also stop targeting miners, even though they really like to smoke, as it turns out, and they love cartoon camels." Uh, so no more cartoon characters in our ads. Uh, we're not going to give away free cigarettes to miners >> at recess, >> which is crazy. Uh, we uh are going to shut down these, you know, sort of shell research companies that that are really just PR firms for us.

[00:22:41]>> Dissolving those. Uh we're going to release all these documents and we're going to create a national foundation to address underage tobacco use and addiction. Uh and we're we promise to care this time.

[00:22:52]>> Yeah. We're a newer, gentler loving tobacco company.

[00:22:56]>> That's right.

[00:22:57]>> Um they also created what's now known as the Truth Initiative, which is this whole teen anti-smoking campaign that was funded originally by tobacco companies.

[00:23:08]>> Those commercials were great.

[00:23:09]>> Yeah, they're still around. the truth initiative is they seem to have migrated online surprisingly.

[00:23:14]>> Yeah, I'm sure.

[00:23:14]>> I mean, I guess it's where kids are these days or something.

[00:23:17]>> That's where the kids are.

[00:23:18]>> Um, and so initially this agreement was just before between these 46 states and territories in DC. Um, and the four largest tobacco companies, which represented the vast majority of the market share of the tobacco industry in the United States, Philip Morris, R.J.

[00:23:35]Reynolds, Brown and Williamson, and Laurelard.

[00:23:39]I'd only heard of two of those.

[00:23:41]>> Uh yeah, for sure. Um I've heard of the other ones, but I cannot tell you what they make.

[00:23:47]>> Okay.

[00:23:47]>> Yeah, no idea.

[00:23:48]>> Let's just leave it at that.

[00:23:49]>> Maybe they make uh bucks. I remember >> remember I think we talked about Bucks in the cigarettes episode, the Golden Pantry. Those were the uh >> those are the ones that I I think the rumor was at least they were just made from the >> sweepings, >> the trimmings and sweepings up of factories. They would just package them as bucks. I'm quite sure that that is true to some degree. There's a kernel of truth in there.

[00:24:11]>> And there's probably kernels of something in those buck cigarettes, too.

[00:24:14]I >> was just about to say that.

[00:24:17]>> So, uh, a bunch of manufacturers were like, "We don't need to take part in this. We didn't do that much damage."

[00:24:22]They're called non-participating manufacturers. They were typically smaller players. I mean, if you weren't one of the big four, you were basically by definition one of the smaller players. But the states were like, "Not so fast. you still are going to have to pay money to us for each cigarette that you sell. And those smaller players, most of them were like, uh, well, maybe we'll sign this master settlement agreement after all. So, they really lassoed like a lot of tobacco manufacturers into this this whole agreement.

[00:24:54]>> Yeah. Uh, if you're wondering about DIP, they had a different agreement, but it was still an agreement kind of under this banner with US Tobacco Company, which makes Skull and Copenhagen.

[00:25:05]>> Uh, did you ever dip at all?

[00:25:07]>> Yes, I did. One thing I never really did was chew. That was I I tried it once and turned as green as you can get.

[00:25:15]>> Yeah, I chewed tobacco early on. We might have spoken about this when I was a a youth group member [laughter] at my church. It was pretty popular. So, I chewed like Red Man and Levi Garrett occasionally. And then here and there in college, I would dip with friends who dipped, but it it never like all nicotine never got its hooks in me.

[00:25:34]Thankfully.

[00:25:35]>> Yeah, that is thankful for sure cuz once it does, it's hard to get rid of.

[00:25:39]>> Yeah, for sure. But uh one difference with the dip companies is uh they were giving out and I remember this is a big deal. They used to just give out reams of uh of dip to minor league baseball and major league baseball. That's why baseball was and other sports too, but baseball was always associated with dipping, but they were like, you can't give this stuff away to like high school and college baseball teams anymore and minor league baseball teams.

[00:26:03]>> Yeah, I think any sports team because like kids look up to them, right? Which is a big part of why they were doing this. So, the sunflower seed companies rejoiced.

[00:26:13]>> Oh, for sure. So, um, there was another thing that came up that was fairly unpopular, but also I think people were just kind of, um, what's not ambivalent, but where you're of two minds and you're kind of tussling over it internally.

[00:26:29]>> Yeah.

