Doing a Slow Burn
Colorado attorney general Gale Norton is investigating one of the most controversial charges yet against tobacco companies: that the firms encourage kids to shoplift cigarettes as part of an effort to hook them on smoking. But even as Norton is turning up the heat in her lawsuit against big tobacco, funding for the suit is hanging by a thread at the state legislature.
Norton is a late convert to the idea of state-funded tobacco litigation and has taken campaign money from cigarette makers herself ("The Marlboro Woman," May 1, 1997). But last July she filed suit against the Tobacco Institute and nine major tobacco companies. Now her staff has begun examining claims that tobacco companies know cigarettes are regularly stolen by minors--and that they're paying big money to make sure convenience stores and other retailers don't do anything about it.
"We think those are serious allegations," says Marti Allbright, chief deputy attorney general and the lead lawyer on Colorado's tobacco suit. "We are investigating them as part of our lawsuit." Allbright won't talk about the results of her office's probe, citing a need to keep strategy secret before trial. She does say that the charge would fall under the portion of the state's suit that accuses tobacco companies of a "pattern of racketeering."
The claim is that tobacco companies want children, who can't buy smokes legally, to steal their product so they'll develop a nicotine habit. "The tobacco companies know that 90 percent of all smokers start before the age of eighteen," says Anne Landman, a coordinator for the American Lung Association of Colorado. "So if they can get some cigarettes into the hands of a kid, that kid becomes a walking annuity for the tobacco companies."
According to Landman and others, the companies accomplish that in part by paying retailers to give cigarettes prominent placement near checkout stands. Tobacco companies say these "rack fees" are designed merely to encourage legal impulse purchases. They also note that it's common for companies to pay retailers for product placement. But critics say the fees serve in part to compensate stores for stolen cigarettes--and to dissuade those retailers from putting tobacco products behind counters where customers have to ask for them.
"The tobacco companies are reimbursing the stores for lost product," says Marianne Wildey, who spent six years studying youth access to tobacco at the Center for Behavioral and Community Health Studies at San Diego State University. "And most of that lost product is going to underage consumers."
The question of whether cigarette companies covertly endorse shoplifting has been discussed in academic circles since Wildey's study was released in 1995. It showed that nearly half of ninth- and tenth-grade smokers surveyed admitted to stealing cigarettes. In a separate survey from Pennsylvania, 10 percent of teen smokers admitted that their primary means of getting cigarettes was by stealing them.
According to Wildey's study, "cigarette companies dislike [putting tobacco products behind the counter], as it reduces shoplifting, resulting in less product movement."
"Of course, they are never going to admit that," Wildey says. "But we collected enough evidence from retailers that we were convinced it was true."
In Colorado, however, the most vociferous denials that rack fees compensate for stolen goods come from the retailers themselves. "We take exception to the accusation that we place products so that they will be stolen," says JoAnn Groff, director of the Colorado Retail Council, an organization that represents stores such as 7-Eleven. The Retail Council has close ties to the tobacco industry; $3,000 of the $5,000 distributed last year by its political-action committee was provided by cigarette makers. And the council recently lobbied hard against a proposal by state representative Ken Gordon of Denver that would have forced stores to put tobacco behind the counter. "That would make convenience stores a lot less convenient," Groff notes.
A spokeswoman for 7-Eleven's parent company, Southland Corporation of Dallas, says the charge that rack fees make up for stolen property is "preposterous." Margaret Chabris says the fees are designed to increase legal purchases, not theft. "The tobacco companies want their product to be in front of the customer so that they'll make an impulse purchase," Chabris says.
However, whether adult smokers really make impulse buys is questionable. Brian Haldorson, president of A-B Petroleum, says that when some of his seven convenience marts around the Denver area recently moved cigarettes behind the counter due to space considerations, they didn't lose out on sales. "We haven't seen much of a drop at all," Haldorson says.
Tobacco companies say rack fees are an important merchandising tool that helps keep their products where customers can see them. If people steal the cigarettes, they say, that's not their problem.
"We pay the retailer to merchandise the product--anything else is in the control of the shopkeeper," says Tara Carraro, a Philip Morris spokeswoman from New York City. Carraro says that the fees are not designed to encourage youth smoking because "we don't believe kids should smoke, period."
But that position has been undermined in recent months as internal documents detailing tobacco companies' efforts to market to children have come out in the course of discovery in other suits around the country, especially in Minnesota. In that case, lawyers working for the state are reviewing 33 million pages of internal tobacco-company documents, many of which had been shipped overseas in an effort to keep them secret. Some of the documents from as late as 1988 detail plans to try to get kids to smoke before they turn eighteen.
