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• Anthony Pidgeon

  

  UCSF professor and anti-tobacco activist Dr. Stanton Glantz discovered the "Project California" diversion conspiracy memo with co-researcher Edith Balbach in 1998.

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  Channeling money from anti-tobacco education to less profit-threatening programs is a common Big Tobacco strategy, says American Lung Association lobbyist Tony Najera.

The tax increase passed with 58.2 percent of the vote, despite a $21 million campaign waged by the tobacco industry to defeat it. Wary of Big Tobacco's political clout, the coalition was careful to include language in Prop. 99 that clearly spelled out how the new tax money was to be divvied up among anti-tobacco education, medical care, tobacco research, and environmental projects.

Set to take effect on Jan. 1, 1989, Prop. 99 specifically stated the share of tax revenues that each purpose should receive every year in percentages, on the theory that as smoking decreased, so would the revenues. Almost half the money was earmarked for medical care for smoking-related illnesses. Twenty percent of the new tax revenue -- $2 out of every $10 raised -- was supposed to go to an anti-tobacco public education campaign to persuade smokers to stop, and nonsmokers not to start.

Changing any of the percentages specified in Prop. 99's language required a four-fifths vote by the Legislature to amend the law, and even then any amendments were supposed to be consistent with the purposes of Prop. 99, the text of the initiative said.

With Prop. 99 funds, California was set to embark on the first comprehensive, statewide anti-tobacco education program in the country, sponsoring ad blitzes, community activities, and school programs.

But the tobacco industry wasn't about to sit idly by while its profit potential was attacked. Within weeks of the passage of Prop. 99, internal industry documents show, a campaign was born to raid the money earmarked for anti-tobacco education. The plan was quite insidious, designed to hide the tobacco industry's true agenda and entice other groups -- knowingly or unknowingly -- into abetting tobacco's agenda.

Mention the now-defunct Tobacco Institute to an anti-smoking activist, and he will sneer, grumbling angrily at the "front group" that used to spearhead Big Tobacco's political operations.

Indeed, for 40 years, the Washington, D.C.-based Tobacco Institute was the voice of the industry, representing Big Tobacco publicly and politically. Before it was closed in January -- as part of a 1998 settlement of state lawsuits against tobacco -- the industry-funded institute was the first place reporters would call to get tobacco's side of any story. Though it was often portrayed as the industry's harmless public relations and trade organization, the Tobacco Institute was truly a powerful private interest group, pooling the resources and influence of companies like R.J. Reynolds and Phillip Morris.

The institute offered up its own research to refute scientific evidence showing that smoking caused health problems, and it also formulated industrywide political strategies and lobbied aggressively. In 1998, the institute was ranked 34th in national lobbying power by Fortune magazine.

Along with the New York City-based Council for Tobacco Research, which was also closed this year in the settlement of the states' lawsuits, the Tobacco Institute championed smokers' rights and challenged research that showed tobacco caused health problems.

Though the institute's pro-tobacco arguments sometimes seemed to defy common sense, the industry was skillful in shaping public opinion. More important, the institute knew how to throw money around, and pressure lawmakers.

As soon as Prop. 99 passed, the Tobacco Institute jumped into California politics with unprecedented resources, spearheading the drive to funnel money away from the public education campaign voters had approved.

In December 1988, the Tobacco Institute received a memo from Nielsen, Merksamer, Parrinello, Mueller & Naylor, LLP, a California law firm and lobbying powerhouse that often represents big businesses and conservative clients, including former Gov. Pete Wilson. The memo was apparently the first document to lay out the plan that would become the foundation of the tobacco industry's diversion campaign. It suggested that tobacco lobbyists push lawmakers to take money from public education and channel it to indigent health care programs, programs that any compassionate human being would have a hard time objecting to.

"There may be pressure to allocate some of the educational money to the Department of Health Services," the memo says, referring to the agency that would head the anti-tobacco education program. "If Health Services 'must' receive some portion of this money, 'Maternal and Child Health Care' ... or 'Child Health Disability Prevention' ... could be considered."

The Nielsen Merksamer memo is the first known document to suggest that medical care for poor women and children would be an "appropriate" place to steer Prop. 99 money that was supposed to go for anti-tobacco education. The initials of Vigo Nielsen, one of Nielsen Merksamer's founders, appear at the bottom of the memo. Although he says he "doesn't remember" writing the memo, Nielsen says it was probably in response to legal or political questions from a client. At the time, Nielsen Merksamer represented both the Tobacco Institute and medical interests.

The strategy suggestion was a slick one. It would take money from health education and give it to medical care for poor women and children - benefiting two of Nielsen Merksamer's clients - without raising any public outcry.

Marc Burgat, lobbyist for the American Heart Association, says rerouting money to laudable causes was one of Big Tobacco's favorite strategies. "The tobacco industry wanted money diverted from the health education campaign and the way to do that was to send that money to medical interests," says Burgat. "Medical care for underinsured, uninsured, and poor kids -- who could possibly be opposed to that? That's [the tobacco industry's] modus operandi: divert money from successful anti-tobacco programs and put money into issues that are difficult to oppose."

The plan was refined in February 1989 when the Tobacco Institute devised "Project California," the secret blueprint for its diversion strategy. The industry had already deemed anti-tobacco education and research as "major trouble spots" in a January strategy memo, and with Project California, it outlined what it deemed "acceptable" and "unacceptable" uses for the Prop. 99 cigarette tax revenues. "The Anti-Smoking Health Education program ($176 million) is an 'unacceptable' program to receive funds," the memo says. "We must do everything possible to prevent these revenues from being used in a vigorous anti-smoking public relations or media program." (Emphasis in original.)

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