[00:26:29]>> The internal tussly, we'll call it. um $5.15 billion went to the National Tobacco Grower Settlement Trust Fund um to compensate tobacco farmers because they were going to sell a lot less tobacco because of this. And >> it's it's interesting to think about.

[00:26:51]>> Yeah. Because you're like on the one hand like who cares? It's tobacco. And then on the other hand you're like these are often family farmers who have been doing this for generations. So I kind of Yeah. I'm tussling internally over it.

[00:27:03]>> What word is it? I know what you're talking about.

[00:27:06]>> Um >> yeah, >> I don't know.

[00:27:09]>> I don't know. Someone write in.

[00:27:11]>> And then one other thing about this too that was part of the provision was people were like, well, what about the federal government? Because Medicaid is this joint state federal partnership and the feds fund a lot of this. And the feds were like, no, we're leaving ourselves out. We're waving any right to any of that money. This is the state's game. And they did a great job with it.

[00:27:30]Yeah. Uh, a lot of, um, public health officials were like not super happy about that, uh, because they were like, "Hey, listen. Unless we have the the feds overseeing this, how do we know what the states are going to use this money for?"

[00:27:44]>> Uh, and, you know, not to tease too aggressively, but I think we'll see in Act three that that was very much a valid concern.

[00:27:51]>> Yeah, for sure. Uh, the feds did come after them, though. They I think this was um they were secretly going to do this when they were like no no we're just gonna leave it to the states and the tobacco companies were like woo >> and the feds were like we have our own thing we're about to do. There was US versus Philip Morris at all >> and they saw billions and billions of dollars in compensation for healthc care money that they had spent out. I guess basically what they had shelled out as part of the Medicaid program. Uh they also went after them for RICO as racketeers and as being um if you're convicted of racketeering as an organization and you're allowed to continue on as an organization, the feds can basically garnish your profits for a very long time or they can go back and seek previous profits. And they did.

[00:28:43]They looked for um they wanted a portion of the company's pro profits from the past 45 years in this case that was um launched in 1999.

[00:28:53]>> Yeah. And in the meantime, Phil Morris was like, "Hey, Phil Morris at all?

[00:29:00]Thanks a lot."

[00:29:01]>> Like, why why is it always got to be us?

[00:29:04][laughter] >> They're like, "You got a great name, Phil." Uh so the companies did not settle this time. and they were like, "All right, we're getting bled dry by the states. Now the feds are coming after us, so we were going to actually fight this thing." Uh, and they lost.

[00:29:18]Uh, in 2006, a district uh, judge for the United States ruled for the DOJ said, "No, you guys are racketeers." Um, I'm going to greatly reduce that financial penalty down to 10 million um, I'm sorry, 10 billion dollars >> from the hundreds they were asking for.

[00:29:34]But you know what? You got to admit to fraud. You have to issue what are called corrective statements. And we got we got to see all those documents because we know there are still more documents in your coffers.

[00:29:45]>> Yeah. I think there's something like 14 million documents that were eventually released, internal documents.

[00:29:52]>> Yeah.

[00:29:53]>> Uh and then finally, remember back as part of like that first settlement agreement that they tried to kick to the feds to ratify, um that part of it was having the FDA Oh yeah. start regulating tobacco. That was in 1998.

[00:30:08]>> Yeah. In 2009, the federal government finally got around to having the FDA regulate the tobacco industry.

[00:30:16]>> Yeah. All right, let's take our second break and we'll come back and talk about what this all meant and means right after this.

[00:30:36]>> [music] [music] >> All right. Uh we promised talk of what it all meant and means and it kind of depends on who you ask uh or or when you ask as well because when it happened um enact the effective national action to control tobacco group said you know what uh and I think other people too like the American Cancer Society the American Psychological Association they all got together and said you know what this isn't so great like that McCain bill really had teeth and that didn't pass and we really wanted it to. So, this is sort of a win for the cigarette companies. Um, it had a lot of like obvious immediate impacts and you know, I talked about, you know, why cigarettes are so expensive now. This is partially why because they're >> what's not going to happen is the investors aren't going to lose any money. So, they're going to say like, "Well, just start jacking up cigarette uh costs and a lot less people are smoking, so let's jack them up even more because we're not going to take a loss on this."

[00:31:42]>> Yeah. What are they going to do? Quit?

[00:31:43]>> Yeah. So, that started almost immediately as far as price hiking. Uh, like450 cents a pack right out of the gate is is was just the tip of the iceberg.

