Big tobacco suffered another legal setback yesterday.
A federal judge ruled that the U.S. government can try to seize $280 billion in past profits the tobacco industry reaped as part of a federal racketeering suit against the cigarette makers.
The news pummeled shares of tobacco companies, including Philip Morris parent Altria and R.J. Reynolds.
In a ruling made public yesterday, U.S. District Court Judge Gladys Kessler denied a motion filed by the tobacco companies seeking to throw out the government’s claim.
“Disgorgement is designed to deprive a wrongdoer of his unjust enrichment and to deter others from violating the law,” Kessler wrote.
The decision gives the government a green light to go after profits the companies made by allegedly selling cigarettes to adults who began smoking as kids. A trial is set for September.
Altria and R.J. Reynolds both said they are considering appealing Kessler’s ruling.
The tobacco companies had argued that the government had to distinguish between “ill-gotten gains” and legal profits. The industry also argued that the federal racketeering law restricted the government to going after money that was being used to fund wrongdoing.
The government sued the cigarette companies in 1999, claiming that the industry lied to the American public for years about the risks of smoking. Aside from money, the government is seeking to impose regulations that would limit advertising, packaging and the nicotine in cigarettes.