Colorado's Norton says she decided to sue in part because of tobacco-company documents she's seen that prove to her "they were trying to get in the minds of fourteen-year-olds." Norton initially supported a national settlement of anti-tobacco claims, a position also held by big tobacco companies. That settlement would see cigarette companies pay states $368 billion over the next 25 years; as part of the deal, the firms would even agree to put cigarettes and chewing tobacco behind the counter in retail outlets. But because approval of a settlement by Congress and President Clinton seems less and less likely, Norton says she decided Colorado should press its own case.
Doubts about the viability of a national settlement also convinced anti-tobacco activists like Ken Gordon that it was more important than ever to legislate an end to self-serve cigarette sales. The liberal Democrat introduced a bill earlier this session that included a provision requiring retailers to put tobacco out of kids' reach. He was pleased when Norton, a conservative Republican, showed up at the Capitol February 13 to testify on behalf of the measure.
Others testifying for the Gordon bill included Brad Blake, a former manager of a 7-Eleven store in Highlands Ranch. Blake told lawmakers that he witnessed constant cigarette thefts, especially by children too young to buy cigarettes in the first place. He added that when he complained to management, he was specifically forbidden from removing the racks. "[A manager] explained to me that 7-Eleven was very protective of its profit margins on cigarettes and that the placement fees were important to those margins," Blake told the House Health, Environment, Welfare and Institutions Committee.
The committee didn't seem convinced: On the same day that Norton and Blake testified, the counter-sale provision in Gordon's bill was axed on a 6-3 vote.
There is little doubt that kids shoplift cigarettes in fairly large numbers. Students at West High School found that out in a recent project for a social studies class that documented advertising aimed at youth, especially in low-income neighborhoods. The students weren't looking to find students pinching smokes, but they saw it all around them, says Johnny Juarez, a ninth-grader at West.
"Sometimes the kids that look kind of young will steal them because they know the clerks will card them," Juarez says. He says he saw students as young as twelve shoplifting cigarettes.
Students from West also echo the claims of anti-tobacco activists who say that chewing tobacco is placed in stores next to the candy as a way of enticing children to pocket some "starter tobacco."
Maria Macias remembers going to a 7-Eleven on Federal Boulevard two or three times a week last year when she was in the eighth grade and watching classmates pilfer the chewing tobacco while she was getting candy. "They would steal it all the time because I guess they were addicted," Macias says. "Plus they knew they couldn't buy it if they asked at the counter."
Norton's tobacco suit is now pending in Denver District Court; an administrative hearing in the case is set for May 22. However, a trial is unlikely this year, and the suit could disappear altogether if the legislature turns off the financial tap.
In January the six-member Joint Budget Committee approved an interim expenditure of $800,000 to continue the fight, but only by a scant 4-2 margin. One of the no votes came from Jim Rizzuto, a Democratic senator from La Junta. He received $400 in direct contributions from tobacco companies in his last campaign and got an additional $500 after his last election, even though term-limit laws are now forcing him from office.
Rizzuto says there's no connection between his contributions and his vote. "I detest tobacco companies," he says, though he admits he still takes their money. ("They don't repulse me," explains the senator.) Rizzuto says his vote against funding Norton's suit was based on financial concerns; he says he didn't want to spend taxpayer money on a suit that could be rendered moot if a national settlement is reached.
The other no vote on the JBC came from Greeley Republican Dave Owen. In the 1996 campaign, Owens took $1,300 in direct tobacco contributions, even though he ran unopposed. "That doesn't sway my vote at all," says Owen of the money, adding that he's against the tobacco suit on principle and is "ticked off" at Norton for not telling the JBC before she filed it.
On closer inspection, though, it turns out that all of the JBC members took money from tobacco companies--including probable swing vote Elsie Lacy, an Aurora Republican who got more than any of them. Lacy received $2,100 in direct tobacco cash in her last campaign, along with $375 from tobacco-related concerns like the Colorado Retail PAC. Should she change her mind and vote against Norton's funding when the JBC revisits the issue later this session, the resulting 3-3 stalemate would effectively force the AG's office to abandon ship. In that case, Norton could choose to continue the suit by handing it over to a private firm, which would handle it on a contingency basis--and rake off as much as a third of the money if a settlement is reached.
Norton says the house committee's decisive vote in favor of self-serve cigarette sales raises questions in her mind about overall support in the legislature for an anti-tobacco lawsuit. Activists such as Landman were shocked by Norton's brusque treatment at the hands of the committee. Norton had planned to testify that the counter-sale provision was an important step in controlling youth access to tobacco, but committee chairwoman Mary Ellen Epps, a Republican from Colorado Springs who got $1,600 from big tobacco in her last campaign, cut her off before she could finish speaking.
Norton says she took the slight in stride and adds that her investigators will continue working on the allegations about underage shoplifting even as she awaits the final decision on her funding. In the meantime, she says of the legislature, "we have a lot of educating to do."
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