[00:31:54]>> Yeah. I mean, did you say $20 a pack? I I believe it, but that's still eye popping.

[00:32:00]>> I I think a smoker told me they were like 20 bucks in New York, >> but I I haven't verified that. So, um, one of the things that really happened that people point to the MSA, um, as being directly responsible for is that like the youth smoking just dropped precipitously.

[00:32:21]>> Yeah.

[00:32:21]>> Once they removed the ability for tobacco companies to market directly to kids and they simultaneously had anti-smoking campaigns targeted towards kids, like it really had an effect. like you said went from like 34% to 3.8% in 2021. I think it's even lower than that now.

[00:32:40]>> The problem is we didn't learn anything >> that or we didn't leave it open enough to apply to future kinds of tobacco that hadn't been around. So >> companies like Juul and other um ecigarette and vape companies, they're they don't face these same regulations.

[00:32:59]So they can basically market to kids.

[00:33:01]They can use celebrity endorsers and they do, but they still get sued a lot.

[00:33:06]I think Juul paid out 462 million to six different states in 2023.

[00:33:13]So, it's still going on, but um that's been a huge dent in the um the the incredible success of the curbing teen smoking. Um it's gone back up if you include vaping and hookas and stuff like that. But I have also the impression that um kids are a little smarter than we were at at that age. Yeah.

[00:33:35]>> And they're they are seeing through a lot of this and and it's not working quite as well as it did on us in the '9s.

[00:33:42]>> Yeah. And you know more parental oversight and just there's a lot of factors for sure. Um, on the EIGs, I think their day has come a little bit, but I think that that it's really they're in in for some bad stuff moving forward because of just all the uh all the stuff that goes into that juice, you know.

[00:34:01]>> Yeah. Yeah. We we took a pretty solid stand um or position on vaping. I think we were, if I remember correctly, we were opposed to it in our episode on vaping. [laughter] >> Uh that's right. The other thing that the settlements led to was just a just a turning of the tide, not just with kids smoking, but smoking in general, which was what they were after was like, let's just try and get smoking way down overall. And individual states started enacting bans. I think in '98, Utah and California were the first and only ones to say like, "Hey, you can't smoke in restaurants anymore. You can't smoke in public places. Secondhand smoke is a real thing."

[00:34:40]>> And most states have these bans in place now. And people just generally uh look at smoking differently. Like you know when someone lights up in public I guess unless you're in Philadelphia there are a lot of people now that will look sort of like what are you doing dude? Yeah.

[00:34:56]Like >> who who still does that?

[00:34:58]>> Exactly. Or when you flick a cigarette filter out the window when you're done with it.

[00:35:03]>> Jeez.

[00:35:05]>> So >> sorry. I just went to a dark place.

[00:35:08]>> No, I'm with you. I understand.

[00:35:09]>> So upsetting. Especially when one flicks off your windshield and you see a spark bounce.

[00:35:13]>> Well, that's kind of >> Well, just briefly, yes.

[00:35:18]>> So, there was a lot of um a lot of success directly from the master settlement agreement. Let's talk about the problems with the master settlement agreement because a lot of people are like, "This could have been done better.

[00:35:30]We should have done the McCain bill, right?" And then really importantly, there were only a couple of states that had the foresight to designate the payments from the um the master settlement agreement from the tobacco companies that are made annually in perpetuity. I hadn't realized this.

[00:35:49]There's no end date to these payments as far as I know. Um which I don't fully understand because I think they settled on like an actual number, right? So, that doesn't quite make sense to me, but I've seen in multiple places that these are in perpetuity payments. Um, >> yeah, the the only thing I can figure out there is they're like, "Hey, you're still selling cigarettes and this is still a problem for Medicaid, so it's not like that's ever going to stop."

[00:36:14]That's the only thing I can figure out.

[00:36:16]>> Yeah, I've got that. I I get that, too.

[00:36:17]I think that that's probably it. That's the best argument for it. But then, does that mean that their ultimate payouts are going to exceed that the the hundreds of billions of dollars that they agreed to pay out to the state?

[00:36:29]it's over 25 years. Like that's that's the part I don't get.

[00:36:33]>> But the the problem is is that the states, very few states actually said this money is designated for anti-smoking programs to pay for um health care for smokers or to to to repay public costs for health care that we we spend on smokers. Um a lot of states don't do that. And in fact, most of the states use it to like fill budget gaps, to build new roads. If they're strapped, they do something called securization where they sell bonds against their future annual payment from the tobacco companies. Did you see that?

