Opening Pandora's Box

• 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.

Details:

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.)

Project California envisioned the tobacco industry "strengthening ties" with medical organizations that might be receptive to the idea of diverting more money to medical programs. It also mapped out the industry's "offensive strategy," which was to "focus on ensuring that Prop 99 revenues are distributed to programs 'acceptable' to the industry, and on tightening restrictions on those 'unacceptable' programs which do receive funding."

"In [the tobacco industry's] arrogance, they felt they could define for the public what was acceptable, that they could substitute their judgment for what the voters had wanted," attorney Sanders fumes.

Spokespersons for Phillip Morris U.S.A. and R.J. Reynolds Tobacco Co., whose internal memos reveal that they were aware of Project California, both said that it would be inappropriate for them to comment on the memos since the documents are being used in a lawsuit to which they are not a party. There is no one left to speak for the Tobacco Institute, since it closed in January.

But the internal documents were only a battle plan, Sanders points out. It took agreeable state lawmakers to make the Tobacco Institute's strategy work.

When California lawmakers convened for the 1989 budget session, the state faced a grim fiscal picture. "In beginning its work on the state budget for 1989-90, the Legislature faces the most adverse set of fiscal circumstances it has faced since the recession of 1981-82," read a memo given to state lawmakers when they arrived that year.

According to the report, California did not have a single cent in its budget reserve, and $500 million had to be found just to maintain the state's current level of service. California was in the midst of a fiscal crisis, and the governor and Legislature were scrambling for funds.

When Prop. 99 tax money began flowing into state coffers that year, it created a new pot of money that lawmakers eyed hungrily. The state's perilous financial situation played to the advantage of tobacco lobbyists, who calculated, correctly, that lawmakers would be receptive to the idea of diverting Prop. 99's public education funds to other uses.

When it came time for the state Legislature to actually appropriate the Prop. 99 revenues, the tobacco industry made sure its voice was well heard in Sacramento by embarking on a lobbying frenzy. Tobacco interests upped their expenditures for lobbyists dramatically, pouring more than $960,000 into lobbyist fees in 1989 alone. The years before and after, the industry spent about $600,000 per year, UCSF research shows. Total lobbying expenditures -- including lobbyist fees, entertainment expenses, and other costs -- for the session topped $3 million. Dozens of contract lobbyists were hired, and John Miller, Sen. Diane Watson's former staffer, says that when the Prop. 99 funding bill made it onto the Assembly floor, the pack of tobacco lobbyists was so thick, it was impossible to get through the doors.

Prior to the Legislature's vote on how to allocate the Prop. 99 money, the industry also flooded the campaign coffers of most of California's legislators, donating an average of $8,500 per Assembly member and $11,000 per senator. Tobacco lobbyists were flown in from Washington, D.C., Miller says, and tobacco researcher and author Edith Balbach says that one of her friends, a lobbyist at the time, joked that tobacco would have hired her cat if her cat had been available.

In 1989 alone, then-Speaker of the Assembly Willie Brown received about $126,000 in tobacco campaign contributions. (Brown remains the undisputed champion of California politics when it comes to accepting tobacco donations, according to figures compiled by anti-smoking activists.)

Finally, in September 1989, after more than half a year of legislative debate, a six-member, bipartisan conference committee came up with the final plan for spending Prop. 99 money. The conference committee was chaired by Assemblyman Phil Isenberg, a former Brown aide and chief of staff on the Ways and Means Committee when Brown was chair. The plan included taking about $46 million from public health education over two years and using it instead for medical services for the poor. That left about $230 million in the education budget.

Sending education money to medical services -- and changing the amount spent on health education -- was legally suspect to many legislators, who knew that Prop. 99 had been very specific, says Eugene Erbin, a former staffer to Sens. Lloyd Connelly and Isenberg, both Sacramento Democrats. As early as February 1989, Assemblyman John Vasconcellos of Santa Clara wrote a letter to the nonpartisan Legal Council asking if medical care for indigents, which was usually funded by the General Fund, could be paid for by Prop. 99 money. Deputy Legislative Counsel Charles Asbill responded that Prop. 99 revenues should never be used for programs normally funded by the General Fund because Prop. 99 stated that money must "be used for specified limited purposes."

Still, the bill passed easily through both houses, and was signed by Gov. Deukmejian in October 1989.

In its battle to limit anti-tobacco education funding, the tobacco industry developed an unlikely ally - the California Medical Association. The CMA's interests and the tobacco industry's merged, because the medical association believed that, in those financially strapped times, money would be better spent on the poor and ailing than on airing a bunch of anti-smoking ads on television.

The tobacco industry instantly jumped at cultivating this mutual interest. "There is the feeling that the CMA, though they would probably deny it, did the tobacco industry's dirty work when it came to rerouting health education funds to their account," says Sheryl Magzamen, a postgraduate researcher with the UCSF Institute for Health Policy Studies. "Because the CMA wanted funds so they can help the people that they help, they took money from the media campaign to do it, which is also what the tobacco industry wanted."