[00:37:08]>> Yeah. Yeah. That's kind of uh you know, it's a it's a shell game with the government in a way in a lot of ways, I think.

[00:37:15]>> Yeah. Because not only are they I mean it's just unseammly in the first place, but secondly, when those bonds come due, when they get that master settlement agreement annual payment to the state, they have to pay out not just the face value of the bonds that they sold, they have to use some of that money to pay the interest, too. So the state's getting less than it would have if it didn't sell those bonds ahead of time, right? So that's that I think that's a sign of poor management of a state, typically if you ask me.

[00:37:44]Yeah, for sure. Uh I think in the end less than 3% of these funds uh have gone to smoking prevention and cessation programs, which was a lot of the reason they initially said they were, you know, going to do this.

[00:37:58]>> Uh and uh I think no state has funded anti-tobacco programs at uh CDC recommended levels at all.

[00:38:07]>> Right. And some states even use them to help the tobacco industry. I know North Carolina, >> oh man, >> they spent $45 billion, I think, on um modernizing tobacco farms. Not, hey, here's money for your losses. And I think I said 45 billion. 45 million.

[00:38:26]>> 42 million.

[00:38:27]>> 42 million.

[00:38:28]>> Um not like here's some money to compensate you for your losses. Here's some money to get better at tobacco farming for the future. That's what this that's what North Carolina spent some of its money on.

[00:38:39]Yeah, I think North Carolina, uh, big tobacco state, obviously, they used 75% of their settlement funds for tobacco production.

[00:38:47]>> That's crazy.

[00:38:48]>> Uh, some of that to private tobacco producers, like you talked about that had taken a hit. Uh, but also, yeah, like you said, like, hey, you want a tobacco museum? [laughter] We'll build it with that money, >> right? And if we build it, they will come. The tobacco company.

[00:39:05]>> Oh, man. It's hard to believe on that one.

[00:39:07]>> There's another thing, too. like tobacco companies haven't exactly paid out all this money. They were supposed to pay out the couple hundred I think what was it 300 something billion dollars over 25 years as part of the settlement in 1998.

[00:39:20]They have paid out according to a press release from Vermont's um attorney general office 175 billion. So I think less than half of what they said and it's been a lot longer than 25 years now, right?

[00:39:34]>> And one of the reasons why is because part of the agreement the tobacco companies there are two calculations that have to be taken into account.

[00:39:45]There has to be an inflation calculation that that adjusts for inflation so that the states are getting their actual value of the dollars that the tobacco companies agreed to. That makes sense.

[00:39:56]There's also a sales formula that they have to calculate every year for to take into account the amount of profits that they're losing to companies that aren't part of the master settlement agreement and therefore aren't hamstrung by those payments. Which means that in some cases, some years there have been um the sales calculation has been larger than the inflation calculation, right? So the states have shouldered the the burden of competition for these tobacco companies.

[00:40:32]Like the states took on that loss for the tobacco companies, which is just disgusting to me.

[00:40:38]>> Yeah. And you know, when you just think about what's happened with the raising the cost of cigarettes, there's a lot of people that look at the settlement of like, well, now you're just getting like the tobacco companies aren't paying states. Like people who still smoke cigarettes are just funneling money through the tobacco companies to the states.

[00:40:56]>> Yeah, that's a that's a great way to put it.

[00:40:59]Um, okay, Chuck. So, one of the other things the legacies of the master settlement agreement is it it created a blueprint. I think you said this kind of early on. um for other ways that states could get together and create real change against corporate malfeasants.

[00:41:16]>> Specifically again in cases where there is harm that comes directly from using a product as directed or intended, right?

[00:41:26]Not abusing it or something. You're just using it like it's supposed to be used and you're being harmed. So you have things like um social media, opioids, climate change is a trickier one. uh but fast food. And the reason why also they fit this master settlement agreement framework is these companies are following like a lot of the same techniques that the tobacco industry laid down back starting back in the 50s.

[00:41:52]>> Yeah. It's interesting because there's there are two playbooks. Uh on the one side, you have the government now that's like, "All right, now we got a playbook moving forward so we can sue uh Meta uh about social media and the harms to to children and the fact that they know they're targeting children and harming children >> or opioids of course uh with the pharmaceutical companies, but then there's that other playbook like you were talking about where they were they end up getting sued, but Meta and the pharmaceutical companies were like, "Hey, you know what? If we can get kids hooked on this stuff and market to children, >> uh, then we can make a lot more money for our investors.

[00:42:30]>> Yeah. A good example of that, not necessarily targeting children, but of just this completely screwing up the narrative for their own gain at the at the expense of people's lives. The opioid um pharmaceutical industry with opioids uh basically floated this idea called pseudo addiction to where the people who were supposedly addicted to opioids weren't actually addicted. What was happening is that their pain wasn't being managed adequately. That's why they needed to take more and were going around from doctor to doctor and the answer, the solution was to up their dose.

[00:43:05]>> Don't cut them off. Don't put them in treatment. Up their dose. That's what they really need because it's not real addiction because you can't get addicted to opioids. They actually publicly said stuff like that.

[00:43:15]>> And I mean, that's cause to go after them alone, you know.

[00:43:19]>> Yeah. I mean, yeah. just as despicable as uh any of these huge corporations sort of issuing these uh really flimsy denials that the public just it just makes them look worse, you know, the public doesn't buy this stuff.

[00:43:34]>> Yeah, it's true. Now I think we did before. Yeah. You know.

[00:43:38]>> Yeah, you're probably right.

[00:43:40]>> Um you got anything else?

[00:43:42]>> I got nothing else. That's uh this is we got to Yeah, I feel like this is in a suite of episodes we've done over the years. Josh and Chuck take on the world.

[00:43:52]>> Big industry. Uh, well, Chuck doesn't have anything else. Chuck said the world and I said big industry. So, that combination obviously unlocked listener mail.

[00:44:04]>> Uh, hey guys. Amongst my favorite things, and that's favorite with an OU, so I think I know where Rebecca is from.

[00:44:10]>> Mhm.

[00:44:12]>> Or at least, you know, one of a few places she could be from. Uh, one of my favorite things about stuff you should know is Josh's jokes that don't land.

[00:44:21]Wow. All right. Uh, absolutely hates my [music] jokes that don't land, by the way. So, you should feel good.

[00:44:27]>> And counting how many No, no, no.

[00:44:29]>> Okay.

[00:44:30]>> Uh, and counting how many times Chuck says that's right in an episode. I guess I feel like I say sure more than more than that's right. [music] But >> you say for sure. For sure.

[00:44:39]>> Yeah, for sure.

[00:44:40]>> But just one time I was adding a for sure to the first for sure.

[00:44:44]>> For sure. Uh, my absolute favorite thing though, guys, have [music] has to be the interlude jingles before and after.

[00:44:49]Yeah, I love how the jingle always matches the theme of the show. For example, the short stuff [music] on the benefits of singing in a group had the barberhop quartet episode about Shakespeare had the green sleeve style jingle and schoolhouse rock had the Queen style jingle.

[00:45:02]>> Uh, my favorite one might have been the techno [music] punk jingles on the cyberpunk episode which was fantastic.

[00:45:08]>> All that to say, shout out to Jerry [music] and the folks who produced these. They are appreciated. And uh Rebecca, I'm glad you brought this up.

[00:45:15]We said it a lot over the years, but uh it always bears repeating that, you know, these are written by Stuff You Should Know listers and produced and performed and we just get these and people are like, "Hey, use this thing. I made it as a love letter to the show and then Jerry does a great job of selecting the episodes where it has a nice fit."

[00:45:32]So, uh we always like reiterating this is how it works. Uh, and Rebecca sends kindest regards and [music] a PS shout out to Rebecca's twin sister, Lauren, who introduced Rebecca to Stuff You Should Know many years ago, and they have been regularly discussing episodes weekly since.

[00:45:49]>> That's awesome. Um, yeah, thank you. We love it when a family member or friend turns somebody on to stuff you should know and then they end up talking about it or listening together. That's kind of the point.

[00:46:01]>> That's how a community is formed, everybody. Also, shout out to Dave and Ben, too, who also do a pretty boss job of selecting jingles, but I think Jerry's probably the goat.

[00:46:11]>> Agreed.

[00:46:12]>> Uh, if you want to be like Rebecca and by proxy Lauren, um, and get in [music] touch with us via email, all you have to do is send it off to stuffodcast.com.

[00:46:26]Stuff you should know is a production of iheartradio. [music] For more podcasts, iHeart Radio, visit the iHeart Radio app, Apple Podcasts, or wherever you listen to your favorite [music] shows.